Document ID: EPA-R03-OAR-2009-0034-0001
Agency: epa
Document Type: Proposed Rule
Title: Approval and Promulgation of Air Quality Implementation Plans; Maryland; Clean Air Interstate Rule
Posted Date: 2009-08-20T04:00Z

[Federal Register: August 20, 2009 (Volume 74, Number 160)]
[Proposed Rules]
[Page 42038-42043]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20au09-6]

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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 (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 (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 (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 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: 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 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 powers.marilyn@epa.gov.

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. 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

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
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

[[Page 42039]]

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. 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
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 (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 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

[[Page 42040]]

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:
    1. Include all NOX SIP Call trading sources that are not
EGUs under CAIR in the CAIR NOX ozone season trading
program;
    2. Provide for State allocation of NOX annual or ozone
season allowances using a methodology chosen by the State;
    3. Provide for State allocation of NOX 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 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
revision 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.\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
SO2 and NOX 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 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.
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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

[[Page 42041]]

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:
    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 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.\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 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

[[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 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.);

[[Page 42043]]

     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 (Pub. L. 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.

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

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