Document ID: EPA-R03-OAR-2009-0034-0005
Agency: epa
Document Type: Supporting & Related Material
Title: 
Posted Date: 2009-08-20T04:00Z

ENVIRONMENTAL PROTECTION AGENCY

	40 CFR Part 52

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

	Approval and Promulgation of Air Quality Implementation Plans;

	Maryland; Clean Air Interstate Rule

AGENCY:  Environmental Protection Agency (EPA).

ACTION:  Proposed rule.

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 (NOx) ozone season
and NOx 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 (D.C.) 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 (SO2) and NOx 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 SO2 and NOX 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 SO2, NOX annual, and
NOX 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 NOx ozone season and NOx annual allocations, the 2009 set aside
allocations and the CSP allocations.

DATES: Written comments must be received on or before [insert date 30
days from date of publication].  

ADDRESSES:  Submit your comments, identified by Docket ID Number
EPA-R03-OAR-2009-0034 by one of the following methods:

A.  www.regulations.gov.  Follow the on-line instructions for submitting
comments.

B.    E-mail:  fernandez.cristina@epa.gov

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 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 www.regulations.gov or
e-mail.  The www.regulations.gov website 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
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
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 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 powers.marilyn@epa.gov.

SUPPLEMENTARY INFORMATION:  

Table of Contents

 What Action Is EPA Proposing?

What Is the Regulatory History of CAIR and the CAIR Federal
Implementation Plans (FIP)?

What are the General Requirements of CAIR and the CAIR FIPs?

What are the Types of CAIR SIP Submittals?

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.  NOX Allowance Allocations

	E.  Allocation of NOX 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

  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 SO2, NOX annual,
and NOX ozone season emissions.  The October 24, 2007 SIP revision
consisted of new Maryland rule COMAR 26.11.28 – Clean Air Interstate
Rule (Maryland revision #07-14).  The June 30, 2008 SIP revision
consisted of revisions to Regulations .01 to .07 of COMAR 26.11.28
(Maryland revision #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 (PM2.5) 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 SO2, which is a precursor to PM2.5 formation, and/or
NOX, which is a precursor to both ozone and PM2.5 formation.  For
jurisdictions that contribute significantly to downwind PM2.5
nonattainment, CAIR sets annual State-wide emission reduction
requirements (i.e., budgets) for SO2 and annual State-wide emission
reduction requirements for NOX.  Similarly, for jurisdictions that
contribute significantly to 8-hour ozone nonattainment, CAIR sets
State-wide emission reduction requirements or budgets for NOX 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
PM2.5 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 PM2.5 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 SO2, NOX annual, and NOX ozone season trading
programs, as appropriate.  The CAIR FIP SO2, NOX annual, and NOX 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 (SO2, NOX annual, and NOX 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.  Fnally, 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 NOX 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 PM2.5 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 (D.C. 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 (D.C. 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 SO2 and NOX and is to
be implemented in two phases.  The first phase of NOX reductions starts
in 2009 and continues through 2014, while the first phase of SO2
reductions starts in 2010 and continues through 2014.  The second phase
of reductions for both NOX and SO2 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 SO2 and NOX 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
NOX SIP Call trading programs in their CAIR NOX 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 appropriate, the corresponding provisions of the CAIR FIPs
(e.g., the NOX 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:

Include all NOX SIP Call trading sources that are not EGUs under CAIR in
the CAIR NOX ozone season trading program;

Provide for State allocation of  NOX annual or ozone season allowances
using a methodology chosen by the State;

Provide for State allocation of  NOX annual allowances from the
compliance supplement pool (CSP) using the State’s choice of  allowed,
alternative methodologies; or

Allow units that are not otherwise CAIR units to opt individually into
the CAIR SO2, NOX annual, or NOX ozone season trading programs under the
opt-in provisions in the model rules. 

An approved CAIR full SIP revision addressing EGUs’ SO2, NOX annual,
or NOX 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 NOX 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 NOX budgets for 2009-2014 and for 2015 and
thereafter, respectively.  EPA derived the State NOX annual and ozone
season budgets from the regional budgets using State heat input data
adjusted by fuel factors.

The CAIR State SO2 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 SO2 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 SO2 emissions in
the CAIR trading program.

In today’s action, EPA is proposing to approve a Maryland SIP
revisions that adopts by reference the budgets established for the State
in CAIR.  These budgets are 27,724 tons for NOX annual emissions from
2009 through 2014, and 23,104 tons from 2015 and thereafter; 12,834 tons
for NOX ozone season emissions from 2009 through 2014, and 10,695 tons
from 2015 and thereafter; and 70,697 tons for SO2 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 SO2 and NOX budgets
established in CAIR were arbitrary and capricious.  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, D.C. 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 SO2 and NOX budgets for the CAIR trading
programs) in order to “temporarily preserve” the environmental
benefits achievable under the CAIR trading programs.

B.  CAIR Cap-and-Trade Programs

The CAIR NOX annual and ozone-season model trading rules both largely
mirror the structure of the NOX SIP Call model trading rule in 40 CFR
Part 96, subparts A through I.  While the provisions of the NOX annual
and ozone-season model rules are similar, there are some differences. 
For example, the NOX annual model rule (but not the NOX ozone season
model rule) provides for a CSP, which is discussed below and under which
allowances may be awarded for early reductions of NOX annual emissions. 
As a further example, the NOX ozone season model rule reflects the fact
that the CAIR NOX ozone season trading program replaces the NOX SIP Call
trading program after the 2008 ozone season and is coordinated with the
NOX SIP Call program.  The NOX ozone season model rule provides
incentives for early emissions reductions by allowing banked, pre-2009
NOX SIP Call allowances to be used for compliance in the CAIR NOX
ozone-season trading program.  In addition, States have the option of
continuing to meet their NOX SIP Call requirement by participating in
the CAIR NOX ozone season trading program and including all their NOX
SIP Call trading sources in that program.

The provisions of the CAIR SO2 model rule are also similar to the
provisions of the NOX annual and ozone season model rules.  However, the
SO2 model rule is coordinated with the ongoing Acid Rain SO2
cap-and-trade program under CAA title IV.  The SO2 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 SO2 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 SO2 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 SO2, NOX
annual, and NOX ozone season trading rules and the respective CAIR FIP
trading rules are designed to work together as integrated SO2, NOX
annual, and NOX 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 SO2, NOX annual, and NOX ozone season emissions.  Maryland has
adopted a full CAIR SIP revision that incorporates by reference the CAIR
model cap and trade rules for SO2, NOx annual, and NOx 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 NOX ozone season
program only, those units in the State's NOX 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 NOX SIP
Call trading rule for non-EGUs to the applicability provisions in 40 CFR
96.304 in order to include in the CAIR NOX ozone season trading program
all units required to be in the State's NOX SIP Call trading program
that are not already included under 40 CFR 96.304.  Under this option,
the CAIR NOX 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 NOX SIP Call trading program.

Maryland has chosen not to expand the applicability provisions of the
CAIR NOX ozone season trading program to include all non-EGUs in the
State’s NOX 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 NOx 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 NOX allowance allocation methodology in the CAIR model trading
rules and in the CAIR FIP, NOX 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 NOX 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 NOX allowance allocation
methodologies, States have flexibility with regard to:

The cost to recipients of the allowances, which may be distributed for
free or auctioned;

The frequency of allocations;

The basis for allocating allowances, which may be distributed, for
example, based on historical heat input or electric and thermal output;
and

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 NOx annual and NOx 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
NOx ozone season allowance budget for each control period during 2009
through 2014, and a set aside of five percent of the NOx Annual
allowance budget for each control period 2009 through 2014.   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. 

E.  Allocation of NOX Allowances from Compliance Supplement Pool 

The CAIR establishes a CSP to provide an incentive for early reductions
in NOX annual emissions.  The CSP consists of 200,000 CAIR NOX 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 NOX 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 NOX 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 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 NOx annual, NOx ozone season, and SO2 annual trading
program.

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

1.  2009 CAIR NOx Annual and CAIR NOx 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 NOx Annual and CAIR NOx 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 NOx
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 NOx 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 NOx
allowances” to the State’s surrender account for every ton of NOx
emitted in excess of the cap.  EPA interprets the reference to “ozone
season NOx allowance” to mean CAIR NOx ozone season allowances because
the NOx Budget Trading Program was discontinued in 2008, and all banked
ozone season NOx allowances from that program have been converted to
CAIR NOx ozone season allowances.  

An owner or operator is required to surrender CAIR NOx 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 NOx 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 NOx ozone season and NOx 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 SO2, NOX annual, and
NOX 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 NOX annual and
NOX ozone season emissions, and 40 CFR 51.124(o), with regard to SO2
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:

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);  

does not impose an information collection burden under the provisions of
the Paperwork Reduction Act (44 U.S.C. 3501 et seq.);

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.);  

does not contain any unfunded mandate or significantly or uniquely
affect small governments, as described in the Unfunded Mandates Reform
Act of 1995 (Public Law 104-4);

does not have Federalism implications as specified in Executive Order
13132 (64 FR 43255, August 10, 1999);

is not an economically significant regulatory action based on health or
safety risks subject to Executive Order 13045 (62 FR 19885, April 23,
1997); 

is not a significant regulatory action subject to Executive Order 13211
(66 FR 28355, May 22, 2001); 

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 

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.

__August 10, 2009_____                   		           
___________/s/_______________

Dated:                                				William C. Early,

                                      				Acting Regional Administrator,

                                      				Region III.

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 SO2 and NOX
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.   

 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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