[Federal Register Volume 74, Number 160 (Thursday, August 20, 2009)]
[Proposed Rules]
[Pages 42038-42043]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-20047]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R03-OAR-2009-0034; FRL-8946-9]


Approval and Promulgation of Air Quality Implementation Plans; 
Maryland; Clean Air Interstate Rule

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: EPA is proposing to approve State Implementation Plan (SIP) 
revisions submitted by the State of Maryland on October 24, 2007 and 
June 30, 2008, except for the 2009 nitrogen oxides (NO<INF>X</INF>) 
ozone season and NO<INF>X</INF> annual allocations, the 2009 set-aside 
allocations and the Compliance Supplement Pool (CSP) allocations. These 
revisions address the requirements of EPA's Clean Air Interstate Rule 
(CAIR). Although the District of Columbia (DC) Circuit found CAIR to be 
flawed, the rule was remanded without vacatur and thus remains in 
place. Thus, EPA is continuing to approve CAIR provisions into SIPs as 
appropriate. CAIR, as promulgated, requires States to reduce emissions 
of sulfur dioxide (SO<INF>2</INF>) and NO<INF>X</INF> that 
significantly contribute to, or interfere with maintenance of, the 
national ambient air quality standards (NAAQS) for fine particulates 
and/or ozone in any downwind State. CAIR establishes budgets for 
SO<INF>2</INF> and NO<INF>X</INF> for States that contribute 
significantly to nonattainment in downwind States and requires the 
significantly contributing States to submit SIP revisions that 
implement these budgets. States have the flexibility to choose which 
control measures to adopt to achieve the budgets, including 
participation in EPA-administered cap-and-trade programs addressing 
SO<INF>2</INF>, NO<INF>X</INF> annual, and NO<INF>X</INF> ozone season 
emissions. In the full SIP revisions that EPA is proposing to approve, 
Maryland will meet CAIR requirements by participating in these cap-and-
trade programs. EPA is proposing to approve the full SIP revisions, as 
interpreted and clarified herein, as fully implementing the CAIR 
requirements for Maryland, except for the 2009 NO<INF>X</INF> ozone 
season and NO<INF>X</INF> annual allocations, the 2009 set-aside 
allocations and the CSP allocations.

DATES: Written comments must be received on or before September 21, 
2009.

ADDRESSES: Submit your comments, identified by Docket ID Number EPA-
R03-OAR-2009-0034 by one of the following methods:
    A. http://www.regulations.gov. Follow the on-line instructions for 
submitting comments.
    B. E-mail: <a href="/cdn-cgi/l/email-protection#caacafb8a4aba4aeafb0e4a9b8a3b9bea3a4ab8aafbaabe4ada5bc"><span class="__cf_email__" data-cfemail="ea8c8f98848b848e8f90c4899883999e83848baa8f9a8bc48d859c">[email protected]</span></a>.
    C. Mail: EPA-R03-OAR-2009-0034, Cristina Fernandez, Chief, Air 
Quality Planning Branch, Mailcode 3AP21, U.S. Environmental Protection 
Agency, Region III, 1650 Arch Street, Philadelphia, Pennsylvania 19103.
    D. Hand Delivery: At the previously-listed EPA Region III address. 
Such deliveries are only accepted during the Docket's normal hours of 
operation, and special arrangements should be made for deliveries of 
boxed information.
    Instructions: Direct your comments to Docket ID No. EPA-R03-OAR-
2009-0034. EPA's policy is that all comments received will be included 
in the public docket without change, and may be made available online 
at http://www.regulations.gov, including any personal information 
provided, unless the comment includes information claimed to be 
Confidential Business Information (CBI) or other information whose 
disclosure is restricted by statute. Do not submit information that you 
consider to be CBI or otherwise protected through http://www.regulations.gov or e-mail. The http://www.regulations.gov Web site 
is an ``anonymous access'' system, which means EPA will not know your 
identity or contact information unless you provide it in the body of 
your comment. If you send an e-mail comment directly to EPA without 
going through http://www.regulations.gov, your e-mail address will be 
automatically captured and included as part of the comment that is 
placed in the public docket and made available on the Internet. If you 
submit an electronic comment, EPA recommends that you include your name 
and other contact information in the body of your comment and with any 
disk or CD-ROM you submit. If EPA cannot read your comment due to 
technical difficulties and cannot contact you for clarification, EPA 
may not be able to consider your comment. Electronic files should avoid 
the use of special characters, any form of encryption, and be free of 
any defects or viruses.
    Docket: All documents in the electronic docket are listed in the 
http://www.regulations.gov index. Although listed in the index, some 
information is not publicly available, i.e., CBI or other information 
whose disclosure is restricted by statute. Certain other material, such 
as copyrighted material, is not placed on the Internet and will be 
publicly available only in hard copy form. Publicly available docket 
materials are available either electronically in http://www.regulations.gov or in hard copy during normal business hours at the 
Air Protection Division, U.S. Environmental Protection Agency, Region 
III, 1650 Arch Street, Philadelphia, Pennsylvania 19103. Copies of the 
State submittal are available at the Maryland Department of the 
Environment, 1800 Washington Boulevard, Suite 705, Baltimore, Maryland 
21230.

FOR FURTHER INFORMATION CONTACT: Marilyn Powers, (215) 814-2308, or by 
e-mail at <a href="/cdn-cgi/l/email-protection#2d5d425a485f5e03404c5f444154436d485d4c034a425b"><span class="__cf_email__" data-cfemail="84f4ebf3e1f6f7aae9e5f6ede8fdeac4e1f4e5aae3ebf2">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. What Action Is EPA Proposing?
II. What Is the Regulatory History of CAIR and the CAIR Federal 
Implementation Plans (FIP)?
III. What Are the General Requirements of CAIR and the CAIR FIPs?
IV. What Are the Types of CAIR SIP Submittals?
V. Analysis of Maryland's CAIR SIP Submittal
    A. State Budgets for Allowance Allocations
    B. CAIR Cap-and-Trade Programs
    C. Applicability Provisions for Non-Electric Generating Units 
(non-EGU) Sources
    D. NO<INF>X</INF> Allowance Allocations
    E. Allocation of NO<INF>X</INF> Allowances From Compliance 
Supplement Pool
    F. Individual Opt-in Units
    G. Clarification of Other Provisions in Maryland's CAIR Rule
VI. Proposed Action
VII. Statutory and Executive Order Reviews

I. What Action Is EPA Proposing?

    EPA is proposing to approve, as interpreted and clarified herein, 
the full CAIR SIP revisions, submitted by Maryland on October 24, 2007 
and June 30, 2008, as meeting the applicable CAIR requirements by 
requiring certain electric generating units (EGUs) to participate in 
the EPA-administered CAIR cap-and-trade programs addressing 
SO<INF>2</INF>, NO<INF>X</INF> annual, and NO<INF>X</INF> ozone season 
emissions. The October 24, 2007 SIP revision consisted of new Maryland 
rule COMAR 26.11.28--Clean Air Interstate Rule (Maryland revision 
<greek-i>07-14). The June 30, 2008 SIP revision consisted of revisions 
to Regulations .01

[[Page 42039]]

to .07 of COMAR 26.11.28 (Maryland revision <greek-i>08-08).

II. What Is the Regulatory History of the CAIR and the CAIR Federal 
Implementation Plans (FIPs)?

    EPA published CAIR on May 12, 2005 (70 FR 25162). In this rule, EPA 
determined that 28 States and the District of Columbia contribute 
significantly to nonattainment and interfere with maintenance of the 
NAAQS for fine particles (PM<INF>2.5</INF>) and/or 8-hour ozone in 
downwind States in the eastern part of the country. As a result, EPA 
required those upwind States to revise their SIPs to include control 
measures that reduce emissions of SO<INF>2</INF>, which is a precursor 
to PM<INF>2.5</INF> formation, and/or NO<INF>X</INF>, which is a 
precursor to both ozone and PM<INF>2.5</INF> formation. For 
jurisdictions that contribute significantly to downwind 
PM<INF>2.5</INF> nonattainment, CAIR sets annual State-wide emission 
reduction requirements (i.e., budgets) for SO<INF>2</INF> and annual 
State-wide emission reduction requirements for NO<INF>X</INF>. 
Similarly, for jurisdictions that contribute significantly to 8-hour 
ozone nonattainment, CAIR sets State-wide emission reduction 
requirements or budgets for NO<INF>X</INF> for the ozone season (May 
1st to September 30th). Under CAIR, States may implement these 
reduction requirements by participating in the EPA-administered cap-
and-trade programs or by adopting any other control measures.
    CAIR explains to subject States what must be included in SIPs to 
address the requirements of section 110(a)(2)(D) of the Clean Air Act 
(CAA) with regard to interstate transport with respect to the 8-hour 
ozone and 1997 PM<INF>2.5</INF> NAAQS. EPA made national findings, 
effective on May 25, 2005, that the States had failed to submit SIPs 
meeting the requirements of section 110(a)(2)(D). The SIPs were due in 
July 2000, three years after the promulgation of the 8-hour ozone and 
PM<INF>2.5</INF> NAAQS. These findings started a 2-year clock for EPA 
to promulgate a FIP to address the requirements of section 
110(a)(2)(D). Under CAA section 110(c)(1), EPA may issue a FIP anytime 
after such findings are made and must do so within two years unless a 
SIP revision correcting the deficiency is approved by EPA before the 
FIP is promulgated.
    On April 28, 2006, EPA promulgated FIPs for all States covered by 
CAIR in order to ensure the emissions reductions required by CAIR are 
achieved on schedule. The CAIR FIPs require EGUs to participate in the 
EPA-administered CAIR SO<INF>2</INF>, NO<INF>X</INF> annual, and 
NO<INF>X</INF> ozone season trading programs, as appropriate. The CAIR 
FIP SO<INF>2</INF>, NO<INF>X</INF> annual, and NO<INF>X</INF> ozone 
season trading programs impose essentially the same requirements as, 
and are integrated with, the respective CAIR SIP trading programs. The 
integration of the FIP and SIP trading programs means that these 
trading programs will work together to create effectively a single 
trading program for each regulated pollutant (SO<INF>2</INF>, 
NO<INF>X</INF> annual, and NO<INF>X</INF> ozone season) in all States 
covered by the CAIR FIP or SIP trading program for that pollutant. 
Further, as provided in a rule published by EPA on November 2, 2007, a 
State's CAIR FIPs are automatically withdrawn when EPA approves a SIP 
revision, in its entirely and without any conditions, as fully meeting 
the requirements of CAIR. Where only portions of the SIP revision are 
approved, the corresponding portions of the FIPs are automatically 
withdrawn and the remaining portions of the FIP stay in place. Finally, 
the CAIR FIPs also allow States to submit abbreviated SIP revisions 
that, if approved by EPA, will automatically replace or supplement 
certain CAIR FIP provisions (e.g., the methodology for allocating 
NO<INF>X</INF> allowances to sources in the State), while the CAIR FIP 
remains in place for all other provisions.
    On April 28, 2006, EPA published two additional CAIR-related final 
rules that added the States of Delaware and New Jersey to the list of 
States subject to CAIR for PM<INF>2.5</INF> and announced EPA's final 
decisions on reconsideration of five issues, without making any 
substantive changes to the CAIR requirements.
    On October 19, 2007, EPA amended CAIR and the CAIR FIPs to clarify 
the definition of ``cogeneration unit'' and thus the applicability of 
the CAIR trading program to cogeneration units.
    EPA was sued by a number of parties on various aspects of CAIR, and 
on July 11, 2008, the U.S. Court of Appeals for the District of 
Columbia Circuit issued its decision to vacate and remand both CAIR and 
the associated CAIR FIPs in their entirety. North Carolina v. EPA, 531 
F.3d 836 (DC Cir. Jul. 11, 2008). However, in response to EPA's 
petition for rehearing, the Court issued an order remanding CAIR to EPA 
without vacating either CAIR or the CAIR FIPs. North Carolina v. EPA, 
550 F.3d 1176 (DC Cir. Dec. 23, 2008). The Court thereby left CAIR in 
place in order to ``temporarily preserve the environmental values 
covered by CAIR'' until EPA replaces it with a rule consistent with the 
Court's opinion. Id. at 1178. The Court directed EPA to ``remedy CAIR's 
flaws'' consistent with its July 11, 2008 opinion, but declined to 
impose a schedule on EPA for completing that action. Id. Therefore, 
CAIR and the CAIR FIP are currently in effect in Maryland.

III. What Are the General Requirements of CAIR and the CAIR FIPs?

    CAIR establishes State-wide emission budgets for SO<INF>2</INF> and 
NO<INF>X</INF> and is to be implemented in two phases. The first phase 
of NO<INF>X</INF> reductions starts in 2009 and continues through 2014, 
while the first phase of SO<INF>2</INF> reductions starts in 2010 and 
continues through 2014. The second phase of reductions for both 
NO<INF>X</INF> and SO<INF>2</INF> starts in 2015 and continues 
thereafter. CAIR requires States to implement the budgets by either: 
(1) Requiring EGUs to participate in the EPA-administered cap-and-trade 
programs; or (2) adopting other control measures of the State's 
choosing and demonstrating that such control measures will result in 
compliance with the applicable State SO<INF>2</INF> and NO<INF>X</INF> 
budgets.
    The May 12, 2005 and April 28, 2006 CAIR rules provide model rules 
that States must adopt (with certain limited changes, if desired) if 
they want to participate in the EPA-administered trading programs. With 
two exceptions, only States that choose to meet the requirements of 
CAIR through methods that exclusively regulate EGUs are allowed to 
participate in the EPA-administered trading programs. One exception is 
for States that adopt the opt-in provisions of the model rules to allow 
non-EGUs individually to opt into the EPA-administered trading 
programs. The other exception is for States that include all non-EGUs 
from their NO<INF>X</INF> SIP Call trading programs in their CAIR 
NO<INF>X</INF> ozone season trading programs.

IV. What Are the Types of CAIR SIP Submittals?

    States have the flexibility to choose the type of control measures 
they will use to meet the requirements of CAIR. EPA anticipates that 
most States will choose to meet the CAIR requirements by selecting an 
option that requires EGUs to participate in the EPA-administered CAIR 
cap-and-trade programs. For such States, EPA has provided two 
approaches for submitting and obtaining approval for CAIR SIP 
revisions. States may submit full SIP revisions that adopt the model 
CAIR cap-and-trade rules. If approved, these SIP revisions will fully 
replace the CAIR FIPs. Alternatively, States may submit abbreviated SIP 
revisions. These SIP revisions will not replace the CAIR FIPs; however, 
the CAIR FIPs provide that, when approved, the provisions in these 
abbreviated SIP revisions will be used instead of or in conjunction 
with, as

[[Page 42040]]

appropriate, the corresponding provisions of the CAIR FIPs (e.g., the 
NO<INF>X</INF> allowance allocation methodology).
    A State submitting a full SIP revision may either adopt regulations 
that are substantively identical to the model rules or incorporate by 
reference the model rules. CAIR provides that States may only make 
limited changes to the model rules if the States want to participate in 
the EPA-administered trading programs. A full SIP revision may change 
the model rules only by altering their applicability and allowance 
allocation provisions to:
    1. Include all NO<INF>X</INF> SIP Call trading sources that are not 
EGUs under CAIR in the CAIR NO<INF>X</INF> ozone season trading 
program;
    2. Provide for State allocation of NO<INF>X</INF> annual or ozone 
season allowances using a methodology chosen by the State;
    3. Provide for State allocation of NO<INF>X</INF> annual allowances 
from the compliance supplement pool (CSP) using the State's choice of 
allowed, alternative methodologies; or
    4. Allow units that are not otherwise CAIR units to opt 
individually into the CAIR SO<INF>2</INF>, NO<INF>X</INF> annual, or 
NO<INF>X</INF> ozone season trading programs under the opt-in 
provisions in the model rules. An approved CAIR full SIP revision 
addressing EGUs' SO<INF>2</INF>, NO<INF>X</INF> annual, or 
NO<INF>X</INF> ozone season emissions will replace the CAIR FIP for 
that State for the respective EGU emissions. As discussed above, EPA 
approval in full, without any conditions, of a CAIR full SIP revision 
causes the CAIR FIPs to be automatically withdrawn.

V. Analysis of Maryland's CAIR SIP Submittal

A. State Budgets for Allowance Allocations

    The CAIR NO<INF>X</INF> annual and ozone season budgets were 
developed from historical heat input data for EGUs. Using these data, 
EPA calculated annual and ozone season regional heat input values, 
which were multiplied by 0.15 lb/mmBtu, for phase I, and 0.125 lb/
mmBtu, for phase II, to obtain regional NO<INF>X</INF> budgets for 
2009-2014 and for 2015 and thereafter, respectively. EPA derived the 
State NO<INF>X</INF> annual and ozone season budgets from the regional 
budgets using State heat input data adjusted by fuel factors.
    The CAIR State SO<INF>2</INF> budgets were derived by discounting 
the tonnage of emissions authorized by annual allowance allocations 
under the Acid Rain Program under title IV of the CAA. Under CAIR, each 
allowance allocated in the Acid Rain Program for the years in phase 1 
of CAIR (2010 through 2014) authorizes 0.5 ton of SO<INF>2</INF> 
emissions in the CAIR trading program, and each Acid Rain Program 
allowance allocated for the years in phase 2 of CAIR (2015 and 
thereafter) authorizes 0.35 ton of SO<INF>2</INF> emissions in the CAIR 
trading program.
    In today's action, EPA is proposing to approve a Maryland SIP 
revision that adopts by reference the budgets established for the State 
in CAIR. These budgets are 27,724 tons for NO<INF>X</INF> annual 
emissions from 2009 through 2014, and 23,104 tons from 2015 and 
thereafter; 12,834 tons for NO<INF>X</INF> ozone season emissions from 
2009 through 2014, and 10,695 tons from 2015 and thereafter; and 70,697 
tons for SO<INF>2</INF> annual emissions from 2009 through 2014, and 
49,488 tons from 2015 and thereafter. Maryland's SIP revisions set 
these budgets as the total amounts of allowances available for 
allocation for each year under the EPA-administered cap-and-trade 
programs.
    EPA notes that, in North Carolina, 531 F.3d at 916-21, the Court 
determined, among other things, that the State SO<INF>2</INF> and 
NO<INF>X</INF> budgets established in CAIR were arbitrary and 
capricious.\1\ However, as discussed above, the Court also decided to 
remand CAIR but to leave the rule in place in order to ``temporarily 
preserve the environmental values covered by CAIR'' pending EPA's 
development and promulgation of a replacement rule that remedies CAIR's 
flaws. North Carolina, 550 F.3d at 1178. EPA had indicated to the Court 
that development and promulgation of a replacement rule would take 
about two years. Reply in Support of Petition for Rehearing or 
Rehearing en Banc at 5 (filed Nov. 17, 2008 in North Carolina v. EPA, 
Case No. 05-1224, DC Cir.). The process at EPA of developing a proposal 
that will undergo notice and comment and result in a final replacement 
rule is ongoing. In the meantime, consistent with the Court's orders, 
EPA is implementing CAIR by approving State SIP revisions that are 
consistent with CAIR (such as the provisions setting State 
SO<INF>2</INF> and NO<INF>X</INF> budgets for the CAIR trading 
programs) in order to ``temporarily preserve'' the environmental 
benefits achievable under the CAIR trading programs.
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    \1\ The Court also determined that the CAIR trading programs 
were unlawful (id. at 906-8) and that the treatment of title IV 
allowances in CAIR was unlawful (id. at 921-23). For the same 
reasons that EPA is approving the provisions of Maryland's SIP 
revision that use the SO<INF>2</INF> and NO<INF>X</INF> budgets set 
in CAIR, EPA is also approving, as discussed below, Maryland's SIP 
revision to the extent the SIP revision adopts the CAIR trading 
programs, including the provisions addressing applicability, 
allowance allocations, and use of title IV allowances.
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B. CAIR Cap-and-Trade Programs

    The CAIR NO<INF>X</INF> annual and ozone-season model trading rules 
both largely mirror the structure of the NO<INF>X</INF> SIP Call model 
trading rule in 40 CFR Part 96, subparts A through I. While the 
provisions of the NO<INF>X</INF> annual and ozone-season model rules 
are similar, there are some differences. For example, the 
NO<INF>X</INF> annual model rule (but not the NO<INF>X</INF> ozone 
season model rule) provides for a CSP, which is discussed below and 
under which allowances may be awarded for early reductions of 
NO<INF>X</INF> annual emissions. As a further example, the 
NO<INF>X</INF> ozone season model rule reflects the fact that the CAIR 
NO<INF>X</INF> ozone season trading program replaces the NO<INF>X</INF> 
SIP Call trading program after the 2008 ozone season and is coordinated 
with the NO<INF>X</INF> SIP Call program. The NO<INF>X</INF> ozone 
season model rule provides incentives for early emissions reductions by 
allowing banked, pre-2009 NO<INF>X</INF> SIP Call allowances to be used 
for compliance in the CAIR NO<INF>X</INF> ozone-season trading program. 
In addition, States have the option of continuing to meet their 
NO<INF>X</INF> SIP Call requirement by participating in the CAIR 
NO<INF>X</INF> ozone season trading program and including all their 
NO<INF>X</INF> SIP Call trading sources in that program.
    The provisions of the CAIR SO<INF>2</INF> model rule are also 
similar to the provisions of the NO<INF>X</INF> annual and ozone season 
model rules. However, the SO<INF>2</INF> model rule is coordinated with 
the ongoing Acid Rain SO<INF>2</INF> cap-and-trade program under CAA 
title IV. The SO<INF>2</INF> model rule uses the title IV allowances 
for compliance, with each allowance allocated for 2010-2014 authorizing 
only 0.50 ton of emissions and each allowance allocated for 2015 and 
thereafter authorizing only 0.35 ton of emissions. Banked title IV 
allowances allocated for years before 2010 can be used at any time in 
the CAIR SO<INF>2</INF> cap-and-trade program, with each such allowance 
authorizing one ton of emissions. Title IV allowances are to be freely 
transferable among sources covered by the Acid Rain Program and sources 
covered by the CAIR SO<INF>2</INF> cap-and-trade program.
    EPA also used the CAIR model trading rules as the basis for the 
trading programs in the CAIR FIPs. The CAIR FIP trading rules are 
virtually identical to the CAIR model trading rules, with changes made 
to account for Federal rather than State implementation. The CAIR model 
SO<INF>2</INF>, NO<INF>X</INF> annual, and NO<INF>X</INF> ozone season 
trading rules and the

[[Page 42041]]

respective CAIR FIP trading rules are designed to work together as 
integrated SO<INF>2</INF>, NO<INF>X</INF> annual, and NO<INF>X</INF> 
ozone season trading programs.
    In the SIP revisions, Maryland choose to implement its CAIR budgets 
by requiring EGUs to participate in EPA-administered cap-and-trade 
programs for SO<INF>2</INF>, NO<INF>X</INF> annual, and NO<INF>X</INF> 
ozone season emissions. Maryland has adopted a full CAIR SIP revision 
that incorporates by reference the CAIR model cap and trade rules for 
SO<INF>2</INF>, NO<INF>X</INF> annual, and NO<INF>X</INF> ozone season 
emissions, with modifications as allowed under the flexibilities of the 
program.

C. Applicability Provisions for Non-Electric Generating Units (Non-EGU) 
Sources

    In general, the CAIR model trading rules apply to any stationary, 
fossil-fuel-fired boiler or stationary, fossil-fuel-fired combustion 
turbine serving at any time, since the later of November 15, 1990 or 
the start-up of the unit's combustion chamber, a generator with 
nameplate capacity of more than 25 MWe producing electricity for sale. 
Maryland's CAIR rules incorporate by reference the CAIR model trading 
rule applicability described in 40 CFR 96.104, 96.204 and 96.304.
    States have the option of bringing in, for the CAIR NO<INF>X</INF> 
ozone season program only, those units in the State's NO<INF>X</INF> 
SIP Call trading program that are not EGUs as defined under CAIR. EPA 
advises States exercising this option to add the applicability 
provisions in the State's NO<INF>X</INF> SIP Call trading rule for non-
EGUs to the applicability provisions in 40 CFR 96.304 in order to 
include in the CAIR NO<INF>X</INF> ozone season trading program all 
units required to be in the State's NO<INF>X</INF> SIP Call trading 
program that are not already included under 40 CFR 96.304. Under this 
option, the CAIR NO<INF>X</INF> ozone season program must cover all 
large industrial boilers and combustion turbines, as well as any small 
EGUs (i.e. units serving a generator with a nameplate capacity of 25 
MWe or less) that the State currently requires to be in the 
NO<INF>X</INF> SIP Call trading program.
    Maryland has chosen not to expand the applicability provisions of 
the CAIR NO<INF>X</INF> ozone season trading program to include all 
non-EGUs in the State's NO<INF>X</INF> SIP Call trading program. 
Therefore, Maryland must, in a separate submission, demonstrate that it 
is meeting 40 CFR 51.121(f)(2) and (h)(4), which sets forth 
requirements for control measures or other regulatory requirement(s) to 
demonstrate that the State will comply with its NO<INF>X</INF> budget 
as established for the 2007 ozone season. Continuous emissions 
monitoring (CEMS) in accordance with 40 CFR Part 75 is required.

D. NOX Allowance Allocations

    Under the NO<INF>X</INF> allowance allocation methodology in the 
CAIR model trading rules and in the CAIR FIP, NO<INF>X</INF> annual and 
ozone season allowances are allocated to units that have operated for 
five years, based on heat input data from a three-year period that are 
adjusted for fuel type by using fuel factors of 1.0 for coal, 0.6 for 
oil, and 0.4 for other fuels. The CAIR model trading rules and the CAIR 
FIP also provide a new unit set-aside from which units without five 
years of operation are allocated allowances based on the units' prior 
year emissions.
    States may establish in their SIP submissions a different 
NO<INF>X</INF> allowance allocation methodology that will be used to 
allocate allowances to sources in the States if certain requirements 
are met concerning the timing of submission of units' allocations to 
the Administrator for recordation and the total amount of allowances 
allocated for each control period. In adopting alternative 
NO<INF>X</INF> allowance allocation methodologies, States have 
flexibility with regard to:
    1. The cost to recipients of the allowances, which may be 
distributed for free or auctioned;
    2. The frequency of allocations;
    3. The basis for allocating allowances, which may be distributed, 
for example, based on historical heat input or electric and thermal 
output; and
    4. The use of allowance set-asides and, if used, their size.
    Maryland has chosen to incorporate by reference the allowance 
allocation methodology of the model rule for both the NO<INF>X</INF> 
annual and NO<INF>X</INF> ozone season trading programs, with the 
exception of the provisions pertaining to the distribution of 
allowances from the set aside pool under 96.142(d). Maryland has 
established a set-aside of five percent of the NO<INF>X</INF> ozone 
season allowance budget for each control period during 2009 through 
2014, and a set aside of five percent of the NO<INF>X</INF> Annual 
allowance budget for each control period 2009 through 2014.\2\ The 
allowances from these set-aside pools will be distributed to new 
affected units, with any remaining allowances to be distributed to 
renewable energy projects and consumers of electric power in the State. 
At the end of each control period, 20 percent of unused allowances from 
the set asides will be transferred to the State's retirement account in 
the CAIR allowance tracking system, and 80 percent of unused allowances 
will be returned to the affected trading sources listed in COMAR 
26.11.28.08.
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    \2\ Maryland anticipated that its CAIR SIP would be in effect in 
time to issue allocations from its set aside pool starting in 2009. 
Because the CAIR FIP is still in effect in Maryland, allocations 
from the new unit set aside have been allocated under the FIP for 
2009. As a consequence, EPA is not approving the allowance 
allocations for new units, renewable energy projects and consumers 
of electric energy contained in Maryland's CAIR SIP for 2009. Those 
allocations will be issued in accordance with Maryland's CAIR SIP 
starting in 2010, contingent upon finalization of this proposed 
action.
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E. Allocation of NOX Allowances From Compliance Supplement Pool

    The CAIR establishes a CSP to provide an incentive for early 
reductions in NO<INF>X</INF> annual emissions. The CSP consists of 
200,000 CAIR NO<INF>X</INF> annual allowances of vintage 2009 for the 
entire CAIR region, and a State's share of the CSP is based upon the 
projected magnitude of the emission reductions required by CAIR in that 
State. States may distribute CSP allowances, one allowance for each ton 
of early reduction, to sources that make NO<INF>X</INF> reductions 
during 2007 or 2008 beyond what is required by any applicable State or 
Federal emission limitation. States also may distribute CSP allowances 
based upon a demonstration of need for an extension of the 2009 
deadline for implementing emission controls. The CSP for the State of 
Maryland is comprised of 4,670 allowances.
    The CAIR annual NO<INF>X</INF> model trading rule establishes 
specific methodologies for allocations of CSP allowances. States may 
choose an allowed, alternative CSP allocation methodology to be used to 
allocate CSP allowances to sources in the States.
    The deadline for requesting the CSP allowances was May 1, 2009, 
therefore, the CSP allowances will be distributed under the provisions 
of the CAIR FIP for the sources in the State of Maryland. EPA is, 
therefore, not approving the CSP allocation contained in Maryland's 
CAIR SIP.

F. Individual Opt-in Units

    The opt-in provisions of the CAIR SIP model trading rules allow 
certain non-EGUs (i.e., boilers, combustion turbines, and other 
stationary fossil-fuel-fired devices) that do not meet the 
applicability criteria for a CAIR trading program to participate 
voluntarily in (i.e., opt into) the CAIR trading program. A non-EGU may 
opt into one or more of the CAIR trading programs. In order to qualify 
to opt into a CAIR trading program, a unit must vent all emissions 
through a stack and be able to meet monitoring, recordkeeping, and

[[Page 42042]]

recording requirements of 40 CFR part 75. The owners and operators 
seeking to opt a unit into a CAIR trading program must apply for a CAIR 
opt-in permit. If the unit is issued a CAIR opt-in permit, the unit 
becomes a CAIR unit, is allocated allowances, and must meet the same 
allowance-holding and emissions monitoring and reporting requirements 
as other units subject to the CAIR trading program. The opt-in 
provisions provide for two methodologies for allocating allowances for 
opt-in units, one methodology that applies to opt-in units in general 
and a second methodology that allocates allowances only to opt-in units 
that the owners and operators intend to repower before January 1, 2015.
    States have several options concerning the opt-in provisions. 
States may adopt the CAIR opt-in provisions entirely or may adopt them 
but exclude one of the methodologies for allocating allowances. States 
may also decline to adopt the opt-in provisions at all. Maryland has 
chosen to incorporate by reference the provisions of the model rule 
pertaining to opt-ins for the NO<INF>X</INF> annual, NO<INF>X</INF> 
ozone season, and SO<INF>2</INF> annual trading program.

G. Clarification of Other Provisions in Maryland's CAIR Rule

1. 2009 CAIR NO<INF>X</INF> Annual and CAIR NO<INF>X</INF> Ozone Season 
Allowances
    The tables in COMAR 26.11.28.08 specify allowances for 2009-2014. 
Maryland anticipated that its CAIR SIP would be in effect in time to 
issue the allowances for this allocation period. However, Maryland 
sources are currently subject to the FIP, therefore allocations for 
2009 have been distributed under the FIP provisions. As a consequence, 
EPA is not approving Maryland's 2009 CAIR NO<INF>X</INF> Annual and 
CAIR NO<INF>X</INF> Ozone Season allowance allocation contained in the 
Maryland CAIR SIP. The tables in COMAR 26.11.28.08 will be used 
starting in 2010, contingent on finalization of this proposed action.
2. Deadline for Requests for Allowances From the Set Aside Pool
    COMAR 26.11.28.04A(1) sets ``March 15 of the year following the 
year the unit began commercial operation * * *'' as the date by which 
the owner or operator of a ``new affected trading unit'' may request 
allowances from the set aside pool. Because this schedule is different 
from the schedule in 40 CFR 96.142(c)(2) and 40 CFR 96.342(c)(2) which 
are incorporated by reference, EPA clarifies that the schedule 
established in COMAR 26.11.28.04A(1) applies to sources in Maryland.
3. Schedule for Recording Set Aside Pool Allowances
    COMAR 26.11.28.05G establishes a July 1 deadline for EPA to 
transfer NO<INF>X</INF> allowances for renewable energy projects to a 
general account for the owner or operator of a renewable energy 
project. Although not addressed in this provision, the owner or 
operator of the renewable energy project is responsible for 
establishing the general account in accordance with 40 CFR 96.151 and 
96.152, or 96.351 and 96.352. Also, these accounts will need to be 
established sufficiently in advance of the July 1 deadline to ensure 
timely allowance transfers to the appropriate general accounts. EPA 
notes that the allocation information from the State must be received 
approximately two weeks before the deadline to give the Agency time to 
process the information and meet the July 1 deadline for recording the 
allowances.
4. Interaction of Maryland's CAIR Rule With COMAR 26.11.27
    COMAR 26.11.27, entitled ``Emission Limitations for Power Plants,'' 
was adopted by Maryland to implement the emission reductions required 
by the State's Healthy Air Act (Annotated Code of Maryland Environment 
Title 2 Ambient Air Quality Control Subtitle 10 Health Air Act Sections 
2-1001--2-1005), and sets emissions caps for fifteen of the largest 
coal-fired power plants in the State. All of these sources are also 
subject to CAIR.
    COMAR 26.11.27.03B(7)(a)(iii) requires that, if a unit exceeds its 
Ozone Season NO<INF>X</INF> tonnage limitation as a result of certain 
specified actions and alerts invoked by the independent system operator 
PJM Interconnection, LLC (PJM), the unit is not in violation if, among 
other things, the owner or operator surrenders one ``ozone season 
NO<INF>X</INF> allowances'' to the State's surrender account for every 
ton of NO<INF>X</INF> emitted in excess of the cap. EPA interprets the 
reference to ``ozone season NO<INF>X</INF> allowance'' to mean CAIR 
NO<INF>X</INF> ozone season allowances because the NO<INF>X</INF> 
Budget Trading Program was discontinued in 2008, and all banked ozone 
season NO<INF>X</INF> allowances from that program have been converted 
to CAIR NO<INF>X</INF> ozone season allowances.
    An owner or operator is required to surrender CAIR NO<INF>X</INF> 
ozone season allowances under this provision only if PJM invokes 
certain specified actions and alerts and the unit's emissions increase 
as a result. Since 1999, PJM has invoked these actions and alerts 
relatively few times (generally a few times a year but up to 22 times 
in one year) and only for relatively short periods of time (generally 
about 24 hours and only once slightly exceeding 48 hours). However, the 
majority of these actions and alerts involve load reductions and so are 
not likely to result in increased emissions that would force a facility 
to exceed its Ozone Season NO<INF>X</INF> tonnage limitation. 
Therefore, EPA believes that the potential for CAIR allowances to be 
used outside of the CAIR trading programs is very limited and will not 
interfere to any significant extent with the CAIR trading programs.

VI. Proposed Action

    EPA is proposing to approve, as interpreted and clarified herein, 
Maryland's full CAIR SIP revisions submitted on October 24, 2007, and 
June 30, 2008, except for the 2009 NO<INF>X</INF> ozone season and 
NO<INF>X</INF> annual allocations, the 2009 set aside allocations and 
the CSP allocations. Under the SIP revisions, Maryland is choosing to 
participate in the EPA-administered CAIR cap-and-trade programs for 
SO<INF>2</INF>, NO<INF>X</INF> annual, and NO<INF>X</INF> ozone season 
emissions. The SIP revisions, as interpreted and clarified herein, 
meets the applicable requirements of CAIR, which are set forth in 40 
CFR 51.123(o) and (aa), with regard to NO<INF>X</INF> annual and 
NO<INF>X</INF> ozone season emissions, and 40 CFR 51.124(o), with 
regard to SO<INF>2</INF> emissions. Upon final approval, the CAIR FIP 
for Maryland will be automatically withdrawn.

VII. Statutory and Executive Order Reviews

    Under the Clean Air Act, the Administrator is required to approve a 
SIP submission that complies with the provisions of the Act and 
applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). 
Thus, in reviewing SIP submissions, EPA's role is to approve State 
choices, provided that they meet the criteria of the Clean Air Act. 
Accordingly, this action merely approves State law as meeting Federal 
requirements and does not impose additional requirements beyond those 
imposed by State law. For that reason, this action:
    <bullet> Is not a ``significant regulatory action'' subject to 
review by the Office of Management and Budget under Executive Order 
12866 (58 FR 51735, October 4, 1993);
    <bullet> Does not impose an information collection burden under the 
provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.);

[[Page 42043]]

    <bullet> Is certified as not having a significant economic impact 
on a substantial number of small entities under the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq.);
    <bullet> Does not contain any unfunded mandate or significantly or 
uniquely affect small governments, as described in the Unfunded 
Mandates Reform Act of 1995 (Pub. L. 104-4);
    <bullet> Does not have Federalism implications as specified in 
Executive Order 13132 (64 FR 43255, August 10, 1999);
    <bullet> Is not an economically significant regulatory action based 
on health or safety risks subject to Executive Order 13045 (62 FR 
19885, April 23, 1997);
    <bullet> Is not a significant regulatory action subject to 
Executive Order 13211 (66 FR 28355, May 22, 2001);
    <bullet> Is not subject to requirements of Section 12(d) of the 
National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 
note) because application of those requirements would be inconsistent 
with the Clean Air Act; and
    <bullet> Does not provide EPA with the discretionary authority to 
address, as appropriate, disproportionate human health or environmental 
effects, using practicable and legally permissible methods, under 
Executive Order 12898 (59 FR 7629, February 16, 1994).
    In addition, this proposed approval of Maryland's CAIR rule, with 
certain exceptions, does not have Tribal implications as specified by 
Executive Order 13175 (65 FR 67249, November 9, 2000), because the SIP 
is not approved to apply in Indian country located in the State, and 
EPA notes that it will not impose substantial direct costs on Tribal 
governments or preempt Tribal law.

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Nitrogen dioxide, 
Ozone, Particulate matter, Reporting and recordkeeping requirements, 
Sulfur oxides.

    Dated: August 10, 2009.
William C. Early,
Acting Regional Administrator, Region III.
[FR Doc. E9-20047 Filed 8-19-09; 8:45 am]
BILLING CODE 6560-50-P


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