.04 Creating Emission Reduction Credits (ERCs).

A. An emissions unit that emits NOx or VOC is eligible to create an ERC if:

(1) The unit was in operation any time during calendar year 2002 or later, and emissions from the unit were included in the current inventory for the State Implementation Plan for the pollutant;

(2) The Department did not rely on the emission reduction in issuing a permit under an approved regulation; and

(3) The Department has not relied on the emission reduction in demonstrating attainment or reasonable further progress.

B. An ERC may be created by:

(1) Controlling emissions below the emission levels required by applicable State and federal requirements and the State Implementation Plan through a federally enforceable permit limit;

(2) Curtailing operations and reducing emissions through a federally enforceable permit condition; or

(3) Permanently discontinuing the operation of one or more emissions units at a source.

C. Quantification and use of ERCs.

(1) ERCs shall be based on a reduction of the source's actual emissions as that term is defined in Regulation .01 of this chapter.

(2) The Department shall credit an emissions unit with emission reductions achieved by shutting down an existing emissions unit or permanently curtailing production or operating hours if the reductions are permanent, quantifiable, and federally enforceable. In addition, the shutdown or curtailment is creditable only if it occurred on or after January 1, 2003, and if the reduction is not necessary to meet any other State or federal requirement.

(3) Creditable emission reductions that qualify as ERCs may be used to satisfy the requirement to provide offsets under this chapter and shall total at least 5 tons per year of VOC or NOx.

(4) If a new regulation is adopted that applies to an emissions unit that created ERCs, the ERCs shall be reduced by an amount equal to the reduction that would have been required before the ERCs were created.

(5) Emission reduction credits shall be enforceable by the Department and the EPA and shall be obtained by the date the new emissions unit commences construction.

(6) The reduction of emissions from an emissions unit that provides emission reduction credits shall occur before the date when the new or modified emissions unit becomes operational.

D. Location of ERCs.

(1) Generally, ERCs are acceptable if obtained from within the same area as the new or modified emissions unit. The Department may allow the owner or operator to obtain VOC or NOx emission reductions from other areas if:

(a) The other area has an equal or higher nonattainment classification than the area in which the emissions unit is located; and

(b) Emissions of the particular pollutant from the other area have been demonstrated to contribute to a violation of the National Ambient Air Quality Standard in the area in which the new emissions unit is located.

(2) The Department shall give preference to ERCs from emissions units located as close to the proposed emissions unit site as possible.

E. Exclusions and Limitations.

(1) ERCs shall expire as follows:

(a) For emissions units discontinuing operation before January 1, 2002, the ERCs expire January 1, 2012; and

(b) For emissions units discontinuing operation on or after January 1, 2002, the ERCs expire January 1, 2012, or 10 years after the discontinued operation, whichever is later.

(2) The expiration dates in §E(1) of this regulation do not apply if the ERCs are committed to a new or modified emissions unit through a permit to construct that has an enforceable contract to transfer the ERCs to the owner or operator of a new or modified emissions unit.

(3) An ERC may not be used to meet BACT, LAER, NSPS, RACT, allowance based programs, or any other emission limitation under the Clean Air Act.

F. Interprecursor Trading.

(1) Provided that the other requirements for such offsets are satisfied, the offset requirements of COMAR for emissions of NOx and VOC may be satisfied through interprecursor trading by offsetting reductions of emissions of either NOx or VOC, by submitting to the Department for written approval the following information:

(a) A description of the EPA approved air quality model(s) used to establish the appropriate ratio for the precursor substitution;

(b) A proposed ratio, not to be less than the ratio required under COMAR, for the precursor substitution and accompanying calculations; and

(c) A technical demonstration substantiating that the ratio achieves an equivalent or greater air quality benefit for ozone in the nonattainment area than what would be achieved without interprecursor trading.

(2) Approvals of precursor substitutions shall be made by the Department on a case-by-case basis and are permit specific.