[Federal Register Volume 65, Number 203 (Thursday, October 19, 2000)]
[Proposed Rules]
[Pages 62671-62675]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-26904]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[MD104-3057; FRL-6888-2]


Approval and Promulgation of Air Quality Implementation Plans; 
Maryland; Nitrogen Oxides Reduction and Trading Program

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: EPA is proposing to approve a State Implementation Plan (SIP) 
revision submitted by the State of Maryland on April 27, 2000. This 
revision responds to the EPA's regulation entitled, ``Finding of 
Significant Contribution and Rulemaking for Certain States in the Ozone 
Transport Assessment Group Region for Purposes of Reducing Regional 
Transport of Ozone,'' otherwise known as the `` NOX SIP 
Call.'' This revision establishes and requires a nitrogen oxides 
(NOX) allowance trading program for large electric 
generating and industrial units, and reductions for cement kilns and 
stationary industrial combustion engines, beginning in 2003. The 
intended effect of this action has two purposes. EPA is proposing to 
approve the Maryland's NOX Reduction and Trading Program 
because it meets the requirements of the NOX SIP Call that 
will significantly reduce ozone transport in the eastern United States. 
In addition, EPA is proposing to approve the Maryland's NOX 
Reduction and Trading Program because it supports the one-hour 
attainment demonstration plans for the Baltimore, Metropolitan 
Washington, D.C. and Philadelphia-Wilmington-Trenton ozone 
nonattainment areas.

DATES: Written comments must be received on or before November 9, 2000.

ADDRESSES: Written comments may be mailed to David L. Arnold, Chief, 
Ozone & Mobile Sources Branch, Mailcode 3AP21, U.S. Environmental 
Protection Agency, Region III, 1650 Arch Street, Philadelphia, 
Pennsylvania 19103. Copies of the documents relevant to this action are 
available for public inspection during normal business hours at the Air 
Protection Division,

[[Page 62672]]

U.S. Environmental Protection Agency, Region III, 1650 Arch Street, 
Philadelphia, Pennsylvania 19103 and Maryland Department of the 
Environment, 2500 Broening Highway, Baltimore, Maryland 21224.

FOR FURTHER INFORMATION CONTACT: Cristina Fernandez, (215) 814-2178, or 
by e-mail at [email protected].

SUPPLEMENTARY INFORMATION: On April 27, 2000, the Maryland Department 
of the Environment (MDE) submitted a revision to its SIP to meet the 
requirements of the NOX SIP Call. The revision consists of 
the adoption of two new chapters COMAR 26.111.29 NOX 
Reduction and Trading Program and COMAR 26.11.30 Polices and Procedure 
Relating to Maryland's NOX Reduction and Trading Program.
    The information in this section is organized as follows:

I. EPA's Action

    A. What action is EPA proposing today?
    B. Why is EPA proposing this action?
    C. What are the general NOX SIP Call requirements?
    D. What is EPA's NOX budget and allowance trading 
program?
    E. What guidance did EPA use to evaluate Maryland's submittal?

II. Maryland's NOX Reduction and Trading Program

    A. When did Maryland submit the SIP revision to EPA in response 
to the NOX SIP Call?
    B. What is the Maryland's NOX Budget Trading Program?
    C. What is the result of EPA's evaluation of Maryland's program?

III. Proposed Action

    A. NOX SIP Call Requirements
    B. One-Hour Attainment Demonstration Plans

IV. Administrative Requirements

I. EPA's Action

A. What Action Is EPA Proposing Today?

    EPA is proposing to approve the Maryland's SIP revision concerning 
the adoption of its NOX Reduction and Trading Program, 
submitted on April 27, 2000.

B. Why Is EPA Proposing This Action?

    EPA is proposing this action for two purposes. Maryland's 
NOX Reduction and Trading Program regulations meet the 
requirements of the NOX SIP Call. In addition, Maryland's 
NOX Reduction and Trading Program regulations are part of 
the one-hour ozone attainment demonstration plans for the serious and 
severe ozone nonattainment areas of the State of Maryland. The one-hour 
attainment demonstration plans for the Baltimore, Metropolitan 
Washington, D.C. and Philadelphia-Wilmington-Trenton ozone 
nonattainment areas rely on the NOX reductions associated 
with the NOX Reduction and Trading Program in 2003 and 
beyond. Therefore, EPA is proposing full approval of Maryland's 
NOX Reduction and Trading Program for two reasons. First, 
because it meets the requirements of the NOX SIP Call, and 
secondly as a strengthening measure for the one-hour ozone attainment 
plans for Baltimore, Metropolitan Washington, D.C. and Philadelphia-
Wilmington-Trenton ozone nonattainment areas.

C. What Are the General NOX SIP Call Requirements?

    On October 27, 1998, EPA published a final rule entitled, ``Finding 
of Significant Contribution and Rulemaking for Certain States in the 
Ozone Transport Assessment Group Region for Purposes of Reducing 
Regional Transport of Ozone,'' otherwise known as the ``NOX 
SIP Call.'' See 63 FR 57356. The NOX SIP Call requires 22 
States and the District of Columbia to meet statewide NOX 
emission budgets during the five month period between May 1 and October 
1 in order to reduce the amount of ground level ozone that is 
transported across the eastern United States.
    EPA determined state-wide NOX emission budgets for each 
affected jurisdiction to be met by the year 2007. EPA identified 
NOX emission reductions by source category that could be 
achieved by using cost-effective measures. The source categories 
included were electric generating units (EGUs), non-electric generating 
units (non-EGUs), area sources, nonroad mobile sources and highway 
sources. However, the NOX SIP Call allowed states the 
flexibility to decide which source categories to regulate in order to 
meet the statewide budgets. In the NOX SIP Call notice, EPA 
suggested that imposing statewide NOX emissions caps on 
large fossil-fuel fired industrial boilers and electricity generating 
units would provide a highly cost effective means for States to meet 
their NOX budgets. In fact, the state-specific budgets were 
set assuming an emission rate of 0.15 pounds NOX per million 
British thermal units (lb. NOX/mmBtu) at EGUs, multiplied by 
the projected heat input (mmBtu) from burning the quantity of fuel 
needed to meet the 2007 forecast for electricity demand. See 63 FR 
57407. The calculation of the 2007 EGU emissions assumed that an 
emissions trading program would be part of an EGU control program. The 
NOX SIP Call state budgets also assumed on average a 30% 
NOX reduction from cement kilns, a 60% reduction from 
industrial boilers and combustion turbines, and a 90% reduction from 
internal combustion engines. The non-EGU control assumptions were 
applied at units where the heat input capacities were greater than 250 
mmBtu per hour, or in cases where heat input data were not available or 
appropriate, at units with actual emissions greater than one ton per 
day.
    To assist the states in their efforts to meet the SIP Call, the 
NOX SIP Call final rulemaking notice included a model 
NOX allowance trading regulation, called ``NOX 
Budget Trading Program for State Implementation Plans,'' (40 CFR part 
96), that could be used by states to develop their regulations. The 
NOX SIP Call notice explained that if states developed an 
allowance trading regulation consistent with the EPA model rule, they 
could participate in a regional allowance trading program that would be 
administered by the EPA. See 63 FR 57458-57459.
    There were several periods during which EPA received comments on 
various aspects of the NOX SIP Call emissions inventories. 
On March 2, 2000, EPA published additional technical amendments to the 
NOX SIP Call in the Federal Register (65 FR 11222). The 
March 2000 final rulemaking established the inventories upon which 
Maryland's final budget is based.
    On March 3, 2000, the D.C. Circuit issued its decision on the 
NOX SIP Call ruling in favor of EPA on all the major issues. 
Michigan v. EPA, 213 F.3d 663 (D.C. Cir. 2000). The Court denied 
petitioners' requests for rehearing or rehearing en banc on July 22, 
2000. However, the Court ruled against EPA on four narrow issues. The 
Court remanded certain matters for further rulemaking by EPA. EPA 
expects to publish a proposal that addresses the remanded portion of 
the NOX SIP Call Rule. Any additional emissions reductions 
required as a result of a final rulemaking on that proposal will be 
reflected in the second phase portion (Phase II) of the State's 
emissions budget. Maryland may be required to submit SIP revisions to 
address any revisions to the NOX SIP Call Rule.

D. What Is EPA's NOX Budget and Allowance Trading Program?

    EPA's model NOX budget and allowance trading rule, 40 
CFR part 96, sets forth a NOX emissions trading program for 
large EGUs and non-EGUs. A state can voluntarily choose to adopt EPA's 
model rule in order to allow sources within its borders to participate

[[Page 62673]]

in regional allowance trading. The October 27, 1998 Federal Register 
notice contains a full description of the EPA's model NOX 
budget trading program. See 63 FR 57514--57538 and 40 CFR part 96. In 
general, air emissions trading uses market forces to reduce the overall 
cost of compliance for pollution sources, such as power plants, while 
maintaining emission reductions and environmental benefits. One type of 
market-based program is an emissions budget and allowance trading 
program, commonly referred to as a ``cap and trade'' program.
    In an emissions budget and allowance trading program, the state or 
EPA sets a regulatory limit, or emissions budget, in mass emissions 
from a specific group of sources. The budget limits the total number of 
allocated allowances during a particular control period. When the 
budget is set at a level lower than the current emissions, the effect 
is to reduce the total amount of emissions during the control period. 
After setting the budget, the state or EPA then assigns, or allocates, 
allowances to the participating entities up to the level of the budget. 
Each allowance authorizes the emission of a quantity of pollutant, 
e.g., one ton of airborne NOX.
    At the end of the control period, each source must demonstrate that 
its actual emissions during the control period were less than or equal 
to the number of available allowances it holds. Sources that reduce 
their emissions below their allocated allowance level may sell their 
extra allowances. Sources that emit more than the amount of their 
allocated allowance level may buy allowances from the sources with 
extra reductions. In this way, the budget is met in the most cost-
effective manner.

E. What Guidance Did EPA Use To Evaluate Maryland's Submittal?

    The final NOX SIP Call rule included a model 
NOX budget trading program regulation. See 40 CFR part 96. 
EPA used the model rule and 40 CFR 51.121-51.122 to evaluate Maryland's 
NOX Reduction and Trading Program.

II. Maryland's NOX Reduction and Trading Program

    A. When Did Maryland Submit the SIP Revision to EPA in Response to 
the NOX SIP Call?
    On April 27, 2000, the Maryland Department of the Environment 
submitted a revision to its SIP to meet the requirements of the 
NOX SIP Call.

B. What Is the Maryland's NOX Reduction and Trading Program?

    Maryland's SIP revision to meet the requirements of the 
NOX SIP Call consists of the adoption of two new chapters 
COMAR 26.11.29--NOX Reduction and Trading Program and COMAR 
26.11.30--Polices and Procedure Relating to Maryland's NOX 
Reduction and Trading Program. The regulations under COMAR 26.11.29 and 
COMAR 26.11.30 affect electric generating units, non-electric 
generating units, cement manufacturing facilities, and large internal 
combustion engines.
    Chapter COMAR 26.11.29--NOX Reduction and Trading 
Program is divided into fifteen new regulations: (.01) Definitions; 
(.02) Incorporation by Reference; (.03) Scope and Applicability; (.04) 
General Requirements for Affected Trading Sources; (.05) NOX 
Allowance Allocations; (.06) Compliance Supplement Pool; (.07) 
Allowance Banking; (.08) Emission Monitoring; (.09) Requirements for 
New Sources and Set-Aside Pool; (.10) Reporting; (.11) Record Keeping; 
(.12) End-of-Season Reconciliation; (.13) Compliance Certification; 
(.14) Penalties; (.15) Requirements for Affected Nontrading Sources.
    The Code of Maryland Regulations (COMAR) 26.11.30--Polices and 
Procedure Relating to Maryland's NOX Reduction and Trading 
Program is divided into nine new regulations: (.01) Scope and 
Applicability; (.02) Definitions; (.03) Procedures Relating to 
Compliance Accounts; (.04) Procedures Relating to General Accounts; 
(.05) Allowance Banking; (.06) Allowance Transfers; (.07) Early 
Reductions; (.08) Opt-in Procedures; (.09) Allocation of Allowances.
    Maryland's NOX Reduction and Trading Program establishes 
and requires a NOX allowance trading program for large 
electric generating and industrial units, and reductions for cement 
kilns and stationary industrial combustion engines.
    The regulations under COMAR 26.11.29 and COMAR 26.11.30 establish a 
NOX cap and allowance trading program for the ozone seasons 
of 2003 and beyond. The State of Maryland voluntarily chose to follow 
EPA's model NOX budget and allowance trading rule, 40 CFR 
part 96, that sets forth a NOX emissions trading program for 
large EGUs and non-EGUs. Because Maryland's NOX Reduction 
and Trading Program is based upon EPA's model rule, Maryland sources 
are allowed to participate in the interstate NOX allowance 
trading program that EPA will administer for the participating states. 
The State of Maryland has adopted regulations that are substantively 
identical to 40 CFR part 96. Therefore, pursuant to 40 CFR 
51.121(p)(1), Maryland's SIP revision is automatically approved as 
satisfying the same portion of the State's NOX emission 
reduction obligations Maryland projects such regulations will satisfy.
    Under COMAR 26.11.29 and COMAR 26.11.30, Maryland allocates 
NOX allowances to the EGUs and non-EGUs units that are 
affected by these requirements. The NOX trading program 
applies to all fossil fuel fired EGUs with a nameplate capacity greater 
than 25 MW or more that sell any amount of electricity to the grid as 
well as any non-EGUs that have a heat input capacity equal to or 
greater than 250 mmBtu per hour. Each NOX allowance permits 
a source to emit one ton of NOX during the seasonal control 
period. NOX allowances may be bought or sold. Unused 
NOX allowances may also be banked for future use, with 
certain limitations. Source owners will monitor their NOX 
emissions by using systems that meet the requirements of 40 CFR part 
75, subpart H, and report resulting data to EPA electronically. Each 
budget source complies with the program by demonstrating at the end of 
each control period that actual emissions do not exceed the amount of 
allowances held for that period. However, regardless of the number of 
allowances a source holds, it cannot emit at levels that would violate 
other federal or state limits, for example, reasonably available 
control technology (RACT), new source performance standards, or Title 
IV (the Federal Acid Rain program).
    Maryland's NOX Reduction and Trading Program establishes 
requirements for cement manufacturing facilities and stationary 
internal combustion engines. These sources are subject to 
NOX reduction requirements but do not participate in the 
NOX trading program.
    Maryland's submittal does not rely on any additional reductions 
beyond the anticipated Federal measures in the mobile and area source 
categories.
    Maryland's submittal demonstrates that the NOX emission 
budgets established by EPA (65 FR11222) will be met as follows:

------------------------------------------------------------------------
                                                               Maryland
                                                  EPA 2007     2007 NOX
                                                 NOX budget     budget
                Source category                  emissions    emissions
                                                   (tons/       (tons/
                                                  season)      season)
------------------------------------------------------------------------
EGUs..........................................       14,656       14,656
Non-EGUs......................................       12,585       12,513
Area Sources..................................        4,448        4,448
Non-road Sources..............................       20,026       20,026

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Highway Sources...............................       30,183       30,183
                                               -------------------------
    Total.....................................       81,898       81,826
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C. What Is the Result of EPA's Evaluation of Maryland's Program?

    EPA has evaluated Maryland's April 27, 2000 SIP submittal and finds 
it approvable. The Maryland NOX Reduction and Trading 
Program is consistent with EPA's guidance and meets the requirements of 
the NOX SIP Call. EPA finds the NOX control 
measures in the Maryland's NOX Reduction and Trading Program 
approvable. The April 27, 2000 submittal will strengthen Maryland's SIP 
for reducing ground level ozone by providing NOX reductions 
beginning in 2003. Furthermore, Maryland's NOX Reduction and 
Trading Program is necessary to fulfill a requirement of the one-hour 
ozone attainment plans for the serious and severe nonattainment areas 
of Maryland. The attainment demonstration plans for the Baltimore, 
Metropolitan Washington, D.C. and Philadelphia-Wilmington-Trenton ozone 
nonattainment areas rely on the NOX reductions associated 
with the NOX Reduction and Trading Program in 2003 and 
beyond. EPA finds that Maryland's submittal is fully approvable because 
it meets the requirements of the NOX SIP Call and it is a 
strengthening measure for the one-hour ozone attainment plans for the 
Baltimore, Metropolitan Washington, D.C. and Philadelphia-Wilmington-
Trenton ozone nonattainment areas.

III. Proposed Action

A. NOX SIP Call Requirements

    EPA is proposing to approve the Maryland's SIP revision consisting 
of its NOX Reduction and Trading Program, which was 
submitted on April 27, 2000. EPA finds that Maryland's submittal is 
fully approvable because it meets the requirements of the 
NOX SIP Call.

B. One-Hour Attainment Demonstration Plans

    EPA is proposing to approve the Maryland's SIP revision concerning 
the adoption of the NOX Reduction and Trading Program, which 
was submitted on April 27, 2000. EPA finds that Maryland's submittal is 
fully approvable because it is a strengthening measure for the 
Maryland's one-hour ozone attainment plans for its serious and severe 
ozone nonattainment areas, namely the Baltimore (severe), Metropolitan 
Washington, D.C. (serious) and Philadelphia-Wilmington-Trenton (severe) 
ozone nonattainment areas.. Interested parties may participate in the 
Federal rulemaking procedure by submitting written comments to the EPA 
Regional office listed in the Addresses section of this document. These 
comments will be considered before taking final action. EPA calls your 
attention to the November 9, 2000 deadline date for submittal of 
comments on this proposed action to approve this SIP revision submitted 
by the State of Maryland . The EPA is providing a shortened time period 
for comment for two reasons. As an initial matter, these revisions are 
non-controversial and EPA does not expect comment as Maryland's 
regulations incorporate by reference much of the federal rule found at 
40 CFR Part 96 for implementation of the NOX SIP call. 
Moreover, this SIP revision is necessary for full approval of the 
attainment demonstration SIP for the Metropolitan Washington, D.C. 
ozone nonattainment area. The EPA is currently under an obligation to 
complete rulemaking by November 15, 2000 fully approving the attainment 
demonstration for the Metropolitan Washington, D.C. ozone nonattainment 
area or, in the alternative, proposing a federal implementation plan.

IV. Administrative Requirements

    Under Executive Order 12866 (58 FR 51735, October 4, 1993), this 
proposed action is not a ``significant regulatory action'' and 
therefore is not subject to review by the Office of Management and 
Budget. This proposed action merely approves state law as meeting 
federal requirements and imposes no additional requirements beyond 
those imposed by state law. Accordingly, the Administrator certifies 
that this proposed rule will not have a significant economic impact on 
a substantial number of small entities under the Regulatory Flexibility 
Act (5 U.S.C. 601 et seq.). Because this rule proposes to approve pre-
existing requirements under state law and does not impose any 
additional enforceable duty beyond that required by state law, it 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). For the same reason, this proposed rule also 
does not significantly or uniquely affect the communities of tribal 
governments, as specified by Executive Order 13084 (63 FR 27655, May 
10, 1998). This proposed rule will not have substantial direct effects 
on the States, on the relationship between the national government and 
the States, or on the distribution of power and responsibilities among 
the various levels of government, as specified in Executive Order 13132 
(64 FR 43255, August 10, 1999), because it merely approves a state rule 
implementing a federal standard, and does not alter the relationship or 
the distribution of power and responsibilities established in the Clean 
Air Act. This proposed rule also is not subject to Executive Order 
13045 (62 FR 19885, April 23, 1997), because it is not economically 
significant.
    In reviewing SIP submissions, EPA's role is to approve state 
choices, provided that they meet the criteria of the Clean Air Act. In 
this context, in the absence of a prior existing requirement for the 
State to use voluntary consensus standards (VCS), EPA has no authority 
to disapprove a SIP submission for failure to use VCS. It would thus be 
inconsistent with applicable law for EPA, when it reviews a SIP 
submission, to use VCS in place of a SIP submission that otherwise 
satisfies the provisions of the Clean Air Act. Thus, the requirements 
of section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (15 U.S.C. 272 note) do not apply. As required by section 3 
of Executive Order 12988 (61 FR 4729, February 7, 1996), in issuing 
this proposed rule, EPA has taken the necessary steps to eliminate 
drafting errors and ambiguity, minimize potential litigation, and 
provide a clear legal standard for affected conduct. EPA has complied 
with Executive Order 12630 (53 FR 8859, March 15, 1988) by examining 
the takings implications of the rule in accordance with the ``Attorney 
General's Supplemental Guidelines for the Evaluation of Risk and 
Avoidance of Unanticipated Takings' issued under the executive order.
    This proposed rule approving the Maryland NOX Reduction 
and Trading Program does not impose an information collection burden 
under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 
3501 et seq.).

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Nitrogen dioxide, 
Ozone, Reporting and recordkeeping requirements.

    Authority: 42 U.S.C. 7401 et seq.


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    Dated: October 12, 2000.
Bradley M. Campbell,
Regional Administrator, Region III.
[FR Doc. 00-26904 Filed 10-18-00; 8:45 am]
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