§ 66-k. Allowance credit trading or sales. 1. Definitions. For
purposes of this section, the following terms shall have the following
meanings:

(a) "SO2" shall mean sulfur dioxide.

(b) "SO2 allowance credit" shall mean any SO2 credit issued to a
generating source within the United States pursuant to the provisions of
title four of the Federal Clean Air Act Amendments of 1990.

(c) "select SO2 allowance credits" shall mean any SO2 allowance credit
issued to generating sources located within the boundaries of the state
of New York.

(d) "acid precipitation source states" shall mean the following
states: New Jersey, Pennsylvania, Maryland, Delaware, Virginia, North
Carolina, Tennessee, West Virginia, Ohio, Michigan, Illinois, Kentucky,
Indiana and Wisconsin.

2. Air pollution mitigation offset. (a) The commission shall assess an
air pollution mitigation offset equal to any sum received by any utility
corporation, person or entity entering into contracts or engaging in the
sale or trade of select SO2 allowance credits for use in operations,
permits or for maintaining compliance with SO2 emission requirements in
acid precipitation source states, where such select SO2 allowance
credits are found to have been transferred to the allowance deductions
reserve account by a generating source located in an acid rain source
state.

(b) Any utility corporation, person or entity entering into contracts
or engaging in the sale or trade of any select SO2 allowance credits
shall provide the commission with written notice of any select SO2
allowance transaction with five business days of such transaction. Such
notice shall include the purchase price, and shall provide the
commission a copy of the Allowance Transfer Form of the United States
Environmental Protection Agency upon the issuance and/or signing of said
form relating to the sale, exchange or trade by the utility corporation,
person or entity, its subsidiaries, agents, employees, successors and
assigns of select SO2 allowance credits.

(c) The commission will annually review information contained in the
SO2 allowance tracking database operated by the United States
Environmental Protection Agency for select SO2 allowances as identified
by their unique serial number.

(d) Any moneys collected as an air pollution mitigation offset
pursuant to this subdivision shall be deposited in the air pollution
mitigation fund established pursuant to section ninety-nine-g of the
state finance law and administered by the New York state energy research
and development authority pursuant to subdivision ten-a of section
eighteen hundred fifty-four of the public authorities law.

3. Exemptions. (a) The commission, in consultation with the department
of environmental conservation, shall produce by rule or order a model
restrictive covenant for use by any utility corporation, person or
entity entering into contracts or engaging in the sale or trade of
select SO2 allowance credits. The model restrictive covenant will be a
self-enforcing contract that shall include at a minimum, the requirement
to give notice to the commission of any SO2 allowance transaction
covered by the restrictive covenant; the requirement that any subsequent
holders of the SO2 allowance covered by the restrictive covenant include
an identical restrictive covenant in any document relating to the sale
or purchase of the covered SO2 allowances; provisions restricting usage
in acid precipitation source states; and provisions for the enforcement
of the terms of the restrictive covenant by the state of New York.

(b) Any utility corporation, person or entity entering into contracts
or engaging in the sale or trade of select SO2 allowance credits may
attach a restrictive covenant as a standard provision in any document
relating to the sale or trade by the utility corporation, person or
entity, its subsidiaries, agents, employees, successors and assigns, of
select SO2 allowance credits. Such restrictive covenant must conform
with the required provisions of the model restrictive covenant produced
by the commission pursuant to this subdivision.

(c) Any utility corporation, person or entity acting in conformance
with the provisions of this subdivision shall be exempt from the
assessment of an air pollution mitigation offset.

4. Nothing contained in this section shall restrict a utility
corporation from use or transfer of SO2 allowances at New York
facilities owned, controlled or operated now or in the future by the
utility corporation, its successors, assigns or purchasers that come to
own, control or operate such facilities.

5. Nothing in this section shall discourage or prohibit allowance
trades (such as for retirement purposes) that will have a beneficial
impact on sensitive receptor areas in the state of New York.

6. Nothing within this section will invalidate or subvert any prior
contractual commitments and/or obligations made by a utility
corporation, person or entity identified in subdivision two of this
section prior to the effective date of this section.