p.1 

OAR Box 1781 

Prepped by Ollie Stewart 

Document Number: 

119) IV-C-33 

Docket Number: 

A-90-37 

Printed 10/29/2008 10:46:23 AM Sheet 119 of 142 
P.2 

\ PRO^ 

7

 /\-^0-31 

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY -TT? ___ ^ _ ^ ^ 

RESEARCH TRIANGLE PARK, NC 27711 ^ "^ 

DEC_2-0_l999 

Dear Participants: 

F£3 2 5 20C0 

EPA AIR DOCKET 

OFFICE OF 

AIR QUALITY PUNNING 

AND STANDARDS 

This is an announcement ofa public meeting on January 13,2000 to discuss EPA's 

thinking on an alternative approach for compliance with new source review (NSR) requirements. 

The meeting will be held on January 13,2000 in the Polaris Room, Ronald Reagan Building and 

International Trade Center, 1300 Pennsylvania Avenue, NW, Washington, DC, 20004, telephone 

(202) 312-1300, beginning at 10:00 a.m., and ending no later than 3:30 p.m. 

The purpose of this meeting will be to discuss an approach that could be workable 

specifically for the utility sector. At the meeting, we plan to present our current thinking on this 

approach, and to receive comment from stakeholders. Attached for background purposes are 

four proposals that we have received to date from various stakeholders (Attachments 1 through 

4). 

We plan to evaluate comments received from stakeholders, and to determine whether and 

how to propose this alternative approach in the Federal Register. In concert with this decision, 

we will also evaluate options for obtaining further stakeholder input. 

Plans for how the meeting will be run are still under discussion within EPA. There is 

uncertainty as to how many attendees will be present, and there are constraints as to the size of 

the meeting room. Initial thoughts are that at the table, which will seat about 40-45 people, an 

equal number of seats will be made available to representatives from: (1) the industrial sector, 

(2) the public interest groups, (3) State and local governments, and (4) the Federal government. 

There will be additional seating, theater style, in the meeting room, available on a first come first 

served basis, for about 100 people. To the extent possible, everyone who wishes to speak will 

have an opportunity. 

An address list of persons who are being sent this letter is also attached (Attachment 5) 

and an announcement will be published in the Federal Register. It is also being placed on the 

Office of Air and Radiation's Internet website: (http://www.epa.gov/oar/oarnew.html) and the 

NSR website (http://www.epa.gov/ttn/nsr/rule_dev.html). If you know of someone who may not 

have received this letter but is interested in participating in such an effort, feel free to contact 

them. 

I 

Recycled/Recyclable • Printed with Vegetable Oil Based Inks on 100% Recycled Paper (40% Postconsumer) 
P.3 

A block of rooms has been reserved at the Metro Center Marriott, which is a short 

distance away from the Ronald Reagan Building. The cut-off date for reservations is January 3, 

2000 and is reserved as "US EPA ©roup Rooms". The telephone number at the Metro Center 

Marriott is (703) 553-5329. 

If you wish to attend the meeting, please E-mail or call Pam Smith, at E-mail address 

"smith.pam@epa.gov" or telephone number (019) 541-0641, by January 6. If you have further 

questions regarding the stakeholder meeting on January 13, you may call Kathy Kaufman at 

(919) 541-0102 or Karen Blanchard at (919) 5il-5503. 

Sincerely, 

Upjohn S. Seitz 

Director 

Office of Air Quality Planning 

and Standards 

Attachments (5) 

1.-4. Stakeholder proposals 

5. Addressee list 

72-
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April 29,1999 

Mr. John S Seitz 

Director, Office of Air Quality Planning and Standard! 

U.S Environmental Protection Agency 

'MTVIO Research Triable Parte, NC 27711 

Dear John: 

Enclosed is a memorandum outlining tiie UARG proposed alternative to the current NSR 

program as it applies to existing electric generating units. This proposal, in our view, would 

simplify the NSR program while at the same time addressing concerns that, under the current 

program, utility unit* may perpetually extend their useful Hfe without ever being mbject to NSR* 

related emission reduction!. We believe this proposal is responsive to the principles announced 

by tbe Agency prior to the "stakeholders" meeting that was held on February 2 and 3 aad 

provides a basis for serious discussions win the Agency and stakeholders. 

In putting this proposed altemative together, we have tried to be responsive to issues aad 

concerns raised by others. In this regard, we have had three meetings with state regulators oa 

NSR alternatives and are encouraged by their response. We will have further discussions with 

State regulators over the next two weeks and expect further input at the STAPPA meeting on tht 

15* and 16* of May in Phoenix. I also plan to talk t o David Hawkins during this period about 

UARG's proposal. We would Hke to meet with you and your staff in May after getting 

STAPPA's comments. 

The current NSR program Is incredibly complex and is characterized by 

misunderstandings by al! as to its applicability. The EPA proposals to change the NSR program, 

in our view, will aggravate, not alleviate, this situ^ion. If adopted, the revised rules will lead to 

3 
-e-a-i 

basis for beginning discussions tad lor delaying action on finalizing Ae Agency's NSR 

proposals. These discussions should include ill industry tnd should cover the proposed program 

for the utility isdustty as well is changes tailored to the needs of the manufacturing sector. 

We look forward to discussing this proposal with you sad other stakeholders. 

SmcertryyMBS, 

Enclosure 

ec: (w/ej-cJosure) Mr. Robert Perciasepe 

Mr. Tom Cumn 

Lydia Wegman, Esq. 

Mr. Bill Harnett 

Mr. David Solomon 

Bruce C. Bucfcheit, Esq. 

Gregory B. Foote, Esq. 

/ » 4 
P.6 

April 28,1999 

MEMORANDUM 

Achieving New Score* Emission Reductions 

from Existing Electric Gen crating Units -

Prf.pi-.--i tVi^r--.- B m , Ptmtv Air ttffalatorv Croro 

Tnis paper outlines s program for electric generating units met addresses two objectives. 

First, simplification and clarification of tbe Clean Air Act ("CAA") new source review ("NSR") 

program for the electric generating mdusty is needed by both permitting authorities sad 

regulated industry. The current program is unduly complex tad conftiSing end, es recently 

interpreted by EPA, is disetungmg desired improvements in unit efficiency end reliability. 

Second, in spite of recent CAA programs directed at existing sources (e.g., me Title IV 

acid rain program, the revised ozone and particulate matter NAAQS, Ae regional haze program, 

and the regional SIP caS), there is continued interest in ensuring that new source levels of control 

are achieved at existing electric generating units. NSR levels of emission reductions can be 

achieved more efficiently snd cost-effectively if addressed directly through s program designed 

for the electric generating industry, as opposed to attempting to force this result on an ad hoc 

basis through revisions to the NSR *_)odification"nile. 

Existing electric generating stations consist of numerous, complex aad integrated 

systems. These sources are designed to have a long life. For example, in analyses underlying the 

1990 CAA Amendments, EPA assumed that utility boilers would last for up to 65 years. 

Because the industry has traditionally had a statutory obligation fo provide a safe, reliable and 

efficient supply of electricity, existing generating units are routinely kept in good worlcing order 

through repair, replacement and maintenance activity. As a result, existing electric generating 

stations have been regulated primarily under the CAA state implementation plan C*SIP*) 

program and, more recently, under the CAA Title IV acid rain program. The CAA modification 

rule has had little impact on these units. 

The program outlined below, therefore, represents a significant departure from how 

existing electric generating units have been regulated under Ae CAA, as well as a significantly 

more stringent existing source program Aan Ae program described by industry af Ae Fcbru.uy 2-

3,1999 EPA stakeholder meeting. Under this program, NSR rec^uiremeaits would continue to 

apply to new and modified sources, tnd existing electric generating units would also be required 

to achieve, individually or through emissions trading or averaging, NSR levels of emission 

reductions over time, on a schedule Aat would begin in 2010 after Ae oAer existing source CAA 

control programs noted above have been defined. This would assure that implementation of this 

new pTO£r?jn fcr existing electric generating units could be coordinated wiA Aese oAer 

programs. The parameters of this program are outlined below. 

5 
P.7 

'.* 

1. Continue the existing NSR program, with a simplified 

•ppUciblliry test for modified wafti, 

•. CovtJnve ^pHeaMlfo nf n—1»« ^ tpqnf^mtBiite „New tmire* wview 

requirements, deluding BACTw LAER, would continue to apply to sew n d 

tnodified aleetrie generating tmits. NSPS would continue to app ty to all acrw, 

reconstructed and modified electric generating units. 

b. ptrtft; "m^ir fnf^^ftion^tett .-Tlie WEPCo rule would be revised. Tne 

term *4cuy or modification" would be clarified to provide Aal physical or 

operational changes must increase fbs maximum achievable emission rate 

(measured in kgAir) before and after a change in order to trigger NSR. Tnis 

clarification would remove uncertainty that has discouraged efficiency aad 

reliability improvement projects, and would address confusion that bas 

complicated aad delayed permit proceedings. 

C. Pperlal OO rtrrtetr fmetdnrea -With Ae exception ef OOt all criteria 

pollutants (including psrticulsle matter) would be subject to this simplified 

modification test CO would be evalusted as pan ef Ae "environmentally 

beneficial" test applied to NO, control projects (i.e., Ae types of projects that 

typically raise CO issues). Because CO releases from elevated point sources do 

not have a significant ambient aft quality impact, 0 0 emission increases would 

aot oAerwisc be subject to Ae modification program. 

2. No pettfnf onf of ceBfrot requirement* for eTtefarfe f epcratfoff UBfti - To ensure mnre 

widespread use of new source controls, new electric generating units could not *aet out" 

of control technology requirements. As under current law, a unit could continue to set 

out of air quality analysis requirements, including ambient air quality modeling. 

3. Subject existing electric generating units to new source levels of emfssfon control 

over time, in a manner coordiosted with Ae fmplemeBtaflon of other existing source 

control prof rami. ! _ _ 

a. Prog ram ifirt date -The eTocfne f encratfng Industry ft currently pTannfag tfr 

implement a number of new control programs for existing sources over Ae next 

decade, including Ae revised NAAQS for ozone and PMU, Ae regional haze 

program, Ae regional N04 SIP call, snd Phase II of Ae Title IV acid rain program. 

In ordtj to allow for coordination wiA Aese oAer programs, Ae existing source 

control program would begin in 2010. To Ae extent any of Aese oAer CAA 

existing source programs do not go forward, Ac program outlined here would 

serve as a "backstop," ensuring levels of emission reduction Aat go as far or 

further than what might bs required under Aese oAer programs. 

b. Unit applicability mectaflftrpy - There would be two options for complying 

with this backstop program - Ae "age based" option and Ae "glide paA** option. 

Companies would be required to opt into one or Ac oAer by Ac year 2010. 

-2-

Cp 
P.8_ 

t »• 

f* 

e. 

. Under Ae age based option, program appBcabiBtywiBuld be triggered on a 

nmt-bymnit basis starting in At year 2010, when a unit has been operated fer 55 

years. Units entering Ae program would be required to achieve new aource 

control levels at As! unit or at other units through trading or averaging systems. 

In prior CAA aaatyses, EPA has eonsfsteotly assumed boiler life up to 65 years. 

and industry therefore originally suggested 65 yean ass trigger age in EPA's 

February 2d- 2d stakeholder meeting. A55yearhfcisthc_h__^boilerlife 

used by EPA fa inatyses undertaken in connection wiA Ac 1 WO Amendments 

and wiA subsequent rulemakings under those amendments. 

Of those units that reach age 55 during Ae course e f Ae "age based" 

program, Ae last unit will cater Ae program in 2030 (i.e., Aose units that began 

operation in 1975). Tbe number of units that would ester Ae program in each 

year it eloss to linear, as are the tons of -emissions (based on 1996 emission 

levels) that come into Ae program in each year. In 2030, all remaining units 

under 55 years of age (i.e.. units beginning operation in 1976 and after) would 

enter Ae program af the same time. Most of Aese younger, larger units are Ae 

units As! will be overcontrolled to offset emissions from older units uader this 

program, to meet Title IV requirements, or to comply wiA other ambient drives 

trading programs. As a result, most of Aese units wiD have, long before 2030, 

been controlled to new aource levels either through Ae NSR program itself er 

through Title I and IV amission reduction programs. 

Under Ae glide paA option, a utility company would elect to have all e f 

its fossil fiiel-fired units subjected to this program in 2010, and Ae system-wide 

average emission rate for Aose units would Aen be reduced proportionately ever 

Ae life of Ae program (e.g., 5 percent reduction per year) in order to reach overall 

new source control levels by Ae program end date of 2030. Among other reasons, 

this option is needed to provide flexibility for companies Aaf might oAemise 

have multiple retrofits lumped together in a short time frame under Ae age-based 

option. 

Program sad .if tie - All units would be brought into Ae age based program by 

2030 (as compared to Ae 2040 date originally suggested by industry). Similarly, 

all reductions under Ae "glide path" option would have to be completed by 2030 

and Aose reductions would be equivalent to Ae "age based** program reductions. 

Source applff ifrPIty - This program would apply to fossil fuel-fired steam 

electric generating units. Consideration should be given to reasonable 

exemptions, for example, for small units and low capacity factor units. 

Pja^iIlajil^pjilfcabflUy - The backstop program would apply to SO, and NO,. 

Particulate matter C'PM") would continue to be subject to the NSR program and 

oAar existing source programs as discussed above. FurAermore, Ac backstop 

program would address emissions of fine PM through its control requirements for 

SOj&ndNO,. • ••*" * 

-3- 7 
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The enclosures to this document can be found In 

Air Docket A-90-37, Item IV-D-343. 

8 

P.9 

I 

• r 

» I 
P.10 

AN ALTERNATIVE TO THE 

NEW SOURCE REVIEW 

PROGRAM 

Presented on behalf off 

the Class off 85 

Regulatory Response Group 

tfV1*

4

-' by William Ivi! Jumpers 

Debra J. JezouK 

Baker & Botts, L.L.P. 

* : . . xx %.., V>C i 

«•*«•*.•«* . 

Details of the Alternative 

§ .. . . 

I The alternative program must be voluntary. 

I to encourage participation, netting would be 

eliminated from the NSR program 

I Sources could opt in up to 5 years after EPA 

establishes the program or up to 2 years after 

EPA sets presumptive BACT/LAER limits, 

whichever Is later. * ~ " 

I Once a source opts in, BACT/LAFR v/ould be 

suspended for a 10-year period. 

. . • * * - " —-i 

;. 

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• ' 1 . 1 •.• 

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P.11 

Applicability of BACT/LAER 

TTrr^^-*l>''fff'«IT,Krlh • •% »fwMlttMm^^vv,,•• „ m -r L.., ...... 

I During the suspension period, BACT/LAER 

requirements would continue to apply to: 

I significant new units <V:. 

I reconstructed units 

I BACT/LAER would not apply to 

repowering pro 

.*"*•'•- i !••''; 

Other 

t

,vw •tfffi^ffiA'B -,' •v?Aa3aBiB!&^^ 

. ; •-,.;, . a . «• ^.v, Srf_. 

I PALs should become a more viable 

applicability optiori! under the regular NSR 

program. • : ^J 7 

I EPA should not review past projects for 

potential NSR applicability Q.e. no lookback). ~'*';

''":••-.-.•-. 

..fp v •:'••.,. --.-
P.12 

> • ' 

Presumptive BACT/LAER 

itttirniitnrmttTtUf/i ''TO^.,^ 

I EPA should set presumptive.BACT/LAER limits. 

I Units would be exempt from presumptive 

BACT/LAER if they meet the following: 

I BACT/LAER or BACT/LAER-equivalent limits 

within 5 years prior to opting in 

l recently promulgated MSPS (i.e. w'thin past 5 

years) 

I federally-approved cap-and-trade programs for 

compliance with NAAQS {i.e. NOx SIP Call) 

I permit limits 'close* to the presumptive limits 

«. «.... . i)..i...»» . 

Safeguards to Maintain Air 

Quality ±.-**.-»Ji~& 

I Sources must continue to meet permit 

limits. •<fiok?.-::-"i- •-»«.* • 

I NSPS would continue to apply. 

I Sources would be subject to subsequent 

SIP requirements.;- ;;; 

I Modeling would be required for "major 

modifications? 

t ' 
P.13 

-—•»-»—*-•-•»—«-*—f •» ' ig j|iu — "Tr" 

Issues to Be Addressed 

i;.¥i.»^"*''»'iroV'*^^''^'V»»'»w' ! ^g.tr^igfBfek" 

I How sources located near Class I areas 

should be treated. 

I Coordination with (State/local NSR 

permitting authorities. 

-• la. >..!», . 

:vS W", , 

:2-
P.14 

Tho 

Clean 

Energy 

Broup 

Con&ofidaed Edison, Inc. 

KeySpan Energy 

Niagara Mohawk Power 

Corporstion 

Northeast Utilities 

PECO Energy Company 

PG&E Generating 

Public Servtee EJectrlc 

and Gas Company 

Rochester Gas and Electric 

Corporation 

Sempra Energy 

November 10,1999 

Michael Bradley 

Executive Director 

The Clean Energy Group 

47 Junction Square Drive 

Ccncord, MA 01742 

3 97aW69-5533 

_ 978-369-7712 

John S. Seitz, Director 

Office of Air Quality Planning and Standards 

U.S. Environmental Protection Agency 

MD-10 Research Triangle Park, NC 27711 

Dear Mi. Seitz: 

I am writing on behalf of the Clean Energy Group (CEG), responding to a number of 

questions that you and your staff raised at our meeting of September 30,1999 regarding 

tiie CEG integrated air quality strategy. Since we last met, we have made several 

improvements and clarifications to the proposal (attached). I look forward to meeting 

with you regarding these changes, and please contact me if you need any additional 

clarification on the issues we have addressed. 

Question 1: Does the existing Clean Air Act authorize the EPA to create a dual 

definition of "modification", with one definition (using the actual-to-actual test) applied 

to sources which do not opt in to the integrated strategy, and another definition (using 

the potential-to-potential test) applied to sources which do opt in? 

Response: Yes, the Clean Air Act authorizes EPA to create a dual definition of 

"modification" as long as any alternative definition that is adopted results in equal or 

greater environmental results. This type of "equivalency" test has been used by the 

Agency in the past in approving altemative definitions of what constitutes a 

"modification" for NSR applicability determinations. One example of this is the 

RECLAIM program in California. Another example is the PAL concept which EPA is 

considering adopting for the complex industrial sector as an alternative to the traditional 

NSR applicability determination methodology. 

In the case of the multi-pollutant cap off-ramp that is being proposed, the equivalency 

test is clearly met Under the existing, and even the proposed revisions to the NSR 

regulations, the number of facilities that become subject to NSR is relatively small. 

Applying controls on facilities which opt into the off-ramp program by certain dates, for 

not only regulated pollutants such as SO* NO* and particulate, but also currently 

unregulated pollutants including mercury and C02, will provide greater environmental 

benefits than can be expected from the traditional NSR program. 

The essential element here is making it clear in the preamble of the supplemental rule 

that the "potential-to-potential" NSR applicability determination test can only be 

justified if it is inextricably linked to voluntary acceptance of enforceable multipollutant caps. 

Question 2: What facilities must be included when a company opts into the integrated 

strategy? Can a company opt in facility by facility, or must all facilities owned or 

operated by the company opt in? If several subsidiaries of the same parent company 

each own or operate one or more facilities, can one subsidiary's facilities opt in while 

the other subsidiaries' facilities do not? 

Response: Companies should have the option of opting in individual "facilities, as 

opposed to requiring company wide participation, for three basic reasons. First, it 

\2> 
P.15 

seems unlikely tbat companies would opt-in only low-emitting sources or only higher-emitting sources 

to take advantage of the program. An incentive exists to opt-in higher emitting sources because of the 

flexibility allowed under the program (i.e., higher emitting sources can over comply and sell excess 

allowances that are generated). Similarly, an incentive exists to opt-in lower emitting sources in order 

to generate excess allowances for trading. Second, many generating stations are owned and operated 

by joint ventures between two or mare unrelated companies. Generally, one of the facility co-owners 

(even the majority owner in the joint venture) could not force the other co-owners to opt the facility 

into the integrated strategy. For this reason, requiring company-wide participation would effectively 

preclude a company which participates in joint ventures from opting in at all unless joint ventures are 

excluded from the company-wide requirement Third, if al) facilities owned or operated by a company 

must opt in, administration and enforcement of the program would be complicated. For reasons 

unrelated to NSR or air quality generally, a parent company may create a number of subsidiaries, each 

of which would own and operate one facility. It would be burdensome for the EPA to track all 

companies within a corporate family in order to ensure that all facilities owned and operated by all ofa 

company's affiliates are participating in the integrated strategy. 

Question 3: How would the proposed integrated strategy address PM-10 and CO? 

Response: The integrated strategy has been revised to include reduction targets for PM-10 and CO. 

CO emissions would be controlled by exercising best combustion control practices. This requirement 

would be effective when a facility first opts-in to the program. PM-Q emissions would be capped at an 

average annual emission level of 0.03 Ibs/mmBtu beginning in 200748. 

Qnestion 4: Does opting into the integrated strategy forever insulate a company from the need to 

reduce emissions below the levels prescribed in the integrated strategy? Or, would the NSR flexibility 

in the integrated strategy end after a specified amount of time? 

Response: Language has been added to the integrated strategy clarifying the next steps after the 15 

year period: "After IS years, emission performance targets under the program would be subject to 

renegotiation based on an analysis of air quality needs to be conducted in advance of the IS year 

deadline. This negotiation process would not take place on a company-by-company basis, rather the 

performance targets for the overall program would be evaluated. If a company opts out of the program 

afier its IS years of participation, it would default back to traditional NSR requirements, while the 

caps committed to at the outset of the program would continue to apply. The decision to opt out of the 

program would not subject a company to a retroactive review of modifications made during the IS 

years that it operated under the multi-pollutant caps." 

Question S: The integrated strategy provides for a cap-and-trade program for mercury- Each source 

subject to a MACT standard, however, must achieve the standard individually. If the EPA 

promulgates a mercury MACT standard, should sources which have opted into the integrated strategy 

be exempt while sources of the same type which have not opted in must comply? If the sources which 

have opted into the integrated strategy cannot be exempted, can they nonetheless be excused from 

complying with the standard individually and be allowed to comply through trading? 

Response: EPA appears to have some flexibility in how it defines an affected source under Section 

112 of the Clean Air Act. We would be interested in your analysis of whether this apparent flexibility 

would be sufficient to allow facilities that opt in to the integrated strategy to comply with a mercury 

reduction target through trading (i.e., can "affected source" be defined to exclude facilities 

participating in the Integrated Strategy.) 

14-

Tba eiaai Entrsv Group 
P.16 

Question 6: Can natural gas-fired units which have opted into the integrated strategy trade SO* 

allowances with coal-fired units which have also opted in? If so, does this amount to a straightforward 

subsidy of the gas-fired units? 

Response: The Integrated Strategy does not propose any changes to the existing operation of the Acid 

Rain S02 trading program. However, with respect to other pollutants that would be capped (e.g., 

NOx, mercuty, etc.) we see no reason why gas units that have opted into the Integrated Strategy 

should not be allowed to participate in allowance trading with coal-fired units, which have also opted 

in. We do not consider this a subsidy of gas-fired units, but rather an equitable treatment of units that 

have already invested heavily in low-emitting generating technology. 

Question 7: If a company opts into the integrated strategy, but does not comply with one or more of 

the emission reduction targets by the date specified, what sanctions should be brought to bear on that 

company? How would the EPA ensure that a facility which opted into the integrated strategy remains 

bound by its emission reduction commitments even after the feci!ity changes hands? 

Response: Language has been added to the integrated strategy addressing both of these issues: 

"Emission caps to be incorporated into facility Title V permits (with the obligations in the permit 

carrying over to the new facility owner if purchased), and penalty provisions similar to those available 

under the Acid Rain SO2 trading program (i.e., penalty per ton of excess emissions plus offsets) would 

apply." 

Sincerely, 

Michael Bradley 

Attachments: 

ec: 

CEG Integrated Air Quality Strategy (11/9/99) 

Paul Bailey 

BUI Becker 

Karen Blanchard 

Ellen Brown 

Robert Brenner 

Bruce Buckheit, Esq. 

Jon Devine 

Gregory Foote, Esq. 

Jason Grumet 

William Harnett 

David Hawkins 

Dennis Crumpler 

Henry Nickel 

Bill O'Sullivan 

Peter Tsirigotis 

John Paul 

Robert Perciasepe 

Robert Roberts 

David Solomon 

Susan S.G. Wierman 

Tba Clean Eneroy Great 

15 
P.17 

The 

Clean 

Energy 

Group 

Comotidated Edison, Inc. 

KeySpan Energy 

Niagara Mohawk Power 

Corporation 

Northeast Utilities 

PECO Energy Company 

PG&E Generging 

Public Service Electric 

and Gas Company 

Rochester GIB and Electric 

Corporation 

Sempra Energy 

Michael Bradley 

Executive Director 

The Clean Energy Group 

47 Junction Square Drive 

Concord, MA 01742 

) 978-369-5533 

S 978-369-7712 

Integrated Air Quality Strategy 

for the Power Generation Industry 

Introduction 

The following framework is offered as a starting point to initiate discussion ofa 

national, voluntary program for the power generation industry that would integrate 

future emission reduction targets with enhanced New Source Review (NSR) flexibility 

(see discussion of principles below), and is offered in the context of EPA's on-going 

efforts to reform the NSR program.1 

Initially, when the Clean Energy Group began to consider an integrated air quality 

strategy for the power generation industry in April 1999, the objective was to develop a 

national uniform multiple pollutant regulatory strategy with dates certain for the 

implementation of cap-and-trade programs for NOx, SO2, mercury, and CO* However, 

after evaluating EPA's regulatory authority under the Clean Air Act, it was determined 

that a mandatory national program was not possible without amendment of the Act 

Faced with this constraint, the concept then evolved into a voluntary program, 

implemented under the auspices of the NSR program, as outlined in this document. 

More specifically, this proposed voluntary alternative would allow participating 

companies flexibility under the NSR program in exchange for an enforceable 

commitment to operate under cap-and-trade programs for NOx, S02, CC_ and mercury. 

These cap-and-trade programs would provide participating companies with a set of 

emission targets that would not change for a period of IS years, unless further 

reductions are needed to attain and maintain health based standards. 

After IS years, emission performance targets under the program would be subject to 

renegotiation based on an analysis of air quality needs to be conducted no later than S 

years in advance of the IS year deadline. This negotiation process would not take place 

on a company-by-company basis, rather the performance targets for the overall program 

would be evaluated. If a company opts out of the program after its IS years of 

participation, it would default back to traditional NSR requirements, while the caps 

committed to at the outset of the program would continue to apply, subject to 

adjustment if necessary to attain and maintain health-based standards. The decision to 

opt out of the program would not subject a company to a retroactive review of 

modifications made during the IS years that it operated under the multi-pollutant caps. 

The objective of the framework is to achieve substantial air quality benefits in a costeffective manner. 

Three basic principles have guided the development of this framework to date: 

1. The alternative framework has been designed in the context of existing Clean Air 

Act authority; 

2. It may be necessary to have a critical mass of companies opted in to the program 

before it would take effect; and 

3. The emission caps developed under the program are to be based on public health 

and environmental quality objectives. 

I .Ontario Power Generation, a member of the Qean Energy Group. Is not at this time a party to 

this proposal, as the New Source Review program does not apply to facilities outside the U.S. 

[ ^ 
P.18 

Strswman Framework 

National cap-and-trade programs under declining tonnage caps, implemented over the course of the 

years 2003-2012 consistent with the principles outlined above, for NOx, SO* mercury and COj by 

dates certain. After a period of 1S years, emission performance targets under the program would be 

subject to renegotiation. At least five years in advance of the IS year deadline, EPA would conduct an 

analysis of air quality needs to inform the renegotiation process. The reduction targets listed below 

are based on public health and environmental quality objectives and promise to deliver significant and 

timely improvements in air quality on both a national and international scale, depending upon tiie. level 

of participation in the program. Emission levels listed below represent national targets assuming 

participation by the entire electric generating industry in the program. Performance targets for 

participating facilities would be established consistent with these targets. 

Reductions proposed for NOx and SO2 emissions would significantly mitigate the problems of fine 

particulate pollution, ground-level ozone, acid rain, regional haze, and the nitrification of certain bays 

and estuaries. Reductions for NOx are proposed in two phases. The first phase would begin in 2003 

with the implementation of the NOx SIP Call in the eastern U.S. Beginning in the 2007-2008 time 

frame, a second phase of NOx reductions will be achieved by extending die first phase program to a 

national program and requiring NOx reductions to be met year-round as opposed to only during the 

ozone season as required in phase one. This will result in approximately a SO percent reduction in 

emissions from the phase one cap level. Ozone season NOx levels in the 22-state NOx SIP Call 

region will not be tightened in phase two beyond levels consistent with an emission rate of 0.15 

Ibs/mmBtu. S02 emissions would be limited to levels SO percent below Clean Air Act Title IV 

commitments. These proposed targets are consistent with EPA's finding that further reductions in 

NOx and SOj are required to address the continued impacts of acid deposition. 

Reductions in emissions of mercury are proposed to address the health effects currently under 

investigation by EPA and other researchers, and reductions in CO2 emissions are proposed to mitigate 

the risks of climate change. The performance target proposed for mercury has been presented as a 

two-phase program, including a 50 percent reduction by 2007-2008 and a more significant reduction 

in 2012. This range of values is presented in recognition of EPA's on-going efforts to investigate the 

mercury emission inventory, potential health and environmental risks of mercury, and mercury control 

technologies. The performance target for C02 emissions is based upon the target established by the 

Rio Accord, which was ratified by Congress. 

By addressing these pollutants under the auspices of an integrated strategy, multiple air quality 

objectives will be achieved while delivering substantial economic benefits relative to a strategy that 

addresses these air quality problems separately. 

Pollutant reductions for NOx, mercury, and C02 would be implemented under a national cap and trade 

program, with allowances allocated on a total energy/output basis and credit awarded for early action. 

The ability to participate in the aforementioned cap-and-trade programs would be incorporated into 

facility Title V permits (with the obligations in the permit carrying over to the new facility owner if 

purchased), and penally provisions similar to those available under the Acid Rain SOj trading program 

(i.e., penalty per ton of excess emissions plus offsets) would apply. SOa reductions would be 

implemented under the existing Acid Rain program. Further emission reductions beyond the national, 

proposed targets may be required in order to insure attainment and maintenance of existing health 

based standards. 

Carbon monoxide (CO) and coarse particulate (PMl0) would also be incorporated into the program, 

Integrated Strat*©* 11/9/99 • Page 3 of $ 

n 

Tia eitaa fntrgy Graap 
P.19 

although trading and averaging of emissions reductions would not be allowed. Rather, CO emissions 

would be controlled by exercising best combustion control practices. This requirement would be 

effective when a facility first opts-in to the program. PM.o emissions would be capped at an average 

annual emission level of 0.03 Ibs/mmBtu beginning in 2007-08. 

Summary of Pollutant Caps for NSR Alternative Proposal 

The following table presents the proposed reduction targets and schedule for the Clean Energy Croup 

Integrated Air Quality Strategy. Individual facility caps would be established at levels consistent with 

the proposed reduction targets outlined below, with th£ ability to participate in the cap-and-trade 

programs incorporated into a participating facility's Title V permit. 

Please note that the following targets should be reviewed in the context of an integrated NSR 

flexibility program. As envisioned, the Integrated Strategy outlined below would serve as an 

alternative to the traditional NSR program for those sources that choose to participate. The reduction 

targets and schedules have been carefully developed and coordinated to deliver timely air quality 

improvements, while creating an incentive for participating companies to evaluate the impact of their 

compliance strategies on all of the pollutants listed (e.|g., optimizing scrubbers for mercury control). 

Because of the aggressive targets proposed and the substantial costs associated with meeting these 

targets, the principles outlined above {e.g., trading and banking, as well as the allocation of allowances 

to new sources) are especially important Also, before any company opts to participate in the offramp, it will need to consider the implications of participation on its competitive position, including 

whether or not competing companies have opted to pirticipate. Clean Energy Group companies, while 

they endorse the concept of this alternative program, Jike all other companies would need to evaluate 

the impacts of participation on their individual competitive positions before opting to participate. This 

highlights the issue of critical mass outlined in the principles above that guided the development of the 

framework. 

Integrated Strategy 11/9/99 -Page 4 of 5 

\ % 

Tbt Clean Enero¥ Brtup 
P.20 

i » 

CEG Integrated 

Pollutant 

NO, 

SQ. 

PMI0 

CO 

mercury 

CO, 

New Source Review Alternative 

Reduction Targets and Emission Levels 

Aisoming Full Electric Industry Participation 

NOx reductions implemented in two phases. Phase-one would begin in 2003, with 

reductions consistent with current commitments, including implementation of the NOx 

S IP Call Rule m the 22-state SIP call region (Le., national emissions of 4.22 million tons). 

Phase-two would begin in 2007-08, with the extension of phase-one to a national/annual 

program or roughly a 50% reduction from phase-one levels (i.e., national emissions of 

2.11 million tons). Environmental benefits resulting from implementation of the NOx SIP 

Call are not to be affected in transitioning to a national/annual NOx program in phase-two. 

Also, ozone season NOx levels in die 22-state NOx SIP Call region will not be tightened 

in phase-two beyond levels consistent with an emission rate of 0.15 lbs/mmBtu. 

SQz reductions 50% beyond Phase II Acid Rain requirements (Le., national emissions of 

4.5 million tons) beginning m 2007-08. This schedule is consistent wilh tbe second-phase 

NOx schedule, PM-10 schedule, and phase-one mercury target to take advsntage of any 

co-pollutant reduction benefits. 

Coarse particulate reduction target at an average annual emission, level of 0.03 lbs/mmBtu 

beginning in 2007*08. 

Reductions achievable by exercising best combustion control practices, effective 

immediately upon opting-in to die program. 

Mercury reductions implemented in two phases. Phase-one would begin m 2007-08, with 

a reduction target 50% below current emission levels (i.e_ national emissions of 26 tons). 

(Tbe flexibility of trading is deemed critical at this phase of die program in order to 

incentivize the testing of advanced mercury control technologies.) According to EPA, 

wet scrubber technology installed to achieve Phase U SOa reductions in this same time 

period are capable of reducing mercury emissions a minimum of 35% and up to 50% if 

scrubber technology is optimized for mercury reduction. 

Phase-two would begin in 2012, with reductions in the range of 70% to 90% below 

current emission levels (Le., national emissions of 5-16 tons). 

Given the uncertainty surrounding mercury control technology effectiveness as well as 

the feet that EPA continues to evaluate the scientific evidence regarding the health effects 

of mercury, these proposed mercury reduction targets may be revised to be consistent 

with EPA's on-going regulatory determination process. 

COj reductions implemented in two phases. Phase-one would begin in 2008, with a 

reduction target representing stabilization at 1990 emission levels (i.e., national emissions 

of roughly 1,925 million tons). Phase-two would begin in 2012, with a reduction target 

consistent with the national reduction target to be determined by Congress. 

Integrated Strategy 11/9/99 • Page 5 of 5 n Thi Clean Enariv 8raop 
P.21 

NATURE A^-37 

RESOURCES 

DEFENSE Befoiethe . 

COUNCIL UNITED STATES ENVIRONMENTAL PROTECTION AGENCY ' 

Comments of ' 

Natural Resources Defense Council 

on 

Notice of Availability; Alternatives for New Source Review (NSR) 

Applicability for Major Modifications. - — 

•. . . . 63 Federal Register 39857-39866 (July 24,1998) 

• : " * Docket No. A-90-37 

. October 8,1998 

• a 9 

I. Introduction and Summary 

The alternatives set forth in EPA's July 24,1998 notice still fail to implement the 

basic purposes of the Clean Air Act's New Source Review (NSR) and Prevention of Significant 

Deterioration (PSD) programs for pre-construction review of new sources and modifications in 

dirty air and clean air regions. As stated in our earlier comments on this rulemaking', the 

purposes of these programs are twofold: to assure that new investments do not degrade air . 

*• • . . 

quality and to assure that when new investments are made, emissions are minimized by requiring 

new and modified sources to meet performance standards that reflect modern emission • .„ 

prevention capabilities. 

.. The second of these functions has become increasingly important as the impact of 

grandfathered air pollution sources on air quality becomes more and. more the central 

impediment to clean air progress. Contrary to the intent of Congress, investments in new 

production have not caused existing grandfathered sources to be replaced by facilities that must 

meet modern performance, standards. As a result, grandfathered sources dominate the pollution 

1

0 ur comments of January 21,1977 are incorporated by reference in the instant' comments, as modified by today's 

comments. .••".* ' ." * „ 

1200 New York A.*, N.W. 

Suite 400 

Washington, DC 20005 

202289-6868 

"Fax 202 289-1060 

•fcvvjvdfcoij 

71 Stevenson Street 

Suite 1825 

San Francisco, CA 94105 

41577y-Q220 

Fax4.5495-5996 2o 

6310 San Vicente Boulevard 

Suite 250 

Los Angeles. CA 90048 

213934*900 

Fax 2l i 934-1210 

40West20lhSue« 

NevrVoi-MCY 10011 

212 727-2700 

Fax 212 727-1773 
P.22 

inventory throughout the United States. EPA needs to reexamine the key policies of NSR and 

PSD applicability and netting to enable these programs to function as drivers of modem 

performance requirements. 

The simple fact is that most significant investments are now avoiding the PSD and major 

NSR programs because the existing rules provide far too many opportunities to avoid 

applicability. As stated in our earlier comments, EPA should not seek to "reform" NSR aad PSD 

by adopting additional exclusions and exemptions from applicability. The opposite approach is 

needed to make inroads on the excessive impact of grandfathered sources on air quality goals. 

EPA should use its authority to make NSR and PSD apply more broadly, while taking 

appropriate steps to streamline the processes employed in the review activities. 

However, creating more exemptions is not a legitimate streamlining activity; it is simply 

p 

a way to weaken the effectiveness of the new source programs. Provisions that allow new 

investments to escape review while maintaining emissions at current or past levels help 

perpetuate the pollution impact of grandfathered sources. Most of the alternatives in die 

agency's July 24,1998 notice would have this effect and they are therefore objectionable. 

NRDC submits that EPA should adopt tests for applicability that insure that emissions from 

grandfathered sources will decline over time as intended by Congress. 

NRDC agrees with EPA's intent to abandon the "demand growth exclusion** from 

calculations of future emissions. We also support EPA's position that post-construction 

emission forecasts relied on to avoid NSR/PSD applicability must be fully enforceable. 

However, we object to EPA's suggestion that the period for enforceable emission limits might be 

limited to ten years. We object to EPA's proposal to allow use of historic emission levels that 

are higher than current levels to establish baseline emissions. Indeed, for the electric generating 

industry in particular, we submit that the only permissible baseline is one that reflects what 

future emissions would be in the absence of the investment that constitutes the physical or 

operational change at the facility. We present data showing that absent such investments, 
P.23 

operations and emissions will decline over time. We submit that a declining path must be used 

as a baseline to calculate whether tbe change results in an emissions increase. Regarding other 

positions, we urge EPA to narrow tbe availability of netting and to broaden the definition of 

"change". We also object to EPA's approach to the PAL concept The PAL provisions outlined 

by the agency certainly are outside EPA's legal authority because they permit reliance on 

emission reductions that are not contemporaneous with the changes at the facility. If there is any 

legally permissible role for the PAL concept, it can only be as part ofa structure that ensures that 

emissions from the facility will decline and approach new source performance levels over a 

reasonable period. 

II. Actual to Future Actual Emissions Calculation 

As the agency notes, the approach to determine whether an emission increase occurs is to 

compare emissions without the change to emissions after the change has been made. While some 

would style these emission profiles as "pre-change" and "post-change" emissions, we believe it 

is more accurate to label them "no-build" and "build" emissions cases. We object to most 

aspects of EPA's handling of these calculations. 

A. Calculation of Baseline or "No-build" emissions 

EPA proposes to allow sources to rely on maximum emissions from the source during the 

past ten years. We object strongly to this approach. First, its impact is clear: allowing such a 

high baseline definition will result in far more sources evading NSR/PSD review, thus 

perpetuating the environmentally harmful grandfather status of highly polluting sources. Under 

EPA's approach, the more polluting a grandfathered source is, the easier it is for the source to 

preserve its grandfather exemption. Given the pronounced adverse impact of grandfathered 

sources on air quality (noted by EPA in its NAAQS RIAs, regional haze proposals, OTAG SIP 

call proceedings, and other rulemakings and studies), it is arbitrary and an abuse of discretion for 

EPA to select a definition of baseline emissions that would perpetuate exemptions from modern 

72Z 
P.24 

performance standards for the most polluting facilities. 

Second, use of an maximum emission level up to ten years old virtually ensures that tne 

source can increase emissions over current levels without being subject to NSR/PSD review. 

Thus, sources could seriously degrade existing air quality without undergoing review. This 

* 

result is contrary to one of the central purposes of pre-construction review and is therefore 

unlawful. EPA's approach would allow firms that have mothballed major sources for up to a 

decade to put them back in operation with grandfathered emission levels and with no major 

source review. Both EPA and Michigan authorities have recognized in the recent Connors Creek 

matter that this result is contrary to good public policy. Yet EPA's approach would allow 

mothballed units to restart without review even though emissions would increase in major 

amounts. 

Third, EPA's approach ignores the only appropriate test for determining whether a 

change has resulted in an emissions increase: that is to compare what emissions would be absent 

the change to emissions afier the change. As EPA's ten-year lookback concept suggests, there 

are many sources which tend to operate less and therefore emit less over time absent significant 

upgrading and related investments. This is understandable, since older sources often use 

production processes that are less efficient than newer facilities and thus the market operates to 

shift demand to more efficient facilities and away from facilities that have not been modernized. 

In addition, facilities deteriorate over time, often resulting in increased production expenses. 

The trend toward decreased operations and emissions over time at specific older units is 

well documented for the electric generating sector. Attached to these comments is a recent 

analysis performed for NRDC by Synapse Energy Economics, Inc., that documents a reduction 

in capacity factors for coal-fired generating units as such units age. Synapse finds that operations 

at existing units decrease at "roughly one percentage point for each year of age."8 As Synapse 

notes, significant ongoing capital investments have been made at existing units, so the one-

' Synapse Energy Economics, Inc., "Coal Unit Capacity Factor Decline With Age," August 12,1998* at 1. 

23 
percent per year decline understates what would have occurred in the absence of such 

investments. Synapse states, "in the absence of significant ongoing capital investment, tne 

decline in capacity factor with age would likely be much greater."3 

NRDC submits that EPA should adopt an applicability test that recognizes the fact that 

absent investments at a facility, its rate of operation and its annual emissions will inevitably 

- decline over time. The appropriate baseline against which to measure the emission increasing 

effect of an investment is not today's emission levels and certainly not levels ofa decade ago. 

Rather, it is the path that emissions would be expected to follow in the future absent the 

investment. 

It is obvious that investments at existing plants are aimed at modifying tiie future 

characteristics of the facility from what they would be in the absence of the investment In profit 

.oriented operations, including electric generating facilities, the economic rationale for making an 

investment is to capture a future return greater than the investment Of course, in calculating the 

economic impact of the investment, the firm compares the future revenues from facility operation 

with and without the investment It does not look back ten years nor confine comparison to 

current activity levels. EPA should adopt a similar approach for determining the emissions 

effect of an investment 

For units where changes are proposed, EPA should presume that emissions from the unit 

would decline with age in the absence of the change. Based on the Synapse data analysis, NRDC 

submits that for electric, generating units EPA should presume a decline significantly greater than 

one percent per year, absent investments that improve productivity. NRDC believes that a 

presumed decline of 3-5% per year would be reasonable. To avoid NSR/PSD applicability, a 

source operator would have to commit to an enforceable limit on emissions that kept the 

facility's emissions below the declining path that would be presumed to occur in the absence of 

Id. 

24-
P.26 

the investment.4 

B. Calculation of "Future Actual" Emissions 

EPA's supplemental notice identifies several aspects of the existing treatment of "future 

actual" emissions for electric utility units (tiie "WEPCO" rule) that h finds are especially 

troubling:' 

•. The lack of enforceable provisions for future emission projections; 

•. The limitation of future emission projections to 5 years; and 

•. The exclusion for demand growth. 

We agree that all three of these features of the existing WEPCO rule are unsupportable from a 

legal and policy standpoint and must be changed. However, the changes proposed by EPA are 

insufficient to comply with the Act's requirements and with sound policy. 

First, we agree that if a future actual calculation method is to be used at all, it must be 

accompanied by fully enforceable legal obligations that require the source operator to keep tne 

facility's emissions at or below the "future actual" emissions that are the basis for the claim tiiat 

the change is not a modification. As EPA notes, a system that relies on potentially self-serving 

calculations by a source operator, often conducted without notice or review by any agency or tiie 

public, cannot provide reasonable assurance that the Act's new source requirements are being 

met.6 Absent a legally enforceable obligation to limit emissions there is no basis to support a 

source's claim that its future emissions will remain below some forecast level that is less than tiie 

source's physical potential to emit Accordingly, absent such enforceable provisions, there is no 

basis for such a "future actual" calculation to be grounds for an exemption from the Act*s major 

new source review requirements. 

4

 Application of the declining emissions presumption indefinitely would result In an emissions limit approaching 

zero after a few decades. This would correspond in most cases to a full amortization of the original plant investment 

and thus appears to be a reasonable basis for conditioning a continued exemption from NSR/PSD applicability. 

Congress did not intend that the grandfather status conferred on existing sources in 1970 should last forever. 

5

 See, 63 Fed. Reg. 39860-61, July 24,1998. 

*63 Fed. Reg. At 39860-62. 

2.5 
P.27_ 

Moreover, since the exemption at issue would render federally enforceable rules (major 

NSR/PSD review requirements and permit limits) inapplicable, EPA cannot lawfully or logically 

premise the exemption on anything less than a federally enforceable limit on projected fixture 

actual emissions. Because the actual source is capable of emitting in amounts tiiat would trigger 

NSR/PSD review, it is necessary to create a legal fiction in the form of an enforceable emission 

limit to transfonn the source as a federal legal matter into a non-major source. Since the source's 

status as non-major is a creation of federal law, the instrument relied on to achieve this legal 

status also must be imbued with the attributes of federal law, including enforceability equal in 

extent to the federal NSR/PSD requirements that are rendered inapplicable. 

Full federal enforceability is critical to the structure of the Act because only by this 

means can EPA and citizens enforce the limits that are the basis for the exemption from 

NSR/PSD requirements. Congress provided in sections 113 and 304 of the Act that the limits in 

state-issued NSR and PSD permits must be enforceable as well by EPA and citizens. Congress 

could have decided that state enforceability of the specific source obligations under the 

NSR/PSD programs were sufficient but it did not do so. The limits on future actual emissions 

that EPA is proposing as a basis for a claim of exemption from the NSR/PSD review 

requirements are just as much a part of the NSR/PSD program requirements as are the limits 

contained in state-issued NSR/PSD permits. It would be anomalous to construe the Act to allow 

EPA to create an exemption from NSR/PSD review based on limits that were not as enforceable 

as the limits that otherwise would have applied to the source. Accordingly, we submit that 

EPA's final rule must include an express requirement that limits on future actual emissions must 

be fully federally enforceable (which includes citizen enforcement) to be recognized as a basis 

for NSR/PSD inapplicability. 

Second, EPA proposes that limits on future actual emissions be enforceable only for a 

period often years after the change is made. We object to this concept of disappearing 

enforceability. There is no legal or policy basis for limiting the operator's obligation to a ten2k> 
P.28 

year period. Sources are physically capable of operating for more than ten years and the preconstruction permits issued to sources do not prohibit operation after ten years. Section 111 of 

the Act requires changes that result in emission increases to trigger NSR/PSD applicability. 

There is no provision in the Act that says such increases may be ignored if they occur more than 

ten years after the change. 

EPA appears to propose creation ofa non-rebuttable presumption that any increases 

occurring ten years after a change did not "resulf from tiie change. But there is no basis for such 

a presumption and EPA points to nothing in the record of this rulemaking that would support 

such a presumption. EPA has not proposed and doubtless would not propose an NSR/PSD 

exemption for entirely new major units based on the source accepting a ten-year limit to keep its 

actual emissions below the major source threshold. Such an approach would allow the creation 

p 

ofa physical facility with the ability to emit in major amounts for an indefinite period in return 

for only a temporary limit on its emissions. Similarly, the approach proposed by EPA in its 

supplemental notice would allow the creation ofa modified facility that could result in major 

increases in emissions for an indefinite period in return for only a temporary constraint 

EPA notes that changes which increase the design capacity or PTE ofa unit are "clearly 

connected" to future increased emissions levels.9 Accordingly, EPA solicits comment on 

whether it should presume that such a source's future emissions result from the change even 

when the increases occur more than ten years after the change. EPA obviously should make such 

a presumption for such changes since the increases are clearly connected to the change. But it is 

equally correct that many other changes are clearly connected to future increased emissions. 

Source operators make investments not only to respond to today's markets but in anticipation of 

market trends. In a market economy the level of operation of any particular facility is a function, 

not only of the facility's physical production capacity, but also of the facility's relative 

production costs. Both of these factors are clearly connected to a facility's use the day after a 

'63 Fed. Reg. 39862. * _ , 
P.29 

change and to its use ten years after a change. 

EPA cannot lawfully presume that an increase which occurs ten years later is in no way 

connected to the way the plant is configured. Tbe change which may have occurred ten years 

earlier is part of the plant's configuration. EPA has no basis to presume that a source's future 

emissions is driven solely by the source's "pre-change" configuration and that the change has 

nothing to do with the source's activity level. It is the plant with the change tiiat is experiencing 

the emissions increase and it is an exercise in fantasy to claim that the emissions increase would 

have occurred even without the change. Accordingly, EPA's final rule should provide that the 

enforceability of limits on a source's future actual emissions must last as long as the source 

operates. 

Third, EPA proposes elimination of the "demand growth" exclusion from the calculation 

of future actual emissions. NRDC fully supports this action. EPA never had a permissible 

rationale for this egregious concept and it is one of the grounds on which NRDC filed a legal 

challenge to the agency's 1992 WEPCO rule. As set forth in our comments on the 1992 rule and 

this rulemaking, there is no basis for treatment of demand growth as a legally distinguishable 

reason for increases in emissions. Source operators do not make investments at production 

facilities in a parallel universe that excludes all considerations of demand for their products. To 

the contrary, production facilities are instruments used to respond to and take advantage of 

market opportunities, including growth in overall demand for a product When a source operator 

makes a change at a facility to position itself to meet demand, there is simply no logic to support 

a claim that demand growth resulted in an emission increase but the change itself did not 

Accordingly, EPA should abandon the demand growth exclusion. 

C. Role of Netting 

As EPA notes, an element of the calculation of emissions after a change is an accounting for 

contemporaneous reductions at a site that may allow a source to "net out" of review.1 

1

63 Fed. Reg. 39861. _ 

23 
P.30 

10 

EPA proposes to continue the use of the actual-to-potential method in conducting a netting 

analysis. NRDC supports the use of the actual-to-potential test to the' extent netting is permitted. 

However, we submit that EPA should consider the impact of current netting policy on the 

purposes of the PSD/NSR program. Is essence, the netting approach merely preserves tiie status 

quo, perpetuating excessively high levels of pollution and distortions created by the continued 

operation of poorly-controlled grandfathered pollution sources. 

Netting rewards sources that have managed to manipulate the current system to preserve 

high levels of emissions. Current netting policy allows those high emission levels to function as 

an asset that can be deployed to avoid NSR/PSD review. Thus, netting operates at cross 

purposes with sound air quality objectives. It creates incentives to keep emissions at 

unnecessarily high levels and perpetuates an inefficient allocation of emission "shares" by 

providing the greatest rewards to the most polluting sources. Netting frustrates one of tile 

primary objectives of the NSR/PSD program, which is to link requirements for modem emission 

performance standards to investments, so that emissions are reduced as the economy expands. 

Instead, netting allows existing emission levels to be perpetuated indefinitely. 

The time has come for EPA to conduct a thorough review of its netting rules to eliminate 

current perverse effects. The agency should constrain netting to the full extent permitted by 

current law, to reduce the advantage accorded to grandfathered sources arid produce a reduction 

in emissions as investments are made, consistent with the purposes of the NSR/PSD programs. 

Adoption of the baseline emissions calculation approach we outline in section A would assist in 

promoting a reduction in emissions over time but other changes are needed. 

First, EPA should reform its definition of contemporaneous so that only activities which 

are part of the project for which the netting claim is made can qualify.* Second, EPA should 

reduce the netting credits available for shutting down or limiting operations at existing units to 

reflect the obvious fact that the new emission-increasing projects will have greater longevity than 

* This approach runs directly contrary to EPA's proposed PAL concept, which we critique later in these comments. 

%°\ 
P.31 

. r 

% « 

11 

the older existing units that are generating the netting credits. For example, consider a source 

that proposes to build a 100-ton-per-year new unit with a 35-year useful life and to net out tiie 

increase with the shutdown ofa 100-ton source that has only 5 years of life remaining. The 

stream of emission reductions from the shutdown source ends after 5 years but the emission 

increases from the new source continue for an additional 30 yean. There clearly is an enormous 

' increase in the cumulative emissions from the facility over the life of the new project that is not 

captured if netting credits are given for the shutdown unit based only on a comparison one year's 

emissions. 

With respect to NSR, the Supreme Court in Chevron made it clear that EPA has tiie 

authority to eliminate the availability of netting altogether.10 As tiie agency is aware, one 

perverse effect of netting in NSR is that new equipment is installed without meeting LAER 

performance standards. This in turn means that a greater level of emission reduction is required 

to offset the new equipment's emissions than if the new equipment had met LAER standards. 

These greater emission reductions must come from a finite pool of existing emission sources 

whose total pollution load must be further reduced for the area to attain the ambient standards. 

Thus, the effect of NSR netting is to allow sources to unilaterally dedicate the cheapest and 

easiest emission reductions in a nonattainment area to offset poorly-controlled new units, leaving 

state and local control agencies with the difficult task of developing an attainment plan from the 

more expensive, politically controversial remaining emission reduction opportunities. 

EPA's original defense of its 1981 change to allow netting under the NSR program was 

that nonattainment areas choosing such an approach would be required to develop timely 

attainment plans in any event so that there would be no environmental harm. It is now 1998 and 

EPA must acknowledge that the theory it presented to the Supreme Court in the early 1980s has 

no basis in reality. 

In the real world, areas have not succeeded in developing timely and adequate attainment 

,c

 Chevron. U.S.A.. Inc v. NRDC, 467 U.S. 837 (1984). 

.So 
12 

plans. State and local agencies have protested repeatedly to EPA that they cannot identify 

sufficient, politically feasible emission reductions to demonstrate timely attainment EPA has 

responded with policies that have permitted lengthy delays in tiie submission of adequate plans. 

Given that the premise for EPA's initial adoption of NSR netting in 1981 has not been achieved, 

NRDC submits that the agency should act to eliminate netting from the NSR program. To fiul to 

do so would be arbitrary and capricious, given tiie lengthy record of empirical evidence 

contradicting the assumption that areas would in fact develop timely and adequate attainment 

plans. 

D. Exclusions from the Definition of Change 

In the course of this rulemaking has noted the existence of certain exclusions from the 

definition of "physical change" in EPA's current rules." While NRDC agrees witii EPA's 

observation that Congress did not intend to make "every activity at a source" subject to 

NSR/PSD review,13 it is equally clear that Congress did not intend that the grandfather status 

conferred on existing sources in 1970 and 1977 should last forever. NRDC submits that tiie 

existing categorical exclusions for "routine maintenance, repair and replacement" can be applied 

so broadly that they frustrate the purpose of the PSD/NSR program to achieve reductions in 

overall emissions as industrial investments are made. EPA should narrow these exclusions. 

Changes which cause the facility to operate at a greater rate and/or for a longer period than would 

have occurred in the absence of the change should be included in the definition ofa "physical or 

operational change." 

As the agency knows, most changes, including changes that involve major capital 

investments avoid NSR/PSD review, typically through a combination of the exclusions to the 

definition of "physical or operational change," the "significance" levels applied to emission 

increases, and the availability of netting. The effect of these exemption provisions, each of 

which EPA has the authority to narrow or eliminate, is to allow most grandfathered sources to 

" See, e.g., 61 Fed. Reg. 38253, July 23,1996. 

31 
P.33 

13 

perpetuate their excessive emissions in a manner that impedes achievement of air quality goals 

and frustrates the objective of the NSR/PSD programs. NRDC asks that EPA cany out a 

comprehensive reevaluation of all of these provisions so that NSR/PSD review will be applied 

more broadly to grandfathered sources making changes that mftititrw-. their operations and 

prolong their life. 

HI. Plantwide Applicability Limitation (PAL) 

In NRDC's January 21,1997 comments we stated our position that no PAL concept was 

defensible if it allowed sources to perpetuate their current emission levels. We reiterate tiiat 

position in these comments and provide additional legal and policy arguments in support of tiiat 

position. 

EPA's supplemental notice points out that the PAL concept is not compatible with a basic 

legal constraint of the PSD/NSR program—the requirement for contemporaneity between 

creditable emission reductions and emission increasing activities.19 EPA notes correctiy that the 

PAL concept is simply a form of netting. As such, it must comply with the requirement that 

emission reductions be contemporaneous with emission increases to be creditable.14 

The PAL concept proposed by EPA does not respect the principle of contemporaneity. 

EPA proposes a PAL that can operate as an exemption from NSR/PSD for as long as ten years. 

In addition, EPA proposes that PAL baseline emissions can be based on the highest year in the 

ten years preceding the creation of the PAL." Thus, under EPA*s approach, an emission 

increasing activity at a PAL source could be shielded from NSR/PSD based on an emission 

reduction that occun-ed twenty years earlier. Such an approach stretches the notion of 

15

 63 Fed. Reg. 39863. As discussed below in the text, there are major policy objections to EPA's PAL approach as 

well. 

"As the agency notes, the contemporaneity requirement stems from Alabama Power Co. v. Costle, 636 F.2d 323 

(D.C. Cir. 1979). The court construed the Act as allowing PSD sources to net out of review provided that the 

claimed emission reductions were contemporaneous with the emission increases that otherwise would have required 

review. 

" 63 Fed. Reg. 39863-64. 

21 
14 

contemporaneous beyond all reasonable bounds. No doubt a geologist would view events 

separated by twenty years as contemporaneous but the deadlines in the Clean Air Act make it 

clear that Congress did not intend EPA to justify its policies based on geological time scales. 

We agree with EPA's observations on tiie policy problems with permitting a PAL 

baseline that is based on historically high emissions.M First, such an approach perpetuates the 

high emission privileges of grandfathered sources. Second, it distorts an area's growth 

opportunities by giving grandfathered sources a privileged claim on scarce air quality resources. 

Third, it makes the job of developing adequate attainment plans more difficult than it already is. 

Sources with PALs based on twenty-year old emission levels could dramatically increase 

emissions without review in amounts that could jeopardize attainment and maintenance of 

ambient standards. A source under such a program is not a "PAL"; it is a "GLUTTON". 

Apart from the adverse programmatic implications of EPA's proposed approach, consider 

the impacts on a more human scale. Under EPA's proposal an 18-year old youth living near a 

major source would be told she had no rights to seek review of dramatic increases in emissions 

from new construction because the source had made an emission reduction two years before she 

was bom. Such a disconnect with the common-sense understanding ofa reasonable time scale 

for evaluating changes in air quality would bring justified disrepute on EPA and other agencies 

embracing this approach. 

Both the legal and policy problems of EPA's PAL proposal flow from the agency*! 

proposed choice ofa baseline calculated from historic high levels of emissions. The agency 

solicits comment on several altemative methods for adjusting an initial PAL baseline: 

shutdowns; unused capacity; expiration; good controls and pollution prevention.17 The difficulty 

with each of these approaches is that they are predicated on an initial excessive baseline and 

depend on voluntaiy source actions to retrieve some of the excess that was incorrectly handed 

over to the PAL source at the outset. Adjusting for unit shutdowns and unused capacity would 

M See, 63 Fed. Reg. 39863. 

"63 Fed. Reg. 39864-65. •cp O 
P.35 

IS 

be easily gamed and invites criticism for creating perverse incentives to maintain emissions at a 

high level to avoid "losing" them. The expiration option simply replaces a twenty-year old 

excessive baseline with a ten-year old excessive baseline. Tne further proposed exception from 

adjustments for "good controls" and "pollution prevention" has the aroma of apple pie but invites 

gaming, enforcement disputes and huge program complexity. 

The agency solicits comment on alternative methods to calculate a PAL. NRDC submits 

that the most straightforward, protective, and legally defensible approach is to require 

commitment to a declining cap as the eligibility criterion for a PAL. The PAL concept, if it is 

legally permissible at all, is not an approach that EPA is mandated to adopt It is an optional 

approach that EPA may have authority to make available, provided it respects the duties imposed 

on EPA by Congress to implement NSR/PSD programs. Accordingly, EPA has ample authority 

to condition the availability ofa PAL on criterion that are designed to be protective of the 

emission reducing objectives of the PSD/NSR programs and supportive of other Clean Air Act 

goals. 

If EPA pursues the PAL concept, rather than using a static baseline based on excessive 

historical emissions, EPA should require a PAL limitation that begins with current emission 

levels (average of the immediately preceding two-year period) and declines annually over a 

reasonable period to an emission level that reflects the application of NSR/PSD performance 

standards to the plant as a whole. Such an approach might suffice as a method of satisfying the 

Act's requirement that emission reductions be contemporaneous to justify exemptions from 

review. If the time period to reach plantwide PSD/NSR performance levels is not too attenuated 

and reductions are required annually (possibly using two- to three-year running averages), EPA 

might reasonably support a conclusion that the required plantwide reductions provide an 

emissions profile as good or better than that which would occur under a case-by-case 

contemporaneous netting program. 

A declining cap would also be consistent with the NSR/PSD program objective of 

34-.. 
P.36 

16 

achieving emission reductions reflecting modem pollution prevention capabilities as investments 

are made. Tbe period over which such a cap should achieve NSR/PSD performance levels 

should, in NRDC's view, not exceed a reasonable amortization period for the existing facilities at 

the site. Some of the most vocal industrial supporters of the PAL concept have argued that their 

investment cycle is much more rapid than tiie 20 to 30-year timescale that may have prevailed 

earlier in the 20* century. By definition, PALs would apply to plants with facilities that are 

already partially amortized. Given this fact and tiie need to respect the legal and policy grounds 

for contemporaneity, NRDC recommends a cap that declines to NSR/PSD performance levels 

over a period no longer than 10 to 15 years.1' 

IV. PAL Termination 

NRDC pointed out in its January 21,1997 comments that allowing a PAL to terminate 

presented opportunities for gaming that would frustrate clean air objectives. If a PAL terminates 

after 10 years, sources could schedule construction of major sources during the last several years 

of the PAL, avoid NSR/PSD review for all such sources, and then proceed to operate them at 

fully ramped-up capacity immediately upon termination of the PAL. EPA's supplemental notice 

does not address this fundamental problem with the PAL concept NRDC submits that a cap on 

plantwide emissions should continue permanently (at NSR/PSD performance levels as discussed 

above) so that sources constructed during the PAL tenure are not allowed to create unreviewed 

emissions increases. 

Conclusion 

The NSR/PSD programs were intended by Congress to operate over a reasonable period 

of time to reduce total emissions as the economy grows—through a process of old, grandfathered 

sources being replaced by sources subject to modem NSR/PSD performance standards. 

" As discussed below in the text, NRDC does not believe a source should be allowed to unilaterally terminate a 

PAL afier a 10-year period. 

35 
P.37 

17 

However, the combination of exemptions, exclusions, and lax netting rules under the existing 

NSR/PSD programs have prevented the programs from fulfilling the role intended by Congress. 

Most investment actions are never subject to the NSR/PSD requirements, regardless of tiie 

project's emission increasing effects or tiie opportunities for emission reduction that are 

available. EPA's current rulemaking would exacerbate the environmental problems caused by 

-the inadequate coverage of the existing NSR/PSD programs. Instead of seeking ways to extend 

the shield that allows continued operation of modified grandfathered sources with excessive 

pollution levels, EPA should adopt changes to these programs, as advocated in these comments, 

that would help achieve Congress* cleaner air goals. 

3h 
P.38 

Synapse Energy Economies, Inc. 

22 Crescent Street, Cambridge, MA 02138 • 617-6611-3248 • fax: 661-0599 • www.svnapse-energy.com 

To: David Hawkins, NRDC 

From: Bruce Biewald and David White, Synapse Energy Economics, Inc. 

Date: August 12,1998 

Topic: Coal Unit Capacity Factor Decline With Age 

Summary 

p 

This memo presents the results of an analysis of capacity factors for the fleet of coal units 

in the US. We find that capacity factor is related to generator age, with older units 

operating at lower capacity factors, by rougMy one percentage point for each year of age. 

The older units also tend to have higher O&M costs per kWh and higher heat rates. 

These two factors are presumably responsibre for the lower capacity factors of the older 

generators, although the relationships among] the variables are complex. 

There has been significant ongoing investment in the fleet of coal generators, for 

emissions controls and equipment repair and-replacement to maintain plant performance. 

In the absence of significant ongoing capital investment, the decline in capacity factor 

with age would likely be much greater. We have not, however, been able to analyze this 

connection between investment and performance. Moreover, we have not analyzed other 

potentially interesting technical and economic variables, some of which may be specific 

to particular regions, companies, or plants. Nonetheless, it appears reasonable to 

conclude at this time that a capacity factor decline of one percentage point per year in the 

absence of significant capital investment is a conservatively low presumption. 

3'"7 
P.39 

Figure 1 

% 

to 

u 

I B -

a 

CO 

O 

Coal Unit Capacity Factor by Vintage 

1930 1940 1950 1960 1970 

Inservlce Year 

1980 1990 2000 

Capacity Factors by Vintage 

Figure 1 is a scatter plot of capacity factors for 886 coal units by installation year. The 

database for this analysis was developed for Synapse's recent report for NARUCA It 

includes virtually all of the coal capacity currently operating in tie United States. The 

data plotted are for 1996. 

While there is considerable scatter, a clear trend is also discemable. Older coal units are, 

on average, operating at lower capacity factors. The trend line, a simple least squares fit 

1

 Grandfathering and Environmental Comparability: An Economic Analysis of Air Emission Regulations and 

Electricity Market Distortions, prepared for the National Association of Regulatory Utility Commissioners by Bruce 

Biewald, David White, and Tim Woolf, of Synapse Energy Economics, Inc., and Frank Ackerman and William 

Moomaw, of the Global Development and Environment Institute, June 11,1998. 

* 3 8 
P.40 

to the data, has a slope of 0.95 per year. That is, for this data set of coal units, capacityfactors of older units average about one percentage point lower than the capacity factors 

of newer units for each year of difference in the installation date. 

The adjusted R-squared for this regression, 0.22, indicates that the independent variable 

(installation year) explains only a small portion of the variation in the dependent variable 

(capacity factor). At the same time, however, the t-statistic of 15.6 indicates that tiie 

correlation between installation year and capacity factor is statistically significant to a 

.very high degree of confidence. While age is only one of many important factors 

influencing capacity factor, we can be quite sure that it is one of the factors. 

Another way of looking at this data is by binned averages. In Table 1, simple average 

and weighted average (by capacity rating) capacity factors are listed for five year bins. 

The trend is clearly upward, with average capacity factors for the first three bins (before 

1950) all below 30 percent and average capacity factors for the last three bins (after 1985) 

all above 70 percent 

It should be noted that the data set thins out at the ends. This can be seen in the plot and 

the table. For example, the bins for the oldest (1935 to 1939) and newest (1995 to 1998) 

units each contain only two observations. Ninety one percent of the tmits in the database 

began operating in the period between 1950 and 1984. 

Table l 

Coal Unit Capacity Factors Binned by Vintage 

Installation Year 

1935 to 1939 

1940 to 1944 

1945 to 1949 

1950 to 1954 

1955tol959 

1960 to 1964 

1965 to 1969 

1970 to 1974 

1975 to 1979 

1980 to 1984 

1985 to 1989 

1990 to 1994 

1995 to 1998 

Total 

Number of Units 

2 

10 

28 

144 

155 

107 

108 

Ul 

95 

86 

33 

5 

2 

886 

Simple Average 

Capacity Factor 

22.9% 

27.8% 

29.2% 

43.8% 

55.2% 

52.6% 

59.8% 

61.8% 

70.3% 

72.2% 

73.9% 

82.7% 

70.5% 

57.4% 

Weighted Average 

Capacity Factor 

17.8% 

29.0% 

30.2% 

46.0% 

573% 

57.7% 

64.0% 

64.6% 

70.3% 

72.5% 

75.6% 

83.0% 

72.1% 

65.3% 

,tf\ 
P.41 

Heat Rate and O&M Cost by Vintage 

The causes of capacity factor decline with age are complex, with many forces interacting 

in different ways for individual units. In the aggregate it is reasonable to conclude that 

the older units are less efficient than the newer units, and so are dispatched less often. 

Heat rate is a measure of the physical efficiency ofa generator. Because it specifies the 

amount of fuel that must be burned to produce a unit of electricity, and because fuel costs 

dominate total operating costs for coal plants, heat rate is an excellent indicator of 

economic efficiency of operation. In Figure 2, coal unit heat rates are plotted against 

vintage. The expected trend is clear, with newer units on average operating more 

efficiently than older units. 

O&M cost is another indicator of generator economic efficiency. In Figure 3, coal unit 

O&M costs are plotted against vintage. Again, the expected trend emerges from the 

scatter. Newer coal units have, on average, lower O&M costs than older units. 

It should be noted that there is no simple cause and effect relationship amount the data 

plotted in the three figures. While heat rate and O&M cost both influence capacity factor, 

the capacity factor will also influence heat rate and O&M cost Lower capacity factors 

generally indicate operation ofa unit in a cycling mode, with the unit shutdown and 

restarted as demands fall and rise, and also operated at partial capacity states. Units 

operated in this manner will tend to burn more fuel to produce a kWh than do generators 

operated as baseload units, with higher capacity factors. 

Similarly, intermediate units will tend to have higher O&M costs per kWh simply 

because some O&M costs are "fixed** (not related to the amount of kWh produced). That 

is, if a plant is operated at lower capacity factor, then some of the expenses incurred in 

operating and maintaining the plant are not correspondingly reduced, and hence the per 

kWh cost is higher. 

Caveats and Directions for Further Research 

The analysis described above is a quick and straightforward way of looking at changes in 

coal unit capacity factors over time. I hope and expect that it is useful. At the same time, 

its limitations should be noted. We have not addressed many potentially important 

factors including the following: 

P 
P.42 

• How does generator availability (as measured by "equivalent availability factor*') 

change with age? 

• How would the results ofa multi-variable regression analysis differ from the simple 

regression results presented here? 

• How specifically does capital investment in power plants relate to capacity factor over 

time? 

• This analysis examines a sample of generators of different vintages at one point in 

time. How do the trends look for generators over time - for either a series of actual 

years or projected conditions into the future? 

• Are there region, company, or plant-specific considerations that should be factored 

into the analysis? 

Future research on this topic might usefully be directed toward addressing some of these 

issues. 

Figure 2 

18,000 

16,000 

14,000 

& 

5 12,000 

n 

e> 

Z 

10,000 

8,000 6,000 

Coal Unit Heat Rates by Vintage 

• 

( 

I 

• 

4 

i 

• 

*• 4* 

- • 

w

 w 

• • 

f "Jfit; m 

* | 

•J 

• • 

• t *Lt* 

r* •* V r 

• 

iil^% 

Tl^T 

1930 1940 1950 1960 1970 1980 1990 2000 

fnservlce Year 

4 fi 
P.43 

45 

40 

35 

30 

lls/k (mi 

S 

•6: 

o 

25 

20 

15 

10 

5 

Figure 3 

Coal Unit O&M by Vintage 

• 

— — 

4 

• 

++ 

-Hi ^rrf 

. • ej 

< 

• ~ • 

* 

> 

• • 

* * a . - a 

for* j v * •" 

SHT jUHltlH 

• 

a • 

Uliffl^* JinPTr *•* 

« • 

iatt^ !Sw^-4 

1930 1940 1950 1960 1970 1980 1990 2000 

Inservlce Year 

42-

> 
• ? 

.Anthony Alexander 

Executive Vice President and General Counsel 

First Energy 

.76 South Main Street 

Akron, Ohio 44308 

Praveen Amar 

NESCAUM 

129 Portland Street 

Boston, MA 02173 

Iclal Atay 

NJDEP 

401 East State Street 

Trenton, NJ 08625 

Bene Bauereis 

BGE 

Ann Berwick 

M. J. Bradley Assoc. 

47 Junction Square Drive 

Concord, MA 

Joel Bluestein 

EEA/TRIGEN 

Tom Bonner 

MidAmerican Energy 

Karen Britto 

Detroit Edison 

601 Pennsylvania Ave., NW, Suite 350 

Washington, DC 20004 

William Brownell 

Hunton & Williams 

1900 K Street, NW, Suite 1200 

Washington, DC 20006 

Robert L. Brubaker, Esq. 

Porter, Wright, Morris & Arthur 

Columbus, Ohio 

Bruce Alexander 

PECO Energy 

Janet Anderson 

WHCCTF 

Paul Bailey 

EEI 

701 Pennsylvania Ave., NW 

Washington, DC 20004 

ATTACHMENT 5 

Addressee List 

(This list is stil l 

under construction.) 

P.44 

T3 

Carmen Bender 

Detroit Edison 

Julie Blackenship 

Cinergy Corp. 

PO Box 960 

Cinncinati, Ohio 45201 

Jerry Bolden/Janet Leatts 

TVA 

1101 Market Street-LT5D 

Chattanooga, TN 37402-2801 

Terry Bowers 

Department of Defense 

Sarah Brown 

Western Resources Inc. 

Mark Brownstein 

PSEG 

80 Park Plaza 

MC-17G 

Newark, NJ 07102-4194 

Jack Brunton 

Sempre Energy 

101 Ash Street 

San Diego, CA 92101 
P.45 

David Buente, Esq. 

Sidley & Austin 

1722 Eye Street, NW 

Washington, DC 20006 

William Bumpers 

Baker & Botts 

1299 Pennsylvania Ave. 

Washington, DC 20004 

Bruce Carhart 

Ozone Transport Commission 

444 N. Capitol Street, NW, Suite 600 

Washington, DC 20001 

Chuck Carlin 

Northeast Utilities 

PO Box 270 

Hartford, CN 06140 

Mark Carney 

US Generating CO./EGA 

7500 Old Georgetown Rd., Bethesda MD 20714 

Mike Cashin 

Minnesota Power 

Duluth, Minnesota 

David Cesareo 

PECO Energy (MC-S21-2) 

2301 Market Street 

Philadelphia, PA 19101-8699 

Richard H. Chastain 

Southern Companies 

Birmingham, AL 

Caroline Choi 

CP&L 

POBoxl551-CPB1327 

Raleigh, NC 27602 

Reid Clemmer 

PP&L,Inc. 

2 North 91 Street (MD-Gentw8) 

AHentown, PA 18101 

Richard Cordes 

Minnesota Pollution Control Agency 

520 Lafayette Rd. 

St. Paul, MN 55155 

Rae Cromillar 

NRECA 

N. N. Dharmarajan 

Central & Southwest Services 

Dallas, TX 

Lenny Dufiiis 

Virginia Power 

Henry Eby 

Lower Colorado River Authority 

MD-S519 

3700 Lake Austin Blvd. 

Austin, TX 78703 

E. Donald Elliott, Esq. 

Paul, Hastings, Janofsky & Walker 

1299 Pennsylvania Ave., NW 

Washington, DC 20004-2400 

Tiffany Elliott 

EPSA 

1401 H Street, NW (Suite 760) 

Washington, DC 20005 

Pam Faggert 

Virginia Power 

5000 Dominion Blvd. 

Glen Allen, VA 23060 

Joe Fontaine 

NH Dept. of Environmental Services 

64 North Main Street 

Concord, NH 03302-2033 

*T4-

Barabara F. Gambill, Esq. 

Bernard L. Huff 

Cinergy Corp. 

PO Box 960 

Cinncinati, Ohio 45201 
P.46 

Kevin Gaynor, Esq. 

Vinson & Elkins, LLP 

1455 Pennsylvania Ave., NW 

Washington, DC 20004 

Steve Gehl 

EPRI 

Felicia R. George, Assistant Commissioner 

Office of Enforcement 

Indiana Department of Environmental Management 

100 North Senate, Room 1001 

Indianapolis, Indiana 46206-6015 

JeffGleason 

Sourthem Environmental Law Center 

201 West Main Street, Suite 14 

Charlottesville, VA 22902 

Glenn Golson 

AL Dept. of Environmental Management 

PO Box 301463 

Montgomery, AL 36130 

Ron Gore, Chief 

Air Division 

AL Department of Environmental Management 

1400 Coliseum Blvd. 

Montgomery, AL 36110 

Pam Graike 

NSP 

David Grilbrert 

Constellation Energy Group (BGE) 

1301 Pennsylvania Ave., NE, Suite 1050 

Washington, DC 20004 

Jason Grumet 

NESCAUM 

PO Box 64596 

St. Paul, MN 55164-0596 

Mark Hall 

Trigen-Energy Corp. 

1 Water Street 

White Plain, NY 10601 

Roy Hamme 

Duke Energy 

Ray Harry 

Southern Company 

1130 Connecticut Ave., NW, Suite 830 

Washington, DC 20036 

David Hawkins 

Natural Resources Defense Council 

1350 New York Ave., NW, Suite 300 

Washington, DC 20005 

Susan Hedman 

Environmental Law & Policy Center 

35 East Wacker Drive 

Chicago, IL 60602 

Ned Helme 

Center for Clean Air Policy 

7501-Street, NE, Suite 1140 

Washington, DC 20002 

Gordon Hester 

EPRI 

Dave Heydlarff 

AEP 

Linda D. Hickok 

Sithe Energies, Inc. 

Robert Hodanbosi, Chief 

Division of Air Pollution Control 

Ohio EPA 

1600 Watermark Drive 

Columbus, Ohio 43215 45 

Patrica Hoffman 

DOE - Cogeneration Program Manager 

1000 Independence Ave., SW 

Washington, DC 20585-0121 
P.47 

Alexandria Holt 

Chicago Dept. Environment 

John Homback, Director 

Division for Air Quality 

KY Department for Environmental Protection 

803 Schenkel Lane 

Frankfort, KY 40601-1403 

Jacqueline Howells 

PNM/SPPC 

332 Constitution Ave., NE 

Washington, DC 20002 

Craig Jakubowics 

Edison Electric Institute 

Debra Jezouit 

Baker & Bolts, L.L.P. 

1299 Pennsylvania Ave. 

Washington, DC 20008 

EricKuhn 

Cinergy Corp. 

(RM552A) 

PO Box 960 

Cinncinati, Ohio 45201 

Mike J. Kennedy 

Florida Power Corporation 

St. Petersburg, Florida 

John Kinsman 

Edison Electric Institute 

701 Pennsylvania Ave., NW 

Washington, DC 20004 

Kris W. Knudens ' 

Duke Energy Corporation 

Charlotte, NC 

David Kolaz, Chief 

Compliance and Systems Management Section 

Bureau of Air, Illinois Environmental Protection Agency 

1021 North Grand Ave. East 

Springfield, Illinois 62702 

John Krissman 

EEI 

701 Pennsylvania Ave., NW 

Washington, DC 20004 

JohnKrogh 

Minnesota Power 

Edward L. Kropp, Chief 

Office of Air Quality 

West Virginia Department of Environmental Protection 

1558 Washington Street, East 

Charleston, WV 25311 

Dennis Limbach 

Allegheny Power 

800 Cabin Hill drive 

Greensburg, PA 15601 

Jeffrey Levine 

Cauthen and Assoc. 

1275 Pennsylvania Ave., NW, IO* Floor 

Washington, DC 20004 

William H. Lewis, Jr. 

Morgan, Lewis, Bochius 

Washington, DC 

Lewis Leuback 

Alleghany Energy 

Eugene Marshall 

Pacificorp Salt Lake City, Utah 

C. V. Mathiai 

APS 

+1* 

Janet McCabe, Assistant Commissioner 

Office of Air Managment 

Indiana Department of Environmental Management 

100 North Senate, Room 1001 

Indianapolis, Indiana 46206-6015 
P.48 

Colleen McCarthy 

NY State DEC 

Dave McCarthy 

IPSLCO Enterprises 

Yvonne Mclntire 

KCPL/Empire/St. Joe Light & Power 

701 Pennsylvania Ave, NW (3rt Floor) 

Washington, DC 20004 

John M. McManus 

American Electric Power 

Columbus, Ohio 

Mike Menne 

AMEREN 

Ronald Methier, Chief 

Air Protection Branch, EPD 

GA Dept. of Natural Resources 

4244 International Parkway, Suite 120 

Atlanta, GA 30354 

Joseph Miakisz, Director 

Niagara Mohawk Power Corp. 

Env. Regulatory Affairs., 300 Erie Blvd. W. 

Syracuse, NY 13202 

D. Micheal Miller, Chief Counsel 

Power and Generation and Director of Litigation 

American Electric Power 

1 Riverside Plaza 

Columbus, Ohio 43215 

Pam Mills 

Alleghany Energy 

1301 Pennsylvania Ave, NW (Suite 1030) 

Washington, DC 20004 

Donald Mohning 

MidAmerican Energy Company 

401 Douglas 

Sioux, IA 51101 

Larry Myers Henry Nickel, Esq./F. William Brownell, Esq. 

Hunton & Williams 

200 Pennyslvania Ave., NW, Suite 9000 

Washington, DC 20006 

John Novak 

EEI 

701 Pennsylvania Ave., NW 

Washington, DC 20004 

Judy Odoulamy 

Dept. of Energy - GC-1 

1000 Independence Ave., SW 

Washington, DC 20585 

Bill O'Sullivan 

NJ Dept. of Environmental Protection 

401 E. State Street 

Trenton, NY 08625 

JeffPardue 

Florida Power Corp. 

263 13* Ave. South (MACBB1A) 

St. Petersburg, FL 33701-5511 

Vickie Patton 

EDF 

Rocky Mnt. Office, 1405 Arapahoe Ave. 

Boulder, CO 80302 

John Paul 

RAPCA 

451 W. Third Street 

Dayton, OH 45422 

Mike Poling 

Kansas City Power & Light/Empire District Electric Co. 

701 Pennsylvania Ave, NW 

Suite 300 

Washington, DC 20004 

47 

George Porch, Esq. 

General Counsel for SIGECO 

Bamberger, Foreman, Oswald and Hahn, L.L.P. 

7* Floor Human Bldgs., 20,h N. W. 4* Street 

Evansville, Indiana 47704 
-*-^—— — 

P.49 

Howard Pyle 

Reliant Energy 

"801 Pennsylvania Ave., N'V (Suite 620) 

Washington, DC 20004 

JohnQuinn 

Baltimore Gas & Electric 

Ratrick Raher, Esq. 

555 Thirteenth Street, NW 

Washington, D.C. 20004-1109 

Robert Rainey 

TN Valley Authority 

1101 Market Street 

Chattanooga, TN 37405 

Raj Rao 

NY State DEC 

Division of Air 

50 Wolfe Road 

Albany, NY 12233 

Howard Rhodes, Director 

Air Resources Management Division 

FL Department of Env. Protection, Mail Station 5500 

2600 Blair Stone Road 

Tallahasee, FL 32399-2400 

June Robinson 

Illinois Power 

302 Shoreline Drive 

Decatur, IL 62521 

Roger Schwarz 

PSEG 

Chris Shaver 

National Park Service 

Air Quality Division 

PO Box 25287 

Denver, CO 80225 

Quintan Shea 

National Mining Assoc. 

Bob Shinn 

NJ Dept. of the Env. 

LeoSicuranza 

U.S. Generating Company 

One Bowdoin Square, Suite 600 

Boston, MA 02114-2910 

Greg Signer 

TVA 

400 W. Summit Hill Drive, ET 10A-K 

Knoxville.TN 37902-1499 

John Slade 

PA Dept. of Environmental Protection 

400 Market St., Rachel Carson State Office BIdg. 

Harrisburg, PA 17105-8468 

Robert Sliwinski 

NY State DEP 

50 Wolfe Road 

Albany, NY 12233-3251 

Rebecca Stanfield 

USPIRG 

218 D Street, SE 

Washington, DC 20003 

Barry Stephens, Director 

Div. of Air Pollution Control 

TN Dept. of Environment and Conservation 

401 Church Street, 9A Floor, L & C Annex 

Nashville, TN 37243-1531 

Daniel V. Steen 

FirstEnergy 

Arkron, Ohio 

Ms. Leah Stetzner 

Vice President, General Counsel and Corporate Counsel 

Illinois Power Company 

500 South 27lh Street 

Decatur, Illinois 62521 

49 

N. Teque 

H&W 
P.50 

.Patsy Thompson 

PSEG 

" 1 Massachusettes Ave., NW, Suite 710 

•Washington, DC 20001 

Eugene Trisko 

Attorney for United Mine Workers of America 

PO Box 596 

Berkeley Springs, WV 25411 

William Tyndall 

VP/Environmental Services, Cinergy corp. 

139 East Fourth Street, Room 500-M 

Cincinnati, OH 45201 

Jerome A. Vennermanh, Esq. 

Acting Counsel 

CINERGY Services 

139 East Fourth Street 

Cincinnati, Ohio 45202 

Jean Vemet 

Dept. of Energy 

Sarah Wade 

EDF 

1875 CT Ave., NW, Suite 1016 

Washington, DC 20009 

David Wallenberg 

STAPPA/ALAPCO 

444 N. Capitol Street, NW, Suite 307 

Washington, DC 20001 

Ann B. Weeks 

Clean Air Task Force 

230 Congress Street 

Boston, MA 02110 

Dick White 

Texas Utility 

1601 Bryan Street 

Dallas, TX 75201 

Susan Wierman 

Mid-Atlantic Regional Air Management Assoc. 

711 West 40lh Street, Suite 318 

Baltimore, MD 21211 

Bill Wemhoff 

APPA 

Janet Watts 

TVA 

400 W. Summit Hill Drive, ET 10A-K 

Knoxville,TN 37902-1499 

Bill Wemhoff 

APPA 

2301 M Street, NW 

Washington, DC 20037-1484 

Samuel A. Wolfe 

Public Service Electric & Gas Company 

80 Park Plaza, 17G 

Newark, NY 07102-4194 

Dwight Wylie, Chief 

Air Division, Office of Pollution Control 

MS Dept. of Env. Quality 

PO Box 10385 

Jackson, MS 39289 

Sheldon Zabel 

Schiff, Hardin & Waite 

7200 Sears Tower 

Chicago, IL 60606-6473 

EPA 

John Bachmann 

Ellen Brown 

Brian McLean 

Sam Napolitano 

Ellen Brown 

David Solomon 

4? 
P.51 

So 
P.52 

ipajp^nd JradeUse^s Growing 

^^P A Jl^uppbrting Expanded use of cap land §L£ 

e programs. ^^^H ^ 

»3rhe lap pro vides more ^ecureprotection of S^& 

'e^hvlrpnment/-, 

§^^|^nability^all miist^me tf nBer& cap. ^S^SSilf; 

si 

I 
P.53 

Sffirninistrationmnd <)f Goritrol S: ClSS 

li^^eguiatdrs do not have io jdetermine where cuts 

^^hould be1^e^1l»W" ;7iSii^ l ^MMM 

"~"

:uaDie!1116w^ce1tuaiket'iinds'1helowest •*&& 

<$g$SRift6ft^^ ;i$H7 

5"2_ 
P.54 

f|p|ap3and ffradeIProv ides :W§i 

•^L2f^-'-•-"'%~'y,2'--' 2*'•>:••• "'2 • ••'-''• • v""'' '^*K& -•-'•'"/?:'

;

-!V:;?'

:

. 

lecKnology-ForciniKDriver 

>v;.i,>f ;-i#j; -

fit^erejis an economic incentive to jcreate cost- |Sf 

Spliffe^ 

^^&r-:;^^ 2 •-.-;•.., -2 •^r-,:-,..-^^.^^:- 4A^LL J^m2^U: 

"" "Owm,%ere1s even strongerpressure to %. 

G^N©|howX&fe 

S3 
P.55 

||)JSR!sjthe|Q^ 

.SaSHl -

:

-'^22- '-•_ TT I ' J •«.<i1-V!v:;«i.-ir--','J';V',v"''^-'r'-:'~'''?!- .*••?•'•'•"> * :~^'-: Ti^'i: <W" • 

;Ssfif >>Q1*\^lf*i n ia **0/^/ ^ "••#S'^~ r-.r'x-:a--i,.i -.--.iX-f- . ij-<'^ .' .- '.---y-. . •:•-- "~rr«r:„: ••*•?. X • 

^l^^lexibiliry^technologyand emissions are^i^g 

^Specifically^determined on a case^fCase basis?| 

^|N o |M)st iminunization Sources required toapply 

7^^iejnewest (most expensive and Often unreliable) 

#»^61env1rP.amental certmntyiiictual emissions 6#7 

^^;??Va t J: i^r2S^: 2 v-2. •-•-• .i<: r--:-/-v 2 "2 •-'•• >.- - - -.' ^r^-.r..^-. ••-.-.. -;:";.•.-<-,. ••- r*«-v»A -:- r :$-&2: 

^P^ejnd^producTUpn^e ^w^solutelcap. f|| g 

ISSIo^uppwt ibarpMuiibiiltfeve^tfo^ 

fflroi.i 

54-
P.56 

ff^SRiVere Removed forajg 

^^Cfv^a-K s •-*r'2''~-'-" l••'.- - y '^ v.-"--^ ' • rr.-r-'-'.-'"^.;-•;,"'"•:• •? •^22i2-22.-K>": 

Mppeid Sector: MpSlf '^#1£S 

•$j0$M^^yfgf :-4 M V .'. j,,*.*-;^".^ ^ 

^^fogram emissions *yould not change. fVf||iJ>§^ 

S&mpUa^ce,^toinistration and consumer Jfe^ 

||i$^tst ^ ^fiss^^ 
P.57 

•5~G 
P.58 

^|Uloyslefiicient,^proper|)peration of the cap and 

^gradejprogram.^ L^^Lf^^i^W0§Sl^&§K 

MSrbwdesincentivesinsteadotoandates: SStftlS 

•^$$Z$-i'-3^2 

dj&buirestoiipfoteor^^^ stock '0$0 

i-r-'-^zyi--' .'••: -•:-•:„• -.£ .\.\2 fir '> •'•22y^'^~.r-i^:r*.r^-^i-^-^f::^-yr,^2^S^2 

^Ijuarantees environmental -safeguanls^rice:'fllii 

*#]&• # ^leiMibhmehtal jisks/^Si 

^7 8 
P.59 

{Implementation' 

^i^fStarffi^M^ lg|v 

^fe$OiviivlBtu).Wi^t iiee^^to 

illimiM 3p^ 

Mte^hiiM lor^maller W$$$0&' 

ourcesas well. »-* ^ 

#^DapSize^ase^bn|ieeded miima^ibtiiofSf^^ 

5B 
P.60 

"7 10