June 30, 2011 MEMORANDUM From: William H. Maxwell EPA/SPPD/ESG (D243-01) To: Docket Number EPA-HQ-OAR-2009-0234 Subject: Discussion held in conjunction with a DOEpresentation on a meta analysis of modelling done on EPA’s utility rules Attendees : See attached. Discussion : A general discussion of the Mercury and Air Toxics Standards was held.

### U.S. Environmental Protection Agency June 30, 2011 

## EPA’s Power Plant Regulations

# Many of the modeling exercises have considered four regulations


# • The Air Transport Rule • The Power Plant Mercury and Air Toxics Rule • The Cooing Water Intake Rule • The Coal Combustion Residuals Rule 23 

### • Important Clean Air Act- required power plant controls have been delayed more than a decade. • The Act required states by 2000 to adopt rules to control interstate pollution

– NOX SIP Call Rule (1998) partially addressed ozone transport, but did not address fine particles.

– Previous administration finalized Clean Air Interstate Rule (CAIR) in 2005 but court found legal flaws and ordered EPA to replace it. CAIR remains in place in the interim. • The Act also required control of hazardous air pollutants from power plants.

– Positive determination in 2000 meant final rule due by 2002.

– Previous Administration issued Clean Air Mercury Rule for power plants in 2005 but court found rule legally flawed and vacated it. Also, rule failed to address all air toxics.



# Key Clean Air Power Plant Rules Overdue - Public Heath Protection Delayed40 200 123 62 51 2 6 113 110 167 112 5 0 100 200 300 400 500 600

>60 years 51 - 60 41 - 50 31 -40 11 - 30 10 or younger number controlled number uncontrolled

4 991

Total number of units 478 • 60% of the uncontrolled units are 31 years or older • These units lack advanced controls for SO2 and NOX • ~100 GW out of total of 300+ GW of coal are without SO2 scrubbers 

# Many Plants Lack Controls5 

# What is the Transport Rule?

• The Transport Rule will limit pollution from fossil fuel -fired power plants that are located in 31 eastern, southern, and Midwestern states and DC • The CAA requires each state to be a “good neighbor” and do its fair share to avoid sending air pollution to other states • This proposal reduces emissions contributing to fine particle (PM2.5) and ozone nonattainment that travel across state lines:

• Sulfur dioxide (SO 2) and nitrogen oxides (NOx) contribute to PM 2.5 transport • NOx contributes to ozone transport • The Transport Rule will reduce millions of Americans’ exposure to fine particles and ozone6 

# States Covered

• Reduces both f ine particle (SO 2 and annual NOx) and ozone - season NOx emissions in 2012 • Requires further SO 2 reductions in 2014 in some states

States controlled for both fine particles (annual SO 2 and NOx) and ozone (ozone season NOx) (21 states +DC) States controlled for fine particles only (annual SO 2 and NOx) (6 states) States controlled for ozone only (ozone season NOx) (4 states) States not covered by the Transport Rule7 7 • EPA is proposed one approach and taking comment on two alternatives. • EPA’s preferred approach -- allows intrastate trading and limited interstate trading among power plants but assures that each state will meet its pollution control obligations. • To meet this proposed rule, EPA anticipates power plants will:

– Operate already installed control equipment more frequently,

– Use lower sulfur coal, or

– Install pollution control equipment such as low NO X burners, Selective Catalytic Reduction, or scrubbers (Flue Gas Desulfurization). • CAIR remains in place until this rule is finalized . • The first Transport Rule emission control requirements take place in 2012 for SO 2 and NOx • Additional SO2 requirements take effect in 2014 • Final rule is expected in this summer. 

# Transport Rule8 

## Air Quality Improvements Are Widespread

Before Transport Rule After Transport Rule9 Health Effect Number of Cases Avoided Premature mortality 14,000 to 36,000 Non -fatal heart attacks 23,000 Hospital and emergency department visits 26,000 Acute bronchitis 21,000 Upper and lower respiratory symptoms 440,000 Aggravated asthma 240,000 Days when people miss work or school 1.9 million Days when people must restrict their activities 11 million * Impacts avoided due to improvements in PM 2.5 and ozone air quality in 2014 Estimated Number of Adverse Health Effects Avoided Due to Implementing the Proposed Transport Rule* 

# Health Benefits for Millions of Americans

# Power Plant Mercury and Air Toxics Rule

• On March 16, EPA proposed the Mercury and Air Toxics Standards, the first national standards to reduce emissions of toxic air pollutants from new and existing coal - and oil -fired power plants – often the biggest contributors to air pollution • Standards would reduce emissions of: • Metals, including mercury (Hg), arsenic, chromium, and nickel • Acid gases, including hydrogen chloride (HCl) and hydrogen fluoride (HF) • Particulate matter • These pollutants are linked to cancer, IQ loss, heart disease, lung disease and premature death • Standards create uniform emissions - control requirements based on proven, currently in - use technologies and processes • Compliance time line set by Clean Air Act: up to 4 years (3 years plus an additional year if granted by the permitting authority) • EPA also proposed a new source performance standard (NSPS) for particulate, sulfur dioxide (SO 2), and nitrogen oxide (NO X) emissions from new sources 10

# The Standards
• Pollutants are in three groups

– Mercury

– Other metals

– Acid gases • For each there is an existing and new source standard • A number of flexible features:

– Choice in format – input or output standard

– Facilities can choose standards within a group (e.g. total metals, metal by metal, or PM)

– Averaging allowed – across units, and over time • Work place standards for organic pollutants 11

# Proposed Toxic Rule Health Benefits

• The value of the improvements to health alone total $59 billion to $140 billion each year • This means that for every dollar spent to reduce this pollution, we would get $5 - $13 in health benefits • Each year, the proposed rule would prevent serious health effects including:

– 6,800 - 17,000 premature deaths

– 11,000 heart attacks

– 120,000 asthma attacks

– 850,000 missed work or “sick” days • Avoiding “sick days” saves companies and families money. It is particularly important for the millions of Americans whose jobs do not provide paid sick leave and who risk losing their jobs if they miss work too often

– The proposed rule would also prevent 12,200 hospital admissions and emergency room visits; 4,500 cases of chronic bronchitis; and 5,100,000 days when people must restrict their activities each year 12 Source: EPA Regulatory Impact Analysis

# CWA §316(b) Existing Facility Rule

# Proposed Existing Facility Rule – Generally • Applies to existing facilities that withdraw at least 2 million gallons per day (MGD) of cooling water • 1,260 facilities

– 670 power plants (coal, gas, nuclear)

– 590 manufacturing (pulp and paper, petroleum refining, chemical, iron and steel, food processing) 

## • Annual costs and benefits of $384 million and 615 million fish • New units at existing facilities subject to more stringent requirements; impingement requirement for all facilities; no national entrainment requirement. • Final rule in July 2012; compliance date would be after other three rules’ compliance dates Page 14

# Proposed Existing Facility Rule – New Units & Impingement • New Units

– Required to have closed - cycle cooling to address impingement and entrainment

– Definition of new unit – newly built units added to increase capacity; does not include rebuilt, repowered or replaced units 

## • Impingement

– Numeric limits on impingement mortality • Compliance can be met with any technology, but limits are based on modified, fish -friendly traveling screens with fish return



### – Compliance alternative – reduce intake velocity to 0.5 feet/second

– Ocean or tidal water facilities – reduce impingement mortality of shellfish to a level comparable to that achieved by properly deployed and maintained barrier nets. Page 15

# Management of CCRs 136 million tons of CCRs were generated by coal -fired electric utilities in 2008 76 million tons of CCRs were disposed in 2008 (by comparison, 2 million tons of RCRA hazardous waste were disposed in landfills and surface impoundments in 2009*) Beneficially Used – 50 million tons (37%) Did not propose to change Bevill exemption for CCRs beneficially used. Example uses:

- 12.6 M tons of fly ash used in concrete

- 8.5 M tons of FGD gypsum used in wallboard

- 1.5 M tons of boiler slag used as blasting grit & roofing granules Used as Minefill – 10 million tons (8%) Proposal did not address minefill uses. DOI OSM will develop federal regulations. Disposed in Landfills – 46 million tons (34%) Disposed in Surface Impoundments – 30 million tons (22%)

16 * Source: 2009 National Biennial RCRA Hazardous Waste Report (Exhibit 2.5) The CCR rule will regulate 

# Coal Combustion Residuals Rule

# June 2010 Proposal

• In June 2010, EPA proposed regulations for the disposal of CCRs from electric utilities and independent power producers. • Key features of the proposal:

– Co - proposed 2 regulatory options for disposal, one under Subtitle C and one under Subtitle D

– Proposed to retain the Bevill exclusion for CCRs being beneficially used;

– Did not propose to regulate beneficial use (BU), but proposed to define placement of CCRs in large scale fills and sand and gravel pits as disposal.).

– Did not propose regulations for minefilling. • Affected universe: approximately 300 landfills and 676 surface impoundments for 500 power plants in 45 states. • Sought comment on over 100 issues. 17 

# Coal Combustion Residuals Rule

# Comments Received • Over 1,400 individuals testified at the eight public hearings. • Over 450,000 comments received; a significant number of these are from mass mailing campaigns.

– Nearly 13,000 submissions (over 2 million pages) have “unique content” requiring analysis. • Environmental groups favor Subtitle C regulations. • ASTSWMO, ECOS, individual states (36), industry groups (electric utilities, recycling firms, trade associations) largely favor Subtitle D regulations.

18 

# Coal Combustion Residuals Rule

# Next Steps

• Due to comments received and to ensure adequate public comment on new information submitted to EPA, we expect to issue a NODA.

– AA for OSWER announced this at the 4/14/11 hearing before the House Subcommittee on the Environment and Economy, Committee on Energy and Commerce. • EPA is working to finalize a rule as expeditiously as possible.

Draft Deliberative/Do Not Quote or Cite 19

# EPA Analysis of Proposed Air Regulations June 30, 2011 Sam Napolitano Office of Air and Radiation U.S. EPA

# Context

• EPA is required to perform detailed economic assessments of the impacts of its regulatory actions, and takes this responsibility very seriously. • The Agency has invested significant resources and developed sophisticated analytical capabilities to inform and support its actions. • For the power sector, EPA relies upon a detailed bottom - up sectoral model that is also used by industry to inform decision making. • While discussions tend to focus solely on costs and other economic impacts, the significant health benefits to public are often overlooked in the public discourse. For instance, the air rules are anticipated to provide at least $180 to $430 billion in annual benefits by 2015. 2

# Detail on EPA Tools and Analytic Approach EPA uses the Integrated Planning Model (IPM) to project the impact of environmental policies on the U.S. Electric power sector: • Uses a linear programming formulation to find an optimal (least cost) solution. • Provides bottom - up detail which allows fine grain parameter variations and detailed disaggregate information. • Comprehensive coal and natural gas supply, demand, and infrastructure (rail and pipeline) embedded within the model. • Very detailed bottom up representation of 32 U.S. power market regions and every electric generating unit and its emission controls. • 6 load segments, 14 coal grades, nearly 40 coal supply and 200 demand regions, 2 seasons. • Generating technology options: Coal with CCS, Coal without CCS, Coal to Gas conversions, Combustion Turbines, Combined Cycle, Integrated Gasification, Combine Cycle (IGCC), Nuclear, Wind, Biomass, Solar, Geothermal, Landfill Gas, Fuel Cells. • Many emission control retrofit options based upon best available engineering cost and performance data. 3

# Data Sources and IPM Decision Algorithm

• Data Sources & Assumptions: Derived from a variety of Federal Agencies, industry experts, engineering and construction firms, and other consultants (EIA, DOE, NERC, States, EPRI, NETL, Sargent & Lundy, MIT, Wood Mackenzie, etc.)

4 Sophisticated View of Power Sector: Detailed and accurate representation of all existing generating units and their configuration All commercially viable future technology options Electric generating technologies Emission control technologies All factors affecting operation, performance, and expansion or contraction of the power sector Economic behavior of power sector Emission constraints on power sector

# Proposed Air Rules

5 

## Coverage Proposed Transport Rule SO 2 

## & NOx 

## (for PM and ozone), Eastern half of U.S. July 2010 Mercury and Air Toxics Rule Hazardous Air Pollutants, Nationwide March 2011

# Economic Analysis Topics



# • Installation of Pollution Controls • Construction of New Power Plants • Facilities Uneconomic to Maintain

6

# Pollution Control Analysis & New Power Plants Assumptions for Pollution Controls: • Retrofit cost and performance assumptions for SO2 , NOx, Mercury, and acid gases controls based on detailed bottom - up engineering analysis • Developed with assistance from Sargent & Lundy • Reflect recent installation costs Assumptions for New Power Plants: • New/projected unit cost and performance assumptions reflect current market conditions supported by engineering review and comparative analysis with other models. • Sourced from extensive discussions with engineering, procurement, and construction (EPC) firms and other industry sources (Annual Energy Outlook 2008, 2009, 2010, National Energy Technology Laboratory, Electric Power Research Institute, Harvard University, Massachusetts Institute of Technology, Union of Concerned Scientists) EPA analysis shows an additional 3.4 GW of additional natural gas capacity in response to proposed EPA air rules by 2020. 7

# New Pollution Controls with Proposed Air Regulations

8

# Factors Influencing Economics of Plant Closure

9 

## • National and regional electricity demand • Price and availability of fuels • Prevailing price of electricity within region and neighboring regions • Reserve margins • Replacement costs • Efficiency of facility • Level of existing investment in facility (for pollution controls, refurbishing, etc.)

### Total Existing Capacity, Existing Coal Capacity, and Coal Capacity Projected to be Uneconomic to Maintain (by 2015)

10