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www.icac.com

David C. Foerter, Executive Director

Email: dfoerter@icac.com Senator Tho mas Carper 513 Hart Building Washington, DC 20510

November 3, 2010

Dear Senator Carper:

Thank you for your letter of October 6, 2010 requesting the Institute of Clean Air Companies’ (ICAC) insights and perspective regardi ng the questions of labor availability and the capacity of the electric power industry to in stall air pollution contro l systems on a timely schedule and the types of jobs thes e installations create. As you r ecognize in your letter, this is not a new concern. In fact, industry stakeholders raised this exact concern when EPA proposed the NOx SIP Call rule in 1998 and, again, when EPA proposed the Clean Air Interstate Rule (CAIR) in 2005. Notably however, these were con cerns raised primarily in advance of the finalization of rules, and in both cases prove d unfounded as the stationa ry source air pollution control and measurement (APC) in dustry satisfied demand for labor and other resources placed upon us and related industries. These concerns an d doubts are being raised again; however, based on a history of successes, we are now even more re solute that labor availability will in no way constrain the industry’s ability to fully and timely comply with the proposed interstate Transport Rule and upcoming utility MACT rules. Contrary to any concerns or rhetoric pointing to labor shortages, we would hope that e fforts that clean the air also pu t Americans back to work. We appreciate your efforts to more fully understand this issue and we offer the following responses to the specific questions you raise:

 The APC Industry is able to meet future dema nds for emission control technology due to our overwhelming experience in meeting requireme nts for selective catalytic reduction (SCRs) and flue gas desulfurization (FGDs ) under the NOx SIP Call and CAIR.

 Less resource and time-intensive technologies ar e available to be quickly deployed offering the electric generating industry th e needed flexibility to comply with the proposed Clean Air Transport Rule and the upcoming utility MACT. For example direct sorbent injection (DSI) and dry scrubbing technology installation tim es are approximately 12 and 24 months, respectively.

 The design and construction of NOx, SO 2 and HAPs control technol ogies require engineers,

skilled craft labor such as boilermakers and creates upstream and downstream employment

and economic benefits.

 We estimate that over the past seven years, th e implementation of CAIR Phase 1 resulted in 200,000 jobs in the APC industry.Is labor availability likely to co nstrain the industry as it seek s to comply with the interstate

transport an d utility MACT rule?

The simple answer is that labor availability has never jeopardized overall industry compliance requirements, nor is there any reason to assu me that it would prevent the power generation industry from effectively complying in a timely way with requirements. As an industry, we respond to whatever demand for products and services is placed upon us by affected industries complying with requirements. The corollary to th is response is that the APC industry has proven, particularly in recent years, the dynamic nature of ours and related indus tries in meeting demand from the electric power generating industry. This has been demonstrated by repeatedly satisfying rapid and substantial increases in demand for services and produc ts, working effectively with end-users to efficiently deploy resources to m eet compliance deadlines, innovating then bringing those innovations quickly to market, and relyi ng on inherent competitiveness within the industry to bring an ever broader range of economically reas onable solutions to our customers. The

variable nature of our industr y, including supporting and related industries, now finds us at a point where demand for products and services is lo w, so we are well-positioned to meet any new

demand.

We are extremely confident in th e ability of our industry to deliv er and satisfy, as we have so successfully in the past, the labo r, materials and resources needed to meet the demand. Labor availability did not constrain th e electric power industry’s ability to comply with CAIR and the NOx SIP Call. We based this observation on (1) recent and past decade of industry installation experience, and (2) the extent of controls already installed at exis ting coal-fired power plants. In addition, there are less capital in tensive control technology options available to th e industry that can be implemented in a shorter period of time. In these current market conditions the APC industry is in a period of underu tilization as compared to the NOx SIP Call and CAIR Phase I

years.

Figure 1. Cumulative SCR and FGD Installations by Year

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,0001999200020012002200320042005200620072008200920102011

Online YearCapacity (MW)

SCR

FGD(wet/dry) CAIR Phase I

NOx SIP Call

Source: US EPA NEEDs database 4.10 v

23 Many of the technologies that will be needed to be installed to comply with the requirements of the proposed interstate Transport Rule and the as yet-to-be-proposed utility MACT rule are likely to be the same technologies installed in recent years for other successful and more laborintensive programs. In fact, over the past deca de (as illustrated in Fi gure 1) our industry has already successfully met the cha llenge of installing wh at were substantially new technologies on a significant portion of the electric power indus try. These technologies have been refined and are readily available, as are the resources needed to complete their installation. Today more than one-half of the coal-fired electric generati on fleet currently oper ates reliably on some combination of these technologies.

The trend in recent years has been to install the largest and most effective control systems such as FGD and SCR systems, which are also some of the most labor-intensive and time-consuming technologies available. The de sign and construction of a large ‘wet’ scrubber system may take 36 months to complete. Wet scrubbers reduce SO 2 emissions by more than 98 percent, and their construction and installation employ several hundred workers. Currently, more than one-half of the coal-fired electric generation capacity of the U.S. operates with FGD systems, with most having been installed over the past decade. We anticipate that FGD control installations from implementing the proposed Transport Rule will be radically less than our recent installation experience under CAIR Phase I. EPA projects th at about 14 gigawatts (GW) of coal-fired generating capacity will be retrofitted with scru bbers and less than 1 GW with SCR controls by 2014 to comply with the recently proposed interstate Transport Rule. This is substantially less than what was accomplished under CAIR.

Going forward, ICAC expects a wide range of technologies will be available to provide flexibility for utility compliance strategies. In particular, we expect greater use of both DSI and dry scrubbing technologies, such as circulati ng dry scrubbers (CDS) and spray dryer absorber (SDA) technology, due to future backend wa ter and disposal requirements. The added advantages of using these techno logies are fewer resources require d and shorter installation times – 12 months for DSI and 24 months for a dry scrubber. Moreover, the next round of EGU control installations will likely be on smaller co al-fired units, and DSI and dry scrubbing are well-suited to smaller footprints and high-sulfur bituminous coal applications. However, exact technology controls are chosen by electric power generating companies based on final requirements and in a context of multiple market variables.

Recent Industry Experience

The electric power sector has a demonstrated ability to install a la rge number of complex pollution control systems in a relatively short peri od of time, while coordinating outage schedules to maintain electric system reliabili ty. Specifically, the industry’s recent experience with the CAIR and the NOx SIP Call clearly de monstrates that the industry has more than sufficient capacity to comply w ith the proposed interstate Transport Rule and upcoming utility

MACT rules.

The majority of coal plants have already installed NOx and SO 2 controls. Of the 310 GW of coal capacity in the United States, 170 GW have in stalled FGD systems and another 55 GW have FGD controls planned. As a result, roughly two-th irds of the existing co al fleet will soon be4 retrof it with FGD controls. Additionally, about one-half of U.S. coal capacity has installed or

soon will be retrofit with advanced NOx contro ls. Many companies have also installed or optimized existing control systems for mercury re ductions in response to state regulations, giving them a jump start on a future utility MACT rule. In the absence of a federal standard, almost 20 states have adopted mercury regulations for coal-fi red power plants over th e past several years.

Clean Air Interstate Rule. The Clean Air Interstate Rule (CAIR), limiting NOx and SO 2 emissions in the Eastern U.S., created substant ial demand for SCR and FGD systems. Between 2008 and 2010, coal-fired power plants added approxi mately 60 GW of FGD controls and almost

20 GW of SCR controls with a to tal of 80 GW of FGD controls installed under CAIR Phase 1. CAIR created unprecedented high demand for sc rubber components and, lead times on key components, including large recycle pumps, motors, fans, chimney components and construction. Utilities managing large, multiple -scrubber programs, also used the compliance flexibility in the rule to st age and optimize use of personnel and other resources over longer periods than would have been needed were there just one scrubber. It is not able to point out that in a recently presented paper ( Implementation Strategies for Southern Company FGD Projects ; Wall, Healy & Huggins; Power Plant Pollutant Control “Mega” Symposium, September 2010), the Southern Company authors noted that company-wide planning for FGD installations started in 2003, while the CAIR rule was not final until 2005.

Labor limitations are normally cited by the utili ty industry as the chief limiting factor in undertaking clean air retrofits, and boilermakers, in particular, ar e cited as the major source of concern because of their specialized skills. Othe r craft labor, such as iron and steel workers and carpenters, can be drawn from th e broader construction industry.

Prior to the implementation of CAIR, EPA and i ndustry stakeholders, such as the Utility Air Regulatory Group, assumed that skilled labor woul d limit the industry’s ab ility to install air pollution control equipment. Ho wever, based on a retrospective review of actual experience by James Staudt, Ph.D., CFA, it was determined that EPA and industry dramatically underestimated the ability of the air pollution control industry to support the ut ility industry in responding to

CAIR 1 . According to Staudt:

“The assumptions regarding the availability of labor were demonstrated in this White Paper to be too limiting and, by imposing a “hard cap” on labor av ailability, did not take into account the dynamic nature of U.S. labor markets, which US EPA had acknowledged in the past. Also, assumptions by US EPA and the representatives of the utility industry regarding the timing of orders relative to the finalization of the CAIR proved to be incorrect. As a result, both US EPA and representatives of the utility industry underestimated the ability of the [air pollution control] industry to support the utility industry in its response to the CAIR.”

Staudt offers several reasons for why EPA and industry underestimated th e capabilities of the labor market: (1) boilermakers will work overtime during periods of high demand; (2)

1 “Availability of Resources for Clean Air Projects”, James Staudt PH.D., CFA, Andover Technology Partners,

October 20105 boilermakers frequently travel to different lo cations for work, supplementing local available labor; (3) boilermakers work in fields other than power, such as refining/petrochemical, shipbuilding, metals industries and other cons truction trades, and workers can shift industry sectors with appropriate traini ng; and (4) new workers will en ter the field between 1999 and 2001 - for example, in advance of the NOx SIP Call, boilermakers increased their ranks by 35 percent mostly by adding new members.

NOx SIP Call. Between 2001 and 2005, the electric industry successfully installed more than 96 GW of SCR systems in response to the NOx SIP call thus adding NOx controls to roughly one-third of the U.S. coal fleet. During this same time period, the industry was simultaneously adding a record amount of new generating capacity. Between 2001 and 2004, the electric industry built more than 180 GW of new genera ting capacity, including natural gas combined cycle power plants, coal-fired power pl ants, and renewable energy facilities.

Alternative Control Options

Much of our discussion has focused on scrubbe rs and SCR systems that may be used for compliance with the proposed interstate Transport Rule and upcoming utility MACT rule. These technologies may require longer installation times, however, there are other less resource and

labor-intensive alternatives that will also be used for compliance. For example, DSI is a technology that reduces SO 2 through injection of trona, so dium bicarbonate or hydrated lime upstream of a particulate contro l device. DSI does not generall y provide the high rates of SO 2 control achieved with a scrubber, but the technology can achieve sign ificant levels of control and can be implemented very quickly—typically w ithin one year. DSI and other dry scrubbing systems also are effective in reducing some h azardous air pollutants that would be controlled under MACT, such as hydrochloric acid (HCl). These systems are likely to preferentially reduce HCl in the flue gas. With regard to NOx contro l, selective non-catalytic reduction (SNCR) is a widely used technology that can al so be implemented in under a year. The levels of NOx control are less than what can be achieved with SCR, but the technology can be installed quickly with fewer labor resources. Again, industry choices prevail in complying with requirements, and there are now approximately 18 GW of generation with SNCR NOx controls.

Even if the upcoming utility MACT were to require the level of control achieved by wet scrubbers, it is unlikely that this technology would then be ap plied to all of the remaining unscrubbed fleet. We can see that the already installed pollution control systems, along with potential coal plant retirements, will change the future demand for equipment orders. When anticipating outcomes of the yet to be proposed u tility MACT, it is importa nt to recognize that wet scrubbers are placed into serv ice to substantially eliminate SO 2 emissions, while the hazardous air pollutants may rely on a different se t of less labor intensive technologies. One observation, is that the demand for large equipm ent orders on the scale of wet scrubbers, may diminish significantly for the near future when driven by the transport rule and utility MACT; and be largely supplanted by a lternative technologies that demand less labor and shorter installation time. Historically, affected industry will comply w ith requirements by utilizing a suite of reasonably economic technology solutions.6 It m ay also be possible to improve the scrubber performance of many older scrubbers that were installed in the 1970’s and 1980’s. For example, limestone forced oxidation wet scrubber system upgrades at the Vectren Culley Station Units 2 & 3, E.On’s Trimble County Unit 1, and Michigan South Central Power’s Endicott Station resulted in increased removal efficiencies in the range of 98 percent. Upgrad es such as these can also be implemented quickly and at lower

cost versus the installation of a new scrubber.

Preserving these compliance alternatives will re quire that EPA allow a degree of compliance flexibility in its regulatory design. For ex ample, EPA has proposed a hybrid cap-and-trade approach under the proposed interstate Transp ort Rule that would allow companies to take advantage of these alternative control strategies . In addition, the Clean Air Act MACT program allows a state-granted one year compliance extension, if neede d, to complete installation of

controls.

What types of engineering and construction skills are required to design and construct NOx, SO2, and HAPs controls?

This is an extremely relevant question, such that dollars spen t on air pollution control not only result in avoided health costs including avoide d premature mortality, but these same dollars are plowed back into the U.S. economy as good and green jobs. Adding pollution control equipment to existing power plants requires engineers to design the systems and specialized construction labor, particularly boilermakers, to build and install the equipm ent. When operational, these control systems rely on a continuous supply of ma nufactured and processed reagents resulting in jobs in related industries. F GD and SCR systems require: (1) cons truction materials, such as steel plate, alloy steel, fabricated steel components, structural stee l, and concrete; (2) engineered equipment and specialty materials, such as slu rry pumps, fans, motors and catalyst; and (3) reagents, especially limestone a nd ammonia. These requirements are examples of direct and indirect employment opportunities resulting from the environmental drives for new and retrofitted air polluti on control systems.

Looking back over the past seven years as industry installed SCR and FGD controls in readiness for the CAIR Phase I requirements, we estimat e that this work required approximately 200,000 person-year jobs in direct and in direct labor. Specifically, a t ypical turnkey installation of a 500 MW scrubber is estimated to employ approximate ly 200 people, with about 80 percent dedicated to construction and 20 percent for engineering and project management 2 . The installation of SCR controls creates a similar number of jobs ove r a shorter time period and employs a greater

number of boilermakers. As we near the end of in stalling this latest phase of beneficial control projects, these workers are readily available and tr ained to continue this level of activity.

Boilermakers are an important trade in terms of th e installation of pollution control equipment. It is a specialized trade, se rving the electric power, refining/ petrochemical, shipbuilding, and metals industries, and boilermaker supply, represented by both union and non-union labor, is

2 Engineering and Economic Factors Affecting Installation of Control Technologies for Multipollutant Strategies ; U.S.

EPA; October 2002dynam ic in responding to demand. Other crafts can be and have been drawn from the broader

construction labor market.

We are not aware that engineering labor has ever been raised as an issue that might limit the industry’s ability to install air pollution control e quipment. There are numerous suppliers of air pollution control equipment. If one supplier becomes busy, there are several other options. Also, companies that are building multiple scrubb ers will often adopt standardized equipment designs, reducing the need for engineering support, as supported by Southern Company’s experience referenced above.

In addition to the amplified employment demands of major clean air ini tiatives such as CAIR and the NOx SIP Call, our industry provides a continuous and enduring stream of good and green jobs related to the manuf acturing, installation and servicing of air pollution control and measurement technologies.

If labor is in short supply among any of these tr ades are there actions that we should be taking today in order to ensure that we have the ski lled labor needed to comply with the Clean Air

Act?

We are extremely confident in th e ability of the industry to deliv er and satisfy, as we have so successfully in the past, the labor, material s and resources needed to meet the demand. While we

do not believe that skilled labor will be in shor t supply, proactive steps to provide more clarity sooner to industry on the full suite of requirements fo r air, water, and waste regulations that they are facing, will in turn provide the needed investments and assist our industry in meeting demand. EPA’s efforts to move forward expediti ously with the proposed interstate Transport Rule and the upcoming utility MACT rules will be helpful in this regard. We believe early and

continuous installations are needed to promote job security in ours and other industries, as well as ensure more efficient application of resources to meet longer term challenges. As discussed throughout our response, labor availability has not and is not an impediment to industry compliance, and we are already at a high level of industry readiness. In closing, ICAC shares your enthusiasm that now is the time “to put American workers back on the job of modernizing our electric generating fleet” a nd give America the clean healthy air they deserve.

Sincerely Yours,

David C. Foerter, ICAC Executive Director

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