## ! 

# I 

# I i i 

### ' BEFORETHEILLINOISPOLLUTIONCONTROLBOARD AMERENENERGYRESOURCES, ) ) ) ) ) ) ) ) ) ) Petitioner, 

### v. ILLINOIS ENVIRONMENTAL PROTECTIONAGENCY, Respondent. NOTICE OFFILING To: ALL PARTIES ONTHEAIT ACHED SERVICE LIST PCB 12-126 (Variance- Air)

PLEASE TAKE NOTICE thatwehave today electronically filed with the Office ofthe Clerk of the illinois Pollution Control Board a MOTION FOR WAIVER OF PAGE LIMITATION and PETITIONER'S POST-HEARING BRIEF, copies of which are herewith served upon you.

Dated: August 15, 2012 ReneeCipriano Gabriel Rodriguez Amy Antoniolli SCHIFFHARDINLLP 233 SouthWackerDrive Suite 6600 Chicago, illinois 60606 312-258-5500



# 12-

- - AlTACHMENT----cERTIFICATEOFSERVICE I, the undersigned, certifY that on this 15th day of August, 2012, I have served electronically the attached MOTION FOR WAIVER OF PAGE LIMITATION and PETITIONER'SPOST-HEARINGBRlEF,uponthefollowingpersons: JohnTherriault, AssistantClerk CarolWebb,HearingOfficer illinoisPollutionControlBoard JamesR ThompsonCenter Suite 11-500 100WestRandolph Chicago,lllinois 60601

andelectronicallyandby

### first classmail,postage affixed, upon: GinaRoccaforte AssistantCounsel DivisionofLegalCounsel illinoisEnvironmentalProtectionAgency 1021 North GrandAvenue, East P.O.Box 19276 Springfield,lllinois 62794-9276

ReneeCipriano GabrielRodriguez AmyAntoniolli SCHIFF

### HARDINLLP 233 SouthWackerDrive Suite 6600 Chicago,lllinois 60606 312-258-5500

# a~**~** AmyAntoniolli



## .,SERVICE LIST (PCB 12-126) JohnTherriault,AssistantClerk GinaRoccaforte CarolWebb, Hearing Officer Assistant Counsel Illinois Pollution Control Board Division ofLegal Counsel James R. Thompson Center lllinois EnvironmentalProtectionAgency 100West Randolph Street, Suite 11-500 1021 North GrandAvenue, East Chicago, lllinois 60601 P.O. Box 19276 therriaj@ipcb.state.il.us Springfield, lllinois 62794-9276BEFORETHEILLINOIS POLLUTION CONTROLBOARD AMERENENERGYRESOURCES, ) ) ) ) ) ) ) ) ) ) 

### Petitioner,


### v. PCB 12·126 

### (Variance-Air) ILLINOIS ENVIRONMENTAL PROTECTIONAGENCY, 

### Respondent.
MOTIONFORWAIVER OFPAGELIMITATION 

### Now comes the Petitioner, Ameren Energy Resources ("AER"), by and through its attorneys, and for its Motion for Waiver ofPage Limitation for Petitioner's Post-Hearing Brief beforethePollution ControlBoard ("Board"), states as follows: 1. Section 101.302(k) oftheBoard's prOcedural rules states as follows: Page Limitation. No motion, brief in support of motion, or brief may exceed 50pages, and no amicus curiaebriefmay exceed20pages, without prior approval ofthe Board orhearing officer. These limits do notinclude appendices containing relevantmaterial. 35lll. Adm. Code 101.302(k). 2. In

### orderto fully and fairly present Petitioner's variance requestbefore this Board, Petitionerrespectfully requests a waiver ofthe applicable 50-page limitation. The Board held a hearing in this matter on August 1, 2012. At that hearing, Hearing Officer Webb received questions from Board Members and heard oral public statements from nearly 100 people. In 

### addition, the Boardhas received a voluminous 2,565 written public comments into the record to date. AER cannot adequately address the numerous questions, public comments, both oral and written, and the various issues raised in those questions and comments, in the 50-page limit provided intheBoard'sprocedural rules.

### 3. AER, therefore, moves this Board to grant a waiver ofthe 50-page limitation applicable to the Petitioner's post-hearing brief and accept the Petitioner's Post-Hearing Brief filed concurrentlywiththis motion. WHEREFORE, thePetitionerrespectfullyrequests thatthe Pollution Control Board grant this motion for waiver and allow the Petitioner's post-hearing brief to 

### exceed the 50-page limitation setforth in35 

### Ill.Adm. Code 101.302(k).

Dated: August 15, 2012 Renee Cipriano GabrielRodriguez Amy

### Antoniolli SchiffHardin, LLC 233 SouthWackerDrive, Suite 6600 Chicago, lL60606 Respectfully submitted, AMERENENERGYRESOURCES,Petitioner.BEFORE THE ILLINOIS POLLUTION CONTROLBOARD

AMERENENERGYRESOURCES, Petitioner,


### v. ILLINOIS ENVIRONMENTAL PROTECTIONAGENCY, Respondent. ) ) ) ) ) ) ) ) ) ) PCB 12-126 (Variance- Air)

PETITIONER'S POST-HEARINGBRIEF On May 3, 2012, Petitioner filed with this Board a request for variaoce relieffrom both the 2015 and 2017 sulfur dioxide (S02) emission rateprovisions ofthe Illinois Multi-Pollutaot Standard ("MPS"), 35 Ill. Adm. Code § 225.233, 1 specifically the S02 emissions staodards set forth in Section 225.233(e)(3)(C)(iii) and (iv). At the time ofthe filing, AER sought relieffrom Section 225.233(e)(3)(C)(iii) for five years beginning Jaouary 1, 2015, and ending December 31, 2019, aod relief from Section 225.233(e)(3)(C)(iv) for four years, beginning Jaouary 1, 2017, and endingDecember 31, 2020. AERhas requested additional time to comply with the 2015 and 2017 S02 emission rates because, among otherthings, declining power marketprices have resulted in an insufficient cash flow necessary to finaoce and ·maintain the construction completion schedule of flue gas desulfurization ("FGD") equipment atthe NewtonEnergy Center ("Newton FGD Project"). The installation aod operation ofthe Newton FGD is necessary for the Ameren MPS Group to meet the 2015 aod 2017 MPS emission rates. As described more fully in the petition and at hearing,
1Hereinafter, citations to the Board's regulations will be by section number only.AER comes to thisBoard now, in 2012, seeking the requested reliefbecause the reliefis critical from both a timing standpoint, as well as from a variance length standpoint. From a timing standpoint, coming before the Board now will allow AER to conserve cash flow and stave off draconian operational measures. From a variance length standpoint, the length oftime ofthe reliefperiod is critical to ensuring that the stability ofthe marketplace will have time to return thereby allowing the completion ofthe Newton FGD Project. Absent time to recover, AER will be left with no choice butto cease operations at additional energy centers as its only other viable compliance alternative. This point is worth repeating. Absent time to recover, AER will be left with no choice but to cease operations at additional energy centers as its only other viable compliance alternative. This is not an idle threat as has seemingly been suggested. The shuttering ofplants is not a decision that AER, or any company for that matter, would chose as its "preferred" or "easy" option norwould AER or any other company, publicly announce such a possible consequence without exploring fully other compliance options. Indeed, the shuttering ofany ofAER'splants would be a blowto the core ofAER's business and would be devastating to its employees, the local communities, equipment suppliers and contractors, state taxing authorities and already struggling local school districts. As Representative Phelps shared with the Board, "Joppa supports 164 well paying jobs for southern Illinois. You put that in perspective in Chicago, that's like 10,000 some odd jobs in southern Illinois." (Tr. 60). The additional time AER seeks due to hardship is necessary to allow recovery ofthe power market and the orderly planning, mobilizing and completion ofthe Newton FGD Project. There has beenmuch discussion in the written public comments as well as at hearingthat AER should have foreseen or anticipated its hardship (Tr. 188, etc.) and should not, therefore, be able to rely on it now. AER struggles to respond to such hollow accusations in light ofthe wide

2spread financial challenges seen throughout the world. AER has also tried to minimize the hardship it faces by instituting a variety of measures to conserve cash. AER further shuttered two ofits energy centers so it could focus resources at its other operating units on the System. All of its efforts, however, could not prevent AER from having to choose its least-preferred approach to conserving cash through deceleration ofthe Newton FGD. As explained by Mr. Gary Rygh ofBarclay's Bank PLC, "from an investor's perspective, it appears no one wants to complete the Newton FGD system project more that AER[G] itself'. (Tr. 49). As presented, AER will continue various limited construction activities at the Newton Energy Center. By continuing limited construction activities, AER will be in a better position to respond quickly
once powermarketprices, the economy and cash flows improve. AER is only asking for reliefthat is absolutely necessary to get it through these trying economic times. In doing so, AERhas been able to offer a compliance plan thatprovides a net environmental benefit with respect to S02 emissions. By agreeing to make S02 emissions reductions earlier than anticipated, AERwill have emitted fewer tons ofS02 that itwould under the current terms ofthe MPS, resulting in a discernible benefit to human health. In response to comments regarding the impacts ofS02 to human health, AERrequested that expert analysis be performed addressing this issue and has attached itto this post-hearing commentfor the Board's consideration.


### I. RELIEF REQUESTED BY AER In AER's petition filed with the Board on May 4, 2012, AERvoluntarily offered to meet
an overall annual S02 annual emission rate in 2012 through 2019 of0.38 lb/MMBtu, decliningto
a rate of0.25 lb/MMBtu by January 1, 2020 and 0.23 lb/MMBtuby January 1, 2021. (Pet. Pg. 8- 9). Also as partofAER's compliance plan, AERmust continue to burn low-sulfur coal fromthe
3PowderRiver Basin and manage operations as necessaryto maintain compliance. (Id.). Further, consistent with cash flows, AER will maintain a continuous program of construction at the NewtonEnergy Center so as to be in a position to have the Newton FGD Project completed and operational to meet compliance obligations. (Id.). In its recommendation ("Recommendation"), the Illinois Environmental Protection Agency ("Agency") proposed an alternative mitigation S02 emission rate of0.35 lb/MMBtu to apply duringthe calendar years 2013 through 20192 (Rec. 11). As explained in AER's first and second set ofresponses to the Board's technical questions, AER agrees to meetthis revised S02 emissionrate. AERalso respondedto the Illinois EPA'srequestthatthe variance time periodbe shortened by agreeing to comply with the 0.23 lb/MMBtu beginning on January 15, 2020, rather than on December 31, 2020 as proposed inthe Petition. The return to compliance with the 0.25 lb!MMBtu rate will remain on the date proposed by AER in its Petition (January 1, 2020). As explained in its Response to the Hearing Officer's Questions dated July 30, 2012, and by Michael Menne through his testimony atthe August I hearing, AERwill comply with the more stringent

## so2 emission rate duringthe calendaryears of2013 through 2019 by operatingflue gas desulfurization ("FGD") systems atthe DuckCreek and Coffeen Energy Centers ata higher level ofcontrol. Mr. Menne went on to explain that"[e]ven atthose levels, [the] compliance margins remain very low and AER will need to employ operational strategies such as low sulfur coal procurement and generation utilization in orderto comply withtheproposed rate." (Tr. 26). The 0.35 lb/MMBtu emission rate for S02 through calendar year 2019 also commits AER to not operate the Hutsonville and Meredosia Energy Centers during the pendency of the variance. None ofthese steps--maintaining the shuttering ofMeredosia or Hutsonville, operating the FGD
2 The Recommendation will be citedto as "Rec. at "

4systems at Duck Creek and Coffeen Energy Centers, procurement oflower sulfur coal-none of them, are required by the laws on the books today. (Tr. 26). Thus, in answer to the question posed by the Environmental Law and Policy Center ("ELPC") "[i]f all those things are done now, how close does that bring the company to compliance with the [MPS]?"--the answer is an emissionrate of0.35lb/MMBtu. (Tr. 119). AER also wishes to confirm again its willingness to meet certain conditions as part ofits complianceplan, should reliefbe granted: I. AER agrees not to operate the Hutsonville or Meredosia Energy Centers for power generation purposes during the pendency ofthe variance; except that the FutureGen project which is currently proposed for the Meredosia Energy Center site is exempt from this restriction. 2. During the term ofthe variance, AER agrees to file progress reports with the Board and the Agency as to the status of construction activities relating to the Newton Scrubber annually by the end ofeach calendar year. Furthermore, in the event the completion ofthe scrubber projectbecomes financially infeasible, AER agrees to advise the Board and the Agency of alternative plans for compliance duringthe remainingterm ofthevariance.


### II. AERHAS MET ITS BURDEN AND IS ENTITLED TO RELIEF Section 35(a) of the Illinois Environmental Protection Act (415 ILCS 5/35(a) (2010)) provides that, "[t]o the extent consistent with applicable provisions ofthe* * *Clean Air Act," the Board may grant individual variances where it is shown that "compliance with any rule or regulation, requirement or order of the Board would impose an arbitrary or unreasonable hardship." The petitionerbearsthe burden ofproof. 415 ILCS 5/37(a) (2010).
5Several public.commenters stated during the course ofthe hearing that AER's variance request was somehow "unfair" since others would have to comply with the MPS. However, the Board created the variance procedure specifically to allow individual petitioners to seek temporary relieffrom rules ofgeneral applicability. The purpose ofa variance has been stated manytimes by the Board and Illinois courts. The Appellate Court, citing to Monsanto in City of Mendota v. Pollution Control Board, 112 

### Ill. Dec. 752, 757, 514 N.E.2d 218 (3'd Dist. 1987), stated "[t]he variance provisions ofthe Act are intended to afford some flexibility in regulating the speed for compliance." The Appellate Court in Celotex Corporation v. Pollution Control Board, 65 Ill. App. 3rd 776, 22 

### Ill. Dec. 474, 382 N.E.2d 864, 866 (4th Dist. 1978), phrasedthe purpose as "[t]he issues in a variance proceeding focus upon whether compliance should be excused for a period oftime." AER's decision to opt-in to the MPS was not an "agreement" or the "functional equivalent ofa contract" as characterized by the ELPC advocating on its own behalfand that ofEnvironment Illinois, Natural Resources Defense Council, Respiratory Health Association, and Sierra Club (collectively, "Citizens Groups") (PC# 2409, at 23), but rather a decision to be subject to one Illinois regulation as opposed to another. AER's .request, accordingly, fulfills the purpose of the variance process and there is nothing "unfair" about asking for more time to comply. Infact, it is theresponsiblethingto do with respectto local and State economies especially given that AER's compliance plan offsets any potential adverse impacts to humanhealth andthe environment. Given the temporary nature of a variance request, site-specific rulemaking analyses regarding environmental impact such as those raised by ELPC are not applicable. 

### Inposthearing comments, ELPC cites to ProposedSite Specific Rule Changefor City of Mendota: 35 Ill. Adm. Code 306.304, R88-6 (Apr. 6. 1989); aff'dby City of Mendota v. PCB, 192 Ill. App. 3d



### 6704 (3'd Dist. 1990), but that comparison is without merit. The Board highlighted the inherent difference between granting a site-specific rulemaking and temporary relief in a variance proceeding by explaining thatifthe Board were to grant the relief, the proponent would have no incentiveto investigate or pursue alternatives and "the potential for environmental improvement would be forfeited." 

### City of Mendota, R88-6, slip op. at 7. The same cannot be said for AER. With the short-term relief allowed under a variance, AER must continuously proceed towards compliance. Also, as explained in more detail below, AER's hardship is not self-imposed and simply cannot be likened to situations where the Board has found that the petitioners' own business decisions led to noncompliance. ELPC cites to 

### Ecko Glaco Corp. v. !EPA, 186 III. App. 3d 141, 150-51 (I" Dist. 1989), for an example ofwhere the Board has found that a company's own business decisions were responsible for its noncompliance. AER's situation is inapposite. AER did not delay either in choosing a plan to comply withthe MPS or in decidingto seekrelieffrom the Board. AERcommitted to installing a wetFGD system atNewtonto comply with the MPS. Theproject is now more thanhalfcomplete. Within a few short months ofthe CSAPR stay and the sharp decline in powerprices due to lowest demand in decades because ofthe recession, the exceptionally mild weatherthis pastwinter, and an increased supply ofnatural gas, AERknew it did not have the cash flows necessary to complete the Newton FGD project. The company petitionedthe Board for moretime which would allow itto continue to progress towards its goal at a sustainable rate. AER never "lacked a firm compliance plan," or "lacked diligence in pursuing compliance" as the Board found in 

### Ecko Glaco. To the contrary, AER acted swiftly and responsibly to ensure that it could remain in compliance and keep energy centers open.

7AER has consistently provided a clear plan to bring it into compliance with the MPS requirements.
A. AER Has Demonstrated that it is Facing an Arbitrary and Unreasonable Hardship. AERhas explained more fully in its petition"the circumstances thathave led itto face the hardship it faces today. During 2012,the marketprices for power collapsed, fallingto levels not
seen since 1978. (Pet. 19). The sharp decline inpowerprices is due to lower demandbecause of the recession, the exceptionally mild weather this winter, and an increased supply ofnatural gas from shale gas that has contributed to lower natural gas prices. Given these conditions, AER's financial health and access to capital have both been severely impaired and the current outlook for the next several years is no better. AEG's operating proceeds are now insufficient to fully fund large-scale capitalprojects, inparticulartheNewtonFGD System. (Pet. at21). During the August I hearing, the ELPC offered Mr. Rob Kelter to testify as to the background oftheElectric Service Customer Choice and Rate ReliefLaw of 1997 ("1997 Law")
as it relates to AER's currentposition and AER's petition for variance. (Tr. 68). ELPC argues that the economic conditions and compliance obligations AER is facing today were somehow foreseeable in 1997 when the Electric Service Customer Choice and Rate ReliefLaw of 1997
was enacted. (Tr. 71). ELPC also contends that in transferring generation assets into merchants companies,Amerentook a calculated and knowingriskthat deregulationwouldbe advantageous to shareholders. (Tr. 70). In support, ELPC relies on a dated and irrelevantreport createdbythe Citizens Utility Board ("CUB") in early 2006 to demonstrate that "lays out just how well Amerenperformed." (Tr. 71). 

### 1. AER'sHardship WasNeitherForeseeableNorSelf-Imposed.
8AER's predecessors did not "seek" deregulation. PC# 2409, pg30. Rather, itwas one of the primary purposes ofthe Electric Service Customer Choice and Rate ReliefLaw of 1997 to, in fact, incent the utilities to move their generating plants into either affiliates or third parties, where they could no longer be controlled by the utilities and would, instead, compete in a wholesale power market to provide power to retail customers at prices determined by competition. The General Assembly intended to incent this change by enacting a streamlined process with reduced "tests," available only for a finite time period. Mr. Kelter's prior employer, the CUB, was a strong advocate for this outcome. The law was purposely crafted to encourage transfer by requiring limited approval requirements and making more onerous the decision to stay within the regulated entity. Why? Becausethe goal ofthe 1997 Law was to give customers significant rate relief-and that it did. Indeed, ifthe 1997 Law was enacted to provide the utilities with some advantage, it would be doubtful that CUB would have been the Law's champion. Contrary to ELPC's assertion, the 1997Law did not "facilitateAmeren's creation." (PC# 2409, pg. 30). CIPSCO Incorporated and Union Electric agreed to merge in 1995, had already filed for approval from the Illinois Commerce Commission under the pre-1997 Public Utilities Act, andwere 

### intheprocess ofmergingwhenthe 1997 Lawwas passed. Mr. Kelter overinterpreted the statutory language ofthe Public Utilities Act by pointing to the words "an electric utility may" in Section 16-111(g) and asserting that Ameren was not compelled by the deregulation legislation to effectuate the transfer ofits generating plants. The phrase "an electric utility may" simply signaled that during the "mandatory transition period" created by the 1997 Law, an electric utility could transfer assets either by using the procedure created by Section 16-111(g), or by using existing procedures already in the Public Utilities Act



### 9(and which had been used prior to the 1997 Law to obtain approval to transfer assets). The broader statutory picture missed by Mr. Kelter is that the General Assembly, by creating an expeditious process for transferring generating plants that would only be available for a limited, finite amount of time (the mandatory transition period), the 1997 Law intended to incent the electric utilities to divest their generating plants into wholesale power supply companies

- which
was one ofthe overriding structural changes that the 1997 Act was intended to foster, namely, the separation of generating plants from the regulated distribution utilities. While it is true Ameren was not compelled to effectuate this transfer, there was at the time a much greater incentiveto do so than Mr. Kelterportrayedinthis testimony. In any case, AER does not argue it is the deregulated market alone that creates the hardship it now faces. Current economic conditions go beyond any price declines that were foreseeable when the 1997 Law was passed or even when the MPS was enacted in 2006. The
new methods of gas extraction are a "game-changing" technology that have fundamentally altered the outlook for gas supplies and pricing. The general recessionary economic conditions have also depressed the demand for power and therefore power prices. Further, mandatory requirements that certain percentages of the total retail electric supply come from renewable resources, enacted in Illinois in 2007, have also reduced the demand for power from traditional sources, and consequently prices. In sum, the MPS was in fact premised onthe expectation that the power market would continue to support the capital expenditures necessary to meet the proposed emission rates. Market conditions and new technologies and policies that have come about since thattime were not self-imposed and simply not foreseeable. It is the convergence of these factors that amountto the arbitrary andunreasonable hardship AERnow faces.

10Nonetheless, AER does not, nor could it, seek to undo in this variance proceeding, the legislative mandate that resulted in a deregulation ofpower generation in Illinois. Rather, AER, in setting forth the realities of the marketplace in its petition for relief, is simply providing contextfor the financial hardship that itfaces today, will face in the coming years, and to explain why creditors are unwilling to provide capital funding to merchant companies as compared to regulated utilities. AERfurther pointed out deregulation to explain why afunding mechanism of passing on the cost ofpollution control equipment to the rate base is not possible for merchant plants.


### 2. The Retail Customers, Not the Power Companies, Have Been the Greatest Beneficiariesof theDeregulatedMarketStructure. The 2006 study provided as Hearing Exhibit 2 was done before Illinois had established the current process for providing power to retail customers through the Illinois Power Agency Act ("IPA Act") enacted in 2007. Prior to the IPA Act, AER could sell power to Ameren Illinois, for example, to use for Illinois retail customers at "frozen" retail rates. Since 2007, AER must compete with other_power suppliers in wholesale bidding process run by the Illinois Power Agency in orderto sell its power in Illinois. The 2006 study was also done before 2007 legislation requiring Ameren to pay $185 million in rate relief to customers and other payments. In 2007, Illinois electricity prices increased sharply. In response, General Assembly enacted Section 16-lll.5A of the PUA, which specified that Amerenwould provide $488 million in rate relief(refunds or future reduced rates) to its retail customers over the 4-year period 2007-2010, with specific dollar amounts of rate reliefprovided in each year as stated in the statute. (220 ILCS 5/16-lll.5A(f)). Through separate agreements, the Ameren utilitie"s were reimbursed a majority ofthis amount. Ameren's unaffiliated generating and energy marketing companies (including AER) had to provide $85.5 

### 11million ofthe amount, and Ameren utilities were responsible for the balance of$95 million. The statute expressly provided that none of the $488 million could be recovered through rates charged to customers. The statute also provided that a group ofgenerating companies, including AER, would provide $25 million to the State to be used, essentially, as start-up funding for the IPA, ofwhich the Ameren generating companies share was $4.5 million. Therefore, in total, the Ameren companies were required to pay $185 million ($85.5 

### + $95 

### + $4.5). The CUB study depicts Ameren's financial results purportedly due to deregulation as of2006 but fails to include the impact to Ameren ofsubsequently having to provide $185 million in rate reliefto customers and other payments as the result ofthe 2007 legislation. Again, since 2007, it is the retail customers in Illinois who are the great beneficiaries ofthe market structure in Illinois following the 1997 and 2007 acts--notthepowergenerators like AER. Moreover, projections from a 2006 study ofthe 1997 rate relieflaw done before Illinois establishedthe currentprocess for providingpowerto retail customers through the Illinois Power Agency Act enacted in 2007 simply·have no bearing on the ability ofunregulated companies such as AERto operate profitably. Ameren's stock traded in the $50 to $54 range at the end of 2007. Today it hovers around $34. As the chart below clearly reflects, Ameren stockholders havenot seen growth dueto investment in unregulated generation.

12Ame.ren**Corpon~~tlon** Common Stock .AEE

JomOB Jan 09 Jan 10 Jan 11 Jan 12 

# "' "' 45

25

20

20.0

AEG's return on equity in 2011 was 4.3% and for 2010 it was -3.9%. AER's assets are not paying returns, and there is currently uncertainly about when the economy will recover and AER's current financial predicament will improve. As a merchant generator, "ithas significant exposure to market prices, swings in load demand and commodity price volatility." (Tr. 46). Current power market conditions remain depressed.3 "As it now stands, AEG's credit quality is poor" (Tr. 47) and investors simply do not place funds into assets that have no prospects for repayment.

3There are three large fossil electric generatingunit (EGU) systems 

### in Illinois. Dynegy filed for bankruptcy protection on July 6, 2012 (Dynegy Filesfor Bankruptcy asPartof Settlement, Azam Ahmed, NewYork Times, July 6, 2012) and press reports indicate that Midwest Generation may soon follow. Illinois coalplantowner weighs Chapter 11, Julie Wernau, Chicago Tribune, July 31, 2012.
13

### 3. Ameren Corporation WillNotSupportthe CapitalNeeds of AER. As both Mr. Ryan Martin and Mr. Gary Rygh described, neither the $500 million revolving credit facility that it shares with its parentnorthe "Put Option" Agreementprovide any financial haven or support for completion ofthe scrubber project. Itis important to note thatthe $500 millionrevolving credit facility is due to expire in the middle of2013. (Tr. 51). This credit facility, however, much like the Put Option Agreement, serves as a source ofliquidity and is not put inplace for purposes offunding longterm projects like the FGD project. Even ifyou ignore the purpose ofthe revolving credit facility, however, anything borrowed by AEG mustbe repaid upon expiration ofthe facility. AEG simply is not in a financial position to do so. Further, the Put Option Agreement was put in place "effectively [as] a replacement for some form of liquidity when the current facility expires." (Tr. 51). As Mr. Rygh went on to explain, the "Put Option" is basically "just an emergency rainy day fund" so there is "some semblance ofliquidity there." (Tr. 51). Lastly, the Office ofthe Illinois Attorney General ("Attorney General") criticizes Ameren Corporation's decision to require its subsidiaries to "stand on its own in terms ofmaintaining a viable cash flow" and attributes such a policy to "investor relations motivations." (Tr. 90). These statements demonstrate a misunderstanding ofparent/subsidiary corporate relationships and are simply unfounded. Ameren Corporation owns the common stock of its subsidiary companies. 

### Itdoes not directly operate any ofits busmess units andtherefore cannot, on its own, generate revenue. In order for Ameren Corporation to act as an ongoing funding source to AER that cash flow would need to come from an operating unit such as one ofthe regulated utilities. The subsidization of merchant generation by a regulated utility such as Ameren Illinois Company would most certainly be challenged and criticized by the Illinois Commerce Commission and the Attorney General. Further, the rates ofregulated utilities are set under 14traditional regulation to recover only the operating and capital costs ofthose regulated utilities. Lastly, the "severe negative reaction would adversely impact Ameren Corporation's own credit quality and access to capital." (Tr. 47). Ameren Corporation must balance tbe credit and lending needs ofall its businesses, and similar to third party lenders, it cannot assume additional unsecured debt on behalfofAERwhere there is not a secure revenue stream to support such an obligation. (Pet. 22).
B. AERhas Considered all Feasible ComplianceAlternatives and Costs. To comply with the 2017 MPS emission rate, AER estimates tbat it must reduce emissions by approximately 16,000 tons. The installation oftwo scrubbers at Newton would reduce emissions by approximately 17,500 tons of S02. No other commercially available technology produces that level ofremoval efficiency. Furthermore, it is important to note tbat compliance witb tbe MPS S02 and NOx requirements is based on a system average basis. Accordingly, when approaching compliance on a system-wide basis, tbe most economical and effective approach is to controltbe largerunits first; Thatis the exact approach usedbyAER. AER has evaluated a series oftechnologies under a myriad ofpotential state and federal compliance scenarios. Third-party engineering firms such as tbe Shaw Group were retained to
assess the viability of dry sorbent injection at tbe Joppa Energy Center. In 2011, AERretained URS Consulting to perform Air Quality Control Technology (AQCT) assessments on the cost and appropriateness ofa host of technologies atJoppa and E.D. Edwards Energy Centers. Each plant has unique site characteristics tbat must be considered when assessing tbe feasibility of retrofitting a facility witb pollution control technology. The cost of installing DSI plus fabric filters at Joppa (6 units) and E.D. Edwards (2 units) was $433 million and $280 million, respectively. A costtable from the URS report is appendedhereto as Exhibitl.
15Contrary to the Attorney General's and ELPC's conclusory assertions, AER has considered all viable compliance alternatives. The measures suggested by the public commenters are either (a) ineffective becausethey do not allowAERto achieve compliance with the MPS emission standards and/or trigger excessive co-pollutant emissions and requiring costly additional controls; or (b) would affirmatively worsen AER's financial predicament. The technological and operational measures proffered by ELPC and the Attorney General are discussed below. CurtailmentofGeneration. Coal plants have extraordinarily high fixed operating costs due to around-the-clock operations and the need to continually maintain equipment and manage coal inventory and daily shipments. As has been explained in AER's petition, in response to questions posed by the Board and at hearing, while curtailing generation does reduce emissions, it also siphons offAER's sole source ofrevenues which are derived from the sale ofpower. Indeed, the de-rating ofa unit means less power to sell, less revenue generated, and therefore reduces the amount ofcash available to coverAER's fixed operating costs to run the units in the first place. Significant curtailment of generation under any market circumstance would exacerbate the precarious fmancial condition of AER in that insufficient cash flow would be generated to cover needed and certain operating costs. However, even faced with this reality, AER did evaluate the viability ofreducing operations at the Newton, E.D. Edwards, and Joppa Energy Centers at varying degrees. That evaluation revealed that in order to comply with the MPS S02 emission rates, AER would need to lower capacity factors on such units to between 22% and 38%.4 In such scenarios, fixed operating costs would essentially remain the same

4 Targetutilization for the A.ER system is between 80 and 90%. Recessionary conditions have lowered such systemutilizationto between 65 to 75% (not including specific unit outages).

16because the units are still operating, even as generating levels are reduced. The result was as suspected: negative cash flow and an inability to fund ongoing operations. In fact, the curtailment of operations puts AER as a whole in greater financial peril than unit or plant shuttering thereby jeopardizing the system's viability and resulting in greater job loss. Operational curtailment is simply not a viable compliance alternative. Inthis power market and under the regulatory landscape, ifrelief is not granted AER's only viable option to maintain compliance would be to take one ormore energy centers out ofoperation. The Attorney General should note this reality is supportedby affidavits inthe record. Optimization of Scrubber Performance. AER has and continues to implement operational measures to reduce emissions. AERhas been doingthis voluntarily at a cost even priorto comingtothis Boardto askfor relief. (Tr. 39). Further, as a part of AER's proposed compliance plan, the operation ofFGD systems at the Duck Creek and Coffeen Energy Centers will haveto be fully maximized in orderto maintain compliance on a system-wide basis withthe proposed mitigation rate of0.35 lb/mmBTU. The removal efficiencies for these FGD systems will range between 98-99%.5 Even at those high removal efficiency levels, compliance margins remain narrow and AERwill needto employ additional operational strategies such as low-sulfur coal procurement and reduce generation utilization as needed to comply with the proposed mitigation emission rate. (Tr. 26). Mr. Gignac's testimony at hearing seems to imply that this commitmenthad not been made byAER. (Tr. 88). AERis not sure whatmore can be asked of it when it is committing to a rate that requires maximization among other things to maintain compliance. 5 See page 8 of AER's First Set of Responses for the associated capital and operating and maintenance costs associated with achieving and maintaining such high FGD removal efficiencies.

17Alternative Technology - Dry Scrubbers. In its post-hearing comments, the Attorney General appears to confuse dry scrubber technology with Dry Sorbent Injection ("DSI") and
seems to suggestthatAERhas failed to consider properlyboth technologies. As described more fully below, DSI has comparatively low capital costs (approximately $19 million) because relatively minor pieces ofequipment are needed to feed the sorbent material into ductwork. In contrast, a dry scrubber requires the construction of multi-storied building and spray tower to house equipment that "treats" the flue gas before it leaves the stack. The cost of wet FGD systems installed at Duck Creek and Coffeen total $258 million for one unit at Duck Creek and $568 million for the two units at Coffeen. Wet FGDs allow for greater chemical reactions and have a higherremoval efficiency. As a result, wet FGDs can accommodate the use ofa variety of coals including the higher sulfur content found in Illinois basin coal. Dry scrubbers have removal efficiencies in the low 90% range and therefore are typically used with low sulfur PowderRiverBasin coal. The Joppa facility's configuration consists ofsixunits whose flue gas is routed through three separate stacks. To achieve reductions approaching those projected for the Newton FGD project, AER would need to install 

### 6 dry scrubbers at Joppa at an estimated cost of$460 million. Further, the United States Environmental Protection Agency ("USEPA") recently finalized federal requirements regarding mercury and hazardous gases. Dry scrubbers may be ineffective in addressing hazardous gas emissions and, without additional add-on controls, could adversely impactparticulate emissions. The cost ofconstructing a dry scrubber system atJoppa would be nearly twicethe cost ofcompletingthe FGD project atNewton. Clearly, the use ofdry scrubbers at Joppa is neither the best economic or environmental alternative for complying with the MPS.

18Alternative Technology - Dry Sorbent Injection. Both the Attorney General and the ELPC believe that AER has not given DSI adequate consideration as a compliance alternative. Specifically, ELPC suggests, through the public comment ofProfessor Kimberly Gray, that "dry sorbent injection (DSI) is an economically feasible strategy to reduce S02 and other acid gases" at the E.D. Edwards and Joppa Energy Centers. (Tr. 119, 120). ELPC also relies upon a DSI study report performed by the Shaw Group6 at the Joppa facility (an abbreviated version ofthe report was provided to the Agency as part of a construction permit reporting requirement). However, neither ELPC nor the Attorney General adequately account for the impact that such pollution control technologies would have on pollutants other than S02. Specifically, due to the size ofthe existing particulate control equipment and the use ofACI for mercury control, the use of DSI would result in a significant increase above threshold levels of PM. Accordingly, additional controls (and capital expense) would be needed to reduce PM emissions. We explain further below. DSI is a process by which chemical materials are injected into the flue gas stream ofa boiler. The injection of calcium or sodium sorbent reagents can occur directly into the boiler furnace or into ductwork location near a component called an air heater. Both types ofsorbents have beentested on Ameren's Illinois and Missouri units. Calcium based reagents were deemed ineffective for S02 removal at tested load levels at Hutsonville. Sodium re-agents were used at 6 In the report submitted to the Agency, Joppa included only those portions (31 pages) necessary to support the reporting conditions set forth in the construction permit. (Final Report dated September 24, 20I0) Appended hereto as Exhibit 2 is the complete Executive Summary ofthe Shaw Group Report (55 pages; Tables 2-1 through 3-29). The Executive Summary addresses the potential compliance and permitting issues associated with DSI and the impact on particulate emissions and ESP performance. It also recommends additional assessments and studies. The complete version 9f the report includes Trona test data and calculations supporting the test program that total well over I,000 pages. AER did not submit this data due to the volume, but will do so atthe Board'srequest.
19the Joppa Energy Center and resulted in 50% S02 reductions at tested load levels. However, AER's preliminary permitting analysis reflects that the use of such materials in the quantities required to comply with the 2015 and 2017 S02 emission rates would exceed applicable particulate requirements thereby triggering significant additional capital and maintenance expenses to address suchemissionrequirements.7 Professor Gray, the ELPC and the Attorney General simply ignore and therefore understate the significant annual operating andmaintenance ("O&M") costs associated with DSI. (In fact, other than noting the cost differential between types of sorbents, Professor Gray provides neither capital nor O&M cost estimates as part ofher public comment). The Shaw Group Report (attached as Exhibit2) provides estimatedannual cost ofdry sorbentranging from $15 millionto $44 million dependinguponthe type ofmaterial used and the location ofinjection (before orafterthe airheater):

7 Professor Gray acknowledges that "some modifications of existing ESPs may be required, such as changing the location of the combustion air preheater" or installing high frequency power upgrades. Neither the cost of such plant modification nor DSI's attendant ash disposal costs appearto have been includedinher "economicallyfeasible" assessment.

20

## .. Table3"29- EstimatedAnnual CostofDrySorbent

.

. .. ·. Dry LbS02 Sorbent remQvedper

. Injection Cost lb ofDry Yearly Cost ofDry DrySorbent Location ($/ton) Sorbent Sorbent (1) Un-milled Trona BeforeAirheater $I75 0.093 $ 23,483,829 Milled Trona Before Airheater $ 175 0.10 $21,839,961 Milled Trona AfterAirheater $ 175 0.049 (2) $44,571,349 (2) SBC Before Airheater $200 0.16 (3) $ 15,599,972 (3) SBC AfterAirheater $200 0.12 $20,799,963 Additional O&M costs would be required to address disposal related and material handling costs. On the AER system, the use of DSI is not a "cheap and easy" compliance alternative. As the sorbent is exposed in the flue gas, it reacts with the S02 to form dry particles which are captured and removed as the gas stream passes through pollution control devices called electrostaticprecipitators (ESP). The ESPs at Joppa and E.D. Edwards were designed and constructed morethan forty years ago. While the ESPs have beenmaintained overtime, itis the original sizing ofthe ESPs that greatly impacts its performance capability. In fact, due to the size ofthe ESPs at Joppa, and while DSIresulted in a 50%reduction ofS02, it also triggers PSD permitting requirements if the sorbent injection rate exceeds 10%.8 The Shaw Group Report specifically notes in the Executive Summary and Section 3.4.2, that DSI will trigger PSD permittingrequirements for particulate matter (see Tables 3-25 through 27). The next step in the Shaw Group Report, as outlined in the Executive Summary and in Section 4.2 Recommendations, references the need to evaluate helper ESPs or a fabric filter (baghouse) (see

8 Based on this assessment and the size ofthe ESPs at Edwards, PSD concerns would also be similarlytriggered at comparable injection rates atthat facility.

21Table 3-28). In contrast to Professor Gray who bases her opinion largely on a literature review, the Shaw Group Report is site-specificto Joppa. As a result ofthe MPS mercury requirements, in July 2009, ACI systems were installed atvirtually every non-scrubbed unit in the fleet. Just as there is a limitto the particulate loading
a house furnace filter can absorb, the same is true with the ESPs at Joppa and E.D. Edwards. Accordingly, due to the size ofthe ESPs and the use ofACI, the injection ofadditional reagents from a DSI system results in additional mass loading and would overwhelm the current effectiveness ofthe ESPs. To comply with both the S02 and PM emission limits applicable to these facilities, AERwould need to install additional particulate controls such as afabric filter. The Shaw Group observes in Section 4.1. Conclusions as follows: "[t]he addition of DSIwill increase the amount of particulate matter leaving the stacks. The Joppafacility will trigger PSD due to injection ofdry sorbent and DSI material handlingunless the controlefficiencyof the existingparticulate control is increased" ELPC, apparently in possession ofan abbreviated version ofthe report, has taken out of contexttwo sentences from the Shawreport. As Shaw makes clear, "[s]ignificantmodifications to the plant'sESPs would be requiredto limitthe additional particulate emissions." Shaw Group f Report, Section 3.4.1, pg. 37. In addition, due to the sodium reagents solubility in water, the resulting waste stream would exceed effluent limits and therefore could not be routed through the existing ash pond water treatment system. Accordingly, particulate material from the ESP would need to be disposed ofin permitted landfills. Such operational and associated capital costs would include the use ofstorage silos, transportation and landfill expenses. Shaw Group Report, Section 4.1.3, pg. 54. The comments provided by ELPC simply ignore thetotal cost associated with the use of DSI. The total cost ofinstallation ofDSI systems at E.D. Edwards and/or Joppa, along with the
22attendant costs required to address corresponding increases in particulate matter emissions and ash disposal and O&M, would exceed the approximate $200 million to $250 million needed to completethe scrubber atNewton. AER's Proposed Mitigation Rate Incorporates a Multitude of Compliance Alternatives. AER's proposed mitigation rate of 0.35 lb/mmBtu S02 imposes significant restrictions on the management ofthe business. The scrubbers at Duck Creek and Coffeen will need to be operated at maximum levels and ultra-low sulfur coal and PRB coal will need to be procured on an ongoingbasis. In additionto these measures AERhas evaluated, throughthe use ofproduction modeling, the impact Of DSI and operational curtailment. Even with the above
measures andthe use ofDSI atJoppa operated at a 50%removal efficiency and the retirement of
one unit at Edwards, the overall system rate is estimated to be 0.28 lb/mmBtu S02 emissionrate, above MPS requirements for 2015 and beyond. This alternative is not deemed viable because (a) it does notresult in compliance; and (b) it would increase emissions associated with PM and require additional capital expenses needed to address those emissions. Such expenditures would be equivalent to that needed to complete the scrubbers. In short, there is no cost effective or otherwise viable alternativethat "minimizesthe deviation." Natural Gas. ELPC seemingly suggests that conversion to natural gas may be a viable compliance alternative. (Tr. 118). AERhas performed a screening analysis with respect to the feasibility ofnatural gas conversion ofE.D. Edwards and Joppa Energy Centers as a compliance alternative to the MPS. That assessment however, is preliminary in nature and ongoing. The conversion of a generating facility from coal to gas combustion represents a fundamental and permanent change in business operation. Under current market conditions, natural gas conversion at Joppa would adversely impact the current capacity levels and current operating

23regime ofthis facility would be reduced to the point where it would operate on a seasonal basis only9 The resulting drop in utilization would reduce the revenue thatAER is able to generate to
cover fixed cost at this facility and across the system. It also would result in a reduction in workforce. Before such a decision could be properly made, detailed engineering and operational assessments would need to be evaluated under a range of technical and economic variables. (URS provided an order ofmagnitude estimate of$634 million to convert the Joppa plant to a combined cycle facility.) In addition, while natural gas pipeline facilities exist in the vicinity of Joppa, itis unknown whetherthere is sufficienttransport capacity on suchpipeline. Withrespect to the E.D. Edwards Energy Center, natural gas pipelines are not located within the vicinity of plant and the cost of developing such pipeline infrastructure is simply prohibitive. Lastly, the

. conversion of
.a facility to gas greatly reduces existing staffing levels and would have

corresponding adverse impact on local communities. For example, at Grand Tower, AER employs ahandful ofpeople to runtheenergy center. Coal procurement. The Attorney General questions whetherAERcould "provide sworn testimony that it has fully procured the lowest sulfur coal possible." (Tr. 88). AER expects to burn approximately 15 million tons ofcoal per year. AER buys coal on a portfolio-wide basis for all ofits Illinois facilities. Coal procurement is a continual process whereby fuel contracts roll offand are replaced on a staggered timeline. The proposed S02 mitigation emission rate of
9 Traditionally, AER's natural gas combustion turbine generator ("CTG") fleet operates at very low capacity factors. In 2011, Grand Tower operated at a 21% factor while the rest ofthe CTG fleet (Elgin, Gibson City and Joppa) were at 3%. In 2010, Grand Tower was at 4% with the remainder ofthe fleet at 3%. The extreme heatthis summerresulted in an increase ofutilization through July at Grand Tower (62%) although those capacity factors were not seen across the rest of the fleet (2%). If natural gas were economical and market conditions favorable, these facilities would operate more frequently.

240.35 lb/mmBtu will require more than careful management and execution ofcoal purchases. As part ofits compliance strategy, AER will direct the higher sulfur coals (i.e. Illinois Basin at 6.2 lb/mmBtu and PRB a 0.8 lb/mmBtu) to its Duck Creek and Coffeen facilities. TheFGD systems at these facilities will remove the higher sulfur content contained in these coals from the flue gas prior to leavingthe stack. The premium ultra-low sulfur coal (e.g. 0.55 lb/mmBtu) will be used atthe E.D. Edwards, Joppa andNewton facilities. To comply with an S02 rate of0.35 lb/mmBtu, AER will limit the use ofIllinois Basin coal (roughly 6.2 lb/mmBtu.) andthe higher S02 content Powder River Basin Coal (roughly 0.8 lb/mmBtu) to the Duck Creek and Coffeen Energy Centers. Ultra-low sulfur coal (0.55 lb/mmBtu) will be used at the Edwards, Newton and Joppa Energy Centers. AERcurrently has 17 million tons ofultra-low sulfur coal under contractthrough 2014. 10
C. AER Crafted its Reliefto Provide a NetEnvironmentalBenefit With respectto variance relief, Section 104.204 (g)(3) ofthe Board rules requires AERto describe 

### "the measures to be undertaken during the period ofthe variance to minimize the impact of the discharge of contaminants
... ". AERhas proposed a compliance plan that exceeds that objective. Specifically, AERhas proposed a mitigation emission rate of0.35 lb/mmBtu that wouldtake effectin 2013, resulting inthereduction ofS02emissions earlierthan requiredbythe MPS. As a result, AER has exceeded the legal standard of"to minimize the impact," AERhas offsetthe impactresulting in a netenvironmentalbenefit. TheAgency concurs: 

### The Illinois EPA agreeswithpetitioner thatthere will be a netenvironmental benefit

## if the Boardwere to grant the requestedrelief subjectto the terms and
1

# °Coal producers have assessed apricepremiumranging from 5to 20% overthe standard 0.8 lb/mmBTU S02PRB coal depending uponthe marketforthe baseprice and S02 allowance pricing.
25conditions containedherein. The Illinois EPA does notbelieve thatany environmentalharm wouldresultthereji·om. (Rec. 22). Over the course ofthe entire variance period, between now and 2020, the total tons of S02 reduced in the atmosphere will be greater ifthe variance is granted than if it is not. The mitigation emission rate ensures thatAER (a) cannotresume operation ofcoal-firedpowerplants shut down late last year; and (b) must maximize removal efficiencies from existing pollution control devices and to procure low sulfur coal to maintain compliance. In response to questions from the Board, AER has demonstrated this net environmental benefit by both including Hutsonville and Meredosia in the calculation (Table 3) or excluding those facilities (Table 4). Under either scenario, a net enviromnentalbenefit exists. In order to respond more completely to questions presented at the August 1, 2012 hearing, AER requested an independent review of the AER's variance request and potential health effects relating to S02 emissions. AECOM Senior Consulting Toxicologist Lucy Frasier, Ph.D. and SeniorToxicologistLisaBradley, Ph.D prepared a letterreport analyzingthe potential health effects ofS02from the requested variance ("LetterReport"), attached hereto as Exhibit 3. Dr. Frasier obtained her Ph.D. in toxicology from the University ofTexas, Austin. She has 21 years of experience in the areas ofhuman health risk assessment, with a specialization in the conduct ofhuman health assessments for toxic air pollutants and persistent organic pollutants. Dr. Frasierhas acted as Health RiskAssessment Team Leader or Project Manager for numerous human health and ecological risk assessments ofair pollutants emitted from facilities including powerplants. Because ofthis experience, she was invited to develop USEPA training materials
on various aspects of the U.S. National Emissions Standards for Hazardous Air Pollutant (NESHAPs) regulations for Hazardous Waste Combustors and to teach the site-specific risk



### 26assessment component of the training in 2008. These are only a few of her extensive qualifications and accomplishments in the field oftoxicology. Dr. Bradley has 25 years ofexperience in risk assessment and toxicology and is certified by the American Board of Toxicology. Dr. Bradley received her Ph.D. from Massachusetts Institute ofTechnology. She has managed risk assessments for numerous hazardous waste sites in many USEPAregions, and under many state programs. These are alsojusta few ofher array ofqualifications, awards, and accomplishments in the field oftoxicology. The figure below from the AECOM toxicology report illustrates AER's projected S02 emissions undertheprovisions oftheMPS and the S02variance.

Ameren Energy Resources Variance 502 Limit Comparison to the Current MPS 

# ::::::**''=~=~m,·:s.-~::'G:; ~-:-~--:~-**  

# ..**--?-~;--~-:--~-~--:;---~-~~====================** 70,000

# +E;;-~:::g~;_;**:s~-·** ••·.j·•{·§.

# ~}~"c·.~I·>,~.······"'~ ..

# -~~--**~;;;~;;~~~** 160.000 ,...

### ~,~'' (

### ~~-" E50,ooo I \**·~** 40,000 w Netdifference overtime bet\:Jeen 0.. 30,000 +------------1 · · '· d 1 <n S01emiSSions uase on t1e Ameren

20,000 variance rate and SO:: emissions based 10,000 onthe MPS baseline rate isadecrease by 60,699 tons.**0~--------~-----~==~==~======~~--------~--~--~** 2010 2011 2.012 2013 2014 2015 2016 2017 2018 2019 2020 Year**~Allowable**Emissions Based on MPS**Ba~elineRate** .......Total Future Emissions Basedon Ameren Variance Rate The blue line represents AER's baseline emissions under the MPS and the black line represents emissions under the S02 variance. As can be seen in the figure, AER's emissions under the S02 variance are considerably lower than the MPS emissions between 2012 and 2014 and are slightly higher from 2015 to 2019. However, the area representing the difference between the MPS and SOz variance emissions is larger than the area between the MPS and S02 variance emissions illustrating the greater reductions of S02 earlier in the variance period. Overall,there is a netreduction in S02emissions underthe variance. 27The regulatory language does not say, as suggested by the Attorney General, that AER must 

### "minimize the deviation [from the applicable regulation]". (Tr. 85, PC# 2240, pg. 5). Notably, the Attorney General provides no legal authority that requires or recognizes such a suggested regulatory standard. At any rate, a complete offset ofemissions more than satisfies the standard articulated in the regulations and applied by the Board in other variance proceedings. The Attorney General's concept of "excess" emissions is equally flawed. (PC# 249, pg. 1, 3, 5, 7). If the variance were granted, a new stringent emission rate would be temporarily substituted for the regulatory rate. "Excess" impliesunauthorized. AER is seeking authorization. Lastly, in its tabulation of"excess" emissions, the Attorney General completely ignores emission reductions that will commence immediately and takes issue (again, without citation to any legal authority) with the concept ofthe "offset" ofemissions. However, as the Agency noted in itsRecommendation:


### In regard to concerns about whether emzsszon reductions due to shutdowns should be allowed to offset potential delays in emission decreases and/or emission increases, it 

### is important to note thatproviding credit for actions (e.g., unit shutdowns) that result in emission reductions is an acceptable part of the established regulatory process. As an environmental regulator, Illinois EPA is accustomed to recognizing and allowing such reductions to offsetpotential emission increases under the New Source Review and Prevention of Significant Deterioration permitting regulations. (Citation omitted). The Illinois EPA believes that is the requestedrelief

## if grantedunder the terms andconditions contained herein, the emission reduction offsets that Petitioner is seeking are creditable andallowable. (Rec. 21). 

### D. AER's Commitment To Shutter Hutsonville and Meredosia During the Variance Period is Real and Meaningful. There is no real dispute that the closures of Meredosia and Hutsonville have an environmental benefit. Rather, ELPC inpublic comments believes that such emissionreductions should not be considered by the Board in reviewing the merits of AER's variance petition.
28(PC#6). The Hutsonville and Meredosia Energy Centers are fully permitted and could lawfully reopen. Furthermore, such status is not compromised by the FutureGen project as is seemingly suggested atthe August I Hearing. (Tr. 121). FutureGen projectplanning is still underway, and
can be characterized as being at its very early stages. There will be years ofwork ahead before that project can be considered a reality and it therefore, would not impact operations at Meredosia duringthe years covered by the variance period. Despite its ability to lawfully reopen these plants, AER does agree not to operate the facilities during the pendency ofthe variance period as a condition ofthe relief granted. As pointed out in the Agency's Recommendation, "there is currently no regulatory requirement for Meredosia or Hutsonville to remain shutdown" and thatAERmakes this commitmentin spite of the associated constraints and operating requirements necessary to mitigate any potential negative environmental impacts resulting from the variance. (Rec. 19, 21). AER's commitment is real, withreal benefitsto the environment. The commitment is especially real when you consider AER's commitment to a. lower mitigation rate during the pendency ofthe variance relief. The overall annual 

### S02 emission rate from the Ameren MPS Group in 2011, prior to the closure ofthe Meredosia and Hutsonville Energy Centers, was 0.46 lb/MMBtu. To calculate an estimated 2012 emission rate based on comparable utilization ofthe fleet, AERused 20II as a baseline and removed the contributions ofthe Hutsonville and Meredosia Energy Centers from the 

### S02 emission rate. AER used this methodology to calculate the annual 

### S02 emission rate after the closureofthe Meredosia and Hutsonville Energy Centers as 0.40 lb/MMBtu. Many assumptions are needed to predict emissions and utilization in the future, so AER chose the last actual compliance period to illustrate the reduction achieved by not"operating those plants. As noted, even with maintaining

29the closure ofthese two plants, AER will still need to do more to meet the 0.35 lb!MMBtu emission rate. Presented differently, AER cannot achieve the mitigation emission rate without maintaining the current shuttering status ofthe plants and running the scrubbers harder during the calendaryears of2013 through 2019. Further, putting aside the clear case that the commitment made with respect to Hutsonville and Meredosia is real, the fact is they are shut down and the benefit to the environment resulting from those shutdowns is meaningful. Why shouldn't AER be able to recognize the benefit? The MPS was based on these two energy centers operating and nowthey
are not. Throughout the hearing commenters focused on the increase in S02 emissions that would result during the years of 2015-2019 as opposed to what would be allowed under the MPS. (Tr. 86). These same commenters, however, conveniently ignore the S02 emissions that would have been allowed under the MPS without the variance and its compliance plan and without the shut downs ofHutsonville and Meredosia Energy Centers. (Tr. 86). Indeed, this approach to environmental benefit seems to be a case of "wanting your cake and eating it too" and should be dismissed as unfair.
E. AER has "Walked the Walk" with Pollution Control Investments and Technology Advancements. As Mr. Menne testified at hearing on August 1, 2012, AER has achieved a steady and significant decline in S02 emissions across the fleet--79% since 1990 and 23% overjustthe last four years. (Tr. 15-16). AERhas achieved these reductions through a number ofinvestments in pollution control equipment and continuing efforts to improve and maximize efficiencies and operating performance. With respect to NOx, AER likewise achieved a steady and significant · drop inNOx emissions since 1990. (Tr. 16). A key element ofthese reductions is that they

· occur despite a significantincrease in coal utilization atthesepowerplants overtheyears. (!d.). 30ELPC and several public commenters have criticized AER's environmental efforts and suggest that the company had taken a "no investment" approach. (Tr. 130, 200). This could not be further from the truth. As explained in the petition and at hearing, AER has spent over $1 billion on pollution control equipment across the fleet. (Pet. 17, 18; Tr. 16). Specifically, in orderto meet the MPS, AERhas already installed scrubbers on three ofits generating units at a cost of over $813 million and has started construction ofthe fourth and fifth at a cost of over $237 million. (Id.). For the scrubbers that have been installed, AER has been voluntarily operatingthose scrubbers at an S02 removal efficiency much greater than necessary to meetthe current MPS and Federal requirements. (Tr. 17). As previously explained, maximizing the scrubber operations at Duck Creek and Coffeen will be required in order for AER to meet the mitigation rate of0.35 lb/MMBtu proposed by the Agency and accepted by AER ifthe reliefis granted. In addition, selective catalyst reduction equipment to reduce NOx emissions has been installed atthree ofAER'splants at a cost ofover $177 million. (Id.). Operating costs total over $7 million annually for this equipment. (Jd.). AERhas also advanced mercury reduction. AER has installed activated carbon injection technology ("ACI") on 12 units atfour plants at a capital costofwell over $20 million withoperating costs totaling about $17 millionto date. (Id.). AER continues to test and evaluate a number ofmethods to enhance mercury removal. Most ofthe AER generating units are very close to meeting the Federal mercury standard established in the recently issued Mercury and Air Taxies ("MATS") regulations. (Id.). Newton Unit 2 currently meets the MPS mercury control requirements-which will be more stringent than the Federal standard-ahead ofschedule. (Tr. 17-18). Infact, investing inpollutioncontrol equipment on its systemwas exactly whatAERwas doing when it began the construction ofthe new scrubber at our Newton Energy Center. Even

31thoughAERknew the forecast was looking grim, AERcommitted the capital dollars to beginthe very costly installation ofthe scrubbers in order to be prepared to meet the very stringent 2015 MPS S02rate. (Tr. I8). Set forth below is a chart that details the various pollution control devices installed at the Coffeen, Duck Creek, E.D. Edwards, Joppa and Newton Energy Centers. As the chart reflects, the suite of S02 , NOx, mercury and PM controls across the system is extensive. Capital investments were made even as the economy and market conditions eroded. AER has complied with all the mercury and NOx requirements set forth in the MPS. Furthermore, if variance relief were granted, AER would implement a compliance plan that results in a net environmental benefit and mitigates the environmental impact represented by extendingthe S02 compliance dates setforth 

### in theMPS.

S02Control

NOxControl U2

COFFEEN Ul
Mercury Control U2

Matter
32 · WFGD AERuses refined fuel for enhancementfor mercury removal.
enhancementfor mercury •removal. 2009
2012 2010DUCKCREEK

EDWARDS

EDWARDS (cout'd) MercuryControl

NOxControl

MercuryControl

Particulate Matter Ul

U2

U3

Ul

Ul

33 'LNB

•LNB/OFA

LNB

· SCR

LNB/OFA •ACI 1993 2008 1994 2003 2008 Jul2009NEWTON

JOPPA CATEGORY

Particulate Matter UNIT

U2

34 DATE INSTALL TECHNOLOGY ED

· FGC (S03 Inj) I Upgrade for I979 I

ESPperformance 2003 Power Supply Upgrade 2009 ' ESPupgradefor S03 injectionJOPPA (cont'd) CATEGORY

NOx Control (cont'd)

Particnlate Matter UNIT

U2 U3

U4



## us

U6

U2 U3 U4 

## us
U6

35 (::01]1b. ()pt,

- SOFA •LNB 1994



### ... ·--·--···**··----··o~"-''·--··** I

_ . _(::o_111.b, Qpt._ 2002



## .. -·-··---· -·----···-=-··-'=- -I 'LNB 1993

SorbentTraps stacks

1994 1994 1994 1993 1994**):l§f'_Ujlgra~.E'S.** .... __ _ .FGC 1994

### ,, CATEGORY 

# l. UNIT 

## I .· CONTROLTECHNOLOGY

• DATE INSTALL

·ED

F. AER's Request is Consistent with Federal Law and Will Not Jeopardize Illinois EPA's BART Compliance Demonstration. The Board may grant the variance consistent with federal law and, specifically, with the Clean Air Act, 42 U.S.C. 7401 

### et seq. USEPA approved revisions to the Illinois State Implementation Plan ("SIP") addressing regional haze on July 6, 2012. The Clean Air Act section 169A and Regional Haze Rule require States to address the best available retrofit technology ("BART") requirements for sources with significant impacts on visibility. BART is defined as follows: "an emission limitation based on the degree ofreduction achievable through the application ofthe best system ofcontinuous emission reduction for each pollutant which is emitted by an existing stationary facility." 40 C.P.R. §51.301. USEPA approved relevant sections ofthe MPS and Illinois Combined Pollutant Standards ("CPS"), and two permits and incorporated them into the SIP as satisfying BART requirements for the affected Illinois power plants and refineries. Accordingly, the MPS, as ofAugust 6, 2012, 30 days after the date of publication in the Federal Register, is federally enforceable. USEPA noted in response to public comments that Illinois' plan would achieve greater reasonable progress - meaning greater emissions reductions and greater visibility protection

- by the BART compliance deadline (in 2017) thanthe application ofBARTon BART-subjectunits. Ifthe Board grants AER's requested relief, the Agency must seek an amendment to the Illinois SIP to incorporate the revised S02 emission limits applicable to the AER fleet. When compared to emissions reductions by AER's energy centers under the MPS, the variance, as proposed by the Agency, imparts even greater emissions reductions by the BART compliance
36deadline in 2017. Accordingly, such an amendment would only serve to enhance Illinois' ability to comply withthe Clean AirActand Regional Haze Rule. AER will also comply with the CSAPR, which is not yet effective, and the MATS through the use ofa combination ofexisting FGD systems and sorbent injectiontechnologies.
III. RESPONSES TO BOARD QUESTIONS RAISED AT HEARING During the public hearing ofAugust I, 2012, there were a number ofquestions posed by the Board members and Alisa Liu from the Board's technical unit. Several questions were answered during the hearing, and several were deferred and will be addressed herein. To aid the Board inits review, AERwill address each ofthe questions individually in this section.


### 1. "Myfirst question, in Ameren's responses to the hearing officer dated July 6, 2012, questionNo. 2, itprovideda more detailedcomplianceplan onpage 6. However, there is no estimated timeframe for the phases ofthe compliance plan. AER states, quote: "Engineering design will continue through 2012." AER then refers to other activities that, quote, "will occur through-out thisperiodas well." DidAER intend for the reference to this period to indicate the varianceperiod orjust between now and 2014?" "Can AER be more specific regarding the timeframes or the costforphases of the complianceplan?"(AlisaLiu, TR. 32) The Newton scrubber project entails integrated work packages ranging from engineering and design, to construction and procurement. Each ofthese categories has literally hundreds of specific tasks that must be executed in order to complete the project. AER has invested $237 million in the scrubber project and believes that one day finances will improve such that the project can be completed (AER has every incentive to complete the project and it cannot even beginto recoup its financial investment unless and untilthe projectis completed). The deceleration of the project has resulted in a re-focusing of effort. The primary objective has been to unwind construction tasks in manner that allows the project to resume rapidly and with minimal planning delay. Virtually all components that require advance
37fabrication have been completed and are being delivered to the site. Foundation work, site preparation, and engineering design work will continue. As indicated, AER has budgeted $16 million annually to keep these efforts moving forward. AER is in continual discussions with its general contractor Advatech to define work tasks that can occur within this $16M envelope. Everything that can be done on the ground including the construction ofthe new chimney stack will be performed. What will not occur is the massive scaffolding and mobilization ofoutside labor forces neededto supportthe "up in the air" mechanical work and electrical connections. Assuming relief is granted, the Company's current budget projections call for greatly increased capital expenditures commencing in 2018 and 2019 so that AER will be in a position to comply with the MPS once the proposed variance term expires on January 15, 2020. A specific timeline that establishes construction and project milestones cannot be provided until an in-service date is fixed. Once the Company "greenlights" the project, AERprojectmanagement and its general contractor Advatech will reestablish a hard and fixed schedule that "backtracks" from the service date and takes into account work already completed. While AER can certainly provide progress reports, it is difficult to provide a specific and targeted prospective schedule beyondthe categories ofworkprovided previouslyto the Board.


### 2. "And then in table 3, we're wondering whether or not you could check the numbers in this table. Inparticular, I wasn'table tofollow the calculationfor the last column cumulativeS02 variance reducedtons." (BoardMemberBurke, TR.. 35). AER apologizes for any confusion resulting from the tables presented. In order to allow
a better review and understanding ofthe Cumulative Reduction in S02Variance Tons, AER is providing two additional columns of data: the "S02 Reduced Tons" and "Net Variance S02 Tons." A new Table 3 is provided as Exhibit4. AER also provides some explanatory notes to aide in the review. Specifically, the tons shown for 2010 and 2011 under "Variance S02Tons" 

### 38are based on actual emissions. For the remaining years in that column, Exhibit 4 must depict projections since actual emissions have not yet been measured. Also, tbe "S02 Reduced Tons" depicted in Exhibit 4 for tbe years 2012 through 2020 are based on the result ofnot operating Hutsonville and Meredosia 

### less the emission accounted for the FutureGen Project (as discussed
more fully in our answerto Question#3 below). Contraryto ELPC's assertion (PC# 2409, pg. 38), AERdoes not understatetbe amount of S02 emissions thatwould be allowed under the proposed variance. AER maintains, as it always has, that it is appropriate to calculate projected emissions under tbe MPS using a baseline heat input tbat includes Meredosia and Hutsonville. Simply put, Meredosia and Hutsonville are part oftbe Ameren MPS group. Table 4, attached to AER's responses to tbe Board's second set of questions, shows tbat even when removing Meredosia and Hutsonville from the heat input, the variance will still provide a net environmental benefit of7,770 tons S02 when compared to the S02 emissions tbattbe AmerenMPS Group is allowed undertbe currentMPS. 

### 3. "I am wondering 

### ifyou could explain in more detail what you meant by factoring two times theprojected emissionsfrom the Future Gen projectfor the Meredosia Energy Center, andI am onpage 9 of thefirst setofquestions?" (BoardMemberBurke, Tr. 36) As presented in our Petition, the Meredosia Energy Center is being considered as the location for the zero emission coal plantprojectknown as FutureGen. AERis proud to be a part oftbis advancement in environmentally friendly technology. The current plan is to use the oilfired unit at tbe Meredosia Energy Center site for the project. Since emission offsets may be required for permitting oftbe project in the future, Illinois EPA wanted to make sure that any such offsets were not "double counted" in our calculations of net environmental benefit. As such, AERwas overly conservative and factor-ed, by deducting from the reduced tons total, two times the projected emissions to**ac~ount** for FutureGen project (two times tbe projected
39FutureGen S02 emissions 1s an estimated 590 tons). The projected emissions from the FutureGenprojectwere factored into Table 4 as well.


### 4. "Is there a lastpossible date at whichpointAER willknow 

### if itwill notbe able to complete the FGD before theproposedJanuary 15, 2020 compliance date." (Alisa Liu, Tr. 37). At hearing, Mr. Menne expressed the difficulty with providing the Board with a date certain by which AER will know if completion of the scrubber project is feasible. (Tr. 38). AER's compliance plan, however, is premised on the commitmentthat meaningful engineering, procurement and construction activities will continue through the variance period. In support of the proffered compliance plan, Mr. Menne indicated that AER is "committed to spending roughly $16 million a year on continued activities at the Newton scrubber between now and 2020." (Tr. 32). Withthe investment ofover $237 million made to date and further commitment of $16 million dollars each year, AER is 

### invested in completing the project and would only abandon completionunder severe financial circumstances.


### 5. "CouldAmerenplease comment on human health and environmental impacts of S02

### emissions ingeneral?" (BoardMemberBurke, Tr. 38) In its petition, AER examined whether any injury would result to the public or the environmentfrom the granting ofrelief. (Pet. 25-29). As explained, AER specifically crafted its mitigation and compliance plan to address any environmental impact that may have resulted from the structure ofthe variance relief. Further, when asked by the Agency to reexamine the mitigation rate and length ofthe variance period, AER challenged its expert staffto try to do
evenbetterthanthe reliefstructure originallypresented to the Board. AERdid exactlythatwhen it came back before this Board in answer to questions presented to AER in the July 5, 2012 Hearing Officer Order and agreed to both a tighter mitigation rate as well as a shorter variance period. Assuming the alternative approach to the variance relief, the Illinois EPA agreed with 40AER that "there will be a net environmental benefit if the Board were to grant the requested reliefsubject the terms and conditions" contained within the Agency's Recommendation. (Rec. 22). The Agency further stated that it "does not believe that any environmental harm would result." (!d.). At hearing, however, AER was confronted by a number of commenters accusing it of "killing people" and suggesting that the proceeding "will determine whether Illinois residents will live or die." (Tr. 101). The Attorney General presented a letter to the Board with its conclusion that "harm" will result because emissions during the 2015 through 2019 period will be higher and "that harm cannot be undone or offset through earlier orlater reductions." (PC# 249). The Attorney General does not provide or describe the methodology employed or the analysis it usedto reachthese conclusions. As stated above, AECOMprepared a Letter Report addressingthe potential health effects relating to S02 emissions under the requested variance. As expressed by Mr. Menne at hearing, he is not a health expert "and he did not feel comfortable going into health consequences, although he observedthat overall more tons ofS02 will be "out ofthe air." (Tr. 39). AERfeels strongly that any review of potential health impacts must be presented to the Board by a toxicologist with expertise in the area ofair impacts and notby someone withoutthe appropriate qualifications. The Letter Report prepared by Dr. Fraiser And Dr. Bradley is attached as Exhibit 3. In the Report, AECOM examined the transcript and documents surrounding AER's variance request. AECOM first observes that over the course ofthe entire variance period, between now and 2020, the total tons of

## so2 reduced in the atmosphere will be greater ifthe variance is granted than ifit is not. (Letter Report, pg 3). The Drs. attribute this reduction in emissions to

41certain terms ofAER's compliance plan, namely its agreement to a tighter mitigation emission rate during 2012-2014 and AER's commitment to keep two ofits coal-fired power plants shut down duringthe variance period, which will result in less coal beingburned. (Id.). AECOM also provides a graph which illustrates the comparison ofAER's S02 emissions undertheprovisions ofthe MPS and the revised variancerequest. (Id.).

Ameren Energy Resources Variance SOz limitComparison to the Current MPS

# :::::~~ 1=!

# ~___.**~~~~ =~~~:!S·:~'~·~·····~··•·,+,i/:~.-·••"•n·~,-·.::i~>-:~_/r~~**  - ..•.

# r ••.

# ~~~~··**·.·.·~··· ··"""~·**  ..

# ~~~~~~~~~~i~~~~~~~i~~~~ !60,000 ' '

# ~-·~:·2 

# ....: ...;**,~>·,,"--------------- ~**  50,000

## ~~~~m**~~ ~~:::::::=**  R I**~** .; 40,000 ! E i Netdifference overtime bet.veen O WN30,000 +'------------1 ' ' b d " <ll 502ernlsSJons ase on 1e Ameren

20.000 variance rate and 502 emissions based lO,OOO on the MPS baseline rate is a decrease by 60,699 tons.**·~-~--~--~~-~-=7--~-~,--------~-~** 2010 2011 2012 20H 2014 2015**Y~ar** 2016 2017 2018**-+-AUowableEmi~s:ions** Easedon MPS**Ba~eline**Rate ......,.Total Future**Eml~~!ons** &ased onAmeren VarianceRate 2.019 1020

The blue line represents AER's baseline emissions under the MPS and the black line represents emissions under the revised variance request. As Dr. Fraiser and Dr. Bradley point out in the graph, AER's emissions under the S02 variance are considerably lower than the MPS emissions between 2012 and 2014 and are slightly higher from 2015 to 2019. (Jd.). However,

> the area representing the difference between the MPS and revised variance emissions from 2012

to 2014 is greater than the area between the MPS and S02 variance emissions from 2015 and 2019. They also note thatAERhas voluntarily operated at lower S02 emission rates since 2010, and ifthose reductions are taken into account, the positive difference is even larger. (Letter Report, pg. 3.). 42AECOM challenges within the Report the assumption that S02emissions from the AER coal fleet are atlevels that could potentiallyresult in off-site ambient concentrations high enough to cause adverse health effects even under the current provisions of the MPS. (Id.). For purposes ofresponding to the accusations presented through public comment and the Attorney General, however, the Drs. treat the methodology employed to correlate S02 emissions and health effects directly from powerplants as not flawed and determines that granting the variance would result in an overall netbenefit in terms ofhealth effects. For example, ifthe hypothetical riskrelationship ofone additional asthma-related emergencyroom (ER) visitper 100 tons ofS02 emitted is assumed, there will have been 77 fewer ER visits over the duration ofthe variance period than if AER complies with the MPS on its current schedule. (Id. at 3-4). AECOM stresses, however, thatthis assumed riskrelationship is purely hypothetical, as risk relationships ofthis nature are typically expressed on a per capitaperton basis, taking into accountthe size of the potentially exposed population. (Id. at 4). AECOM further stresses that although it can be universally agreed that respiratory effects such as asthma attacks and chronic obstructive pulmonary disease (COPD) represent adverse or harmful effects, simply establishing that a person who has been exposed to S02 experienced bronchoconstriction or a reduced expiratory volume is not proofthat the exposure causedthe effect. (I d.). This is because in any individual, these effects could have been caused by a number of different factors, for example, indoor or outdoor allergens, smoking or passive exposure to cigarette smoke, or viral pathogens. Likewise, the fact that a power plant may emit S02 does not necessarily mean that off-site air concentrations will behigh enoughto elicit adversehealth effects. (Id.). AECOM goes on to address a number ofthe public comments presented at the hearing. It begins with the comments presented by the Attorney General. Dr. Fraiser and Dr. Bradley

43dispute the Attorney General's statement that additional harm would occur despite the overall reduction in tonnage of S02 emissions over the term ofthe variance. AECOM concludes that there would be fewer adverse health effects overall and, therefore, the health benefits of approving the variance requested by AER outweigh the health costs when considering the entire variance period. Even this conclusion, is based on the assumption that there is a causal relationship between S02 exposures and adverse health effects. AECOM states that "more studies than not have failed to find statistically significant associations between long-term and short-term S02 concentrations and adverse health outcomes." In fact, it references a USEPA report prepared in support of the most recent S02 National Ambient Air Quality Standards review, which fmds no causal relationship between long-term exposure to S02 and asthma, bronchitis, or respiratory symptoms. The report did find a causal relationship between respiratory morbidity and short-term exposure to S02. However, the studies USEPA relied on found either no association or very small positive associations. Even those that showed weak positive associations raised questions about whether exposure and effect were causally associated. (ld. at4-5.). The Letter Report also contradicts the statement by a representative of Sierra Club implying that S02 is responsible for the increase in asthma over the last several decades. AECOM explains that exposureto outdoorpollutionis probably the least likely culprit. The Drs. say, for example, that nationwide S02 concentrations fell 32% between 1980 and 1990 alone. There are a number ofexplanations for the increase in asthma cases, butthe insinuation that S02 emissions are significant contributors to the rise in reported asthma cases is not supported by the evidence in literature. (Letter Report, pg. 6). AECOM's responses to public comments consistently showed that generalized comments claiming S02 caused respiratory illnesses


### 44including asthma relied on studies that either did not show statistically significant results or could notisolate the effects associatedwith S02 from confounding co-pollutants. In response to a number ofpublic commenters who made generalized statements such as "Coal powerplants kill people" and "Hundreds ofpeople in Illinois die from what comes out of coal-fired power plant stacks," AECOM stated "the public debate on air pollution coupled with the sensationalized air pollution health stories in the media have created the appearance that harm from air pollution is much greater and more certain than suggested by the underlying scientific evidence." Dr. Fraiser and Dr. Bradley attached an article by Dr. Joel Shwartz, which demonstrates that misinformation about air pollution is wide spread. 11 A closer review ofthe studies looking at the health effects oflow levels ofairpollutants relied upon by activists, health scientists, and even governmental agencies show their claims are based on observational studies that do not control for co-pollutants, lifestyle variables, or even contemplate regional disease patterns that have nothingto do with airpollution. !d. at 10. TheAECOMLetterReport directly contradicts the Attorney General's statement that any harm done cannotbe offsetthrough earlier emissions and shows the lack of evidence supporting claims that the variance will determine whether Illinois residents will live or die.


### 6. "IfCSAPR does go into effect, doesAmeren have a complianceplan?" (Board MemberZalewski, Tr. 41) At hearing Mike Menne explained that on the S02 side, AER would still have to take
some additional measures in order to meet the Cross State Air Pollution Rule ("CSAPR"). (Tr.

11 Dr. Joel Schwartz is Professor of Environmental Epidemiology in the Department of Environmental Health at the Harvard School ofPublic Health in Boston, Massachusetts. Dr. Schwartz received his Ph.D. from Brandeis University in Statistical Physics in 1980. He was formerly employed as a staffscientistand senior scientistfor USEPA.
4542). He mentioned options including bringing in lower sulfur coal and additional sorbent injection. (!d.). Mr. Menne was clear, however, that none ofthese additional measures would help the company achieve the MPS rates at issue. (!d.). As further explained, by committing to the mitigation S02 rate of0.35 lb/MMBtu, AERwill need to employ these additional measures to achieve compliance withthatlower rate. (Tr. 25). DeterminingAER's CSAPRcomplianceplanrequires abit offorecasting because we can not necessarily assume thatthe rule will be upheld in its full and current form. However, based
on the substance ofthe currently stayed rule, AER's compliance strategy for CSAPR and the MPS do overlap. As indicated by Mr. Menne at hearing, the company will continue to procure low sulfur coal and maximize the operation of its FGD systems to reduce S02 emissions. Alternative technologies such as DSI and operational measures such as management modifications of utilization rates of units will also continue to be evaluated and employed, if appropriate. However, the compliance mechanisms under MPS and CSAPRcontain several significant differences, buttwo are worthhighlighting. First, CSAPR is implemented according to state allowance budgets. These budgets are developed by USEPA as part ofthe rulemaking process. Second, CSAPR contains a mass emission limitation whereas the MPS is a ·rate based compliance limitation. Depending on how the state budget allowances are determined post appeals, AER could procure allowances as one of its compliance techniques. Assuming the second phase of CSAPR ultimately goes into effect, AER anticipates that it would need to implement additional technology measures such as completing the Newton scrubber or installation of a sorbent injection system or modify the utilization rates at certain units. That decision cannot be made, however,' until the appeals are resolved, the compliance deadlines established, andthe state allowance budgets finalized.

467. 

### "TheAG suggested a shorter two year variance, andI wasjust wondering 

### if Ameren would commenton the feasibility of thesuggestion andthe impact on air emissions?" (BoardMemberZalewski, Tr. 203) Unfortunately, for planning purposes, a two-year variance simply does not create a sufficient period of economic certainty and AER would have little choice but to begin transitioning into mothballing of its uncontrolled units and/or plants. This is due to the regulatory structure of the MPS, the anticipated construction timeline required prior to the compliance date, and the high level of certainty that power markets will not sufficiently return
over tbe next two years such tbat a capital funding option is available. Without the additional lead-time tbat AER has requested, the Company would be compelled to make the very difficult decision to continue to fund tbe Newton scrubber without comfort tbat an additional extension would ultimately be granted-in a time of extremely limited access to capital, the Company would likely decide tbat its capital would best be deployed in other, less risky projects. The rationale behind AER's request for a five year variance is based upon the regulatory structure of the MPS, tbe control strategy and construction timeline needed to comply witb those requirements, and tbe anemic economic outlookoverthe next severalyears. The Board may note that the structure ofAER's requested reliefis such tbat compliance with both tbe 0.25 and 0.23 lb/MMBtu S02 emission standards is separated by two only weeks (December 31, 2019 and January 15, 2020, respectively). Thatis because the control technology needed to achieve both ofthese rates, is the same - the completion oftbe Newton scrubber. In reality, achievement ofone is the achievement ofthe other. A two-year variance as suggested by the Attorney General would move the 2015 compliance date to 2017 (and keep the 2017 compliance date unchanged). In order to comply witb these rates, AER would need to reacceleratethe Newton scrubber starting in January 2015 so as to accommodate tbe estimated 24- montb construction schedule. 47As the Board is well aware, economic growth is virtually stagnant and AER does not expect power prices to recover (certainly not sufficiently) over the next twenty-eight months. Eventhe most optimistic economist would characterize this economy as faltering. Power prices have dropped steadily over the last four years and a return to more typical rates will likely be very gradual. As Mr. Gary Rygh testified, without a dramatic and sustained rebound in power prices, investors simply will not fund the $200 million to $250 million needed to complete that project and meet other financial obligations. The five-year term was selected with this bleak horizon in mind to allow a sufficient windowforthe economy (and powerprices) to recover and to facilitate the two-year construction cycle. Investors need to see sustained growth before
access to capital will be possible. Because ofthat reality, instead of investing in the Newton scrubber, AERwill needto transitionto a compliance strategythat encompasses shutdowns with all ofits unfortunate and tragic consequences. Accordingly, atwo-year variance is tantamountto
a variance denial. While AER certainly appreciates the Attorney General's apparent beliefthat variance reliefis appropriate, the suggestedvariance does notprovide a sufficientreliefperiodto alter the only other viable compliance option available to AER. AER carefully designed its request for reliefto focus on what is needed based upon the current economic predicament and the need to synchronize both the construction and financing ofthe scrubber project. A two-year variance simply does not provide sufficientreliefto AER. We believe we have presented a case that supports the variance terms AERrequested alongwiththe modifications suggested by IEPA and our otherproposed conditions.


### 8. "Several public comments referred to the benefits that Ameren realized by opting into the MPS. Couldyouplease comment and quantifY the benefit thatAmeren has realized in terms ofcontrolsfor mercury, NOx andS02? I amparticularly interested in the perceivedbenefitregardingmercury?"(BoardMember Glosser, Tr. 204)

48Pursuant to 35 Illinois Administrative Code Part 225, Subpart B, electric generating units ("EGUs") are required to reduce mercury emissions by a specified removal rate (expressed as either percent reduction from input mercury content or an outlet based emission standard), beginning July 1, 2009. The regulations also contain alternative compliance mechanisms. Ameren selected the MPS compliance option and in so must, and has performed**an~** IS performing, the following:
• Installed an activated carbon injection (ACI) system on each unit lessthan 90 MWby July2009, resulting in the installation of12 systems;

• Injects halogenated activated carbon into the ACI systems atarate determinedby the type ofcoal burned and in an "optimizedmanner" as defined by Section 225.233(c)(2);

• Inlieu ofanACI system, installed 3FGD/SCRcombined system in combinationwiththe burning of bituminous coal. Also, by opting into the MPS, AER is required to achieve a specified removal efficiency
or emission rate for mercury effective July I, 2015 and reduce S02 and NOx emissions across the Systempursuantto progressively tightening emission rates. At the time of the original rulemaking, the company believed that three years was. insufficient time to install control technology and to test and perfect various sorbent injection methodologies across the fleet so as to achieve compliance with the mercury removal requirements. (As one AER employee from the E.D. Edwards plant noted, performance under laboratory conditions is very different than under field operating scenarios). Ameren believed that substantial field testing and refinement would be needed and therefore opted into the MPS. The benefit to the company was that the compliance date for one aspect of the regulation 

### 49(compliance with the removal efficiency) was deferred from July 2009 to January 2015. Notably, the obligation to install control technology and to inject activated carbon was not deferred. AERhas continuedto test various control methodologies and reagents. 12 Atfive ofits active units, AER has recorded mercury emission levels between 0.00l 8 and 0.0073 lb/GWh, well underthe 0.008 lb/GWh standard that will go in effect in 2015. Mercury emissions at nine other units have been recorded at levels between 0.01 and 0.018 lb/GWh and AER has continuous experimentation and testing underway. AER also notes that with the exception of two units, overall mercury capture currently ranges from 80% to 95%. AER continues to evaluate and test mercury control technology to achieve more effective control and has been committedto reducing emissions as indicated bythis data. The mercury reductions from AER's fleet are being achieved three years ahead of the compliance deadline set forth in the MPS. There is no questionthatthe environment in Illinois is benefitting from these earlyreductions. Many public commenters have referred to the "benefits" AER has gained through the MPS. To really examine the benefits, one needs only to look back at the testimony Jared Policicchio of the Chicagoland area offered into the record at the August 1 hearing. Mr. Policicchio quoted the testimony ofMichael Menne from the original mercury proceeding: "the proposal we put before you today sets out a regulatory scheme that addresses three pollutants, SOz, NOx and mercury, in a way that synchronizes and coordinates regulatory reduction mandates that are clearly on the way." (Tr. 140). Mr. Menne went on to say that the "amendment reflects our commitments to meet specific regulatory limits for mercury by 2010 and 2015, representing 90% reduction on all but its smallest units, and substantial and real

12 Exhibit2to the Petition details the numerous ACI permits obtained byAERandpilottests performed as the Company seeks to refine the besttechnology appropriate for its units.
50reductions in NOx and S02 which go beyond the CAIR requirements." 

### (In the Matter of Proposed New 35 Ill. Adm. Code 225 Control ofEmissionsfrom Large Combustion Sources (Mercury), R06-25, Testimony ofMichael Menne, pg. 8-9, filed Jul. 28, 2006). There is no question that the company's intended benefit was to align the MPS's NOx and S02 emissions requirements with what AER believed to be its control strategy for compliance with thenpending CAIRregulations. Those regulations were deemed legally flawed and remanded back to USEPA. USEPA's CAIRreplacement, CSAPR, has been stayed pending judicial review. The intended benefit to AER--coordinated implementation of state and federal regulatory requirements--has not occurred but substantial and real reductions ofNOx and S02
are still occurring. Much like the Attorney General, AER is also proud ofthe work it did to establishthe MPS and agrees itputIllinois in a national leading role interms ofpollution control reduction. (Tr. 85). Unfortunately, the Attorney General did not develop the MPS nor can that Office talk to the purposes ofits origination. AER can "lookthrough the lens ofthe work that
was done to achieve the MPS" as suggested bythe Attorney General (Tr. 86) because

### AER has done andcontinues to do the work. The full benefit ofthe regulatory structure ofthe MPS has not been realized by AER, but the environment in Illinois is benefiting from its work and will continue to so benefitin the future.
IV. CONCLUSION There are many people throughout this proceeding thattalked about their participation in the creation ofthe MPS. Some claim it is theirjob to defend it, some claim that itwas a "deal" they "agreed to" and yet others claim that without it, people will die. Yet, itwas Ameren, who offered the very proposed language that was adopted ultimately as the MPS; and Ameren who worked with the Agency to negotiate, draft and advance the inclusion of the proposed
51amendment within the underlying proposed regulation. 

### (In the Matter ofProposedNew 35 Ill. Adm. Code 225 Control ofEmissionsfrom Large Combustion Sources (Mercury), R06-25, · Ameren Joint Statement, filed Jul. 28, 2006). To be sure, at a later date, one other power generator presented its own approach to the MPS which also was ultimately adopted, and the Agency consulted withthe environmental groups aboutthe overall approach. Alongthe way, the Board took each position into consideration. The record shows, however, that no other stakeholderputmore effortandheartinto the MPS thanAmeren. Those arejustthe bare facts. Just like Amerenputthetime and effort, heart, andhardwork into the MPS, so too do the
men and women ofAER put their hearts and and hard work into how they operate their power plants. At the August I, 2012 hearing, the Board heard time and time again what AER employees bring to theirjobs and communities every day. It is worth repeating some ofthose. comments here because they are emblematic ofthe environmental stewardship ofAER: 

### Mr. Bogardus, E.D. Edwards Energy Center: "We go to work every day and manage
ourpowerplants with every one ofyou in mind. Firstpart ofevery day is to look exactly athow
we did inthe environmental footprint the nightbefore, and I do that every day, and my signature goes on every single piece ofpaper and the men and women who are going to stand up here spend more overtime on this system called ACI, mercury, trying to make sure we do absolutely everything we can to go above and beyond the minimum, above and beyond the minimum opacity, the late nights they're running. These people workhard for you. They understand. The
men and women here with these vests on are working really hard, and we like you to consider that." (Tr. 136). 

### Mr. Carter, Duck CreekandE.D. Edwards: "Ijustwantto assure the Board thatwe are very dedicated to providing electricity in an environmentally responsible manner. I've been

52there long hours, late nights, trying to make everything work like it should be. We're also very dedicated to our families and communities in which we live." (Tr. 165). 

### Mr. Killebrew, E.D. Edwards: "What we are doing is spending a lot oftime and effort trying to get up the pollution controls we do have. I work with a number ofinstrument techs. That's whatI do there, and every day we workwith ACI, the SCR, and weworkvery hard to try to make the emerging sciences thatFaithtalked aboutworkproperly." (Tr. 175). 

### Mr. Pullen. Joppa: "Ameren and these employees you see out here, we are the people that make the decisions every day on how our plants are operated. We work hard. We do not gamble. We do not fool around. We operate our plants in a safe, environmentally responsible manner." (Tr. 198). 

### Mr. Marsc/zewski, Newton: "I would comment on the fact that Ameren has done more than nothing. I live it every day. I've worked on the equipment that's been put in five years. I've been there for the activated carbon, calcium bromide, not to mention the precipitators that
remove particles from our effluent. I'm constantly working on that and developing ways to make itbetter and keep it on line." (Tr. 238). 

### Mr. Pierson, Joppa: "We'renot like everyone has said, we're not here to deliberately do anything wrong. We do everything we can. Every morning ofevery day we meet and see what
we can do, what we can be better. We meet the standards, and we continually strive to be even betterthan the standards. That'sjustthe waywe are." (Tr. 259). Obviously, this sample of comments is only a small representation of the men and
women ofAERwho traveled long distances and waited a number ofhours to express their own thoughts and opinions to this Board. They are invested in what they do every day and they care



### 53abouttheir future. These people ofsouthern and central Illinois are also the "People" ofthe State ofIllinois. Numerous elected officials, a number ofthem during an election year, took a day out of their schedule to explain to the Board exactly what is at stake. Senator Forby stated simply: "Everybody wants clean air. There's no doubt about that.
... Ifit keeps going like it's been going and we don't sit down and think what we're doing, we won'thave a southern Illinois. It's goingto be gone." (Tr. 58). The mayors oftowns that would be directly impacted by the Board's decision in this proceedingrecognized thatthis is not a choice betweenjobs and the environment, but rather one that can benefit both. The mayor ofNewton Illinois, Mayor Bolander, stated "I'm asking the Illinois Pollution Control Board to grant the extension to ensure reduced emissions and higher environmental standards while protecting the economiclivelihoods of Illinois families." (Tr. 79). Julie Johnson, mayor ofJoppa, Illinois added "We realize our environment is importantbut it's hard to put this aside when your families are without work, can't be provided for, your village is losingpeople outbecause theyhave to go elsewhereforjobs, your schools close down, and thatpretty much devastates your community." (Tr. 103). In explaining how vital the Joppa Energy Center is to the area, the Mayor ofthe City ofMetropolis, Billy McDaniel explained "You know, we do know that we have to have a quality oflife as far as pollution and things of that nature, but we also still have to have a quality oflife as far as economic situations." (Tr. 105). AER knows what is at stake when faced with plant closures and the value ofhaving the
men and women ofsouthern and central Illinois willing to travel to Springfield, Illinois, to put their own face to the other perspective. As Representative David Reis said so effectively to the

54Board, "The people of Jasper County that I represent, you know, they don't have big organizations representing them, no lobbyists, no lawyers, no database of activists to send in comments, but for common sense folks, we have a deep sense for our community and our schools and ourjobs, and I would be willing to bet in fact that not one person from Jasper County puttheir name on this denial request. I bet not one sent in a comment saying we reject it." (Tr. 66). To assume, as several ofthe commenter have, that AERhas not considered all of its options before itpresented its plant shut down case to this Board is absurd. The reality is that the decision the Boardis now facing is as serious as the decision AERfaced when it came to this Board onMay 3, 2012. Itis important to note that AER and the elected officials that appeared at hearing agree with Faith Bugel ofELPC that this is not a choice betweenjobs and the environment. AER made sure itwould notputtheBoard in thatposition and did so by presenting a variance request that provides an overall net environmental benefit to the State ofIllinois. AER presented its request to the Board in this way because it is not ready to give up on the completion ofthe Newton scrubber and it is certainly not prepared to give up on the plants. AER disagrees with both the Attorney General and ELPC when they suggest that the plants are "likely reaching the end oftheir viable life anyway and that with or withoutthe variance, it is likely that these plants will shut down." (Tr. 117). Even in the face ofadversity in the market, regulatory landscape and aggressive opposition from activists and the Attorney General, AER is before this Board asking it to allow the variance process to work. AER had demonstrated that it faces a hardship that cannot be fairly characterized as self-created or foreseen. It has provided the Board with a variance request and compliance plan that provides a net environmental benefit. AER's framework, contrary to the Attorney General's assertions, does respect the very essence ofthe


### 55MPS and in fact, enhances it. AERhas met its burden. AERnowrespectfully asks the Board for time to comply with the 2015 and 2017 emission rates under the MPS. AER will allow Mr. Weaver's own words to explain, "Chairman, ladies and gentlemen ofthe Pollution Control Board, thank youfor giving us this opportunity to present today. You know, coming up here today
...firstof all, myname is J. D. Weaver. Iworkatthe Amerenfacility in Duck Creek. Prior to that, I workedatthe Dynegyplant in Havana, Illinois. In '94 I was laidoff from there due to the economic conditionsshuttingunits 1 through 5 down. Sixyears later, Iwas fortunate enough to be employedwithAmeren andhave workedtherefor 12years. Cominguphere today, Ididn't really think --I'm notreally aperson to dopublicspeaking butI thoughtI'dprobably be remiss 

### ifI didn 't give my 5-year-old boy a chance to say I did everythingI could to remain gainfUlly employed, and in doing that, I didn't really want to come up here with an "us versus them" mentality, but coming at the decision upon usfrom a team approach, atAmeren, we use the TEAM concept and use the acronym TEAM as "Together, everyone achieves more, " and in doing so, I wantedto try toput together maybe a common theme or some type of analogy that mostpeople in this room can relate to orwill relate to in their lives, andthat is, all of us atsome time will get ajob or have ajob andwhen they go out, theyfind their house oftheir dreams, whether it be in the city, afarm. They go to the bank. They borrow the money to helpfinance that dream, the American dream, and in doing so, they build, they upgrade, theyfix up their house to make ittheprettiesthouse on the block, theprettiest farm, the mostproductivefarm, but sometimes there's circumstances that come about that are out of people's control. The person may be in an accident. That's not theirfault. A person may get a debilitating illness and a person maylose theirjob because their companymoves, all of which are circumstances that they couldnot foresee or was out of their control. 

## If that happenedto thatperson, they woulddo the

56

### prudent thing. They wouldgo to the bank, to the loan officer, andthey would try to restructure that loan, that debt obligation that they agreed to in order not to affect their creditrating, to do what's right, to do whatyouwoulddo with integrity. From a banker'sstandpoint, they wouldtry to work with thatperson and try to maybe restructure the loan, try to work with him on his payments because they don'twant that house in an economy which they wouldn't be able to sell. So in that case, working together was a win-win approach. This is really not about home ownership. I"s really about the situation we have atAmeren. AtAmeren in our coal-fired facilities, we build our houses in Canton, Illinois, Duck Creek, Bartonville, 

### E. D. Edwards, Newton, Coffeen andJoppa. We've upgraded thosefacilities. We've built that house. We've made it the best we can make it by spending over a billion dollars. In doing that, we're not trying to-we've done ourpart. We've tried to meet our obligations, andwe 're notskirting the issues. We know our environmental obligation. We're trying to achieve it, and for thepeople of the board, we'rejustaskingyou to be the banker;justto give us time so the market can recover
so thepowerprices thatwe'refacing can get the cashflow to where we can affordtofinish the scrubbers." (Tr. 246-249). In the spirit of its dedication to environmental stewardship, AER has considered every viable alternative to seeking this variance, but there is no other economically reasonable technology, operational measure, or pollution control equipment that would allow AER to meet the 2015 and 2017 S02 emission rates. Completing the Newton FDG system is the most effective and economically reasonable Bolution and through this variance AER seeks time to finish the work it has started towards that goal. AER cannot now secure the funding necessary to complete the scrubber and the outlook for the next several years is no better. AERhas shown, and the Agency agrees, that the earlier and greater S02 emissions reductions AERwill achieve

57under its compliance planwillprovide anetenvironmentalbenefit ifthe Boardwereto grantthe requested relief. Accordingly, AER has met its burden to show it is facing an arbitrary and unreasonable hardship, and granting the requested variance is justified under these circumstances. WHEREFORE, petitioner Ameren Energy Resources respectfully requests the Pollution Control Board to grant its request for variance from the TI!inois Multi-Pollutant Standard 2015 S02 emissionrate through December 31,2019 and 2017 S02 emissionrate through January 15, 2020, as describedmore fully herein.

Dated: August 15, 2012 Renee Cipriano Gabriel Rodriguez AmyAntoniolli SchiffHardin, LLC 233 SouthWackerDrive, Suite 6600 Chicago, IL 60606 Respectfully submitted, AMERENENERGYRESOURCES, Petitioner.

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