p. 1



# OAR Box 1802 Prepped by Charmelle Mathews



### Document

Number: 

# 32 ) IV-E-2 7 Docket Number: 

# A-90-3 7

Printed 11/4/200811:57:59 AM

Sheet 32 of 117

# I P. 2 

# SEP A FACSIMILE COVERSHEE T 7 OFFIC E O F AI RAN D RADIATION ; OFFIC E O F POLIC Y ANALYSI

S AND REVIE

W 401 M STREET , S.W . > 7 7 WASHINGTON , D.C . 2046 0 ( / 

## Ps-lo-ll

\',''V

'.PA Mfi CGCKE T TELEPHONE : (202 ) 260-558 0 FAX : (202 ) 260-976 6 

# TO : 

# '-I W ftJ yf'J 5"- " _J}_JjA. 

### _U±LL ; ^d"^ ' TELEPHONE : FAX : Ad/2 . 

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# i

Th e EP A i s takin g step s NOW t o ensur e n o disruptio n i n servic e o r environmental protectio n occurs wae n ou r dat a systems conver

tto th e yea r 2000 . W e are preparin g fo r th e yea r 200 0 -areyou ? ..f.,./....... . '.• ..-

TOTA L V AGE

S (INCLUDING THI S COVE RSHEET ) ^

.,.(, ' ... . ;;.y ;P. 3

GOA L STATEMENT-Evaluat e regulator y roadblock s an

d initiative s tha

t impede th e abilit

y t o reduc e climat

e ga s emission s i

n a n efficien t manner . EP A GOA L STATEMENT-Develo p mor e co^-effectiv e way s o f

achievin g th e Clea n Ai r Ac t regulations
. -'••-.
. ' 7 •• , SUGGESTIO N

- Star t ou t th e nex t meeting with : 1
. Som e CAP I lesson s learned
. - ;\r7*]••••;.•'•'• ' 2
. EPRI presentatio n o

n th e Energy Policy Integratio n an d Coordination : Integrate d Assessmen

t o f Ai r Qualit y an d Climat e Chang e Regulation s i n th e Electri c Powe r Industr y an d Thei r Impac t o n th e U.S
. Economy
. , " , APPROAC H '7777.V- , .-.;•. . I woul d lik

e t o sugges t

amutua l gain s process'a s a

n approach t o working throug h th e followin g issue s (pleas e ad

d t o o r delete) : 1
. WEPC O (EP

A suggest s deletiBg.WEPC O and
. usin g th e commen t perio d t o document

issues. ) 2
. Enforcemen

t Initiativ e 3
. H g an d an y othe r toxi c onregulator

y development s 4
. PM2.5/regionalhaz e 5
. -- • 7 2.7 .-2.ii^4'-- ^7:
.
I t woul d g o somethin

g lik e this : A
. Eac h meeting woul d focu s o n one issu e wit h th e meetin

g objective o f

thoroughl y understandin g eac

h partie s perspectiv e an

d woul d answe

r question s like..
. 1
. Ho w doe s thi s facilitat

e o r interfer e wit h CO 2 emission s reduction ? 2
. Wha t impact doe s thi s hav e o

n energ y cost , industry , futur

e asse t managemen

t (any dat a t o support) ?

. 3
. Wha t i s th e basi s o f

thi s regulatio n on regulator y interpretation ? 4
. Wha t i s th e rang e o f

flexibility possible fromth e regulators ' perspective ?
B
. Th e en d o f

th e meeting would focu s o n expandin g th e pie : Ar

e ther e other way s t o accomplis h th e sam

e thing ? Getting creativ e wit h out o f bo x thinking
.



# 2 -P. 4

C
. Whe n x.. . numbe

r o f meeting s hav e taken place

* an d eac h party' s perspectiv e o n mdividua l issue s ar e understood , the n th e thre e partie s conven e independently
. 1'
. Utilitie s 7 2
. Admi n climat e chang e representatives/EP A Each comin

g bac k wit h awin/win proposal
. D
. I f ther e i s workabl e commo

n ground o r

clearl y abes t proposal , w e woul d continue
. I f thre e partie s ar e unwillin g t o yield fo

r awin/wi n sobtion , the n w e thro w i n th e towel
. Othe r Issue s ' 7 Doe s thi s nee d t o b e legislativ e fix? "•'-•• : * / V 77* 7 D o w e need amediato

r t o ru n th e meetings ? Ho w do w e incbd e th e Environmental , Fuel Community , Nucs , an d IPPs ? Are ther e an y waste or water issue s t o add ? FACA? ? —•< -

-2 -P. 5



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# AP. 6



### Example s o f

Environmenta l Permittin g Issue s Facin g CH P Project s

A Discussio

n Pape r for: EPA/Whit e Hous e Climat e Chang e Office/Utilitie

s Informa l Workin g Grou p Combine d Hea tan d Powe r (CHP ) use s integrate d generatio

n ol*therma

l an d electric energ y t o provid e hea tt o industria l processe s o r spac e heatin g an d cooling whil e als o generatin g electricit y a ttwice tb e efficienc y o f conventiona

l deari e generatin

g stations . Becaus e these facilities als o hav

e low emission

s to begi n with , the

y provid e th e combinatio

n o f lo w emission

s an d hig h efficienc y tha twill b e require d t o mee tfutur e environmenta

l constraints, includin

g carbo n limits . CH

P i s on e o f th e few currentl

y commercia

l technologies tha

tca n significantl

y reduc e emission s o f al l pollutant s includin g carbo n whe n usin g an y fuel, includin

g coa l On e o f th e mos timportan topportunitie

s fo r expandin g CHP' s shar

e o f electri c an d therma l energ y market s i s addin g CH P t o existin g facilities t

o reduc e emissions . While ther e i s a larg e potentia l t o appl y CH P systems , th

e potentia l i s constraine

d b y a variet y o f regulator y barrier s whic h discourag

e it s use. Thes

e includ e regulation

s relate d t o electri c restructuring

, ta x code s an d stat e an d loca l buildin g an d safet y codes . Ther

e ar e als o environmenta

l regulations , in particula

r relate d t o Ne w Sourc e Review , whic

h ar e slowing th e pac e o f emission s reduction

s achievabl

e throug h th e us e o f CHP . Som e o f these barrier

s ar e listed below . Nettin g wit

h Off-Sit e Sources Problem : CH

P ofte n involves increasin

g emission s a ton e sit e in orde r t o effec ta large r decreas e a tanothe r site . Th e curren trule s t o no tallow fo r these effect

s t o b e linke d whic h ca n trigge r NS Rfo r th e projec tan d discourag

e project s tha thav e a net environmenta

l benefi t77' . Background : On

e o f th e mos ttypica l application

s o f CH P i s t o retrofi ta n existin g stea

m o r electric generato

r t o provid

e bot h therma l an d electri c energy. This ma

y involv e constructio

n o f a ne w combustio

n uni to r simpl y addin g equipmen

tt o recove r unuse d therma l o r electric capacity . Th

e modifie d facilit y typicall y consume

s mor e fue l an d ma y hav e highe r emissions tha

n a conventiona

l single-use facility . Bu

tth e facilit y wil l consum e les s fue l an d ma y hav e substantiall

y lowe r emission s tha n th e two conventiona

l facilitie s tha

twoul d otherwis e be require

d t o provid e th e sam e energ y service . Althoug

h th e ne tenvironmenta

l impac ti s clearl y beneficial, becaus

e th e conventiona

l electric an

d stea m generatin

g facilities ar

e normall y in differen

tlocations , NSR

. doe s no trecogniz e thi s ne tbenefi tan d penalize s th e CH P sourc e fo r ih e increas e a tOn e sit e withou tcreditin g ih e reductio n a tth e secon d ate . Fo r som e pollutant s suc h a s SO , an d C0 2 , tlier

e i s clearl y n o reaso n no tt o mak e thi s connection

. Eve n fo r NO, , given EPA' s curren tfocu s o n regiona l solutions , i tseems reasonabl e t o credi tth e overal l reductio n a s long a s ther e i s n o loca l violation o f

th e NO , ambien

tstandard: ' ' '""

:

:...; • ...'' • . :.•.. • 7- i • '• : i. r ,V'.V», i "e V •tiV i - T -* ' '••"•i l .*>. ! **jj s 'J-3V c .* > v.,. : y.-:y : - ,M\ y

,v.. Discussio n Pape

r .^... . • I - 7 Trige n Energ y Corporatio

n


## < TP. 7



### Anothe r commo n CH P applicatio n i s distric tenergy . Thes e project s frequentl y interconnec tmultipl e larg e an d smal l source s int o a networ k thatprovide s therma l an d electri c energy . Th e centra l boile r o r CH P facilit y i s usuall y a majo r sourc e o f ai r emissions . Whe n developin g a ne w distric tenerg y system , th e ne w centra l boile r o r CH P facilit y ma y b e subjecte d t o NS Ro r PS D eve n thoug h ther e i s significan tne t environmenta l benefi tthroug h substantia l emissio n reduction s fo r th e area . I n thi s cas e th e CH P facilit y ofte n ca n no tne tou teve n agains tth e existin g loca l emissio n sourc e emission s withou tthos e source s bein g permanentl y shu tdown . Thi s i s ofte n no tfeasibl e becaus e th e distribute d plant s are necessar y a s emergenc y backu p t o th e centra l boile r o r CH P facility . A n exampl e i s give n belo w o f a CH P projec tan d it s ne tbenefits . A s note d previousl y ther e i s a loca l increas e bu ta n overal l decreas e i n emission s an d considerin g th e tota l environmenta l impac twoul d allo w th e projec tt o ne tou tan d avoi d NSR . Forcin g th e projec tt o underg o NS Rincrease s th e cos tan d decrease s th e attractivenes s o f thes e projects . .- . .; v ; .- . • '. . Exampl e 1 : - ' 7 -•••••--"•'•_'•.•'• • 3S 5 MMBiu/h r inpu tindustria l boile r i s retrofi tprovid e sam e stea m outpu tplu s 2 6 M W o f electri c output . Hea l inpu tincrease s t o SO O MMBtu/hr . On-sit e NO , emission s increas e b y 4 1 tons/y r bu ttota l impac ti s a 9 5 tp y decrease , assumin g tha tdisplace d electricit y wa s generate d a tSI P cal l rat e o f 0.1 5 ib/MMBtu . Simila r result s fo r carbon .

• : * ' ** • * " '" ' 

### Bas e Plan t/7r v 

### CH P System'"' ' •.

• 7777: " O n Sit e Increas e ITCTTU Emission s Avoide d Offsit e Ne tEnvironmenta l Effec t NOx 

### (Tons/yr) ,7^7- 

# l$..WX 7:U40,^ :


### • ; . 136:7 . -9 6 Carbon (WOO Tonsfyr) •->•<- - 4$.- * 

### "£*&:&•?' 7 •- \:i'.lA

### 11 9 -10 5 Notes : Industrial/CH ? boile

r i s a.gas-f»Tt d boUereminin

j NO , a t0. 1 lb/MMBtu

. Offsit e electricit y i s generate d a tNO , rat e o f 0.1 5 lb/MMBt

u an d car-bo a emission s o f 1314 Ib/MWJ

j (U.S . averag

e fo r al l sources) . . " •'•"•-- '-'-. • ; * : 

### * • ^ * ••v**-*'

- •-•'•-•: ' ",'. • ,. i

. '

'

. • '•'*' ' :. . • . ''.•*.»•;'•'';.:. • .. i •. . 

### Solution : Develo p permittin g approache s thatwoul d allo w source s t o ge tcredi tfo r real , verifiabl e offsit e reduction s associate d wit i CH P projects., , .,_ . "Wepco " Issue *

. '.'7 • ^'''^^'T^T^fTij-fc-r.' ••'•• v 

### *- : 

### ' : 

### TT •'' 'TrT 7-[\7y7 '••''• 7,7^7".' • . Problem : Modificatio n o f

existin g unit s ma y triggerNS Ri f capacit y increases . :K : 

### '- -fJ-V-' i *'> : 

### ' r i W'-'. ''?'*.<,', •.•;'•'•.-)•« ' Background : Addin g CH P capacit y is a modificatio n tha tcoul d trigge r a ne w sourc e revie w evaluation . I n particular , i f th e CH P capacit y i s adde d t o a previousl y underutilize d unit , ther e coul d b e NSR-h^Hc>ti,^,\Vhfl^M*'^. * tro«d « question , th e cas e o f CH P i s specia l becaus e i ti s creatin g a ne tenvironmenta l henefi tWhe n tota l

•'• • ..••.,:••. - •;•> T •••.. .• -^ i i.„.i ; ',• •... • ~: \ ,.i*^ r.

• . •".. . • -.''«• ' • i i '•• ' ! ; \"t;- • ' :, ' :* . ,'.>..;.•:.''. 7 

### Discussio n Pape r *%r:\^u*,v : ^l-.&.^iafrir: 

### ;.-..Tiige n Energ y Corporatio n 7^7727-!7'<'T

: *>-277••...

'• • '•'•--• • •_•< : ' ;
. • • yt-72 7



### n 

### • 

### •- •P. 8



### impact s ar e accounte d for-/a s describe d above , increasin g capacit y utilizatio n actuall y increase s environmenta l benefits . Thu s w e shoul d encourag e thes e project s an d w e shoul d encourag e the m t o increas e utilization . I n effect , th e CH P projec ti s decreasin g emission s b y increasin g efficiency , bu tthi s i s no tpicke d u p withinbu r curren tregulator y system . ^* - -^-r * -i4^.--p-->!?*s;^-:^

v ^-U : 

### i.-M-^^'ivi-isiis*?* ' k:i 

### ' : 

### i 74Mi£7* s 27

*&-Tl\%»fe$<$4ZiSolution : Solvin g prio r proble m help s thi s on e sinc e ther e i s n o emission s increase . Alternatively , provid e "WEPCO " typ e exemptio n fo r CH P projects. : Th e Focu s O n Ne w Sourc e Contro l Inhibit s Penetratio n O f New , Cleane r Technolog y Problem : Focusin g emissio n contro l requirement s o n ne w source s whil e grandfatherin g existin g plant s put s a n unsupportabl e burde n o n ne w piantt V Ti e excessiv e cos to f buildin g an d permittin g plant s t o mee tuneconomi c ne w "sourc e standard s actuall y perpetuate s th e us e o f

hig h emitting'plants'ari d discourage s thei r replacemen to r clean-up . Background : Th e regulator y syste m o f grandfatherin g existin g emissio n source s ha s blocke d new , clea n technolog y fro m th e marketplace . I n mos tarea s i ti s significantl y les s expensiv e t o creativel y life-exiea d older , existin g facilitie s tha n t o buil d ne w facilitie s subjec tt o a NS Ro r PS D permittin g proces s tha twoul d trigge r BAC T o r LAE R requirements . I n addition , man y loca l jurisdiction s d o no trecogniz e pollutio n preventio n i n performin g BAC T an d mino r sourc e analysis . B y usin g th e tota l economi c impac t instea d o f incrementa l cos tc-

f add-o n contro l technology , state s forc e th e us e o f excessivel y expensiv e clean-u p equipmen to n to p o f P 2 technologies . Th e hig h ccs t force s th e cancellatio n o f

project s tha twoul d otherwis e result'.ii i decrease d pollutio n an d replacemen to f

old , inefficient'equipmen tI tplates'contimioui'^wnwar d pressur e o n eac h ne w potentia l marke tentrantto draiM'ticafl ^ compet e wit h othe r facilitie s whic h d o no thav e t o emplo y th e 'iam e pollutioh'cbntro l requirements . Example2 : '•; • ...7--;i > 7;7^7; v 7-7. .T-TTT T Combustio n turbine s are currentl y 'availabl e With ! highl y ciTc&y e cfr y low-NO , combustor s whic h ar e a for m o f pollutio n preventiotuM^ y states' , howeve r requir e source s t o appl y add-o n control s (SCR ) an d calculat e th e costbase d o n a n uncontrolle d system , rathe r ma n o n th e incrementa l cos to f th e SCR.'liti s ignore s th e valu e o f th e P 2 an d fail s t o recogniz e th e excessivel y hig h contro l cos tbein g imposed .

Control Costs forCombustion Turbines ' Uncontrolle d NO , JNSPS ] (fipm) 727 7 •' ; NO,rat e with:c^low^O,'(^m):J' *£f. l Contro l cos twit h DL N ($/tpn)'^*: 7 J ; 

### NO , rate wit h DL N an d SCR'(ppm) y 

### * i : 

### Tota l contro l cos ta tSC Rleve l (S/ton) , Incrementa l cos to f

SC R($/toh) 7 77' : 20 MW 7 100 MW 77ST7T7T1S 

# 'SS ' 9 .v%60§!!-IS: - S35 0 $3,200 7 $2,00 0 $16,00 0 7 $19,00 0
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### Discussio n Pape r '.im^jMiiTUTT^ )Ml&* Ener 

### S y Corporatio n I'-'i'-.t--.',..,." % ':.' : 7;">i
- i.-i.

. y.iC. V' « .'i' r••'•;':•

. !'•->"•
- U;i v : . J Si.-*.-.afci. V j-Kitf t

. : " * r\. •'."'•

- i I - - - '* 1 ' •• " •*>.*"
. /.*
. ,.* » fc-v i»< » T- ; ••..-* • SV* * , ' " -* «" f * i-y*.. 1

• - .. : ^- . 7.7--7. ; T7:^AA.\ 2i •7.r:J:ir'v:':!7 ; •P. 9 T >r7* 2:2^7r2T'2\7^.'

7yy.V:7-<;y7 '^7:%2727tTl-vT277Y7rry;<it *-:-^r#.i4K'/«* ^

- ; * - . -.^-.fcV . C

i ^i * V ^ • > • i..:.-2>\7, t t.

• ••• - • :...- • : *. v •:..-: . .*•

. ...-•«• . - y - • M.

. Solutions : ^--v/W-irV^^f 1 •:••'•• = x^l*^ - • Provid e guidanc e to state s on^ogmi ^ w an d •\:7Y7 "'"''-'-' properl y calculatin

g incrementa

l costo f control.; ' Move from technolog

y standard/offse

tsyste m toreliance pri'ca

p an d trad e progra m to dea l wit h ne w sources . Thi

s syste m wil l driv

e ne w technolog

y a ta pac e consistent wit h th e Tn?rgi"» - cos to f contro l fo r th e whol e regio n an d wil l encourag

e the lowes t cos treduction

s from existin

g source s an d associate d efficienc y improvemen

tas old ) source s ar e replace d wit h mor e efficient , lowe r emittin g equipmen

tI

• ':';•' ; : ' 7V7. ••']'.-2 "•"'• • : 7'7
. "• ; . V7 ; ? • • • !
'• •'•.'T : -'*• y.%..'• "-•.• ' •'• , '.'.:" ,'".,•••*!v'-,7;."' • *i. :

- ••'; • Efficienc y a s Emfasioiu Control . - A ,, ;

- - • ; . v"i- ; 7 : ** > .Vi'i-.'
. '•..;••:'.. • ?.•*;;«'2 ' j--'»i^,.;S.«•••."•
. :•;.. . .• ; : ; . .. - •; . •;.;:. , 7
. ; ! .•;...-, > -. v ;.•...-j.7:.
. .; • Problem : Curren

tregulation

s d o no trecogniz e o r encourag

e efficiency . 7:77 Background : Th

e EP A ha s state d m^ y times/tha

tin^roye d efficienc y i s a critica

l componen tof meetin g futur e ehvirormenlalcbmini^t

o EP A ha s been slo w t

o incorporat

e efficienc y directl y int o itsiregulatot

y progra m b y adoptin

g output-base

d standards

. Thi s approac h woul d automaticall

y rewai d an d encourag

e increase d efficiency . Thi

s i s a goo d time t o be lookin

g a ta mov e to output-base

d standard s becaus e ther e ar e s o man y ne w standard

s bein g promulgate

d unde r th e CAAA , ne w o*ione/P M standard

, SI P call , etc . Eve

n i n th e curren tcais e wher e th e ne w NO x ! NSP S fo r Subpar tD a boiler s i s bein g promulgate

d a s a n outpu tstandard , onl y 50 % o f th e therma l outpu ti s bein g credite d whic h inappropriatel

y discount s th e environmenta

l valu e o f usin g therma l energy . v "- : ->-:.' , <••. 7;.;7- . .v. ' Solution : Widesprea

d applicatio

n of 6iitput

: base d envu-onmenta

l regulations . Titl e V Source Separatio n Problem : Limitation

s o f Titl e V na^ltfliffi^td'^e^^^^'CJI P project s t o reduc e emission s a texisting facilities./* . -.•: o ?- •• -,. - * • -i'-ov . 7*-,-

;

•••' : -V-V ' .*•

• '•"• , :

. 'i' ).. '

'''••• 7 * ''.'•]]'-'• ? Background : Th

e outsourcin

g o f energ y asset s i s becoming ' comrnb

n throughou

tth e » nation . A numbe

r o f energ y companie

s ar e purchasin

g th e energ y asset s o f industria l • facilities , hospitals , \utivenities,'etc.'Wd u hxan y case s ar e improvin

g thes e facilitie s ? throug h th e additio n o f cogeneraitiio

h and/o r othe r ne w technologies . These modifie d • facilities , ofte

n subjec tt o variou s ne w sourc e standards

, incorporat

e som e o f th e mos t' innovativ e energ y efficienc y techniques . O

n an^utpu tbasis , thes

e plant s ar e som e o f lowes tpollutin

g in th e country . 7 ^^jT^Tyf

7020 : 7 tiV^'^'eV ^ Th e abilit y fo r thir d part y companie

s t o tik e ove r ap d improve , energ y infrastructur

e i s bein g impede d in man y EP A region s du e t o differin g interpretation

s o f the ter m "stationar y source" . A ke

y elemen tti f outsoiiircin

g i s a^ufual'interes tbetween th e 'customer " an

d th e energ y provide r t o transfe

r ownershi p an d lega l responsibility . Like

Discussio n Pape

r ^4:*i3ii4^"-^;l^i^^J ^ Ener ^ Corporatio n

' iTl;}t,!*:..*44« : "^r^;?^ji ^

. ' ••' " •. • :'!.'•£;•'• '/•• - .' * .• i-ftv'•-.«*;-.1iuli:..».;- -P.1 0

th e electri c utilit

y whic h ha s historicall y provide d service't

o a facility , th e energ y provide r may b e a

n mdependenti y b^ed, ^ ofte n pubUcly^a4e d company . • 2 7-2. 27, : 7Ty : .'rT^r-r^i^ When a n energy company , for example , purchase s th e boile r planta ta

n industrial facility , itneed s t o ge tpossessio n o f th e emissio n nghU7 and.respoiisibilitie s a s wel l Withou t; them , th e energy company wil l hav e a difficulttimetravrobig mefermi tproces s t o j upgrade an

d improve th e facility t o produc e mor e energ y with lowe r emissions . i 

### r--'- •• 7 7 T;72 '\7' 7 -. '7-72 pk7;7

- ? Som e EP A region s hav e interprete d the'definition o f

stationar y sourc e s o a s t o preven tan . energy compan

y from takin g contro l o f

th e emissio n permi tThi s make s an y improvement

s ver y difficul tan

d can als o mak

e upgrade s a tth e industria

l facilit y mor e difficul tThe y hav e don e thi s b y includin g th e concep to f "expanded commo n control" , wher e th e sharing o f

product s an d byproduct

s constitut e contro l (eve n i f the y ar e a purchased commodity ) o r where>6me J iet^«ic1tritajg

e o f Ae.&rninbdity produce d and sol d t o a singl e end-use r i s considere d tbb e ah,exeruo n ^ actua l definitio n from th e Cod e o f

Federa l Regulation s i s 'printe d 'Wdwyj-v^!*^' ' 

### 2'7\2 : 

### 77): rt77772\::7: 40CFR Part

51 Jtiquire^ri^M^^^ion. ffltifitieMapd Submittal

of f 

### Implementation Plans, Section 165'Permitrequire/^^x^itmes astationar y \ sourc e as follows:.' ' ^ :; 

### T'7 : 

### -*7fT T^7^^:7^^7^' (a ) Sat e Implementatio n Pla n provision s satisfyin g sections.172(b)(6 ) aa d 17 3 o f th e Ac t shal l mee tth e following conditicins:-- : :-'.2^7>i\T 72±i~ (1 ) Al l suc h plan s shal l us e th e specifi c definitions . Deviation s fro m th e followin g wordin g wil l b e approve

d onl y i f th e stat e specificall y demonstrate s tha tth e submitte d definitio n i s mor tstringent

, o r a tleas ta s stringent , i n al l respect s a s the correspondin g definitio n below : (i ) Stationar

y sourc e mean s ahy;b^ding,'itructure . facility , o r installatio n which I enute'br.may-eBnninyaihj^llu^ tSubjec tt o regulatio n unde r lhe ; Aot7:!' ^ (ii ) Building , structure , ijcility , o r installatio n mean s al l o f th e poliutant-emittin g activitie s whic h belon g t o th e sam e industria l grouping , ar

e locate d o n on e o

r mor e contiguou s o r adjacen tproperties , •./ r .*" ? '•&.- * IS'Sn-VY
. '^.•*!V J 7:»*«:: f VfX-i

- r. , , . . nn d lir e unde r ih e contro

l o f th e sam e perso n (o r person s unde r •

- --; ' • -• - commo n control } excep tthejictiyUitt i Wtm y vessel . \ Pollutant-emittin g activitie s shal l b e considere d a s par to f th e sam e

...... . indujtna l groupin g i f the y belon g t o th e sam e Majo r Grou p (I* , ': . whic h hav e th e sunt

two-digi tcode ) a s describe d i n th e Standar d

.. . Industria l (Classification Manual , .1972 * a s amende d b y th e 197 7 •

. • Supplement(U.S . Governmen tPrinting Offic e stoc k number s 74L01-ppiS 5 and

1 .^3-W)5-P017^Tespeenvely) . (iii ) .Potempa

l t o emi tmean s th e maximu

m capacity o f

a sxartonai

y sourc e r

o emi ta pollutsco

tjuide r it s physica l and operationa

l design . An y physica l o r operational . limiarion* » th e capacit y c f di e sourc e t o emi ta pollutant, includin g ai

r polfotion control equipmen tan d restriction s o n hours,ofoperationo r on

i the t ^ pr.ainoun

to f material combusted , storedl's r processed , sM : b9..frea r i d assar to f it s de-sig n onl y i f th e limitatio n o

r the effec ti

twoul d hav e o n emission s i s federall y enforceable . Swojiidary

. emissipnsjc^-not^oun l i n determinin g the , • .-•• ' potentialtt.einitofa^tetion^.s^^e^.^i.^, .

. :.: • ;^vy-ji;J'^ii«i«J?.isi'^.^'»: ,< ' jj-fc-ter-vJilflf c & Discussio n Paper . " ;>7! f TSLCI^ - '•.'* ^ r \T'. 117*7- -trise n Energy Corporatio n

• . — : :'..v.
. v r.P.1 1

:*•*•!•.*• • • :»( • T.*.-.*-v :

•^t*7J-^'7^'''7' : ^ ^ : . Th e definitio n i s clea r tha ta , stationar y sourc e mus tb e o f th e sam e industria l groupin g . (SI C Code

) an d unde r tiie contro

l o f th e sam e person . Responsibilit

y fo r all aspect

s o f tiie operation, includin

g environmenta

l permit s shoul d not , an d i n man y case s ca n no tb e share d betwee n th e "customer " an

d th e energ y provider . Indeed, i f

ther e i s n o common contro l an d onl y a contrac

tt o provid e energ y service , i ti s unreasonabl

e t o expec ttha tthe lega l responsibilit

y fo r ensurin g tha ttiie provision

s o f ^ e entir e permi tca n b e share d whe n neithe r part y hav e th e lega l righ tt o "affectth e other-party' s behavior. •2)••7.2'. V" ' •

• •'•'7.'2-- r

. ! -\'i-''-.-\.\>K-'\'-• v&rz !.:;•'•.:•»;•'•'•"' ; : 27r7: : 7z z*ix : *-r To tak e i ta ste p further , th e -tstablishmen

to f thi s share d permi trequiremen

tcould b e construe d a s anti-competitive . Certainl y th e requiremen

tfo r a.share d permi twhic h migh t limi tth e numbe r o f outsourcin

g effort s undertake

n i s contrary' tq^h

e purpos e o f th e Clea n Air Ac twhereb y older, les s efficien

tsource s ar e encourage

d rad new , efficien

tsources ar e discouraged . 'ir' ..M : y:-rT27^ Solution : Th

e mechanis

m t o separat e ax i 'ewstir^'e'mis^bhi's^uircelnt o multipl e sources seem s clear . I f a transfe r o f ownershi p of a h emission

s sourc e occur s an d th e ne w owne r i s a separat

e entit y o f a differeii tindustria l grouping ; the

n ane w permi

tshoul d b e issued . Emission s shoul d b e transferre

d vnt h th e equipmen

ttha i i s sold an d a new Operatin

g Permi tshoul d b e applie d fo r an d issued.'I f th e "customer

5 ' still retain

s emission source

s

* • , .*('• • ••*••- . '*••".• . V"*' " ' ' / the n the y to o mus tb e abl e t o revis e thei r existin g operatingperini

tt o eliminat e th e emission s source

s tha twer e sold . Thi

s issue mus

tb e clarifie d t o allo w new , efficien

t technolog y investment

s t o l e mad e b y ri^parte^!'^^"!-^*:?r

• « M» : 0 ^ ; 1 | : | Vi<w

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### 77; ; 

### - 7*;;i6.^7^77?77^:'Trige n •'•''•.''•.'''•'• '': 7

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' 7^^'^-^'77{'"7'7 . * ,7r7 ^ 7 7 7 • i&*5%\^y&¥&4 Ms " Trige n Energ y Corporatio

n i TOTA L P.B ? 

### / DP.1 2
Environmenta l Affair s Hit 

## X SSCr t Phoiw O U tef NS N 7640.01-317-736 1 5086-10 1 GENERA L CEWIOES ADMINISTRATIO N •


## „ v ieloo e 

## SOUTHER N JL ^ Octobe r 19,199 8 COMPAN Y Mr.RobertPerciasep e A^.^^iw r Assistan t Administiaxo r

for Ai r an d Radiatio n U.S
. Environmental Protectio n Agenc y Washington , D C 2046 0
Dear Mr
. Pcrciasepe : Whe n w e me t

o n Septembe

r 30,1998 , w e expresse d considerabl e concer n tha t recen t action s take n b y th e Agenc y under its Ne w Sourc e Revie w (NSR ) progra mmigh t discourag e "energ y efficiency " project s frombein g undertaken
. Yo u aske d for specifi c examples
. Thi s letter , whic h i s submitte d i n m y capacit y a s th e Chairma n o f

th e Utilit y Ai r Regulatory Group (UARG) , an d o n behal f o f UAR G member s attendin g th e meetin g wit h you , i s i n respons e t o you r reques t Backgroun d Withi n th e pas t

fe w months , th e Agenc y ha s begu n a n "enforcemen t initiative " agains t coal-fire d power

plant s i n th e Mi d Atlanti c Region , Southeast , an d Midwes t S o far , thi s '•initiative " ha s le d t o sit e visit s an d § 11 4 request s t o boile r manufacturer s an d utilitie s askin g fo

r informatio n o n capital project s undertake n a t existin g plant s goin g bac k a s ta r a s 6 0 years . I n respons e t o a

n inquiry fro mth e Offic e o f

Managemen t

an d Budge t (OMB) , th e Agenc y ha s state d tha t i t ha s activ e enforcemen t

file s opene d fo r

al l o f th e utilitie s tha t

are covere d b y th e enforcement initiative
. A t th e same time thi s i s goin g on , th e Agenc y ha s propose d t o repea l importan t element s o f

th e so-calle d "WEPCo " rule , whic h allow s utility unit s t o undertak e project s tha t improv e efficienc y o r

restore reliabilit

y withou t prio r Agenc y NS Rreview
. Contrar y t o pas t guidance , th e Agenc y ha s als o recentl y suggeste d tha t an y significan t

projec t tha t migh t improv e efficienc y o r

reliabilit y o r reduc e cost s migh t

trigge r NSR , whil e encouragin g sourc e owner s t o see k time-consuming "applicability " determination s befor e initiatin g suc h projects
. Thes e pronouncement s affec t potentiall y tens o f

thousand s o f project s tha t

are undertake n i n th e industr

y ever y year . Discussio n Unti l recently , electri c utilitie s hav e operate d a t regulate d monopolies
. W e hav e bee n under , an d i n mos t

jurisdiction s are stil l under , alegal obligatio n unde r stat e la w t o undertak e project s tha t

assure reliable , efficien t

an d lo w cos t

electri c servic e i n a

/ /P.1 3

transparen

tenvironmen

t(i.e. , every significantcapita l projec ti s disclose d t o federal an d stat e regulators) . Thi s has le d th e industr y t o pursu

e project s thatwoul d enhanc e operations , includin g thos e tha twoul d improve efficiency . Certainly , restructurin g wil l no tchang e the incentiv e t o pursue suc h projects . ButEPA' s propose d change s t o it s ^NS Rpolicies , an

d th e "enforcemen

tinitiative, " definitel y will . Th e recen tEP A regulator

y proposal s an

d administrative/enforcement pronouncement

s pos e tw o land s o f

regulator y threat s t o energy efficienc y projects . Th e firs tregulator

y threa ti s EPA' s repeate

d recen tstatemems an

d suggestions , includin g thos e i n its Jul

y 2 4 WEPCo "notice o f

availability, " tiiatan

y significan tefficienc y o r reliabilit y projec tconstitute s a "change " tha tcoul d trigger NSR . Th e secon d i s th e proposa l fro m th e Jul y 2 4 notice tha

tan y "change " to a

n existin g uni twil l b e irrebuttabl y presume d t o resul ti n a

n increas e i n futur

e annua l emission s triggerin g NS Rrequirements . Th e WEPC o rule tha

tapplie s t o utilit

y unit s (an d its preambl

e tha tinterpret s th e 198 1 NS Rrule s tha

tapply t o al l othe

r units ) doe s so testablis h such a presumptio n an d onl y require s NS Ri f

ther e i s a n actua l projecte d increas e caused b y th e project 1 Turbin e blad e replacement

s illustrat e ho w efficiency improvementproject s are threatened b

y recen tEP A pronouncements . Turbin e blades ar

e replace d a

ta give n uni t ever y 5 t o 1 0 years due t o th e corrosive effecto f

superheate

d steam . W e hav e alway s viewe d replacemen

to f thes e blade s a s routin

e i n the electri c utilit

y industry . I n recen t years , supplier

s hav e offere

d replacement

s tha tdu e t o improve d design , allo w turbine s t o produce mor

e electricit

y (by a s muc

h a s 10% ) withoutan

y increas e i n fue l burned and , therefore , withoutan

y increases i n emissions . EP A Regio n VI

I has specificall y foun d tha tto replace deteriorate

d blade s wit

h th e improved-efficienc

y blade s i s no t"routine " becaus e the ne w blade s ar e designe d differentl

y fro m the ol d blades . Th e Regio n ha s furthe r conclude d tha

tthi s "change " woul d trigge r NS Rbase d o n th e regulator y presumption tha

tth e boile r woul d operat

e 36 5 day s a yea

r a tmaximum capacit

y afte r th e blade s were installed . Whil e w e fundamentall y disagree wit

h th e Region' s conclusions , I believ e yo u ca

n understan

d tha tihi s decision , an

d the threa

ttha tother s i n th e Agenc y may follo w it , wil l discourage innovatio n i n equipmen tdesig n t o achiev e state-of-the-art efficienc y improvements . Th e projectdescribe

d abov e woul d produc

e improvement

s i n efficiency , with no correspondin g increas e i n th e rat e o f emissions . However , th e economi c saving s derive d from such improvement

s fad e to insignificanc e whe n compare d t o th e cos to f

havin g t o underg o NS Ro r limitin g annua l emission s to pastlevel s i n orde r t o avoi d NSR - A s a result , give n th

e choic e between suc

h a projec tan d meeting NS Rrequirement s (o r acceptin g limitation s t

o avoi d them ) the resolutio n wil l alway s b e t o foreg o th e projec t an d it s environmenta

l an d energ y benefits . Othe

r efficiency improvementproject s
1 Othe r industries commenting o n th e "notic e o f availability " agre e wit h UARG' s vie w tha tthe notic e misrepresent

s curren tla w regardin

g unit s no tsubjectt o th e WEPC o rul e (whic h includ e unit

s i n ou r industry , such a s combustio n turbines) . OPTIONA L FOR M 8 6 (T.tO ) FA X TRANSMITTA L

_j)qi)yc l Q*oU(VU><J[--iVcU<l j Dwt./Aoane

y t *
F B * 

## X 55Cr t t efpaga*-* * w * i hJc*pAxk~tvo Prion * f 0 Fm> « NEN7M0-01.317-73B B SOM-10 1 GENERA L SERVICE S ADMINISTRATIO N

/ ?P.1 4

threatene d b y th e Agency' s NS Rpolicie s coul d b e cited , butth e ultimate analysi s woul d b e fh e same . I f

th e "notice o f

availability " become s th e law , o r i f th e "enforcemen t initiative " continue s an

d result s i n claim s tha

tpas tefficiency o r reliability-improvemen t project s triggered NSR , thes e type s o f projects , a s wel l as project s simpl y designe d t o preven ta deterioration i n efficiency , wil l b e severel y curtailed throughoutth e country . Th e resul twil l b e mor

e costl y electricit

y an d mor e pollutio n pe r uni to f

electricity produced . Thi s i s no ti n th e publi c interes t Conclusio n Thes e ar e obviousl y comple x issue s o f regulator y polic y thatw e wil l no tb e abl e to explor e i n an

y detai l atou r October 2 2 meeting . Wha tw e need , I believe , i s a separat e meetin g later thi s mont

h o r earl y nex tmont

h wit h you . Dir k an d Karen , counse l fo r ou r industr y an d selecte d compan

y personne

l involve d i n th e kind s o f

projects tha tw e believ e wil l b e inhibite d b y whatw e vie w as a fundamenta l shif ti n Agenc y NS Rpolicy . Yo u nee d to hea

r th e giv e an

d tak e betwee n your staf

f an d ou r expert s o n thes e matters an d decid e whether thi s chang e i n directio n U appropriate.

Sincerely yours ,

Charle s H . Goodma

n

cc : UAR G Polic y Committe e Dir k Forriste r , Jane tAnderso n

TOTR L P.0 2



## / 3P.1 5



### Example s o f

Environmenta

l Permittin g Issue s Facin g CH P Project s EPA/White Hous e Climat e Chang e Office/Utilitie s Informa

l Working Group
ADDITIONA L INFORMATIO N FO RTR1GE N CASE S

Example s an d Propose d Solution s A Not e o n Examples : I ti s difficul tt o find specifi c citabl e example s tha tillustrat e each point . An y projects thatar e u p an d running have , b

y definitio n foun

d way s t o avoi d th e cite d barriers . Project s i n whic h ther e may stil l b e issue s to resolv e ar e either i n a sensitiv e regulator y proces s and/o r par

to f confidential developmen tnegotiation s an d canno tb e specificall y cited . W e wil l giv e example s o f specifi c existin g project

s tha i genericall y illustrat

e th e proble

m an d anonymou s example s o f project s atwhic h th e proble

m mightb e a significantbanrier . Projectin g the potentia

l valu e o f removing barrier

s i s atonce difficul tan

d simple . Th e issue s cite d com e u

p i n on e for

m o r anothe r i n almos tever

y projec tOfte

n they can b e avoided , bu t tha tdoe s no tmean the y ar

e no timportan

tA join tEPA/DO E analysi s foun d tha tCH P ca n provid e 3 4 MMTC

E o f reduction s i n carbo

n emission s annuall

y b y 201 0 an

d simila r reduction s i n other pollutants . Addressin g thes e issue s i s a necessary , thoug h no tsufficien trequiremen tt o achievin g tha

tpotential . W

e believ e tha

tth e pointo f thi s exercis e i s to mak

e thes e reduction s possibl e b y removin g barriers . Nettin g wit h OIT-Sit

e Source s Ther e ar e tw o sub-case s here . On e i s the distric

theatin g exampl e wher

e therma l energ y i s produce d a

ta n electri c generator an

d displace s end-us e therma l generators . Th e othe r i s th e industria l cogeneratio n cas e wher

e electricit y generated off-sit

e i s displaced . Distric tEnergy Trige n Trenton , Gray

s Ferr y an d a projec tcurrentl y unde r developmenti n th e Mid-Atlanti c regio n ar e al l example s o f

usin g hea tfro m a centra

l electri c generating statio n to provid e thermal energy t o distributed end users . The therma l energy replace s man

y individua

l heatin g and coolin g plants an

d therefor e create s area ! reduction i n emissions . A tGray s Ferry , th e gas turbin e base d CH

P projec tresult s i n annua l reductions o f

1. 1 millio n ton s o f

CO, , 8,50 0 ton s o f NO , an d 4,50 0 ton s o f

SO, . The Trento

n dual-fue l engin e based CH

P plan tprovide s ove r 48,00 0 ton s o f annua l C0 2 reductions . Althoug h th e ne teffecto f th e system installation i s t o decreas e tota

l emissions , Trige n ha s no t bee n abl e t o ge tcreditfor thes e reduction s i n orde r t o netou

to r offse temissio n increase s atth e centra l station . I n th e cas e o f

th e Trento

n plan tTrigen was tol d i tcoul d tak e credi tfo r th e
Discussio n Pape r Trige n Energ y Corporatio nP.1 6

' } -

reduction s i n it s construction permi tonl y i f th e individua

l boiler s wer e destroye d befor e constructio n began . Thi s woul d leav e th e en d user s wit h no servic e durin g tiie 1 8 month constructio n perio d an

d with n o back-u

p i n cas e o f

damag e to therma

l distributio n equipment . Solution : Th e centra

l statio n should ge tcreditfor avoide d end-user emission s i f th e end-use r equipmenttake s a permi

tlimi tafte r syste m start-u

p t o operat

e onl y durin

g emergency condition s fo r a limite d numbe

r o f hours . Reduce d Emission s Throug h Gri d Displacemen t I n thi s application , equipmen ta ta commercial , institutiona l an d industria

l facilit y provide s on site therma

l energy sende e an

d als o provide s electricit

y t o the loca

l grid , thereb y displacin g offsit e electri c generation . Th e hig h efficiency an d lo w emission s o f

th e CH P plantresul ti n th e electricit y being-supplie d a

temissio n rate

s belo w th e norma l levels . Trige

n operates man y facilitie s o f

thi s typ e includin g Nassau Count y (Nassa u Coliseum , Nassau Count y Medica l Center , Nassa u Communit y College , Hyat

tHote l plu s 5 7 M

W t o LILCO ) an

d the McCormic k Plac e Projec

twhich supplie s heatin

g an d coolin g to th

e 5 millio n s q foo tconventio n cente r plu s 3 M W displace d fro

m th e grid . Annua

l emissio n reduction

s for the two project

s are : Emission s Avoide d b y Trige n CH P Project s (Tons/year)

Nassau County * McCormic

k Plac e CO2 NOx SOx

155,00 0 90 0 2,00 0 24,32 7 5 9 12 6
* te e attache d pape r

entitle d "Comparin g Combine d Hea l an d Powe r Emission s t o Conventiona l Energ y Qenentta f There ar e als o man

y similar industria

l projects . Althoug

h eac h projec thas significan tne t environmenta

l benefits , Trige

n i s no table to ge tcreditfo

r emission s offse tb y displacin g off-sit e generation . Asid e fro

m the institutiona

l unwillingnes s t

o includ e thes e benefits , ther e ar e question s abou

tho w t o sho w thes e reduction s ar e real . Solution : Th e end-us e facilit y wil l tak e a penni trequiremen

tt o offseta minimu

m portio n o f

it s electri c consumption . Thi s offset/avoide d amoun tmigh tb e mor e tha n 10 0 percento f

it s electri c consumption - A n emission s value i n )b/MW h avoided woul d b e develope d an d applie d base d o n th e emission s characteristic o f th e loca l utilit y o r othe r sourc e o f offsetelectricity . WEPC O Issue s Th e critica

l poin ti s tha

tthe WEPC

O situatio n can b e triggere d b y changes t

o th e plantwhic h d o no tdirectl y affec

tth e boile r an

d whic h do no tincrease plan

temission s above th e currently permitte d level . For example , a ta n industria

l facilit y fo r whic h Trige n ha s purchased th e boile r house , th e boiler s ar

e permitte d t o emita ta certai n level . Trige

n ca n operat e a tth e maximu m
Discussio n Pape r Trige n Energ y Corporatio n


# «rP.1 7

leve l withou ttriggerin g an y review . A s i thappens ; ther e i s unuse d boile r capacit

y whic h ha s no t bee n use d fo r several years . Trige n woul d lik e t o add stea m turbines a

tth e plantwhic h coul d generat e electricit

y bu twoul d no tchange th e emissio n rates o r th e maximu

m potentia l emission s atth e plant . Th e us e o f

th e turbine

s to displac e off-site generatio n woul d resul ti n a ne treductio n i n regional emissions . Making tha tenvironmentally beneficia l change , however , coul d trigge r a WEPC O typ e PS D revie w tha twoul d requir

e Trigen t o mak

e significan tadditiona

l investment s i n th e existin g boilers . We can ru n th e boilers a s har

d a s w e wanti f

w e don' ttr

y t o mak e th e syste m mor e efficien tI f w e mak e i tmor e efficien tw e ar

e penalized . Solution : Provid e WEPC O exemptio n for CH P system s tha

tprovid e demonstrabl e environmenta

l benefits and/or allo w creditfor off-site emission s reductions . Permi tSeparatio n Trige n own s an

d operates facilitie s whic h wer e previousl y owne d an

d operate d b y anothe r entity . I n a number o f

cases , thes e facilitie s were older boile r plant s whic h provide

d onl y energ y t o a single-owne r industria

l complex . Trige

n ha s purchased , o

r has proposed t o purchas e thes e facilitie s and mak e substantia l investment

s t o improve the efficienc y o f th e operation s throug h th e additio n o f

cogeneratio n equipmen tI n som e cases , al

l o f th e electricit

y tha ti s no w generate d i s delivere d to the single-owne r industria l complex . In othe

r case s som e o f

th e electricit y i s sold t o th e loca l utility . Additiona l therma l energ y customer

s (steam , ho twate r o r chille d water ) may als o b e adde d eithe r immediately o

r ove r time. Th e treatmen

to f thes e facilitie s b y regulator y agencie s wit

h regar d t o permit

s ha s bee n erratic . I n mos tcase s wher e a larg e IP P ha s constructe

d a new , larg

e independen

tpowe r plantservin g th e loca l utility (o r th e wholesal e powe r market ) an d providing stea

m t o one industria

l user , typicall y i n orde r t o obtai n Qualified Facilit y (QF ) status , tiie IP

P ha s obtaine d thei r own , separat

e ai r permi tHowever , i n case s wher e existin g energ

y asset s wer e purchased , improved , an d expande d t o eithe r provid e energ y servic e t o other s o r t o offer energ

y product s no tpreviousl y produced , i tappear

s tha tdifferin g regiona l interpretation

s allo w abou

thal f o f thes e facilitie s t o obtai n thei r ow n permitan d half to b e require

d t o shar e a permitwit

h th e histori c single-owne r industria l complex . Th e opportunit

y t o substantially inves ti n efficiency improvement s i n existin g energy facilitie s an d th e man y ne w opportunitie s t o sel l power i n a competitiv e marketplac e make i tver y importan tfo r legall y separat

e entitie s t o obtai

n their ow n operatin g permit s whic h allo w eac h entit y t o focu s o n thei r cor

e business . Th e recen

tfocu s o f severa l EP A region s t

o interpre tth e ter m "control " i n th e contexto f th e definitio n o f

a stationar

y source ha

s le d t o a principl e o f presumptiv e contro l i f

on e facilit

y i s co-locate d o n th e propert y o f another. T o refut

e th e presumption , facilitie s ar e bein g aske

d t o submi tcopie s o f

contracts,-vendor an

d fuel suppl y agreements , etc . A s a

n example , one recen

tinterpretatio

n letter characterised th e sharin g o f • intermediates , byproduct s an d product s a s a possibl e example o f

exertio n o f

contro l an d ye tEP A i s strongl y encouragin g entitie s t o joi n together t

o for m eco-park

s relyin g o n industria

l ecolog y

Discussio n Pape r 3 - Trige n Energ y Corporatio n

/ /P.1 8

principal s wher e on e company's waste become s another' s inpu tI n addition , tryin g t o forc e mor e separat e facilitie s require s more lan d us e an d mor e pollutio n fro m transportin g products , byproduct s an d intermediaries . I n th e fac e o f

a fluid energ y marketplace wher e ne w energ y suppl y arrangement s wil l becom e popular , th e arbitrar

y an d arduou s proces s shoul d b e eliminatr d Solution : Develo p nationa l guidanc e tha tmake s i tclea r ma tlegall y separate entitie s o f a separat e industria l groupin g ca n no tb e a singl e stationar y source . Eliminat e th e opportunit y fo r broa d interpretatio n o f

th e ter m control b y definin g i ti n lega l term s withou tlimitin g creativ e use s o f byproduct s an d intermediar y products .

Discussio n Pape r Trige n Energy Corporatio n TOTA L P.8 5

\%P.1 9

..•••••- • Docke t No
. A-ty-lTI Subcategor

y
The enclosure s wit

h thi s documen

t ar e 'V

- 0 " 32 H ^ v"*- '



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