July 27, 2011

Lanelle Bembenek Wiggins

RFA/SBREFA Team Leader U.S. Environmental Protection Agency Office of Policy 1200 Pennsylvania Avenue, NW (1806A) Washington, DC 20460

Re: American Public Power Association Comments to the Small Business Advocac y Review Panel for the Utility Greenhouse Gas New Source Performance Standards

Dear Ms. Wiggins:

The American Public Power Association (“APPA”) appreciates the opportunity to submit these comments to the Small Business Advocacy Review Panel for the U.S. Environmental Protection Agency’s (“EPA” or “Agency”) upcoming regulation under Clean Air Act § 111 addressing greenhouse gas (“GHG”) emissions from power plants (“Utility GHG NSPS”)

. As we have discussed during our two recent meetings with the Panel, the re is no doubt that the Utility GHG NSPS will have a significant economic impact on a substantial number of small entities. Indeed, that is the very reason that EPA convened a small business review panel for this rule. Consistent with its obligations und er the Small Business Regulatory Enforcement Fairness

Act (“SBREFA”)

, EPA must use all available discretion to ameliorate these adverse impacts

.

We believe that our comments illustrate how elements of the possible rule that are particularly problematic for small e ntities and offer recommendations as to how th ese problems

should be solved. We ask that you consider these comments under SBREFA, Unfunded

Mandates Reduction Act (UMRA) an d the various Executive Orders including 12866, 13132

The American Public Power Association (APPA) is the national service organization representing the interests of the more than 2,000, not

- for

- profit municipal and other state and

local community

- owned electric utilities that collectively provide electricity to approximately 45 million Americans. These utilities, or “public power” systems, are among the most diverse of the electric utility sectors, representing utilities in small, medium and large communities in 49 states (all but Hawaii). Seventy percent of public power systems are located in cities with populations of 10,000 or less. APPA was created in 1940 as a non

- profit, non

- partisan organization. Its purpose is to advance the pu blic policy interests of its members and their consumers, and to provide member services to ensure adequate, reliable electricity at a reasonable price with the proper protection of the environment.Lanelle Bembenek Wigg ins

July 27 , 2011 Page 2

Overall, public power accounts for about 16% of all kilo watt

- hour sales to retail electricity consumers in 49 states . Approximately 46% of the megawatt hours of electricity produced by public power systems are generated using coal and more than 17% of MWH are generated using natural gas

. Our utilities have considerable experience in the use of natural gas. This percentage of gas generation i s growing since best practices for system stability dictate that the new intermittent resource capacity, such as wind and solar power be backed up at a 1:1 ratio by natural gas (mostly new Natural Gas Combined Cycle). In 2008, 27.7% of APPA member

electric generating capacity (in Megawatts) and 46.4% of generation (in Megawatt

- hours) was

coal based.

As we have noted from the beginning of our work with the panel, our ability to provide informed advice to EPA has been compromised by the Agency’s failure to provide meaningful information as to the specific regulatory alternatives that are under consideration. We have been provided with only vague and non

- specific information as to the nature of the emissions standards that are being developed and the potenti al impacts of these standards on affected small

entities. As a result, all we can do is guess as to what EPA intends to do and provide advice

based on these guesses. This violates both the letter and the spirit of SBREFA. We urge you to

take more time t o develop clear regulatory alternatives, conduct analyses to determine the impact of these alternatives on small entities, and provide this information to the small entity representatives to enable the development and submission of informed advice.

1. EPA should not set output

- based GHG emissions limits.

In our second meeting with the Panel, representatives of the National Rural Electric Cooperative Association (“NRECA”) provided several charts depicting actual operating information for several power plant s. The charts from the utility sector presented information on a monthly block average basis of average heat rate (Btu/kWh), hours online, CO2 emissions rate (lb/mmBtu) and capacity factor (%). Those charts have been re

- submitted by NRECA. APPA

defers to NRECA as a peer on the panel

.

These char ts show that the average heat rate for each of these units varies significantly over time. For example, the chart for Fort Dodge

– a natural gas

- fired boiler operated by Sunflower Electric Power Corporation

– shows a range from a low of 1150 0 Btu/kWh to a high of 1,310 0 Btu/kWh. This means that the heat rate of this unit can reasonably be expected to vary by roughly 2
, 00 0 Btu/kWh . Data for the other units presented in Attachment 1 show s similar variability.

As discussed in the meeting, this variability i s not due to poor maintenance or operating practices. For Fort Dodge, for example, the variability is attributable to the fact that the unit is primarily used to back up wind resources . Serving in this function unavoidably causes the unit to operate less efficiently than it would if it did not need to “chase” the constantly

- varying wind

resources. This information shows that an output

- based standard would not reasonably

accommodate real

- world variability in efficiency that is caused by unavoidable operat ing

conditions.Lanelle Bembenek Wigg ins

July 27 , 2011 Page 3

We note that several additional concerns with output

- based standards were raised during our meetings with the Panel. For example, how would an output

- based standard accommodate differences in parasitic load attributable to different air po llution control schemes employed at different plants? Similarly, as discussed in more detail below, certain utility boilers provide energy in multiple forms

– generating not only electricity, but also heat used in district heating, sidewalk deicing, and i ndustrial applications. An output based standard would not easily

accommodate such units.

We also note that EPA has broad authority to implement work practices in place of

numeric emissions limitations because CO 2 “cannot be emitted through a conveyance d esigned

and constructed to

... capture such pollutant.” CAA § 111(h)(2). In other words, because BDT does not currently consist of pollution control measures that “capture” CO 2 , EPA has clear authority to implement work practice standards. EPA should take full advantage of this authority. Doing so would avoid the need to set emissions limitations in the first instance.

But, to the extent EPA considers setting emissions limitations, EPA should use a form other than output

- based in order to avoi d the proble ms detailed above.

2. EPA must appropriately accommodate permitted facilities for which construction will not have commenced prior to the date of proposal.

Several small entities in the utility sector have recently obtained air permits authorizing

the cons truction of new units, but almost certainly will not be in a position to commence construction on the new units prior to the date that EPA proposes the Utility GHG NSPS. As a result, these unit s stand to be regulated as new sources under the rule, which c reates great uncertainty for the projects until the rule is finalized and ultimately may prevent the projects from being implemented, depending on the new source standards that are included in the final

rule.

For example, Sunflower Electric Power Corporati on ( an electric co

- operative that se rves ably as a “technical expert” on the SER panel ) received a PSD permit in December 2011 to

construct a new coal

- fired unit at its Holcomb Station in western Kansas. Similarly, the Holland Board of Public Works received a PSD permit in Feb ruary 2011 to construct a 78 MW circulating fluidized bed (“CFB”) unit. It appears that there are just 12 projects in the country that are in these circumstances.

By the time an air permit is issued for such projects, years of effort and millions of

dolla rs have been invested in the project. Under ordinary circumstances, the owners of such facilities would have ample notice of EPA’s plans to develop a potentially applicable NSPS and

c ould manage their projects accordingly

– either scheduling the commencem ent of construction prior to proposal or factoring potential new requirements into the original design. But, in this case, EPA’s rulemaking schedule was announced in late 2010

– barely six months before the date of proposal. Moreover, EPA negotiated the rulemaking deadlines in secret with environmental petitioners, making it impossible for companies to know ahead of time whetherLanelle Bembenek Wigg ins

July 27 , 2011 Page 4

the Agency ultimately would commit itself to a fixed schedule and what milestones would be

included in such a schedule.

As a res ult, public power utilities (and private companies ) have had essentially no opportunity to reasonably or realistically factor potential new source requirements into the design of the pending projects . This is extraordinarily unfair to the companies and pu ts at risk projects that are needed to assure reliable electric service in affected areas. EPA must take steps to prevent these problems. This is especially critical since some of these 12 pending plants may be to replace retiring units. It is very import ant that the U. S. EPA (and states) recognize the convergence of the CSPAR (replacement of the CAIR rule) and the EGU MACT/NSPS rules that may cause far greater retirements than the U. S. EPA expected even just a few months ago.

One approach is simply to defer the NSPS rulemaking schedule to give companies more time to factor the rule into their plans. This approach would have the added benefit of giving EPA more time to develop regulatory alternatives, analyze these alternatives, and fully consider

the k ey issues before issuing a proposed rule.

If the Agency decides to stick with the current schedule to propose the NSPS rule by September 30, 2011

, then the rule should be structured so that it does not apply to units that have been permitted, but for which construction has not yet commenced

. There are several ways that this could be accomplished. For example, EPA has broad authority to define the

source category that will be regulated under any particular NSPS. In this case, the source category could be defined to exclude these units. As justification, EPA could point out that these would be the very newest units in the fleet and, as a result, can reasonably be expected to be the most efficient units of their kind . Given the severe consequences of regul ating these units as new units under the NSPS, adjusting the bounds of the source category to exclude these units would be entirely reasonable.

Alternatively, EPA has broad authority to distinguish among various classes of units when setting standards for a particular source category. EPA could reasonably create a separate class for permitted units for which construction has not yet commenced and then set

class

- specific standards designed to not significantly interfere with the construction of these

units.

But, however the new NSPS is accomplished, EPA must assure that the upcoming NSPS rulemaking will not unreasonably and unfairly threaten the viability of permitted projects when they are needed to help replace or augment needed power and maint ain local reliability.

3. The Utility GHG NSPS must assure continued diversity in fuel types and power plant design.

A “one size fits all” approach will significantly disadvantage small entities because it likely will significantly constrain the choice of fuel and boiler design

. For example, in our last meeting with the Panel, a representative from the Holland Board of Public Works (Michigan) explained that a CFB design is critical to accomplishing the many needs that must be served byLanelle Bembenek Wigg ins

July 27 , 2011 Page 5

the unit for the mu nicipal utility and broader municipal government . For example, the unit will generate electricity, provide heat to deice sidewalks in the wintertime, and likely will be needed for district heating in the future. In addition, Michigan imposes a state rene wable portfolio standard, which the City of Holland intends to meet by co

- firing biosolids from the local public wastewater treatment plant. Such co

- firing will have the added benefit of reducing the amount of

biosolids that would otherwise need to b e land

- filled.

In addition, Holland needs only about 80 MW of generating capacity. The small size of the unit effectively precludes the application of certain technologies that might be available for larger units (such as so

- called “ultra

- supercritical” bo iler designs). Another unique consideration for Holland is that coal to fuel the existing and the planned new power plant is received by barge. This allows Holland to maintain a commercial harbor designation, which qualifies the city for

federal funds an d assists in maintaining the local tourism industry.

More generally, many small entities are located in parts of the country where natural gas supply or the infrastructure needed to deliver that gas is limited or nonexistent . Imposing a standard that, for example, is based on the efficiency that can be achieved by a natural gas

- fired combined cycle gas turbine facility would leave many small entities with no reasonable compliance alternatives. APPA has provided its 2010 study “ Implications of Greater Relia nce on Natural Gas for Electricity Generation” 1 and spoke on these concerns at the first SER meeting in June 2011. It is important that the U. S. EPA , U. S. Small Business Administration (SBA) and Office of Management and Budget (OMB) recognize that there are many states with inadequate natural gas delivery and storage infrastructure. While natural gas pipeline exp ansions can be built over the next four to six years, some of these smaller communities must replace their coal fired power plants with either co al or gas where the existing transmission lines exist . In the case of smaller towns where the power plant or transmission lines are in the heart of the community

, some natural gas pipeline expansions, extensions or entirely new pipelines might not be permi tted to be placed in central parts of the community due to safety concerns. These infrastructure and logistical factors must be considered by U. S. EPA and state agencies

when NSPS is proposed for both new and existing . APPA’s study only looked at additional natural gas usage to the sta tes, not to the city gates

. So this means that APPA’s chart on page 6

is conservative and that gas usage at individual utilities and on individual natural gas pipelines may be much higher

. The APPA study did not include the natural gas usage to back up

intermittent wind and solar so these numbers are actually lower than actual usage when one combines the EGU MACT, NSPS pr essures and installation of wind and solar power that is backed up with natural gas.

1 https://appanet.cms

- plus.com/files/PDFs/Im plicationsOfGreaterRelianceOnNGforElectricityGeneration.pdfLanelle Bembenek Wigg ins

July 27 , 2011 Page 6

ExcerptLanelle Bembenek Wigg ins

July 27 , 2011 Page 7

Like natural gas pipeline, APPA believes that storage of natural gas for the rapid deliverability of natural gas to electric uti lities within the pipeline is critical for hourly relia bility

. Few states contain high deliverability of natural gas storage facilities due t o t he limitations of the geology

. Storage for manufacturing which has predicable daily usage is very different from an electric utility. See Figure 15 of the APPA study (page 58).

As these examples of both unique public power communi ties, their locations, and the services that the public power utilities provide to their customers demonstrate, EPA must devise appropriate sub categories and/or classes of affected units so that small entities will continue to have reasonable flexibility as to the type of generating resources that may be built and operated. For example, BDT should be established for different fuel types rather than across fuel types. EPA also must consider remaining useful life of the units in establishing § 111(d) existing

source pe rformance standards.

4. Carbon capture and sequestration is promising but not a promise. CCS is not a viable technology that can be fac tored into the Utility GHG NSPS in this six year cycle.Lanelle Bembenek Wigg ins

July 27 , 2011 Page 8

At our first meeting with the Panel, APPA distributed several pap ers 2 that provided an assessment of the current state of carbon capture and sequestration (“CCS”) as it might be applied as an emissions control technology to reduce CO 2 emissions from power plants. These papers demonstrate that CCS is a promising technol ogy, as evidenced by the several pilot projects that are being implemented and are planned to be implemented over the next few years. But, CCS will not be demonstrated and commercially available for many years to come . As a result, CCS does not constitut e BDT for under the Utility GHG NSPS. Attachments 3, 4, 5, and 6 are copies of the papers that were distributed at the June 2011 meeting. These APPA papers provide significant additional data and explanation supporting this conclusion. Copies of these papers are attach ed to the APPA NSPS comments.

5. GHG standards should not be developed for biomass combustion.

EPA recently issued a rule deferring the regulation of biomass

- fired combustion units under the PSD program for three years. EPA justified this action by explai ning:

EPA recognizes that use of certain types of biomass can be part of the national strategy to reduce dependence on fossil fuels, efforts are underway at the Federal, State and regional level to foster the expansion of renewable resources and promote bi oenergy projects when they are a way to address climate change, increasing domestic alternative energy production, enhancing forest management and creating related employment opportunities. We believe part of fostering this development is to ensure that t hose feedstocks with negligible net atmospheric impact not be subject to unnecessary regulation. At the same time, it is important that EPA have time to conduct its detailed examination of the science and technical issues related to accounting for biogeni c CO2 emission and therefore have finalized this deferral

. 3

APPA believes that i t makes no sense to regulate biomass GHG emissions under the Utility GHG NSPS when EPA has determined that the regulation of such emissions under the PSD program is not current ly warranted

. Therefore, for the same reasons that EPA used to justify the P SD biomass deferral, GHG emissions from the combustion of biomass should not be covered by the Utility GHG NSPS.

We also note that EPA issued guidance in conjunction with the PSD biomass deferral explaining the “reasoning that a Prevention of Significant Deterioration (PSD) permitting authority may use to support the conclusion that the best available control technology (BACT) for carbon dioxide (CO2) emissions at a bioenergy facil ity is the combustion of biogenic fuels

2 www.publicpower.org/files/CCS%20White%20Paper%20Links.pdf

3 76 Fed. Reg. 43490, 43492 (July 20, 2011).Lanelle Bembenek Wigg ins

July 27 , 2011 Page 9

itself.” 4 This guidance was predicated on the observation that “CO 2 emissions from bioenergy merit unique consideration in the BACT analysis because land

- based biomass carbon stocks can be replenished more quickly t han fossil fuel carbon stocks, and thus these biogenic carbon stocks
can act as a sink on a shorter time scale than fossil carbon.” 5 As a result, combustion of biogenic fuels should not be expected to appreciably add to atmospheric CO 2 levels.

For this re ason, while biomass combustion should not be covered by the Utility GHG NSPS, the combustion of biomass (such as co

- firing in an exist ing coal

- fired unit) should be recognized and appropriately accommodated as a compliance technique under the rule.

6. Impl ementation of NSPS control measures should not trigger further regulatory requirements.

EPA should rely on the longstanding NSPS pollution control project exclusion to make sure that implementation of GHG NSPS requirements does not trigger further obligati ons under the NSPS program ( e.g. , transforming an existing source into a new source). Similarly, implementation of GHG NSPS requirements should not trigger new source review permitting.

7

. EPA may not adopt an NSPS unless it makes a category and pollutant specific endangerment and significant contribution finding.

EPA is not authorized to regulate GHG emissions unless and until it makes a finding that GHG emissions endanger health or the environment and that affected units significantly

contribute to the e ndangerment. A contribution/significant endangerment finding for one pollutant under § 111 does not authorize EPA to thereafter regulate any other pollutant.

Thank you for the opportunity to participate on the small entity review panel for the Utility GHG NSPS and for the opportunity to submit these comments.

It is APPA’s strong recommendation that the U. S. EPA hold yet a third meeting on these important topics before proposing a NSPS for CO 2

.

4 See Guidance for Determining Best Available Control Technology for Reducing Carbon Dioxide Emissions from Bioenergy Production , U.S. Environmental Protection Agency, Office of Air and Radiation (March 2011) at 3.

5 Id. at 6.Lanelle Bembenek Wigg ins

July 27 , 2011 Page 10

Please feel free to contact me if you have questions or nee d more information. Due to the size of the CCS papers and the natural gas study, those will be sent under another e mail note immediately following this letter.

Sincerely,



### Theresa
Theresa Pugh Director, Environmental Services

c c: Mr. David Rostker , SBA

Ms. Co rtney Higgins, OMB Mr. Robert Wayland , EPA SER Panel Participants

Mr. Bill Wehrum