### MICHIGAN DEPARTMENT OF ENVIRONMENTAL QUALITY AIR QUALITY DIVISION

February 18, 2015

PERMIT TO INSTALL 40-15

ISSUED TO Consumers Energy

LOCATED AT 2742, 2680 and 2555 North Weadock Highway

Essexville, Michigan

IN THE COUNTY OF Bay

STATE REGISTRATION NUMBER

B2840

The Air Quality Division has approved this Permit t o Install, pursuant to the delegation of authority from the Michigan Department of Environmental Quali ty. This permit is hereby issued in accordance with and subject to Section 5505(1) of A rticle II, Chapter I, Part 55, Air Pollution Control, of the Natural Resources and Environmental Protection Act, 1994 PA 451, as amended. Pursuant to Air Pollution Control Rule 336.1201(1), this permit constitutes the permittee’s authority to install the identified emission unit(s ) in accordance with all administrative rules of th e Department and the attached conditions. Operation of the emission unit(s) identified in this Permit to Install is allowed pursuant to Rule 336.1201(6).

DATE OF RECEIPT OF ALL INFORMATION REQUIRED BY RUL E 203: 

## February 18, 2015

DATE PERMIT TO INSTALL APPROVED: 

## April 30, 2015 SIGNATURE:

DATE PERMIT VOIDED: SIGNATURE:

DATE PERMIT REVOKED: SIGNATURE:Consumers Energy D.E. Karn Plant (B2840) April 30, 2015

Permit No. 40-15 Page 1 of 32

PERMIT TO INSTALL

Table of Contents

Section Page

Alphabetical Listing of Common Abbreviations / Acro nyms .............................................. ..................................... 2

General Conditions ................................

................................................... ................................................... ........... 3

Special Conditions ................................

................................................... ................................................... ............ 5

Emission Unit Summary Table .......................

................................................... ................................................... ... 5

Special Conditions for EU-KARN1 ...................

................................................... ................................................... . 6

Special Conditions for EU-KARN2 ...................

................................................... .................................................. 11

Appendices ........................................

................................................... ................................................... ............. 16Consumers Energy D.E. Karn Plant (B2840) April 30, 2015

Permit No. 40-15 Page 2 of 32

Common Abbreviations / Acronyms Common Acronyms Pollutant / Measurement Abbreviatio ns AQD Air Quality Division BTU British Thermal Unit BACT Best Available Control Technology °C Degrees C elsius CAA Clean Air Act CO Carbon Monoxide CEM Continuous Emission Monitoring dscf Dry standa rd cubic foot CFR Code of Federal Regulations dscm Dry standard c ubic meter CO 2 e Carbon Dioxide Equivalent °F Degrees Fahrenheit COM Continuous Opacity Monitoring gr Grains EPA Environmental Protection Agency Hg Mercury EU Emission Unit hr Hour FG Flexible Group H 2 S Hydrogen Sulfide GACS Gallon of Applied Coating Solids hp Horsepower GC General Condition lb Pound GHGs Greenhouse Gases kW Kilowatt HAP Hazardous Air Pollutant m Meter HVLP High Volume Low Pressure * mg Milligram ID Identification mm Millimeter LAER Lowest Achievable Emission Rate MM Million MACT Maximum Achievable Control Technology MW Megawatts MAERS Michigan Air Emissions Reporting System ng Nanogram MAP Malfunction Abatement Plan NO x Oxides of Nitrogen

MDEQ Michigan Department of Environmental

Quality (Department) PM Particulate Matter MSDS Material Safety Data Sheet PM10 PM with aerody namic diameter ≤ 10 microns

NESHAP National Emission Standard for

Hazardous Air Pollutants PM2.5 PM with aerodynamic diameter ≤ 2.5 microns NSPS New Source Performance Standards pph Pounds pe r hour NSR New Source Review ppm Parts per million PS Performance Specification ppmv Parts per million by volume PSD Prevention of Significant Deterioration ppmw Pa rts per million by weight PTE Permanent Total Enclosure psia Pounds per squar e inch absolute PTI Permit to Install psig Pounds per square inch g auge

RACT Reasonably Available Control

Technology scf Standard cubic feet ROP Renewable Operating Permit sec Seconds SC Special Condition SO 2 Sulfur Dioxide SCR Selective Catalytic Reduction THC Total Hydroc arbons SRN State Registration Number tpy Tons per year TAC Toxic Air Contaminant μg Microgram TEQ Toxicity Equivalence Quotient VOC Volatile Orga nic Compound VE Visible Emissions yr Year

* For High Volume Low Pressure (HVLP) applicators, the pressure measured at the HVLP gun air cap shall not exceed ten (10) pounds per square inch gauge (psig)

.Consumers Energy D.E. Karn Plant (B2840) April 30, 2015

Permit No. 40-15 Page 3 of 32

GENERAL CONDITIONS

1. The process or process equipment covered by this permit shall not be reconstructed, relocated, or modified, unless a Permit to Install authorizing su ch action is issued by the Department, except to th e extent such action is exempt from the Permit to Ins tall requirements by any applicable rule. (R 336.1201(1))

2. If the installation, construction, reconstructio n, relocation, or modification of the equipment for which this permit has been approved has not commenced within 1 8 months, or has been interrupted for 18 months, this permit shall become void unless otherwise auth orized by the Department. Furthermore, the permitt ee or the designated authorized agent shall notify the Department via the Supervisor, Permit Section, Air Quality Division, Michigan Department of Environmen tal Quality, P.O. Box 30260, Lansing, Michigan 48909-7760, if it is decided not to pursue the inst allation, construction, reconstruction, relocation, or modification of the equipment allowed by this Permi t to Install. (R 336.1201(4))

3. If this Permit to Install is issued for a proces s or process equipment located at a stationary sour ce that is not subject to the Renewable Operating Permit progr am requirements pursuant to R 336.1210, operation of the process or process equipment is allowed by t his permit if the equipment performs in accordance with the terms and conditions of this Permit to Ins tall. (R 336.1201(6)(b))

4. The Department may, after notice and opportunity for a hearing, revoke this Permit to Install if ev idence indicates the process or process equipment is not p erforming in accordance with the terms and conditio ns of this permit or is violating the Department’s rul es or the Clean Air Act. (R 336.1201(8), Section 5510 of Act 451, PA 1994)

5. The terms and conditions of this Permit to Insta ll shall apply to any person or legal entity that n ow or hereafter owns or operates the process or process e quipment at the location authorized by this Permit to Install. If the new owner or operator submits a wr itten request to the Department pursuant to R 336.1 219 and the Department approves the request, this permi t will be amended to reflect the change of ownershi p or operational control. The request must include a ll of the information required by subrules (1)(a), (b), and (c) of R 336.1219 and shall be sent to the District Supervisor, Air Quality Division, Michigan Departm ent of Environmental Quality. (R 336.1219)

6. Operation of this equipment shall not result in the emission of an air contaminant which causes inj urious effects to human health or safety, animal life, pla nt life of significant economic value, or property, or which causes unreasonable interference with the comfortab le enjoyment of life and property. (R 336.1901)

7. The permittee shall provide notice of an abnorma l condition, start-up, shutdown, or malfunction tha t results in emissions of a hazardous or toxic air po llutant which continue for more than one hour in ex cess of any applicable standard or limitation, or emissi ons of any air contaminant continuing for more than two hours in excess of an applicable standard or limita tion, as required in Rule 912, to the Department. The notice shall be provided not later than two busines s days after start-up, shutdown, or discovery of th e abnormal condition or malfunction. Written reports , if required, must be filed with the Department wi thin 10 days after the start-up or shutdown occurred, wi thin 10 days after the abnormal conditions or malfunction has been corrected, or within 30 days o f discovery of the abnormal condition or malfunctio n, whichever is first. The written reports shall incl ude all of the information required in Rule 912(5). (R 336.1912)

8. Approval of this permit does not exempt the perm ittee from complying with any future applicable requirements which may be promulgated under Part 55 of 1994 PA 451, as amended or the Federal Clean Air Act.

9. Approval of this permit does not obviate the nec essity of obtaining such permits or approvals from other units of government as required by law.

10. Operation of this equipment may be subject to o ther requirements of Part 55 of 1994 PA 451, as ame nded and the rules promulgated thereunder.Consumers Energy D.E. Karn Plant (B2840) April 30, 2015

Permit No. 40-15 Page 4 of 32

11. Except as provided in subrules (2) and (3) or u nless the special conditions of the Permit to Insta ll include an alternate opacity limit established pursuant to subrule (4) of R 336.1301, the permittee shall not cause or permit to be discharged into the outer air from a process or process equipment a visible emission o f density greater than the most stringent of the foll owing. The grading of visible emissions shall be determined in accordance with R 336.1303. (R 336.1301) a) A six-minute average of 20 percent opacity, exce pt for one six-minute average per hour of not more than 27 percent opacity. b) A visible emission limit specified by an applica ble federal new source performance standard. c) A visible emission limit specified as a conditio n of this Permit to Install.

12. Collected air contaminants shall be removed as necessary to maintain the equipment at the required operating efficiency. The collection and disposal of air contaminants shall be performed in a manner so as to minimize the introduction of contaminants to the outer air. Transport of collected air contamin ants in Priority I and II areas requires the use of materia l handling methods specified in R 336.1370(2). (R 336.1370)

13. The Department may require the permittee to con duct acceptable performance tests, at the permittee ’s expense, in accordance with R 336.2001 and R 336.20 03, under any of the conditions listed in R 336.2001. (R 336.2001)Consumers Energy D.E. Karn Plant (B2840) April 30, 2015

Permit No. 40-15 Page 5 of 32

SPECIAL CONDITIONS

EMISSION UNIT SUMMARY TABLE

The descriptions provided below are for information al purposes and do not constitute enforceable condi tions.

Emission Unit ID Emission Unit Description (Process Equipment & Control Devices) Installation Da te / Modification Date Flexible Group ID EU-KARN1 Karn Boiler #1 is a 2500 million BTU per hour dry bottom tangential coal fired boiler with fuel oil startup capabilities and supplemental co- firing for flame stabilization and mill outages. Particulate emissions are controlled by a low pressure high volume (LPHV) pulse jet fabric filter (PJFF).

To comply with the Cross State Air Pollution Rule (CSAPR), Selective Catalytic Reduction (SCR), and/or the accumulation of adequate NOx allowances will be utilized.

A Selective Catalytic Reduction (SCR) unit, a spray dry absorber (SDA), and sorbent injection are installed for NOx, SO 2 , other acid gas, and mercury control. July 1, 1956, 1973 - 1993 FG-KARN12

EU-KARN2 Karn Boiler #2 is a 2540 million BTU per h our d ry bottom wall coal fired boiler with fuel oil startup capabilities and supplemental co-firing for flame stabilization and mill outages. Particulate emissions are controlled by a low pressure high volume (LPHV) pulse jet fabric filter (PJFF). Additionally, Low NOx burners are installed.

To comply with the Cross State Air Pollution Rule (CSAPR), Selective Catalytic Reduction (SCR), and/or the accumulation of adequate NOx allowances will be utilized.

A Selective Catalytic Reduction (SCR) unit, a spray dry absorber (SDA), and sorbent injection are scheduled to be installed for NOx, SO 2 , other acid gas, and mercury control. July 1, 1956, 1973 - 1998 FG-KARN12

Changes to the equipment described in this table ar e subject to the requirements of R 336.1201, except as allowed by R 336.1278 to R 336.1290.Consumers Energy D.E. Karn Plant (B2840) April 30, 2015

Permit No. 40-15 Page 6 of 32

The following conditions apply to:

EU-KARN1

DESCRIPTION: Karn Boiler #1 is a 2500 million BTU per hour dry bottom tangential coal fired boiler with fuel oil startup capabilities and supplemental co-firing for flame stabilization and mill outages. Particu late emissions are controlled by a low pressure high volume (LPHV) pulse jet fabric filter (PJFF). To comply with the Cross State Air Pollution Rule (CSAPR) NOx Budget Trading Program/CAIR Program, Selective Catalytic Reductio n (SCR), and/or the accumulation of adequate NOx allo wances will be utilized. A Selective Catalytic Red uction (SCR) unit, a spray dry absorber (SDA), and sorbent injection are installed for NOx, SO2, other acid g as, and mercury control.

Flexible Group ID: FG-KARN12

POLLUTION CONTROL EQUIPMENT: PJFF, SCR, SDA, and sorbent injection are install ed.

I. EMISSION LIMITS

Pollutant Limit Time Period / Operating Scenario Equipment Testing / Monitoring Method Underlying Applicable

Requirements

1. SO 2 1.67 lbs/mmBtu

heat input** 2 Monthly calendar average EU-KARN1 SC VI.3 R 336.1401(1)

2. SO 2 0.090 pounds per

MMBtu heat input 3 Based on a 30-day Rolling

Average Emission Rate. This limit applies beginning 60 Operating Days after December 31, 2014. 3,4 EU-KARN1 SC VI.4 “U.S. V CONSUMERS ENERGY COMPANY, CIVIL ACTION 14- 13580, E.D. MICH., 2014” paragraph 117, Act 451 324.5503(b) 3. SO 2 0.075 pounds per

MMBtu heat input 3 Based on a 365-day Rolling

Average Emission Rate. This limit applies beginning 365 Operating Days after December 31, 2014. 3,4 EU-KARN1 SC VI.4 “U.S. V CONSUMERS ENERGY COMPANY, CIVIL ACTION 14- 13580, E.D. MICH., 2014” paragraph 117, Act 451 324.5503(b) 4. PM 0.16 lb/1000 lb of

exhaust gas corrected to 50% excess air 2 Test Protocol* EU-KARN1 SC V.1 R 336.1331(1)(c)

5. PM 0.015 pound per

MMBtu heat input 3 At all times, as verifiable

through required stack testing. This limit applies 30 Operating Days after November 4, 2014 (i.e. December 8th, 2014) 3,4 EU-KARN1 SC V.4, SC V.5 (See Appendix C-1) “U.S. V CONSUMERS

ENERGY COMPANY, CIVIL ACTION 14- 13580, E.D. MICH., 2014” paragraph 147, Act 451 324.5503(b) 6. NO x 0.080 pound per MMBtu heat input 3 Based on a 30-day Rolling

Average Emission Rate. This limit applies beginning 60 Operating Days after November 4, 2014 (i.e. January 10 th , 2015) 3,4 EU-KARN1 SC VI.4 “U.S. V CONSUMERS ENERGY COMPANY, CIVIL ACTION 14- 13580, E.D. MICH., 2014” paragraph 85, Act 451 324.5503(b)Consumers Energy D.E. Karn Plant (B2840) April 30, 2015

Permit No. 40-15 Page 7 of 32

Pollutant Limit Time Period / Operating Scenario Equipment Testing / Monitoring Method Underlying Applicable

Requirements 7. Opacity 20% 3,4 Per 6-minute period except for one 6-minute period per hour of not more than 27% EU-KARN1 SC VI.2 “U.S. V CONSUMERS ENERGY COMPANY, CIVIL ACTION 14- 13580, E.D. MICH., 2014” paragraph 151 * Test protocol shall specify averaging time ** 1.0 percent sulfur by weight in coal at 12,000 B TU per pound is equivalent to 1.67 pounds per milli on BTU heat input. Compliance with this emission limitati on shall be based upon the monthly average of conti nuous emission monitoring data. (R 336.1401(1))

See Appendix C-1

II. MATERIAL LIMITS

Material Limit Time Period / Operating Scenario Equipment Testing / Monitoring Method Underlying

Applicable Requirements NA NA NA NA NA NA

III. PROCESS/OPERATIONAL RESTRICTIONS

1. The permittee shall not operate EU-KARN1 unless a Malfunction Abatement Plan (MAP) as described in Rule 911(2), for the emission control equipment is implemented and maintained. The MAP shall, at a minimum, specify the following: a. A complete preventative maintenance program incl uding identification of the supervisory personnel responsible for overseeing the inspection, maintena nce, and repair of air-cleaning devices, a descript ion of the items or conditions that shall be inspected, the frequency of the inspections or repairs, and a n identification of the major replacement parts that shall be maintained in inventory for quick replacem ent. b. An identification of the source and air-cleaning device operating variables that shall be monitored to detect a malfunction or failure, the normal operati ng range of these variables, and a description of t he method of monitoring or surveillance procedures. c. A description of the corrective procedures or op erational changes that shall be taken in the event of a malfunction or failure to achieve compliance with t he applicable emission limits. If at any time the MAP fails to address or inadequa tely addresses an event that meets the characterist ics of a malfunction, the permittee shall amend the MAP with in 45 days after such an event occurs. The permitt ee shall also amend the MAP within 90 days, if new equ ipment is installed or upon request from the Distri ct Supervisor. The permittee shall submit the MAP and any amendments to the MAP to the AQD District Supervisor for review and approval. If the AQD doe s not notify the permittee within 90 days of submit tal, the MAP or amended MAP shall be considered approved. U ntil an amended plan is approved, the permittee shall implement corrective procedures or operationa l changes to achieve compliance with all applicable emission limits. 2 (R 336.1910, R 336.1911)

2. Commencing 60 Operating Days after November 4, 2 014 (i.e. January 10, 2015) and continuing thereaft er, Consumers shall Continuously Operate the PJFF and u se good air pollution control practices to maximize the PM emission reductions at all times when the Unit i s in operation. The requirements of Appendix G-1 s hall be met. 3, 4 (“U.S. V CONSUMERS ENERGY COMPANY, CIVIL ACTION 14- 13580, E.D. MICH., 2014” – paragraph 141, Act 451 324.5503(b))

See Appendix G-1Consumers Energy D.E. Karn Plant (B2840) April 30, 2015

Permit No. 40-15 Page 8 of 32

IV. DESIGN/EQUIPMENT PARAMETERS



### 1. The permittee shall not operate EU-KARN1 unless the SCR, the fabric filter baghouse (PJFF), the SDA, a nd sorbent injection (for mercury control) are install ed, maintained, and operated in a satisfactory mann er. Satisfactory manner includes operating and maintain ing each control device in accordance with an appro ved MAP for EU-KARN1 as required in SC III.1. (R 336.1901, R 336.1910)



### 2. The permittee shall not operate EU-KARN1 unless the SCR, SDA and fabric filter are Continuously Operated. 3,4 ( “U.S. V CONSUMERS ENERGY COMPANY, CIVIL ACTION 14-1 3580, E.D. MICH., 2014” – paragraphs 84, 117 and 147, Act 451 324.5503(b))

V. TESTING/SAMPLING Records shall be maintained on file for a period of five years. (R 336.1201(3))

1. Once every three years, or more frequently upon request of the AQD, permittee shall verify the PM e mission rate from EU-KARN1 by testing, utilizing US EPA Ref erence Method 17 (Determination of Particulate Emissions from Stationary Sources (In-stack Filtrat ion Method)) or other AQD approved test method, at permittee’s expense, and in accordance with Departm ent requirements. Verification of emission rates in cludes the submittal of a complete report of the test resu lts within 60 days of test completion. (R 336.1331(1)(c), R 336.2001, R 336.2003, R 336.2004)

2. The permittee shall submit a complete test proto col to the AQD for approval at least 30 days prior to the anticipated test date. (R 336.2001(3))

3. The permittee shall notify the AQD no less than 7 days prior to the anticipated test date. (R 336.2001(4))

4. No later than November 4, 2015, the permittee sh all conduct a stack test for PM pursuant to the pro visions found in Appendix C-1: PM Emissions Testing and Mon itoring Requirements. Thereafter, subsequent stack tests for PM shall be conducted pursuant to the sch edule and provisions found in Appendix C-1: PM Emissions Testing and Monitoring Requirements. 3,4 ( “U.S. V CONSUMERS ENERGY COMPANY, CIVIL ACTION 14-13580, E.D. MICH., 2014” – paragraph 153, Act 451 324.5503(b))

5. As an alternative to the requirements of SC V.4 PM stack testing, the permittee may forego stack te sting and instead demonstrate continuous compliance with SC I .5 PM filterable emission limit by using the PM CEM S pursuant to conditions contained in Appendix C-1: P M Emissions Testing and Monitoring Requirements. 3,4 ( “U.S. V CONSUMERS ENERGY COMPANY, CIVIL ACTION 14-1 3580, E.D. MICH., 2014” – paragraph 157, Act 451 324.5503(b))

See Appendix C-1

VI. MONITORING/RECORDKEEPING Records shall be maintained on file for a period of five years. (R 336.1201(3))

1. The permittee shall monitor and record the para meters specified in the applicable MAPs. (R 336.1910, R 336.1911)

2. The permittee shall monitor and record the opac ity from the boiler using a Continuous Opacity Moni toring System (COMS), installed, operated and maintained i n accordance with 40 CFR Part 60, Appendix B. 2 (R 336.2101(1)(a), R 336.2150(1)(a), R 336.2152(1), R 336.2153(1)(a) and (b), R 336.2154, R 336.2155(1 ), R 336.2190, 40 CFR 64.6(c)(1)(iii))

3. The permittee shall install, calibrate, maintai n, and operate a continuous emission monitoring sys tem for the measurement of gas flow, SO 2 , CO 2 , and NOx, in accordance with the provisions of 40 CFR Part 75. 2 (R 336.1401(1), 40 CFR 52.21 (c) and (d))Consumers Energy D.E. Karn Plant (B2840) April 30, 2015

Permit No. 40-15 Page 9 of 32

4. For purposes of determining compliance with the Rolling Average Emission Rates for NO x and SO 2 as found in SC I.2, I.3 and I.6, the permittee shall install and operate CEMS in accordance with the procedures of 40 C.F.R. Part 75, except that the NO x and SO 2 emissions data need not be bias adjusted and the m issing data substitution procedures of 40 C.F.R. Part 75 s hall not apply. If applicable, diluent capping (i. e., 5% CO 2 ) will be applied to the NO x emission rate for any hours where the measured CO 2 concentration is less than 5% following the procedures in 40 C.F.R. Part 75, Appendix F, Section 3.3.4.1. 3,4 (“U.S. V CONSUMERS ENERGY COMPANY, CIVIL ACTION 14-13580, E. D. MICH., 2014” paragraphs 99 and 130, Act 451 324.5503(b))

5. By no later than May 4 th , 2015, the permittee shall submit to EPA a plan fo r review and approval for the installation and correlation of PM CEMS for EU-KARN 1. By no later than 18 months after EPA approval o f the above PM CEMS installation and correlation plan , the permittee shall install, correlate, maintain, and Continuously Operate a PM CEMS pursuant to the cond itions contained in Appendix D-1: PM CEMS. 3,4 (“U.S. V CONSUMERS ENERGY COMPANY, CIVIL ACTION 14- 13580, E.D. MICH., 2014” paragraphs 159, 160, 163, Act 451 324.5503(b))

See Appendix D-1

VII. REPORTING

NA

VIII. STACK/VENT RESTRICTIONS

The exhaust gases from the stacks listed in the tab le below shall be discharged unobstructed verticall y upwards to the ambient air unless otherwise noted:

Stack & Vent ID Maximum Exhaust Diameter/Dimensions (inches) Minimum Height

Above Ground (feet) Underlying Applicable Requirements

1. SVKARN1 216 2 350 2 R 336.1201(3)

IX. OTHER REQUIREMENTS

1. The permittee shall comply with all applicable provisions of 40 CFR Part 63, Subpart UUUUU, the Na tional Emissions Standard for Hazardous Air Pollutants: C oal- and Oil-fired Electric Utility Steam Generatin g Units. (40 CFR Part 63 Subpart UUUUU)

2. The permittee shall comply with the System-Wide Annual NOx Tonnage Limitations and System-Wide Annual SO 2 Tonnage Limitations listed in Appendix E-1: System Wide Tonnage Limitations. Emissions from EU-KARN1 shall be counted toward the system-wide to tal emissions. 3,4 (“U.S. V CONSUMERS ENERGY COMPANY, CIVIL ACTION 14-13580, E.D. MICH., 2014” p aragraphs 98, 129, Act 451 324.5503(b))Consumers Energy D.E. Karn Plant (B2840) April 30, 2015

Permit No. 40-15 Page 10 of 32

3. The permittee shall comply with the SO 2 and NO x allowance surrender and super-compliance allowance provisions listed in Appendix F-1: Allowance Provi sions. 3 (“U.S. V CONSUMERS ENERGY COMPANY, CIVIL ACTION 14-13580, E.D. MICH., 2014” paragraphs 101-109 and 132-140, Act 451 324.5503(b))

See Appendix E-1 and Appendix F-1

Footnotes: 1 This condition is state only enforceable and was es tablished pursuant to Rule 201(1)(b). 2 This condition is federally enforceable and was est ablished pursuant to Rule 201(1)(a). 3 This condition is federally enforceable and was est ablished pursuant to the “U.S. V CONSUMERS ENERGY COMPANY, CIVIL ACTION 14-13580, E.D. MICH., 2014” and will remain in effect after termination of the referenced document. 4 Definitions specific to this condition may be found in Appendix 2-A: Definitions associated with the C onsent DecreeConsumers Energy D.E. Karn Plant (B2840) April 30, 2015

Permit No. 40-15 Page 11 of 32

The following conditions apply to:

EU-KARN2

DESCRIPTION: Karn Boiler #2 is a 2540 million BTU per hour dry bottom wall coal fired boiler with fuel oil startup capabilities and supplemental co-firing for flame stabilization and mill outages. Particulate emissions are controlled by a low pressure high volume (LPHV) pul se jet fabric filter (PJFF). Additionally, Low NO x burners are installed. To comply with the Cross State Air Pollution Rule (CSAPR), Selective Catalytic Reducti on (SCR), and/or the accumulation of adequate NOx allowances will be utilized. A Selective Catalytic Reduction (SCR) unit, a spray dry absorber (SDA), and sorbent injec tion are scheduled to be installed for NOx, SO 2 , other acid gas, and mercury control.

Flexible Group ID: FG-KARN12

POLLUTION CONTROL EQUIPMENT: Low NOx burners and PJFF are installed. SCR, SDA, and sorbent injection are scheduled for installation.

I. EMISSION LIMITS

Pollutant Limit Time Period / Operating Scenario Equipment Testing / Monitoring Method Underlying Applicable

Requirements

1. SO 2 1.67 lbs/mmBtu

heat input** 2 Monthly calendar average EU-KARN2 SC VI.3 R 336.1401(1)

2. SO 2 0.090 pounds per

MMBtu heat input 3 Based on a 30-day Rolling

Average Emission Rate. This limit applies beginning 60 Operating Days after April 15, 2015, or as otherwise agreed upon by EPA pursuant to the Consent Decree. 3,4 EU-KARN2 SC VI.4 “U.S. V CONSUMERS ENERGY COMPANY, CIVIL ACTION 14- 13580, E.D. MICH., 2014” paragraph 118, Act 451 324.5503(b)

3. SO 2 0.075 pounds per

MMBtu heat input 3 Based on a 365-da y Rolling

Average Emission Rate. This limit applies beginning 365 Operating Days after April 15, 2015, or as otherwise agreed upon by EPA pursuant to the Consent Decree. 3,4 EU-KARN2 SC VI.4 “U.S. V CONSUMERS ENERGY COMPANY, CIVIL ACTION 14- 13580, E.D. MICH., 2014” paragraph 118, Act 451 324.5503(b)

4. PM 0.16 lb/1000 lb

exhaust gas, corrected to 50% excess air 2 Test Protocol* EU-KARN2 SC V.1 R 336.1331(1)(c)

5. PM 0.015 pound per

MMBtu heat input 3 At all times, as verifiable through required stack testing. This limit applies 30 Operating Days after November 4, 2014 (i.e. January 31, 2015) 3,4 EU-KARN2 SC V.4, SC V.5 (See Appendix C-1) “U.S. V CONSUMERS

ENERGY COMPANY, CIVIL ACTION 14- 13580, E.D. MICH., 2014” paragraph 148, Act 451 324.5503(b)Consumers Energy D.E. Karn Plant (B2840) April 30, 2015

Permit No. 40-15 Page 12 of 32

Pollutant Limit Time Period / Operating Scenario Equipment Testing / Monitoring Method Underlying Applicable

Requirements

6. NO x 0.080 pound per MMBtu heat input 3 Based on a 30-day Rolling

Average Emission Rate. This limit applies beginning 60 Operating Days after the November 4, 2014. 3,4 EU-KARN2 SC VI.4 “U.S. V CONSUMERS ENERGY COMPANY, CIVIL ACTION 14- 13580, E.D. MICH., 2014” paragraph 87, Act 451 324.5503(b) 7. Opacity 20% 3,4 Per 6-minute period except for one 6-minute period per hour of not more than 27% EU-KARN2 SC VI.2 “U.S. V CONSUMERS ENERGY COMPANY, CIVIL ACTION 14- 13580, E.D. MICH., 2014” paragraph 151 * Test protocol shall specify averaging time **1.0 percent sulfur by weight in coal at 12,000 BT U per pound is equivalent to 1.67 pounds per millio n BTU heat input. Compliance with this emission limitation sh all be based upon the monthly average of continuous emission monitoring data. (R 336.1401(1))

See Appendix C-1

II. MATERIAL LIMITS

Material Limit Time Period / Operating Scenario Equipment Testing / Monitoring Method Underlying

Applicable Requirements NA NA NA NA NA NA

III. PROCESS/OPERATIONAL RESTRICTIONS

1. The permittee shall not operate EU-KARN2 unless a Malfunction Abatement Plan (MAP) as described in Rule 911(2), for the emission control equipment is implemented and maintained. The MAP shall, at a minimum, specify the following: a. A complete preventative maintenance program incl uding identification of the supervisory personnel responsible for overseeing the inspection, maintena nce, and repair of air-cleaning devices, a descript ion of the items or conditions that shall be inspected, the frequency of the inspections or repairs, and a n identification of the major replacement parts that shall be maintained in inventory for quick replacem ent. b. An identification of the source and air-cleaning device operating variables that shall be monitored to detect a malfunction or failure, the normal operati ng range of these variables, and a description of t he method of monitoring or surveillance procedures. c. A description of the corrective procedures or op erational changes that shall be taken in the event of a malfunction or failure to achieve compliance with t he applicable emission limits. If at any time the MAP fails to address or inadequa tely addresses an event that meets the characterist ics of a malfunction, the permittee shall amend the MAP wi thin 45 days after such an event occurs. The permi ttee shall also amend the MAP within 90 days, if new equ ipment is installed or upon request from the Distri ct Supervisor. The permittee shall submit the MAP and any amendments to the MAP to the AQD District Supervisor for review and approval. If the AQD doe s not notify the permittee within 90 days of submit tal, the MAP or amended MAP shall be considered approved. U ntil an amended plan is approved, the permittee shall implement corrective procedures or operationa l changes to achieve compliance with all applicable emission limits. 2 (R 336.1910, R 336.1911)Consumers Energy D.E. Karn Plant (B2840) April 30, 2015

Permit No. 40-15 Page 13 of 32

2. Commencing 60 Operating Days after November 4, 2 014 and continuing thereafter, Consumers shall Continuously Operate the PJFF and use good air poll ution control practices to maximize the PM emission reductions at all times when the Unit is in operati on. The requirements of Appendix G-1 shall be met. 3, 4 (“U.S. V CONSUMERS ENERGY COMPANY, CIVIL ACTION 14- 13580, E.D. MICH., 2014” – paragraph 141, Act 451 324.5503(b))

See Appendix G-1

IV. DESIGN/EQUIPMENT PARAMETERS

1. The permittee shall not operate EU-KARN2 unless the SCR, fabric filter baghouse (PJFF), and (after startup and shakedown) the SDA, sorbent injection ( for mercury control) are installed, maintained, and operated in a satisfactory manner. Satisfactory ma nner includes operating and maintaining each contro l device in accordance with an approved MAP for EU-KA RN2 as required in SC III.1. 2 (R 336.1910)

2. The permittee shall not operate EU-KARN2 unless the SCR and fabric filter are Continuously Operated

. 3,4 ( “U.S. V CONSUMERS ENERGY COMPANY, CIVIL ACTION 14-1 3580, E.D. MICH., 2014” – paragraphs 86 and 148, Act 451 324.5503(b))

3. The permittee shall not operate EU-KARN2 after A pril 15, 2015, or as otherwise agreed upon by EPA pursuant to the Consent Decree, unless the SDA is C ontinuously Operated. 3,4 ( “U.S. V CONSUMERS ENERGY COMPANY, CIVIL ACTION 14-13580, E.D. MICH., 2014” – paragraph 118, Act 451 324.5503(b))

V. TESTING/SAMPLING Records shall be maintained on file for a period of five years. (R 336.1201(3))

1. Once every three years, or more frequently upon request of the AQD, permittee shall verify the PM e mission rate from EU-KARN2 by testing, utilizing USEPA Ref erence Method 17 (Determination of Particulate Emissions from Stationary Sources (In-stack Filtrat ion Method)) or other AQD approved test method, at permittee’s expense, and in accordance with Departm ent requirements. Verification of emission rates includes the submittal of a complete report of the test results within 60 days of test completion. (R 336.1331

, R 336.2001, R 336.2003, R 336.2004)

2. The permittee shall submit a complete test proto col to the AQD for approval at least 30 days prior to the anticipated test date. (R 336.2001(3))

3. The permittee shall notify the AQD no less than 7 days prior to the anticipated test date. (R 336.2001(4))

4. No later than November 4, 2015, the permittee sh all conduct a stack test for PM pursuant to the pro visions found in Appendix C-1: PM Emissions Testing and Mon itoring Requirements. Thereafter, subsequent stack tests for PM shall be conducted pursuant to the sch edule and provisions found in Appendix C-1: PM Emissions Testing and Monitoring Requirements. 3,4 ( “U.S. V CONSUMERS ENERGY COMPANY, CIVIL ACTION 14-13580, E.D. MICH., 2014” – paragrap h 153, Act 451 324.5503(b))

5. As an alternative to the requirements of SC V.4 PM stack testing, the permittee may forego stack te sting and instead demonstrate continuous compliance with SC I.5 PM filterable emission limit by using the PM CEMS pursuant to conditions contained in Appendix C -1: PM Emissions Testing and Monitoring Requirements. 3,4 ( “U.S. V CONSUMERS ENERGY COMPANY, CIVIL ACTION 14-1 3580, E.D. MICH., 2014” – paragraph 157, Act 451 324.5503(b))

See Appendix C-1Consumers Energy D.E. Karn Plant (B2840) April 30, 2015

Permit No. 40-15 Page 14 of 32

VI. MONITORING/RECORDKEEPING Records shall be maintained on file for a period of five years. (R 336.1201(3))

1. The permittee shall monitor and record the para meters specified in the applicable MAPs. (R 336.1910, R 336.1911)

2. The permittee shall monitor and record the opac ity from the boiler using a Continuous Opacity Moni toring System (COMS), installed, operated and maintained i n accordance with 40 CFR Part 60, Appendix B. 2 (R 336.2101)(1)(a), R 336.2150(1)(a), R 336.2152(1) , R 336.2153(1)(a) and (b), R 336.2154, R 336.2155(1), R 336.2190, 40 CFR 64.6(c)(1)(iii))

3. The permittee shall install, calibrate, maintai n and operate a continuous emission monitoring sys tem for the measurement of gas flow, SO 2 , CO 2 , and NOx, in accordance with the provisions of 40 CFR Part 75, Appendix B. 2 (R 336.1401, 40 CFR 52.21 (c) and (d))

4. For purposes of determining compliance with the Rolling Average Emission Rates for NO x and SO 2 as found in SC I.2, I.3 and I.6, the permittee shall install and operate CEMS in accordance with the procedures of 40 C.F.R. Part 75, except that the NO x and SO 2 emissions data need not be bias adjusted and the m issing data substitution procedures of 40 C.F.R. Part 75 s hall not apply. If applicable, diluent capping (i. e., 5% CO 2 ) will be applied to the NO x emission rate for any hours where the measured CO 2 concentration is less than 5% following the procedures in 40 C.F.R. Part 75, Appendix F, Section 3.3.4.1. 3,4 (“U.S. V CONSUMERS ENERGY COMPANY, CIVIL ACTION 14-13580, E. D. MICH., 2014” paragraphs 99 and 130, Act 451 324. 324.5503(b))

5. By no later than May 4 th , 2015, the permittee shall submit to EPA a plan fo r review and approval for the installation and correlation of PM CEMS for EU-KARN 2. By no later than 18 months after EPA approval o f the above PM CEMS installation and correlation plan , the permittee shall install, correlate, maintain, and Continuously Operate a PM CEMS pursuant to the cond itions contained in Appendix D-1: PM CEMS. 3,4 (“U.S. V CONSUMERS ENERGY COMPANY, CIVIL ACTION 14- 13580, E.D. MICH., 2014” paragraphs 159, 160, 163, Act 451 324.5503(b))

See Appendix D-1

VII. REPORTING

NA

VIII. STACK/VENT RESTRICTIONS

The exhaust gases from the stacks listed in the tab le below shall be discharged unobstructed verticall y upwards to the ambient air unless otherwise noted:

Stack & Vent ID Maximum Exhaust Diameter/Dimensions (inches) Minimum Height

Above Ground (feet) Underlying Applicable

Requirements

1. SVKARN2 216 2 350 2 R 336.2803, R 336.2804, 40 CFR 52.21 (c) and (d)

IX. OTHER REQUIREMENTS

1. The permittee shall comply with all applicable provisions of 40 CFR Part 63, Subpart UUUUU, the Na tional Emissions Standard for Hazardous Air Pollutants: C oal- and Oil-fired Electric Utility Steam Generatin g Units. (40 CFR Part 63 Subpart UUUUU)Consumers Energy D.E. Karn Plant (B2840) April 30, 2015

Permit No. 40-15 Page 15 of 32

2. The permittee shall comply with the System-Wide Annual NOx Tonnage Limitations and System-Wide Annual SO 2 Tonnage Limitations listed in Appendix E-1: System Wide Tonnage Limitations. Emissions from EU-KARN2 shall be counted toward the system-wide to tal emissions. 3,4 (“U.S. V CONSUMERS ENERGY COMPANY, CIVIL ACTION 14-13580, E.D. MICH., 2014” p aragraphs 98, 129, Act 451 324.5503(b))

3. The permittee shall comply with the SO 2 and NO x allowance surrender and super-compliance allowance provisions listed in Appendix F-1: Allowance Provi sions. 3 (“U.S. V CONSUMERS ENERGY COMPANY, CIVIL ACTION 14-13580, E.D. MICH., 2014” paragraphs 101-109 and 132-140, Act 451 324.5503(b))

See Appendix E-1 and Appendix F-1

Footnotes: 1 This condition is state only enforceable and was es tablished pursuant to Rule 201(1)(b). 2 This condition is federally enforceable and was est ablished pursuant to Rule 201(1)(a). 3 This condition is federally enforceable and was est ablished pursuant to the “U.S. V CONSUMERS ENERGY COMPANY, CIVIL ACTION 14-13580, E.D. MICH., 2014” and will remain in effect after termination of the referenced document. 4 Definitions specific to this condition may be found in Appendix 2-A: Definitions associated with the C onsent DecreeConsumers Energy D.E. Karn Plant (B2840) April 30, 2015

Permit No. 40-15 Page 16 of 32

Appendices

Appendix A-1. Definitions associated with the Conse nt Decree

The following phrases and terms are specifically de fined in relation to those special conditions assoc iated with “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” (the Consent Decree) .

• For the purposes of the Consent Decree, every term expressly defined by this Appendix shall have the meaning given that term herein. Every other ter m used in the Consent Decree that is also a term used under the Act or in a federal regulation implementing the Act shall mean in the Consent

Decree what such term means under the Act or those regulations. (“U.S. v Consumers Energy Company, Civil Action 14-13580, E.D. Mich., 2014” p aragraph 4)

• A "30-Day Rolling Average Emission Rate" for a Unit shall be expressed in lb/mmBTU and calculated in accordance with the following procedu re: first, sum the total pounds of NO x or SO 2 emitted from the Unit during the current Unit Opera ting Day and the previous 29 Unit Operating Days; second, sum the total heat input to the Unit in mmBTU during the current Unit Operating Day and the previous 29 Unit Operating Days; and third, divide the total number of pounds of NO x or SO 2 emitted during the 30 Unit Operating Days by the t otal heat input during the 30 Unit Operating Days. A new 30-Day Rolling Average Emission Rate s hall be calculated for each new Unit Operating Day. Each 30-Day Rolling Average Emissio n Rate shall include all emissions that occur during all periods within any Unit Operating Day, i ncluding emissions from startup, shutdown, and Malfunction, except as otherwise provided by Section XV (Force Majeure – beginning at paragraph 214 of the Consent Decree). (“U.S. v Consumers Energy Company, Civil Action 14- 13580, E.D. Mich., 2014” paragraph 5)

• A "90-Day Rolling Average Emission Rate" for a Uni t shall be expressed in lb/mmBTU and calculated in accordance with the following procedu re: first, sum the total pounds of NO x or SO 2 emitted from the Unit during the current Unit Opera ting Day and the previous 89 Unit Operating Days; second, sum the total heat input to the Unit in mmBTU during the current Unit Operating Day and the previous 89 Unit Operating Days; and th ird, divide the total number of pounds of NO x or SO 2 emitted during the 90 Unit Operating Days by the t otal heat input during the 90 Unit Operating Days. A new 90-Day Rolling Average Emiss ion Rate shall be calculated for each new Unit Operating Day. Each 90-Day Rolling Average Em ission Rate shall include all emissions that occur during all periods within any Unit Operating Day, including emissions from startup, shutdown, and Malfunction, except as otherwise prov ided by Section XV (Force Majeure – beginning at paragraph 214 of the Consent Decree). (“U.S. v Consumers Energy Company, Civil Action 14-13580, E.D. Mich., 2014” paragraph 6)Consumers Energy D.E. Karn Plant (B2840) April 30, 2015

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• A "365-Day Rolling Average Emission Rate" for a Uni t shall be expressed in lb/mmBTU and calculated in accordance with the following procedu re: first, sum the pounds of the pollutant in question emitted from the Unit during the most rece nt Unit Operating Day and the previous 364 Unit Operating Days; second, sum the total heat inp ut to the Unit in mmBTU during the most recent Unit Operating Day and the previous 364 Unit Operating Days; and third, divide the total number of pounds of the pollutant emitted during th e 365 Unit Operating Days by the total heat input during the 365 Unit Operating Days. A new 36 5-Day Rolling Average Emission Rate shall be calculated for each new Unit Operating Day. Each 3 65-Day Rolling Average Emission Rate shall include all emissions that occur during all periods of operation, including startup, shutdown, and Malfunction, except as otherwise provided by Sectio n XV (Force Majeure – beginning at paragraph 214 of the Consent Decree). (“U.S. v Consumers Energy Company, Civil Action 14- 13580, E.D. Mich., 2014” paragraph 7)

• "Baghouse" means a full stream (fabric filter or m embrane) particulate emissions control device. Full stream is defined as capturing the entire stream of exhaust gas with no concurrent by-pass. ( “U.S. v Consumers Energy Company, Civil Action 14-13580, E. D. Mich., 2014” paragraph 8)

• "Campbell" means Consumers' J.H. Campbell Generati ng Plant consisting of three electric utility steam-generating units designated as Unit I (260 MW), Unit 2 (360 MW), and Unit 3 (835 MW) and related equipment, located in West Olive, Ottawa Co unty, Michigan. Campbell Unit 3 is co-owned by Consumers (approximately 93%) along with Wolverine Power Supply Cooperative and the Michigan

Public Power Association. ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” paragraph 10)

• "CEMS" or "Continuous Emission Monitoring System ," means, for obligations involving the monitoring of NO x

and SO 2 emissions under the Consent Decree, the devices defined in 40 C.F.R. § 72.2 and installed and maintained as required by 40 C.F.R. Part 75. ( “U.S. v Consumers Energy Company, Civil Action 14-13580, E.D. Mich., 2014” paragraph 12)

• "Clean Air Act" or "CAA'' or "Act" means the federa l Clean Air Act, 42 U.S.C. §§ 7401-7671q, and it’s implementing regulations. ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” paragraph 13)

• "Cobb" means, for purposes of the Consent Decree, Consumers' B.C. Cobb Generating Plant consisting of two electric utility steam-generating units designated as Unit 4 (160 MW) and Unit 5 (160 MW) and related equipment, located in Muskegon , Muskegon County, Michigan. ( “U.S. v Consumers Energy Company, Civil Action 14-13580, E. D. Mich., 2014” paragraph 14)

• "Consent Decree" means Consent Decree (“U.S. v Consumers Energy Company, Civil Action 14- 13580, E.D. Mich., 2014”) and its Appendices. ( “U.S. v Consumers Energy Company, Civil Action 14-13580, E.D. Mich., 2014” paragraph 15)

• "Consumers" means Consumers Energy Company. ( “U.S. v Consumers Energy Company, Civil Action 14-13580, E.D. Mich., 2014” paragraph 16)Consumers Energy D.E. Karn Plant (B2840) April 30, 2015

Permit No. 40-15 Page 18 of 32

• "Consumers System" means the Campbell, Cobb, Karn , Weadock, and Whiting facilities as defined

herein. ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” paragraph 17)

• "Continuously Operate" or "Continuous Operation" m eans that when a pollution control technology or combustion control is required to be used at a Unit pursuant to the Consent Decree (including, but not limited to, SCR, FGD, DSI, ESP, Baghouse, or Low NO x Combustion System), it shall be operated at all times that the Unit it serves is in operation (except as otherwise provided by Section XV (Force Majeure – beginning at paragraph 214 of the Consent Decree )), consistent with the technological limitations, manufacturers' specifications, good engineering and maintenance practices and good air pollution control practices for minimizing emission s (as defined in 40 C.F.R. § 60.11(d)), as applica ble, for such equipment and the Unit. ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” paragraph 18)

• "Date of Entry" means the date the Consent Decree was signed by the United States District Court Judge (i.e. November 4, 2014). ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” paragraph 19)

• "Day" means calendar day unless otherwise specifie d in the Consent Decree. ( “U.S. v Consumers Energy Company, Civil Action 14-13580, E.D. Mich., 2014” paragraph 21)

• "Dry Sorbent Injection" or "DSI" means a process i n which a sorbent is pneumatically injected into the ducting downstream of where the coal is combusted a nd flue gas is produced, and upstream of the PM

Control Device. ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” paragraph 22)

• "Electrostatic Precipitator" or "ESP" means a devic e for removing particulate matter from combustion gases by imparting an electric charge to the partic les and then attracting them to a metal plate or screen of opposite charge before the combustion gas es are exhausted to the atmosphere. ( “U.S. v Consumers Energy Company, Civil Action 14-13580, E. D. Mich., 2014” paragraph 23)

• "Emission Rate" for a given pollutant means the nu mber of pounds of that pollutant emitted per million British Thermal Units of heat input (lb/mmB TU), calculated in accordance with the Consent

Decree. ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” paragraph 24)

• "Flue Gas Desulfurization System" or "FGD" means a pollution control device that employs flue gas desulfurization technology, including an absorber o r absorbers utilizing lime or limestone, or a sodium based material, for the reduction of SO 2 emissions. (“U.S. v Consumers Energy Company, Civil Action 14-13580, E.D. Mich., 2014” p aragraph 27)Consumers Energy D.E. Karn Plant (B2840) April 30, 2015

Permit No. 40-15 Page 19 of 32

• “Force Majeure” means an event that has been or wi ll be caused by circumstances beyond the control of Consumers, its contractors, or any entity controlle d by Consumers that delays compliance with any provision of the Consent Decree or otherwise causes a violation of any provision of the Consent Decree despite Consumers’ best efforts to fulfill the obli gation. “Best efforts to fulfill the obligation” i nclude using the best efforts to anticipate any potential Force Majeure Event and to address the effects of any suc h event (a) as it is occurring and (b) after it has o ccurred, such that the delay and any adverse environmental effect of the delay or violation is m inimized to the greatest extent possible. the kinds of events listed below are among those that could qual ify as Force Majeure Events within the meaning of t his Section: construction, labor, or equipment delays; Malfunction of a Unit or emission control device; unanticipated coal supply or pollution control reag ent delivery interruptions; acts of God; acts of wa r or terrorism; and orders by a government official, gov ernment agency, other regulatory authority, or a regional transmission organization, acting under an d authorized by applicable law, that directs Consum ers to supply electricity in response to a system-wide (state-wide or regional) emergency or is necessary to preserve the reliability of the bulk power system. Depending upon the circumstances and Consumers’ response to such circumstances, failure of a permit ting authority to issue a necessary permit in a tim ely fashion may constitute a Force Majeure Event where the failure of the permitting authority to act is b eyond

the control of Consumers and Consumers has taken al l steps available to it to obtain the necessary permit, including, but not limited to: submitting a complete permit application; responding to request s for additional information by the permitting authority in a timely fashion; and accepting lawful permit te rms and conditions after expeditiously exhausting any legal rights to appeal terms and conditions imposed by t he permitting authority. ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich.,

2014” paragraphs 214 & 221)

• "Fossil Fuel" means any hydrocarbon fuel, includin g coal, petroleum coke, petroleum oil, or natural g as. ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” paragraph 29)

• "Full Stream Operation" is defined as the design c onfiguration of a control device such that it captures the entire stream of exhaust gas with no concurrent by-pass. ( “U.S. v Consumers Energy Company, Civil Action 14-13580, E.D. Mich., 2014” paragraph 30)

• "Karn," for purposes of the Consent Decree, means Consumers' D.E. Karn Generating Plant consisting of two electric utility steam-generating units desi gnated as Unit 1 (255 MW) and Unit 2 (260 MW) and related equipment, located in Essexville, Bay Count y, Michigan. Karn does not include the oil-fired electricity generating units designated as Karn Units 3 and 4, also located in Essexville, Bay Coun ty, Michigan. ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” paragraph 34)

• "Karn Units 3 and 4" means Consumers' oil-fired Un its 3 and 4, in Essexville, Bay County, Michigan. ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” paragraph 35)

• "KW" means Kilowatt or one thousand watts net. ( “U.S. v Consumers Energy Company, Civil Action 14-13580, E.D. Mich., 2014” paragraph 36)Consumers Energy D.E. Karn Plant (B2840) April 30, 2015

Permit No. 40-15 Page 20 of 32

• "lb/mmBTU" means one pound per million British The rmal Units. ( “U.S. v Consumers Energy Company, Civil Action 14-13580, E.D. Mich., 2014” paragraph 37)

• "Low NOx Combustion System" means burners and asso ciated combustion air control equipment, including Over Fire Air if specified, which control mixing characteristics of Fossil Fuel and oxygen, thus restraining the formation of NO x during combustion of fuel in the boiler. ( “U.S. v Consumers Energy Company, Civil Action 14-13580, E.D. Mich., 2014” paragraph 38)

• "Malfunction" means a failure to operate in a norm al or usual manner by any air pollution control equipment, process equipment, or a process, which i s sudden, infrequent, and not reasonably preventable. Failures that are caused in part by po or maintenance or careless operation are not

Malfunctions. ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” paragraph 39)

• "Michigan SIP" means the Michigan State Implementa tion Plan, and any amendments thereto, as approved by EPA pursuant to Section 110 of the Act, 42 U.S.C. § 7410. ( “U.S. v Consumers Energy Company, Civil Action 14-13580, E.D. Mich., 2014” paragraph 40)

• "MW" means a megawatt or one million watts net. ( “U.S. v Consumers Energy Company, Civil Action 14-13580, E.D. Mich., 2014” paragraph 41)

• "NO x '' means oxides of nitrogen, measured in accordance with the provisions of the Consent Decree. ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” paragraph 45)

• "NO x Allowance" means an authorization to emit a specif ied amount of NO x that is allocated or issued under an emissions trading or marketable permit pro gram of any kind established under the Clean Air Act or the Michigan SIP; provided, however, that wi th respect to any such program that first applies to emissions occurring after December 31, 2011, a "NO x Allowance" shall include an allowance created and allocated to a Consumers System Unit under such program only for control periods starting on o r after the fourth anniversary of the Date of Entry of the Consent Decree. ( “U.S. v Consumers Energy Company, Civil Action 14-13580, E.D. Mich., 2014” paragraph 46)

• "Operating Day" means any calendar day on which a Unit fires Fossil Fuel. ( “U.S. v Consumers Energy Company, Civil Action 14-13580, E.D. Mich., 2014” paragraph 49)

• "Over Fire Air" or "OFA" mean an in-furnace staged combustion control to reduce NO x emissions. (“U.S. v Consumers Energy Company, Civil Action 14-13580, E.D. Mich., 2014” paragraph 51)

• "PM" means total filterable particulate matter, me asured in accordance with the provisions of the

Consent Decree. ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich.,

2014” paragraph 53)

• "PM Continuous Emission Monitoring System" or "PM CEMS" means, for obligations involving the monitoring of PM emissions under the Consent Decree , the equipment that samples, analyzes, measures, and provides, by readings taken at freque nt intervals, an electronic and/or paper record of

PM emissions. ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” paragraph 54)Consumers Energy D.E. Karn Plant (B2840) April 30, 2015

Permit No. 40-15 Page 21 of 32

• "PM Control Device" means any device, including an ESP or Baghouse, which reduces emissions of

PM. ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” paragraph 55)

• "PM Emission Rate" means the number of pounds of P M emitted per million BTU of heat input (lb/mmBTU). ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” paragraph 56)

• "Selective Catalytic Reduction" or "SCR" means an a ir pollution control device for reducing NO x emissions in which ammonia ("NH 3 ") is added to the flue gas and then passed through layers of a catalyst material. The ammonia and NO x in the flue gas stream react on the surface of the catalyst, forming nitrogen ("N 2 ") and water vapor. ( “U.S. v Consumers Energy Company, Civil Action 14- 13580, E.D. Mich., 2014” paragraph 61)

• "SO 2 " means sulfur dioxide, measured in accordance with t he provisions of the Consent Decree. ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” paragraph 62)

• "SO 2 Allowance" means an authorization to emit a specifi ed amount of SO 2 that is allocated or issued under an emissions trading or marketable permit pro gram of any kind e stablished under the Clean Air Act or the Michigan SIP; provided, however, that wi th respect to any such program that first applies to emissions occurring after December 31, 2011, an " SO 2 Allowance" shall include an allowance created and allocated to a Consumers System Unit under such program only for control periods starting on o r after the fourth anniversary of the Date of Entry of the Consent Decree. ( “U.S. v Consumers Energy Company, Civil Action 14-13580, E.D. Mich., 2014” paragraph 63)

• "State Implementation Plan" or "SIP" means regulat ions and other materials promulgated by a state for purposes of meeting the requirements of the Act tha t have been approved by EPA pursuant to Section 110 ofthe Act, 42 U.S.C. § 7410. ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” paragraph 65)

• "Surrender" or "Surrender of Allowances" means, for purposes of SO 2 or NO x allowances, permanently surrendering allowances from the accounts administe red by EPA and Michigan for all Units in the Consumers System, so that such allowances can never be used thereafter to meet any compliance requirements under the Act, a SIP, or the Consent D ecree. ( “U.S. v Consumers Energy Company, Civil Action 14-13580, E.D. Mich., 2014” paragraph 66)

• "System-Wide Annual NO x Tonnage Limitation" means the limitations, as specified in the Consent Decree, on the number of tons of NOx that may be em itted from Campbell , Cobb, Kam, Weadock, and Whiting, collectively, during the relevant calendar year i .e., January 1 through December 31), an d shall include all emissions of NOx during all periods of operations, including startup, shutdown, and

Malfunction. ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” paragraph 67)Consumers Energy D.E. Karn Plant (B2840) April 30, 2015

Permit No. 40-15 Page 22 of 32

• "System-Wide Annual SO 2 Tonnage Limitation" means the limitations, as specified in the Consent Decree, on the number of tons of SO 2 that may be emitted from Campbell, Cobb, Kam, Weado ck, and Whiting, collectively, during the relevant calendar year (i.e., January 1 through December 31), and sh all

include all emissions of SO 2 during all periods of operations, including startu p, shutdown, and Malfunction. ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” paragraph 68)

• "Title V Permit" means the permit required of Cons umers' major sources pursuant to Subchapter V of the Act, 42 U.S.C. §§ 7661-7661e. ( “U.S. v Consumers Energy Company, Civil Action 14-13580, E.D. Mich., 2014” paragraph 69)

• "Unit" means collectively, the coal pulverizer, st ationary equipment that feeds coal to the boiler, the boiler that produces steam for the steam turbine, t he steam turbine, the generator, the equipment necessary to operate the generator, steam turbine, and boiler, and all ancillary equipment, including pollution control equipment and systems necessary f or production of electricity. An electric steam generating station may comprise one or more Units. ( “U.S. v Consumers Energy Company, Civil Action 14-13580, E.D. Mich., 2014” paragraph 70)

• "Urea Based Ammonia System" or "UBAS" means a type of ammonia feed system for SCRs where solid urea pellets are stored in a silo. Upon use, the solid urea is heated to liquid, thermally decomposed to ammonia, and injected into the SCR as the reagent for the NO x reduction reaction. ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” paragraph 71)

• "Weadock" means, for purposes of the Consent Decree , Consumers' J.C. Weadock Generating Plant consisting of two electric utility steam-gene rating Units designated as Unit 7 (155 MW) and Unit 8 ( 155 MW) and related equipment, located in Essexville, Bay County, Michigan. ( “U.S. v Consumers Energy Company, Civil Action 14-13580, E. D. Mich., 2014” paragraph 72)

• "Whiting" means, for purposes of the Consent Decree , Consumers' Whiting G eneration Station consisting of three electric utility steam-generati ng Units designated as Unit 1 (102 MW), Unit 2 (102 MW), and Unit 3 (124 MW) and related equipment , located in Luna Pier, Monroe County, Michigan. ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” paragraph 73)Consumers Energy D.E. Karn Plant (B2840) April 30, 2015

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Appendix B-1: Used as a placeholder.Consumers Energy D.E. Karn Plant (B2840) April 30, 2015

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Appendix C-1: PM Emissions Testing and Monitoring R equirements

• Within 12 months of the Date of Entry, and continu ing annually thereafter (unless a Unit is Retired or Refueled to Natural Gas), Consumers shall conduct a stack test for PM pursuant to Paragraphs 154 and 156 of the Consent Decree. The annual performan ce test requirement imposed on Consumers by this paragraph may be satisfied by stack tests cond ucted by Consumers as may be required by its permits from the State of Michigan for any year tha t such stack tests are required under the permits. Consumers may perform testing every other year, rat her than every year, provided that two of the most recently completed test results from tests conducte d in accordance with the methods and procedures specified in the Consent Decree demonstrate that the PM emissions are equal to or less than 0.015 lb/mmBTU if the applicable rate is 0.030 lb/mmBTU, and 0.010 lb/mmBTU if the applicable rate is

0.015 lb/mmBTU. Consumers shall perform testing every year, rather than every other year, beginning in the year immediately following any test result d emonstrating that the PM emissions are greater than

0.015 lb/mmBTU if the applicable rate is 0.030 lb/mmBTU, and 0.010 lb/mmBTU if the applicable rate

is 0.015 lb/mmBTU. ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich.,

2014” paragraph 153)

• To determine compliance with the PM Emission Rate established in Subsections VI.C (Unit-Specific PM Requirements at Kam Units I and 2; beginning at paragraph 147 of the Consent Decree), Consumers shall use the applicable reference methods and pr ocedures (filterable portion only) specified in its CAA permits and the Michigan SIP for Kam Units 1 and 2. Each test shall consist of three separat e runs performed under representative operating condi tions not including periods of startup, shutdo wn, or Malfunction. The sampling time for each run associated with a Unit controlled by a Baghouse shall

be at least 120 minutes and the volume of each run shall be at least 1.70 dry standard cubic meters (60 dry standard cubic feet). The sampling time for ea ch run associated with a Unit controlled by an ESP

shall be at least 60 minutes and the volume of each run shall be at least 30 dry standard cubic feet.

Consumers shall calculate the PM Emission Rate from the stack test results in accordance with 40 C.F.R . § 60.8(f). The results of each PM stack te st shall be submitted to EPA within 60 Days of completion of each test. ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” paragraph 154)

• As an alternative to the PM testing required in th is Appendix C-1: PM Emissions Testing and Monitoring Requirements, following the installation and operation of PM CEMS as required by Appendix D-2: P M CEMS, Consumers, at its sole discretion, may seek E PA approval pursuant to Section XIII (Review and Approval of Submittals; beginning at paragraph 193 of the Consent Decree) to forego stack testing and instead demonstrate continuous compliance with an a pplicable filterable PM Emission Rate by using the PM CEMS data on a 3-hour rolling average basis. ( “U.S. v Consumers Energy Company, Civil Action 14-13580, E.D. Mich., 2014” paragraph 157)Consumers Energy D.E. Karn Plant (B2840) April 30, 2015

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Appendix D-1: PM CEMS

• Consumers shall install, correlate, maintain, and operate two PM CEMS as specified below. The PM CEMS shall comprise a continuous particle mass moni tor measuring particulate matter concentration, directly or indirectly, on an hourly average basis and a diluent monitor used to convert the concentra tion to units expressed in lb/mmBTU. The PM CEMS installed at each Unit must be appropriate for the anticipate d stack conditions and capable of measuring PM concen trations on an hourly average basis. Consumers shall maintain, in an electronic database, the hour ly average emission values of all PM CEMS in lb/mmBTU. Except for periods of monitor malfunctio n, maintenance, calibration, or repair, Consumers shall continuously operate the PM CEMS at all times when the Unit it serves is operating. (“U.S. v Consumers Energy Company, Civil Action 14-13580, E. D. Mich., 2014” paragraph 159)

• By no later than six (6) months from the Date of E ntry of the Consent Decree, Consumers shall submit to EPA for review and approval pursuant to Section XII I (Review and Approval of Submittals; beginning at paragraph 193) of the Consent Decree a plan for the installation and correlation of two PM CEMS at Kar n Unit I and Karn Unit 2. (“U.S. v Consumers Energy Company, Civil Action 14 -13580, E.D. Mich., 2014” paragraph 160)

• By no later than six months from the submittal of a plan in Paragraph 160 of the Consent Decree, Consumers shall submit to EPA for review and approv al pursuant to Section XIII (Review and Approval of Submittals; beginning at paragraph 193 of the Conse nt Decree) a proposed Quality Assurance/Quality Control ("QA/QC") protocol that shall be followed f or such PM CEMS. (“U.S. v Consumers Energy Company, Civil Action 14-13580, E.D. Mich., 2014” p aragraph 161)

• In developing both the plan for installation and c orrelation of the PM CEMS and the QA/QC protocol,

Consumers shall use the criteria set forth in 40 C. F.R. Part 60, Appendix B, Performance Specificatio n 11 ,and Appendix F, Procedure 2. Following EPA's appr oval of the plan described in Paragraph 160 of the Consent Decree, and the QA/QC protocol described in Paragraph 161, Consumers shall thereafter operate the PM CEMS in accordance with the approved plan and QA/QC protocol. Notwithstanding any other provision of the Consent Decree, exceedances of the PM Emission Rate that occur as a result of d eoptimizing emission controls and/or spiking the exh aust gas with excess particulate required to achiev e the high level PM test runs during the correlation test ing shall not be a violation of the requirements of the Consent Decree (or credible evidence thereof) ; pro vided, however, that Consumers shall make best efforts to keep the high level PM test runs during such correlation testing below the applicable PM

Emission Rate. (“U.S. v Consumers Energy Company, Civil Action 14- 13580, E.D. Mich., 2014” paragraph 162)

• By no later than eighteen (18) months after the da te that EPA approves the plan described in Paragraph 160 of the Consent Decree, Consumers shal l install, correlate, maintain, and commence Continuous Operation of the PM CEMS approved by EPA at Karn Units 1 and 2, conduct performance specification tests on the PM CEMS, and demonstrate compliance with the PM CEMS installation and correlation plans submitted to and approved by EPA. ( “U.S. v Consumers Energy Company, Civil Action 14-13580, E.D. Mich., 2014” paragraph 163)Consumers Energy D.E. Karn Plant (B2840) April 30, 2015

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• Except as approved pursuant to paragraph 157 of t he Consent Decree, stack testing shall be used

to determine compliance with the PM Emission Rates est ablished by the Consent Decree. Data from PM CEMS shall be used, at a minimum, to provid e information to operators on PM emissions

rate trends on a continuous basis. ( “U.S. v Consumers Energy Company, Civil Action 14- 13580, E.D. Mich., 2014” paragraph 164)Consumers Energy D.E. Karn Plant (B2840) April 30, 2015

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Appendix E-1: System Wide Tonnage Limitations

System-Wide Annual NO x Tonnage Limitations

The Consumers System, collectively, shall operate s o as not to exceed the following System-Wide Annual NO x Tonnage Limitations: For the Calendar Year Specified Below: System-Wide Annual NO x Tonnage Limitation: 2015 15,245

2016 9,319

2017 and continuing each calendar

year thereafter 6,912 [cap shall adjust to 6,600 if Consumers elects to Retire Cobb 4 and 5] ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” paragraph 98)

• For purposes of calculating the System-Wide Annual NO x Tonnage Limitations, Consumers shall use CEMS in accordance with the procedures specified in 40 C .F.R. Part 75, which includes the requirements associated with the concepts of bias adjustments an d missing data substitution. ( “U.S. v Consumers Energy Company, Civil Action 14-13580, E.D. Mich., 2014” paragraph 100)

System-Wide Annual SO 2 Tonnage Limitations

The Consumers System, collectively, shall operate s o as not to exceed the following System-Wide Annual SO 2 Tonnage Limitations: For the Calendar Year Specified Below: System-Wide Annual SO 2 Tonnage Limitation: 2015 57,900

2016 34,000 2017 and continuing each calendar

year thereafter 10,900

( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” paragraph 129)

• For purposes of calculating the System-Wide Annual SO 2 Tonnage Limitations, Consumers shall use CEMS in accordance with the procedures specified in 40 C .F.R. Part 75, which includes the requirements associated with the concepts of bias adjustments an d missing data substitution. ( “U.S. v Consumers Energy Company, Civil Action 14-13580, E.D. Mich., 2014” paragraph 131)Consumers Energy D.E. Karn Plant (B2840) April 30, 2015

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Appendix F-1: Allowance Provisions

Use and Surrender of NO x Allowances

• Consumers shall not use NOx Allowances to comply w ith any requirement of the Consent Decree, as enumerated in this permit, including by claiming co mpliance with any emission limitation required by t he Consent Decree, as provided in this permit, by usin g, tendering, or otherwise applying NOx Allowances to offset any excess emissions. ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” paragraph 101)

• Except as provided by Appendix F-1: Allowance Prov isions, Consumers shall not sell, bank, trade, or transfer any NO x

Allowances allocated to the Consumers System Units . Nothing in the Consent Decree shall restrict Consumers’ ability to transfer NO x Allowances among its own facility or general accou nts. ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” paragraph 102)

• Beginning with the year 2014 compliance period, an d continuing each year thereafter, Consumers shall

Surrender all NO x

Allowances allocated to the Consumers System for t hat year’s compliance period that

Consumers does not need in order to meet its own fe deral and/or state CAA regulatory requirements for the Consumers System Units. However, NO x Allowances allocated to the Consumers System may b e used by

Consumers to meet its own federal and/or state CAA regulatory requirements for such Units. ( “U.S. v Consumers Energy Company, Civil Action 14-13580, E. D. Mich., 2014” paragraph 103)

• Nothing in Appendix F-1: Allowance Provisions, sha ll prevent Consumers from purchasing or otherwise obtaining NO x

Allowances from another source for purposes of com plying with federal and/or state CAA regulatory requirements to the extent otherwise all owed by law. ( “U.S. v Consumers Energy Company, Civil Action 14-13580, E.D. Mich., 2014” paragraph 104)

Super-Compliant NO x Allowances

• Beginning with the year 2014 and continuing in eac h calendar year thereafter, Consumers may sell, ban k, use, trade, or transfer NO x Allowances made available in that year’s complianc e period solely as a result of: a. the installation and operation of any NO x pollution control that is not otherwise required b y, or necessary to maintain compliance with, any provision of the C onsent Decree as provided in this permit, and is no t otherwise required by law; b. the use of SCR prior to the date established b y the Consent Decree; or

c. achievement and maintenance of an Emission Rat e below a 365-Day Rolling Average Emission Rate for

NO x at the following Units: (v) at Karn Unit 1: 0.070 lb/mmBTU; (vi) at Karn Unit 2: 0.070 lb/mmBTU; provided that Consumers is also in compliance for t hat calendar year with all emission limitations for NO x set forth in the Consent Decree, as provided in this pe rmit. ( “U.S. v Consumers Energy Company, Civil Action 14-13580, E.D. Mich., 2014” paragraph 106)Consumers Energy D.E. Karn Plant (B2840) April 30, 2015

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Method for Surrender of NO x Allowances

• Consumers shall Surrender, or transfer to a non-pr ofit third-party selected by Consumers for Surrende r, all

NO x Allowances required to be Surrendered pursuant to A ppendix F-1: Allowance Provisions, by June 30 of the immediately following calendar year. Such Surre nder need not include the specific NO x Allowances that were allocated to Consumers System Units, so long a s Consumers Surrenders NO x Allowances that are from the same year or an earlier year and that are equal to the number required to be Surrendered unde r the Consent Decree, as provided in this permit. ( “U.S. v Consumers Energy Company, Civil Action 14-13580, E.D. Mich., 2014” paragraph 107)

• If any NO x

Allowances required to be Surrendered under Append ix F-1: Allowance Provisions are transferred directly to a non-profit third-party, C onsumers shall include a description of such transf er in the next report submitted to EPA pursuant to the Period ic Reporting provisions of the consent decree (begi nning at paragraph 188) of the Consent Decree. Such repor t shall: (a) identify the non-profit third-party re cipient(s)

of the NOx Allowances and list the serial numbers o f the transferred NOx Allowances; and (b) include a certification by the third-party recipient(s) stati ng that the recipient(s) will not sell, trade, or o therwise exchange any of the NOx Allowances and will not use any of the NOx Allowances to meet any obligation imposed by any environmental law. No later than the third periodic report due after the transfer of an y NO x Allowances, Consumers shall include a statement tha t the third-party recipient(s) Surrendered the NO x Allowances for permanent Surrender to EPA in accord ance with the provisions of Appendix F-1: Allowance Provisions within one year after Consumers transfer red the NO x Allowances to them. Consumers shall not have complied with the NO x Allowance Surrender requirements of Appendix F-1: Allowance Provisions until all third-party recipient(s) have actually Surrende red the transferred NOx Allowances to EPA . ( “U.S. v Consumers Energy Company, Civil Action 14-13580, E. D. Mich., 2014” paragraph 108)

• For all NO x

Allowances required to be Surrendered, Consumers o r the third-party recipient(s) (as the case may be) shall first submit a NO x Allowance transfer request to EPA’s Office of Air and Radiation’s Clean Air Markets Division directing the transfer of such NO x Allowances to the EPA Enforcement Surrender Accoun t or to any other EPA account that EPA may direct in writing. Such NO x Allowance transfer requests may be made in an electronic manner using EPA’s Clean Air Markets Division Business System or similar system provided by EPA. As part of submitting these transf er requests, Consumers or the third-party recipient (s) shall irrevocably authorize the transfer of these N O x Allowances and identify – by name of account and a ny applicable serial or other identification numbers o r station names – the source and location of the NO x Allowances being Surrendered. ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” paragraph 109)

Use and Surrender of SO 2 Allowances

• Consumers shall not use SO 2 Allowances to comply with any requirement of the C onsent Decree, as enumerated in this permit, including by claiming co mpliance with any emission limitation required by t he Consent Decree, as enumerated in this permit, by us ing, tendering, or otherwise applying SO 2 Allowances to offset any excess emissions. ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” paragraph 132)Consumers Energy D.E. Karn Plant (B2840) April 30, 2015

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• Except as provided in Appendix F-1: Allowance Prov isions, Consumers shall not sell, bank, trade, or transfer any SO 2 Allowances allocated to the Consumers System Units . Nothing in Appendix F-1: Allowance Provisions, shall restrict Consumers’ ability to tr ansfer SO 2 Allowances among its own facility or general

accounts. ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” paragraph 133)

• Beginning with the year 2014 compliance period, an d continuing each year thereafter, Consumers shall

Surrender all SO 2 Allowances allocated to the Consumers System for t hat year’s compliance period that

Consumers does not need in order to meet its own fe deral and/or state CAA regulatory requirements for the Consumers System Units. However, SO 2 Allowances allocated to the Consumers System Units may be used by Consumers to meet its own federal and/or st ate CAA regulatory requirements for such Units. ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” paragraph 134)

• Nothing in Appendix F-1: Allowance Provisions shal l prevent Consumers from purchasing or otherwise obtaining SO 2 Allowances from another source for purposes of com plying with federal and/or state CAA regulatory requirements to the extent otherwise all owed by law. ( “U.S. v Consumers Energy Company, Civil Action 14-13580, E.D. Mich., 2014” paragraph 135)

Super-Compliant SO 2 Allowances

• Beginning with the year 2014 and continuing in eac h calendar year thereafter, Consumers may sell, ban k, use, trade, or transfer SO 2 Allowances made available in that year’s complianc e period solely as a result of: a. the installation and operation of any SO 2 pollution control that is not otherwise required b y, or necessary to maintain compliance with, any provision of the C onsent Decree, and is not otherwise required by law ; b. the use of FGD or DSI prior to the date establ ished by the Consent Decree; or

c. achievement and maintenance of an Emission Rat e below a 365-Day Rolling Average Emission Rate for

SO 2 at the following Units: (iii) at Karn Unit 1: 0.07 5 lb/mmBTU, (iv) at Karn Unit 2: 0.075 lb/mmBTU; provided that Consumers is also in compliance for t hat calendar year with all emission limitations for SO 2 set forth in the Consent Decree, as provided in this pe rmit. ( “U.S. v Consumers Energy Company, Civil Action 14-13580, E.D. Mich., 2014” paragraph 137)Consumers Energy D.E. Karn Plant (B2840) April 30, 2015

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Method for Surrender of SO 2 Allowances

• Consumers shall Surrender, or transfer to a non-pr ofit third party selected by Consumers for Surrende r, all

SO 2 Allowances required to be Surrendered pursuant to Appendix F-1: Allowance Provisions by June 30 of the immediately following calendar year. Such Surre nder need not include the specific SO 2 Allowances that were allocated to Consumers System Units, so long a s Consumers Surrenders SO 2 Allowances that are from the same year or an earlier year and that are equal to the number required to be Surrendered unde r Appendix F-1: Allowance Provisions. ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” paragraph 138)

• If any SO 2 Allowances required to be Surrendered under Append ix F-1: Allowance Provisions are transferred directly to a non-profit third party, C onsumers shall include a description of such transf er in the next report submitted to EPA pursuant to the Period ic Reporting provisions of the Consent Decree (beginning at paragraph 188 of the Consent Decree). Such report shall: (a) identify the non-profit thi rd party recipient(s) of the SO 2 Allowances and list the serial numbers of the tran sferred SO 2 Allowances; and (b) include a certification by the non-profit third par ty recipient(s) stating that the recipient(s) will not sell, trade, or otherwise exchange any of the allowances and wil l not use any of the SO 2 Allowances to meet any obligation imposed by any environmental law. No lat er than the third periodic report due after the tra nsfer of any SO 2 Allowances, Consumers shall include a statement th at the non-profit third party recipient(s)

Surrendered the SO 2 Allowances for permanent Surrender to EPA in accor dance with the provisions of Appendix F-1: Allowance Provisions within one year after Consumers transferred the SO 2 Allowances to them. Consumers shall not have complied with the SO 2 Allowance Surrender requirements of Appendix F-1: Allowance Provisions until all third party recipien t(s) have actually Surrendered the transferred SO 2 Allowances to EPA. ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich.,

2014” paragraph 139)

• For all SO 2 Allowances required to be Surrendered, Consumers o r the third party recipient(s) (as the case may be) shall first submit an SO 2 Allowance transfer request to EPA’s Office of Air a nd Radiation’s Clean Air Markets Division directing the transfer of such SO 2 Allowances to the EPA Enforcement Surrender Accoun t or to any other EPA account that EPA may direct in writing. Such SO 2 Allowance transfer requests may be made in an electronic manner using EPA’s Clean Air Markets Division Business System or similar system provided by EPA. As part of submitting these transf er requests, Consumers or the third party recipient (s) shall irrevocably authorize the transfer of these S O 2 Allowances and identify – by name of account and a ny applicable serial or other identification numbers o r station names – the source and location of the SO 2 Allowances being Surrendered. ( “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” paragraph 140)Consumers Energy D.E. Karn Plant (B2840) April 30, 2015

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Appendix G-1: Optimization of Baghouses

Consumers shall: a) At a minimum, to the extent practicable: (i) ope rate each compartment of the Baghouse as designed f or Full Stream Operation for each Unit, where applicable (r egardless of whether those actions are needed to comply with opacity limits); (ii) maintain and repl ace bags on each Baghouse as needed to maximize collection efficiency, where applicable; and b) during the next planned Unit outage (or unplanne d outage of sufficient length), optimize the PM con trols on that Unit by inspecting for and repairing any faile d Baghouse compartment.

The above requirements are found in “U.S. v Consumers Energy Company, Civil Action 14-1 3580, E.D. Mich., 2014” paragraph 141.