.~~.' ,....,

'0

STATE OF CONNECTICUT

DEPARTMENT OF ENVIRONMENTAL PROTECTION

In the maner of

The State of Connecticut and

Middletown Power LLC

)

)

)

)

)

Trading Agreement

and Order No. 8182 A

Whereas, the Commissioner of Envirorunental Protection ("Commissioner") and Middletown

Power LLC ("11P") agree that it is in the public interest that they work cooperatively to improve the

air quality within the State of Connecticut and that the use of discrete emission reduction credit

("DERe") trading to reduce nitrogen oxide (''NOx'') emissions will achieve this result in a timely

and cost-effective manner:

A. At the request and with the agreement ofMP, the Commissioner finds the following:

1. This Trading Agreement and Order 5upercedes Trading Agreement and Order 8182

issued on January 12,2000.

2. :MP is an exempt wholesale electric generating company with its principal place of

business in Sewickley. Pennsylvania. MP owns one (1) piece offuel-burning

equipment ("peaking unit'') identified in Table 1 ofthis Trading Agreement and

Order. This peaking unit is a combustion turbine operated at 1866 River Road,

Middletown, CT ("facility").

3. Emission testing performed on the dates indicated in Table 1, resulted in a NOx

emission rates as follows:

Table 1

Facility/ Fuel Heat Input Stack Test FLER Allowable Date of Next

Peaking Unit MMBruIbr (ppmvd) IbsIMMBtu Rate Stack Stack

IbsIMMBtu Test Test Due

Middletown- #2 oil 256 148.8 0.67 0.29 6111/01 6111/06

10

l.:..•. ,••

(Prillted 011 Recycled Papcr)

79 Elm Streel • Hanford, CT 06J06 - 5127

hltp:lldep.$llle,cl.U$

lin Equal OppoNunily Employer
Middletown Power LLC 2 Trading Agreement

and Order No. 8182 A

()

. ; .. ",/

.'

4. MP exceeds the NOx allowable emission rate for the peaking unit specified in

Section 22a-174-22(e) ofthe Regulations as shown in Table 1 of this Trading

Agreement and Order.

5. Pursuant to the Department ofEnvironmentaJ Protection's "Credit Trading/or

Sources with Irr~gular NOx Emissions" policy, with a revised date of February 27,

2001, attached-hereto and incorporated by reference into this Trading Agreement and

Order as Exhibit I, the pea.1dng units have peak daily NOx emissions greater than

three times the average daily emissions during the ozone season and are therefore

considered sources with irregular NOx emissions.

6. Pursuant to Section 22a-174-22(j) ofthe Regulations, during the non-Olone season,

MP intends to acquire approved DERCs until May I, 2005 for the peaking units.

Pursuant to Section 22a-174-22(j) of the Regulations, during the ozone season, rvf.P

intends to acquire approved Budget discrete emission reduction credits ("BDERCs")

until May I, 2005 for the peaking uruts.

B. The Commissioner, in accordance with the provisions of this Trading Agreement and

Order, and pursuant to Section 22a-174-220) ofthe Regulations, hereby allows MP to

comply with Section 22a-174-22 ofthe Regulations through use ofDERC and BDERC

trading.

C. With the agreement ofMP, the Commissioner, acting under Sections 22a-6, 22a-171,

22a·174, 22a-176, and 22a·l77 ofthe Connecticut General Statutes, orders MP as

follows:

1. Upon issuance ofthis Trading Agreement and Order, at the facility, 1vfP shall comply

with Section 22a-174-22 of the Regulations through DERC trading. Until MP

achieves permanent compliance with the emission standard in Section 22a-174-22(e)

ofthe regulation or by May 1, 2005 whichever occurs earlier:

a. MP shall use approved DERCs as required under this Trading Agreement and

Order;

b. MP shall have in its possession sufficient approved DERCs to meet applicable

NOx emission limits as allowed under this Trading Agreement and Order; and

c. 1v1P shall comply during operation of the peaking units with the FLERS shown in

Table 1 oftrus Trading Agreement and Order.
Middletown Power LLC 3 Trading Agreement

and Order No. 8182 A

I

"-~ .....

3. Until May 1, 2005, before the first day of each month, 1vfP shall have in its possession

sufficient approved DERCs for the peaking units based on the following calculations.

Before the first day of each month, 1vfP shall estimate DERCs required for such month

for the peaking units as follows.

i. At all times (mass calculation):

Estimated DERCs (in tons) = {(estimated fuel use in MMBtu) x «FLER) - (0.95 x

NOx allowable emission limit))} ~2000 pounds/ton

Where:

-Allowable emission limit= in IbsfM}..1Bru as sho\Vl1 in Table 1 of this

Trading Agreement and Order.

• FLER~ full load emission rate in IbsIMMBtu as shown in Table I of this

Trading Agreement and Order.

• Discount (.95)= %5 design margin applied to the allowable limit.

ii. During the ozone season only (peak. day calculation):

the maximwn"actual excess NOx emissions (in lbs) on any ofthe days

projecteq. by the Commissioner to be "moderate to unhealthful,"

"unhealthful;' or "very unhealthful," divided by 3 and then divided by 13

(with the result in ton·s):

Estimated DERCs (in tons) [(Maximwn estimated excess NOx in Ibs) 3J

~[13 Ibs/day/ton]

b. No later than October 30 of2003, and 2004 calculate and permanently retire the

DERCs used in the preceding ozone season as the greater of:

i. the actual total excess emissions for the ozone season in tons, as follows:

DERCs (in tons) «actual fuel use in MMBtu) x «FLER) - (0.95 x NOx allowable

emission limit)))~ 2000 pounds/ton

- .
Middletown Power LLC

OR

4 Trading Agreement

and Order No. 8182 A

('"'\ -..J

c.

11. the maximwn actual excess NOx emissions (in lbs) on any ofrhe days

projected by the Commissioner to be "moderate to unhealthful",

"unhealthful", or "very unhealthful", divided by 3 and then divided by 13 , (with th.e result in tons):

Actual DERCs (tons) used [(Actual excess NOx in Ibs) +3J + [13

lbs/day/ton]

As described in Exhibit 1 of this Trading Agreement and Order, to ~e extent

thal DERCs used to offset on peak day basis exceed the total mass excess

emissions, remaining DERCs may be used in the non-ozone season in the

same or subsequent years through May 1, 2005.

During the non-ozone season starting on October 1. 2003:

In addition to meeting the 24-hour emission limit in Table 22-1 of Section 22a174-22 of the Regulations, meet a non-ozone season emission limit of 0.15

IblMMBtu. Prior to October I, 2003 and October I, 2004, MP shall estimate

and acquire sufficient DERCs and/or allowances needed to comply with Section

22a-174-22(e)(3) ofthe Resulations as follows:

Estimated DERCs (tons) [Estimated fuel use in MMBtu from October I

through April 30 x (Estimated maximum emission

rate in IblMMBtu during October 1 through April

30 - (0.95 x 0.15 IblMMBtu))J ) + 2000

pounds/ton.

.: "';

,.

-,.,1

d. No later than May 31 of2004, calculate and permanently retire DERCs used in

the preceding non-ozone season as follows:

Actual DERCs (tons) = [Actual fuel use in MMBtu from October I through

April 30 x (average emission rate in IbJM:MBtu

during October I through April 30 - (0.95 x 0.15

IblMMBtu))] + 2000 pounds/ton.
Middletown Power LLC 5 Trading Agreement

and Order No. 8182 A

3. BDERCs shall only be used by other NOx budget program sources located in Connecticut.

BDERCs shall only be used to offset ozone season excess emissions, and shall not be used

for compliance during the non·ozone season. BDERCs generated during a given year shall

only be used through the following ozone season. BDERCs are subject to all DERC

requirements set forth in this Trading Agreement and Order except for those requirements

pertaining solely to non-ozone season DERCS and as otherwise may be provided.

4. MP shall make and keep records of: daily fuel use and fuel type; excess NOx emissions;

the number ofDERCs in its possession, created, purchased and used (by serial number if

assigned) each month in accordance with the appropriate emission rates and limits in this

Trading Agreement and Order; the number ofDERCs used during the ozone season and

non-ozone season (the remainder of the year); during the ozone season, the ozone

classification as forecasted by the Commissioner on the previous day; as well as

documentation anesting to the fact that approved DERCs used during the ozone season

were generated during the ozone season. Generator certification ofthis fact shall be

sufficient. MP shall maintain and submit such records to the Corrunissioner in accordance

with Section 22a-174-22 ofthe Regulations.

5. Record Keeping. shall retain records and supporting documentation as described in

this Trading Agreement and Order for a minimum of five years. commencing on the date

such records were created. MP shall provide the records specified above to the

Commissioner within thirty (30) days ofreceipt of a wrinen request from the

Commissioner.

6. Annual Emission Statement. No later than March 1 of every year after issuance ofthis

Trading Agreement and Order, MP shall include with the Annual Emission Statement

provided to the Cornmissioner1 a record of each sale or other transfer, and use of any and

all ofthe DERCs approved within and subsequent to issuance of this Trading Agreement

and Order until all such DERCs have been used or are no longer in MP's possession. MP

shall also include actual NOx emissions from the peaking units and the amount of all

DERCs used (including serial numbers (if assigned) and approved DERCs generated

and/or purchased from other facilities), generated and/or approved for the previous

calendar year. These reports shall be on a fonn prescribed by the Commissioner and shall

be in r.nonthly increments. Should M:P choose to discontinue the generation ofDERCs,

11P will notify the Commissioner upon discontinuance.

7. Allowance Use. Pursuant to Secrion 22a-174-22(d)(3) of the Regulations, MP may use

NOx allowances, pursuant to Section 22a-174-22(j) ofthe Regulations to achieve all or a

portion ofthe reductions required by Section 22a-174-22 of the Regulations..A.ny

allowance used for compliance with Section 22a-174-22(e) ofthe Regulations shall be
Middletown Power LLC 6

•

Trading Agreement

and Order No. 8182 A

':J

i

'-

subject to all restrictions andlor requirements applicable to DERCs contained in this

Trading Agreement and Order. Each allowance used for compliance with Section 223-

174-22 of the Regulations shall be equivalent to one discrete emission reduction credit and

shall be deducted from :MP's NOx Budget Program compliance account upon such use.

Allowances shall be considered used for compliance with Section 22a-174-22 of the

Regulations when they are transferred from the facility's compliance account or overdraft

account to a State ofConnecticut NOx allowance retirement account, account ID

CTOO00000300 in the NOx Allowance Tracking System.

8. PERC Doubling. At a minimum, DERCs required shall be adjusted upwards by 100% if

DERCs are not in !viP's possession for use prior to the first day of each month or

applicable season. However based on the gravity ofthe noncompliance. the

Commissioner may require additional upwards adjustment.

9. Vintage Restriction. For the purposes of compliance with Section 22a-174-22 of the

Regulations, DERCs/allowances shall only remain valid for five (5) calendar years from

the year ofthe generation/allocation ofsuch DERCs/allowances. DERCs/allowances

older than five (5) calendar years from their creation/allocation are not valid for use for

compliance with Section 22a-174-22 ofthe Regulations. Notwithstanding the above,

DERCsiallowances generated/allocated prior to calendar year 2000 are valid for use for

compliance with Section 22a-174-22 of the Regulations up to and including December 31,

2004

10. FLER Exceedance. Noncompliance with an established FLER shall subject MP to make

restitution by matching the quantity of emissions ("true up'') caused by the exceedance

plus a 100% premium. The true up in tons ofDERCs shall be equal to the FLER

exceedance in lbs&11v1Btu, multiplied by the total heat input during the period of

noncompliance divided by 2000 lbs/ton. lfthe period of noncompliance is not knO\VIl., the

time period from the completion ofthe last/previous Department witnessed emission test

through the date the FLER compliance is achieved as approved by the Commissioner shall

be used. However. nothing in this Trading Agreement and Order shall affect the

Commissioner's authority to institute any proceeding or take any other action to require

additional upward adjustment, based on the gravity of any alleged noncompliance or

violation oflaw.

11. FLER Modification. FLERs set forth in Table 1 ofthis Trading Agreement and Order

may be modified only after the consent of the Commissioner by wrinen modification of

this Trading Agreement and Order.

12. Emissions Testin2. Pursuant to Section 22a·174-22(k) of the Regulations, :MP shall

conduct NOx emission tests of the peaking units at least once every five years
Middletown Power LLC 7 Trading Agreement

and Order No. 8182 A

commencing from the dates of the NOx emission tests for the peaking Wlits as provided in

Table 1 of this Trading Agreement and Order.

13. Extension. No later than May 1, 2005, with respect to the peaking units, MP shall comply

with the requirements of Section 22a-174-22(d)(J) of the Regulations. However, after full.

program review of thiS' and other Trading Agreements and Orders and, if detennined to be

appropriate, the Commissioner may grant a written extension ofthis Trading Agreement

and Order.

14. Future Compliance Report. On or before September 1, 2004, MP shall submit a report

indicating how the facility shall comply with section 22a-174-22 ofthe Regulations with

respect to the Peaking units on and after May 1, 2007.

15. Full compliance. 1v1P shall not be considered in full compliance with this Trading

Agreement and Order until all actions required by this Trading Agreement and Order have

been completed as approved and to the Commissioner's satisfaction.

16. Approvals. MP shall use best efforts to submit to the Commissioner all documents

required by this Trading Agreement and Order in a complete and approvable form. Ifthe

Commissioner notifies M:P that any document or other action is deficient, and does not

approve it with conditions or modifications, it is deemed disapproved, and :M:P shall

correct the deficiencies and resubmit it within the time specified by the Commissioner or,

if no time is specified by the Commissioner, within 30 days of the Conunissioner's notice

of deficiencies. In approving any document or other action ill1der this Trading Agreement

and Order, the Commissioner may approve the document or other action as submitted or

performed or with such conditions or modifications as the Commissioner deems necessary

to carry out the purposes of this Trading Agreement and Order. Nothing in this paragraph

shall excuse noncompliance or delay.

17. Definitions. As used in this Trading Agreement and Order, "Commissioner" means the

Commissioner ofEnvironmental Protection or an agent of the Commissioner. "Ozone

season" means the period from May 1 through September 30 in any given calendar year.

The date of "issuance" of this Trading Agreement and Order is the date the Trading

Agreement and Order is deposited in the U.S. mail or personally delivered, whichever is

earlier.

18. Dates. The date ofsubmission to the Commissioner of any document required by this

Trading Agreement and Order shall be the date such document is received by the

Commissioner. The date of any notice by the Commissioner under this Trading

Agreement and Order, including but not limited to notice of approval or disapproval of

any document or other action, shall be the date such notice is deposited in the U.S. mail or

is personally delivered, whichever is earlier. Except as othenvise specified in this Trading

/
Middletown Power LLC 8 Trading Agreement

and Order No. 8182 A

()

Agreement and Order, the word "day" as used in this Trading Agreement and Order means

calendar day. Any document or action which is required by this Trading Agreement and

Order to be submitted or performed by a date which falls on a Saturday, Sunday or a

Connecticut or federal holiday shall be submitted or performed by the next day which is

not a Saturday, Sunday or Connecticut or federal holiday

I

19. Certification of documents. Any document, including but not limited to any notice, which

is required to be submitted to the Commissioner under this Trading Agreement and Order

shall be signed by:rv1P or, ifMP is not an individual, by MP's chief executive officer or a

duly authorized representative ofsuch officer, as those terms are defined in Section 22a430-3(b)(2) of the Regulations, and by the individual(s) responsible for actually preparing

such document, and MP or MP's chief executive officer and each such individual shall

certify in writing as follows:

"I have personally examined and am familiar with the infonnation submitted in this

document and all attachments thereto, and I certify, based on reasonable investigation,

including my inquiry of those individuals responsible for obtaining the infonnation, that

the submitted. information is true, accurate and complete to the best ofmy lmowledge and

belief. I understand that any false statement made in the submitted information is

pwrishable as a criminal offense under Section 53a-157b ofthe Connecticut General

Statutes and any other applicable law."

20.

21.

22.

Noncompliance. This Trading Agreement and Order is a final order of the Commissioner

with respect to the matters addressed herein, and is nonappealable and immediately

enforceable. Failure to comply with this Trading Agreement and Order may subject l\.1P

to an injunction and penalties.

False statements. My false statement in any infonnation submitted pursuant to this

Trading Agreement and Order is punishable as a criminal offense under Section 53a~157b

ofthe Connecticut General Statutes and any other applicable law.

Notice oftransfer; liability ofMP and others. Until MP has fully complied with this

Trading Agreement and Order, NIP shall notify the Commissioner in writing no later than

fifteen (15) days after transferring all or any portion of any of the facilities, the

operations, the sites or the businesses which are the subject ofthis Trading Agreement

and Order or after obtaining a new mailing or location addresses. MP's obligations under

this Trading Agreement and Order shall not be affected. by the passage oftitle to any

property to any other person or municipality.

23. Commissioner's powers. Nothing in this Trading Agreement and Order shall affect the

Commissioner's authority to institute any proceeding or take any other action to prevent

or abate violations of law, prevent or abate pollution, recover costs and natural resource
Middletown Power LLC 9 Trading Agreement

and Order No. 8182 A

<,C)

-

damages, and to impose penalties for past, present, or future violations oflaw. If at any

time the Commissioner detennines that the actions taken by lvfP pursuant to this Trading

Agreement and Order have successfully corrected all violations, fully characterized the

extent or degree of any pollution, or successfully abated or prevented pollution, the

Conunissioner may institute any proceeding to require !viP to undertake further

investigation or funher action to prevent or abate violations or pollution.

,

24. MP's obli23tions under law. Nothing in this Trading Agreement and Order shall relieve

MP of other obligations under applicable federal, state and local law.

25. No assurance by Commissioner. No provision of this Trading Agreement and Order and

no action or inaction by the Commissioner shall be construed to constitute an assurance

by the Commissioner that the actions taken by:MP pursuant to this Trading Agreement

and Order will result in compliance or prevent or abate pollution.

26. Access to facility. Any representative ofthe Department ofEnvironmental Protection

may enter any of these facilities without prior notice for the purposes ofmonitoring and

enforcing the actions required or allowed by this Trading Agreement and Order.

27. No effect on rights of other persons. This Trading Agreement and Order neither creates

nor affects any rights of persons or municipalities that are not parties to this Trading

Agreement and Order.

28. No Creation of PropertY Riehts. This Trading Agreement and Order does not create any

property rigbts with respect to these DERCs.

29. Notice to Commissioner of changes, Within fifteen (15) days of the date MP becomes

aware of a change in any information submitted to the Corrunissioner under this Trading

Agreement and Order, or that any such infonnation was inaccurate or misleading or that

any relevant information was omitted, :MP shall submit the correct or omitted information

to the Commissioner.

30. Notification of noncompliance. In the event that MP becomes aware that it did not or

may not comply, or did not or may not comply on time, with any requirement ofthis

Trading Agreement and Order or of any document required hereunder, MP shall

immediately notify by telephone the individual identified in the next paragraph and shall

take all reasonable steps to ensure that any noncompliance or delay is avoided or, if

unavoidable, is minimized to the greatest extent possible. Within ti"ve (5) days of the

initial notice, :MP shall submit in writing the date, time, and duration of the

noncompliance and the reasons for the noncompliance or delay and propose, for the

review and wrinen approval of the Commissioner, dates by which compliance will be

achieved, and MP shall comply with any dates which may be approved in writing by the

,
Middletown Power LLC 10 Trading Agreement

and Order No. 8182 A

(')

J

Commissioner. Notification by MP shall not excuse noncompliance or delay, and the

Commissioner's approval of any compliance dates propos.ed shall not excuse

noncompliance or delay unless specifically so stated by the Commissioner in writing.

31. Submission ofdocuments. Any document required to be submined to the Commissioner

under this Trading Agreement and Order shall, unless otherwise specified in this Trading

Agreement and order or in WTiting by the Commissioner, be directed to:

Mr. Michael lafleur

Department of Envirorunental Protection

Bureau ofAir Management

Compliance and Field Operations Division

Emissions and Credit Trading Section

79 Elm Street

Hartford, CT 06106
Middletown Power LLC 11 Trading Agreement

and Order No. 8182 A

, j

1vfP consents to the issuance of this Trading Agreement and Order without further notice. The

W1dersigned certifies that he/she is fully authorized to enter into this Trading Agreement and

Order and to legally bind MP to the terms and conditions of the Trading Agreement and Order.

Middletown Power LLC

:i::nue /=c.~ Title £eslC?na! mCLf\28eL

Date G/-Cf-D3

Issued as a final order ofthe Commissioner ofEnvironment

--1=1~:-''L<'1f------'p.-=---, 2003.

CITY OF MIDDLETOWN LAND RECORDS

MAILED CERTIFIED MAIL,

RETURN RECEIPT REQUESTED

Certified Document No.