\"Laughlin, Jan L\" \<Jan.L.Laughlin@conocophillips.com\>

10/05/2006 04:52 PM

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Group A-AND-R-DOCKET@EPA

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Kevin Culligan/DC/USEPA/US@EPA

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Subject

Docket ID No. OAR-2004-0076, Comments on CAIR NODA

To: Docket ID No. OAR-2004-0076

Please accept the attached comments by Nelson Industrial Steam Company

\<\<NISCO NODA comments.doc\>\>

**Comments of the Nelson Industrial Steam Company (NISCO) on**

**EPA's Notice of Data Availability for the CAIR Rule, Docket No. OAR-**

**2004-0076, 71 Fed. Reg. 44283 (August 4, 2006)**

# Introduction 

> EPA has included the Louisiana generating units owned by the Nelson
> Industrial Steam Company (NISCO) in its list of units subject to
> regulation under the EPA Federal Implementation Plan (FIP)
> implementing the CAIR rule. NISCO is filing these comments to object
> to the inclusion of its units in CAIR, and to address the accuracy of
> EPA's data concerning them.
>
> We begin with some general background on CAIR and our units, then
> address why our units should not be subject to CAIR, and conclude by
> discussing EPA's data concerning these units.

# Outline of the CAIR Rule

#   {#section .unnumbered}

> EPA's CAIR rule, issued in May of 2005, requires 28 States, including
> Louisiana, to reduce their aggregate emissions of SO~2~ and NO~x~ in
> order to help achieve EPA's air quality standards for particulates and
> ozone. 70 Fed. Reg. 25162 (May 12, 2005). The CAIR rule does not --
> and legally could not - formally tell States how to achieve these
> reductions. However, EPA has made clear that it strongly favors a "cap
> and trade" approach with control obligations limited to electric
> generating units (EGUs). EPA has embodied this approach in a FIP that
> would apply in CAIR States that do not timely adopt CAIR regulations
> under their own law. 71 Fed. Reg. 25328 (April 28, 2006).
>
> Under the FIP, EGUs in CAIR States would have to hold "allowances" for
> each ton of SO~2~ or NO~x~ they emitted. The total number of
> allowances in each State would reflect the State's allowable emissions
> under the CAIR rule. For SO~2~, this would be done by "devaluing" the
> acid rain SO~2~ allowances already issued. For NO~x~, new allowances
> would be issued. If the State issued them, it could decide the
> allocation scheme. If EPA issued them, they would be distributed
> according to "baseline" heat input, which is the average heat input in
> the highest three of the last five years.
>
> EPA issued its Notice of Data Availability to allow sources that would
> be subject to its CAIR FIP to object to their inclusion, and to
> correct any errors in EPA's database and thus make sure they received
> the NO~x~ emissions allowances to which they were entitled.

#  The NISCO Units 

> The NISCO facility consists of two 130 megawatt units in Westlake,
> Louisiana close to Lake Charles. The industrial participants who own
> the NISCO partnership are CITGO Petroleum Corporation, Sasol North
> America, and ConocoPhillips Company. Entergy, which operates the units
> pursuant to an operations and maintenance agreement, has a 1% voting
> interest in the venture.
>
> NISCO was designed and built as a source of electricity and process
> steam to the local plants of the three primary owners. These consist
> of two oil refineries and a chemical plant.
>
> The NISCO units were designed and built to be able to burn low-grade
> fuels such as culm, garbage, recycled tires, and petroleum coke. Since
> 1992, the NISCO units have been fueled by petroleum coke, a waste
> product of petroleum refining. (In fact, refinery production of
> petcoke has increased as the quality of crude available for refining
> has declined.) We believe these to be the only exclusively petcoke
> fueled, limestone-injection fluidized bed generators in the United
> States.
>
> The NISCO units have been approved cogenerators (Qualifying
> Facilities) under the Public Utility Regulatory Practices Act (PURPA)
> since inception of the partnership. They are also exempted as
> cogenerators from EPA's Acid Rain program.
>
> The NISCO power units are limestone injected fluidized bed boilers and
> are controlled for SO~2~, reducing potential emissions by over 90%.

# The NISCO Units Should be Exempt from CAIR 

## [The NISCO Units are not Designed and Operated to Produce Electricity for Sale]{.underline} 

> To be an EGU under the CAIR rule, a unit must "produce electricity for
> sale", 40 CFR 96.104(a). The NISCO units produce such trivial amounts
> of electricity for sale that they should be regarded as not meeting
> this test.
>
> In five of the 15 years since 1990, NISCO has not sold any electricity
> to the grid. In six more of those years, sales were below 0.2 % of
> total generation. Only in 2005 did sales to the grid exceed 0.82%.
> 2005 was the year of Hurricane Rita, and the special force majeure
> circumstances of that storm accounted for additional outside sales,
> which eventually totaled only 2.58% of annual production. The NISCO
> units were the first two units back on line in the entire SW
> Louisiana/SE Texas area and were intentionally run at maximum rates to
> supply badly needed power.
>
> Because these units are designed and used for internal power and steam
> use, several incidental sales to the grid in the past, due to abnormal
> plant operations or Force Majeure conditions, should not completely
> change the applicability. We feel strongly that this attribute should
> lead EPA to conclude that this facility is exempt from the CAIR
> regulation. A decision as momentous as classification as an EGU should
> not rest on such a thin data base.

B. [The NISCO Units Should be Classified as Cogenerators]{.underline}

> As noted earlier, only EGUs are subject to EPA's CAIR FIP. Following
> long-standing practice, EPA excluded cogenerators from the EGU
> definition and thus from CAIR. See 40 CFR 96.102.
>
> As EPA admits, it modeled its cogeneration exclusion on the
> long-standing PURPA approach. Had EPA stuck strictly with the PURPA
> approach, the NISCO units would have been excluded from CAIR.
>
> However, while the PURPA regulations apply tight qualification
> standards only to units that burn "natural gas or oil", see 18 CFR
> 292.205, a term that does not include petroleum coke, CAIR imposes
> these tests on the burning of "any solid fuel".
>
> Using this language to bring the NISCO units under CAIR reaches beyond
> EPA's intended purpose. EPA made clear that it intended this change to
> bring coal-fired units into CAIR "considering their relatively high
> emissions of SO~2~ and NO~x~ " 70 Fed. Reg. 25162, 25277 (May 12,
> 2005).
>
> Moreover, EPA based its conclusion that "solid fuel" units could meet
> the CAIR standards at reasonable cost on an analysis of control costs
> for coal-fired units only.
>
> id. See also the docket document entitled. "Cogeneration Unit
> Efficiency Calculations", which analyzes exclusively coal-fired units.
>
> In short, the NISCO units fall outside EPA's CAIR intent in two
> fundamental ways.
>
> First, they are not coal burning but burn petroleum coke, a fuel that
> was not covered by EPA's analysis. Petcoke is significantly harder to
> burn than coal. EPA's conclusion that coal-fired units could meet
> cogeneration efficiency standards does not apply to petcoke units
> because of this factor.
>
> That should not reflect adversely on NISCO. Both EPA and FERC
> supported the construction of the NISCO units at the time they were
> constructed, since both agencies saw the benefits of expanding
> capacity to burn low-grade fuels. Indeed, NISCO served as a
> demonstration project for the possibilities of burning such fuels in a
> full-scale generation unit.

# EPA's Specific Calculations for the NISCO Units 

> While NISCO maintains that these units should be exempt from the Clean
> Air Implementation Rule for the reasons outlined above, the following
> comments address the data accuracy outlined in the NODA Tables.
>
> EPA has linked several different data bases to the NODA. One of them
> contains heat input data from the Energy Information Administration.
> That database contains the following entries for "R S Nelson" Units 1A
> and 2A.
>
> From this data EPA, in "Table T-1, Annual Unit NOx Allocation",
> derives a proposed allowance allocation of 405 tons for Unit 1A and
> 429 tons for Unit 2A.
>
> NISCO believes that these numbers are meant to apply to its
> facilities. If so, we concur with the allowance allocation noted
> above. We concur even though the heat input data for 2000 is much
> lower than it should be and the fuel type listing is incorrect. Since,
> as we understand the rule, the allowance allocation is based on the
> highest three years of data, this single understatement does not
> affect the results. NISCO is continuing to evaluate the Ozone Season
> Allowance and will submit supplemental data as soon as possible.

# Conclusion

> For the reasons stated above, NISCO requests EPA to confirm that its
> units are not subject to the CAIR rule. NISCO is also happy to visit
> with EPA regarding the technical details of this unique process and
> fuel if additional information is needed. Please contact Allen Hile,
> NISCO Technical Manager @ (337) 494-6089.

Respectfully,

Mike Brenk

NISCO Management Committee Representative

> by Jan Laughlin
>
> ConocoPhillips