7

Allowances will be auctioned in accordance with the following
table:

Table II
Year of sale Number of allowances available for auction
Spot Auction (same year) Advance Auction
1993 50,000* 100,000
1994 50,000* 100,000
1995 50,000* 100,000
1996 150,000 100,000
1997 150,000 100,000
1998 150,000 100,000
1999 150,000 100,000
2000 100,000 100,000

Allowances sold in the spot sale in any year are allowances

which may only be used in that year (unless banked for use in a
later year), except as otherwise noted. Allowances sold in the
advance auction in any year are allowances which may only be used
in the 7th year after the year in which they are first offered for
sale (unless banked for use in a later year.)

*Available for use only in 1995 (unless banked for use in a later
year.

Recording of Allowance Auction Results

. EPA shall make public the nature, prices and results of
each auction, and shall record the transfer of allowances.

Additional Auction Participants

- Any person holding allowances may submit them to the
EPA for inclusion in the auction, and may specify a
minimum price for their sale. These allowances will
be allocated and sold on bid price after the EPA
auction is complete. Proceeds shall be transferred
by the purchaser at the time of sale to the seller.
(416 (d) (4))

NOx Control Program

Together with NOx provisions in other parts of the legislation, NOx
provisions in the acid rain title will help to achieve an
approximate reduction in annual NOx emissions of 2 million tons
from 1980 levels by 2000. The NOx reduction program is not an
allowance based program, although, the excess emissions fee





6

Table I
Number of Allowances Available for Sale at $1500/ton
Spot Sale (same year) Advance Sale
1993 - 1999 25,000
2000 and after 25,000 25,000

Allowances sold in the spot sale in any year are allowances which
may only.be used in that year (unless banked for use in a later
year), except as otherwise noted. Allowances sold in the advance
auction in any year are allowances which may only be used in the
7th year after the year in which they are first offered for sale
(unless banked for use in a later year.)

Independent Power Producers

. An Independent Power Producer (IPP) is defined the owner of
a new facility required to hold allowances which sells 80%
of its electricity wholesale, is non recourse project-
financed, and does not generate energy sold to an affiliate
of the facility owner (unless it can not obtain allowances
from the affiliate). The opportunity to purchase allowances
from the above-noted reserve shall first be given to IPPs.
IPPs proposing to construct new independent power facilities
for which allowances are required before the date of the
first EPA allowance auction, and which have not received
responses to written offers to all affected units to purchase
allowances for $750, are also entitled to an EPA written
guarantee of allowance availability at $1500 per allowance.
(416 (c) (3)

wance

EPA is to establish a subaccount in the allowance reserve for
auctions. (416(d@)) Auction rules will be developed by EPA, in
consultation with the Department of Treasury, within 12 months of
enactment. Auctions will be open to any person, and will be
carried out by sealed bid, with sales based on bid price. No
minimum bid will be established. Auction proceeds will be
transferred to affected units contributing to the reserve on a pro
rata basis, and allowances held for auction which were not sold at
the auction will be returned to contributing affected units on a
pro rata basis. EPA may delegate or contract out for auction
services. EPA may terminate the auctions after 2002 if less than
20% of the allowances available for purchase have been purchased
in any 3 consecutive years. (416(f))



8

discussed in the context of S02 applies to excess NOX emissions as |
well. (411(a)&(b)) @

Utility Nox emissions - Existing units

Within 18 months of enactment, EPA is required to
establish NOx emissions limitations for tangentially-fired
and dry bottom, wall-fired boilers. The standards set for
these boiler types may not be less stringent than those
specifically provided for in the legislation, unless the
legislatively mandated standards can not be met using low
NOx burner technology. The standards established go into
effect after January 1, 1995, and are applicable to all
Phase I sources. (407(b))

. By January 1, 1997, EPA must promulgate emissions limitations
for all other types of utility boilers. All affected sources
must meet these standards by the Phase 2 deadline.

Alternate Emission Limitations

. Less stringent emissions limitations then those established
above may be authorized if the operator can demonstrate that
the applicable emissions limitation can not be met using the
requisite technology. A compliance extension is also
possible if the required technology is not immediately @
available. (407(d))

New Source Performance Standards
. By 1/1/93, EPA must propose, and by 1/1/94 promulgate,
revised New Source Performance Standards for NOx from all
fossil fuel-fired steam generating units (407(c))
Emissions Averaging
. An owner of 2 or more units subject to the NOx provisions

may comply based on the average emissions rate of all such
units. (407(e))

Acid Rain Permits

The acid rain title is implemented through permits. Permits are
issued for 5 years pursuant to the provisions of Title V as
modified by this title.



United States.
Environmental Protection Air and Radiation EPA/400/1-91/011
Agency (ANR-445) April 1991

Summary of
Acid Rain Provisions

HEADQUARTERS LIBRARY
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460

a
@
~ ~
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to
a



11

Permanent Demonstration Projects

- Permanent demonstration projects that constitute repowering
under 402(1) shall not be subject to New Source Performance
Standards, or to review or permitting requirements of Part
C for any pollutant whose potential emissions do not in-
crease as a result of the project. (415(b) (3))

EPA Regulations

- Within 12 months of enactment, EPA shall promulgate
regulations or interpretive rulings to make existing
regulations consistent with the above noted requirements.
State changes may be submitted to EPA to accomplish the
Same objectives. (415(4))

Miscellaneous
Required Reports

EPA must report to Congress on the following matters:
The feasibility and effectiveness of an acid rain standard

A list of all lakes known to be acidified due to acidic
deposition

. An inventory of national annual S02 emissions from industrial
sources. If the inventory shows that industrial so2
emissions are likely to exceed 5.6 million tons, the
EPA shall take regulatory actions to see that emissions
are capped at the 5.6 million ton level.

+ Annual S02 and NOx emission levels and reductions, and
reduction methods utilized in each province of Canada
participating in Canada's acid rain control program.

Reports required by other Agencies
Clean Coal Technologies Export Program

Study of buffering and neutralizing agents



4

allocated allowances using an alternative baseline
calculation. (404(h))

Early Reductions from Certain Units

Phase I (and Phase 2) affected units that make early
reductions, and that are part of a utility system that
reduced its coal reliance by over 20% in the years 1980

- 1985, and for which coal-fired units produced less than
50% of the systems capacity in 1985-87 receive extra
allowances. (404(e))

Phase I Reductions

.» In Phase II, which begins on 1/1/2000, the limits that were
imposed on Phase I plants are tightened, and emissions limits
are imposed on smaller, cleaner plants as well. In general,
all utility plants emitting at a rate above 1.2 1bs/mmBtu
will have to reduce their emissions to a level equal to 1.2
lbs/mmBtu multiplied by their baseline. (405) However, there
are various other emission rate/allowance allocation
provisions for several other categories of sources including:

Units using primarily lignite coal in 1985 - 1987 and located in
attainment states (405(b)).

Coal or Oil-fired units below 75 MWe and above 1.2 lbs/mmBtu
(405 (c))

Coal-fired units below 1.2 lbs/mmBtu (405(d))

Oil and gas-fired units equal to or greater than .6 lbs/mmBtu and
*--  :han 1.2 lbs/mmBtu (405(e))

iad Gas-fired units less than .6 lbs/mmBtu (405(f))
Units that commence operation between 1986 and 12/31/95 (405(g))}
Qil and gas-fired units with fuel consumption of less than 10%
(405 (h))
Bonus Allowances

In addition to allocation through the above noted provisions, bonus
allowances are allocated to the following categories of sources:

Units in certain "high growth" states (405(i))

Certain municipally-owned power plants (405(j))

(a)

(a

Ce


5
States with emission rates at or below 0.8 lbs/mmBtu

Units in 10 midwestern states (405(a) (3))

Units with actual 1985 rates below 2.5 lbs/mmBtu and capacity
factors less than 60% (405(b)(2))

Units that converted to coal between 1980 and 1985 and that are
located in states with more than 30 million KW installed electrical
generating capacity.

a eserv. EPA ink 2 a ions

EPA is to create an allowance reserve by tapping each affected
sources allocation 2.8% during 1995 - 99, and 2.8% of the basic
Phase 2 allocation for each year beginning in 2000. These
allowances are to be set aside for EPA allowance sales and
auctions. (416(b))}

Allowance Sales

A portion of the allowances in the reserve established above are
to be put in a direct sale subaccount and sold by EPA in accordance
with EPA regulations. The proceeds of allowance sales are to be
returned to the affected units on a pro rata basis. Purchasers are
required to pay 50% of the total purchase price within 6 months
after the approval of the request to purchase, the remainder due
before allowance transfer. Unsold allowances are to be transferred
to an auction subaccount (discussed below). The requirement to
hold direct sales shall be terminated by EPA if less then 20% of
the allowances available for sale are sold in any 2 consecutive
years, and any remaining allowances are transfered to the auction
subaccount described below.

EPA Direct Allowance Sale

- EPA will offer for sale allowances as described in the
table below. They shall be offered at a price of $1500
per allowance (CPI. adjusted). Sales are to be made on a
first come first served basis subject to the priority
for Independent Power Producers (IPPs) described below.