p. 1



# OAR Box 1781 Prepped by Ollie Stewart



### Document

Number: 

# 119 ) IV-C-3

3
Docket Number: 

# A-90-3 7

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

\ PRO ^ 

## 7 

# /\-^0-3 1

UNITE D STATE S ENVIRONMENTA L PROTECTIO N AGENC Y -TT ?

___ ^

_^ ^ RESEARC H TRIANGL E PARK , N C 2771 1 ^ " ^ 

### DEC_2-0_l99

9

Dea r Participants : 

### F£ 3 2 5 20C 0

EPA AI R DOCKE T OFFIC E O F AI R QUALIT Y PUNNIN G AN D STANDARD S



### Thi s i s a n announcemen

t of apubli c meetin g o n Januar y 13,200 0 t o discus s EPA' s thinkin g o n a

n alternativ e approach fo

r complianc e wit

h new sourc e revie w (NSR ) requirements

. Th e meetin g will b e hel do n Januar y 13,200 0 i n th e Polari s Room , Ronal dReaga n Buildin g and Internationa

l Trade Center , 130

0 Pennsylvani aAvenue , NW , Washington , DC , 20004 , telephon e (202 ) 312-1300 , beginning a t 10:00 a.m. , andending n o late r tha n 3:3 0 p.m . Th e purpos e of

thi s meetin g will b e to discus s a n approach tha

t coul db e workabl e specificall y fo r th e utilit y sector
. A

t th e meeting , w e pla

n to presen

t ou r current thinkin g on thi s approach , and t o receiv e commen t fromstakeholders

. Attache dfo r backgroun dpurpose s ar

e fou r proposal s tha

t we hav e receive dto dat

e fromvariou s stakeholder s (Attachment s 1 throug h 4)
. W e pla n t o evaluat

e comment s receive dfromstakeholders , andto determin e whethe r and ho w t o propos e thi s alternativ e approach i n th e Federa l Register

. I n concer

t wit h thi s decision , we wil l als o evaluat

e option s fo

r obtainin g furthe

r stakeholde

r input

. Plan s fo r ho w th e meetin g wil l b e run ar e stil l unde

r discussio n withi n EPA
. Ther e i s uncertaint y a s t o ho w man

y attendee s wil l b e present , an dther e ar e constraint s a s to th e siz e o f the meeting room . Initia

l thought s ar

e tha t a t th e table , which will sea

t about 40-4 5 people , a

n equa l numbe r o f seat s will b e mad

e availabl e t o representative s from: (1 ) th e industria l sector , (2 ) th e publi c interes t

groups , (3 ) Stat

e andloca l governments , an

d(4 ) th e Federa

l government
. Ther e will b e additiona

l seating , theate

r style , i n th e meetin g room , availabl e on afirst com e first servedbasis , fo

r abou t 10 0 people

. To th e extent

possible , everyone who wishe s to spea k wil l have a n opportunity

. A n addres s lis t

o f person s wh o ar

e bein g sen

t thi s lette r i s als o attache d(Attachmen t 5 ) an d a n announcemen

t will b e publishe din th e Federa l Register

. It

i s als o bein g place do n th e Offic e o f Air an dRadiation' s Internet

website : (http://www.epa.gov/oar/oarnew.html ) andth e NS Rwebsit

e (http://www.epa.gov/ttn/nsr/rule_dev.html)

. If you kno w of

someone who ma

y no t have receive dthi s lette

r but i s intereste di

n participatin g in suc

h a n effort , fee

l free t o contac t them

. 

# I

Recycled/Recyclabl e • Printe d wit h Vegetabl e Oi l Base d Ink s o n 100 % Recycle d Pape r(40 % Postconsumer )P. 3



### A block o f room s ha s bee

n reserve da

t th e Metr o Cente r Marriott , whic h i s ashor

t distanc e awa

y fromth e Ronal dReaga

n Building

. Th

e cut-of f dat e fo r reservation s i s Januar

y 3 , 200 0 andi s reserve da s "U S EP A ©rou p Rooms"
. Th e telephon e numbe r at th e Metro Cente

r Marriot t i s (703 ) 553-5329

. I f you wis h t o atten dth e meeting , pleas e E-mail or cal l Pa mSmith , a

t E-mai l addres s "smith.pam@epa.gov " or

telephon e numbe

r (019 ) 541-0641 , b y Januar y 6
. I f yo u hav e furthe

r question s regardin g th e stakeholde r meetin g o n Januar

y 13 , yo u ma

y cal l Kathy Kaufma

n a t (919 ) 541-010 2 or

Karen Blanchar

da t (919 ) 5il-5503

. Sincerely ,
Upjoh n S
. Seit z Director Office o f Air Qualit y Plannin g andStandard s
Attachment s (5 ) 1.-4
. Stakeholde

r proposal s 5

. Addresse e lis t



# 72 -P. 4

-.! *

0Mlt.t

•CkCM " y«««te« . Tit - le. * »••« . «« r •• « 

### HUNTO N & WILLIAM S >»o o X Stmxrt. K.-W

. V_cBoroToir . P £ »0oo*<uo » Ttia-MOM t BO»Mft«»0 0 [~esry»««ao i •Mr* * < • •i f • «*at « «Ma*va«*

MtNRrV.Me m S>MA1L.* KNja&e^iVMTCILeO M fB S No : SlSSlJMo n PBSCTDUL*a02/f5SlS6 1 Apri l 29,199 9

Mr . Joh n S Seit z Director , Office o f

Ai r Quality Plannin g an

d Standard ! U. S Environmenta

l Protectio n Agenc y 'MTVI O Researc

h Triabl e Parte

, N C 2771 1
Dea r John : Enclose d i s a memorandu m outlinin g tiie UARG propose d alternativ e t o th e curren tNS R progra m a s i tapplie s t

o existin g electri c generatin g units . Thi s proposal , i n ou r view , woul d simplif y th e NS Rprogra

m whil e a tth e sam e tim e addressin

g concern s that, under th e curren t program , utilit

y unit * may perpetuall y extend thei r usefu l Hf e withou teve r bein g mbjec tt o NSR * related emissio n reduction! . W e believ e thi s proposa l i s responsiv e t o th e principle s announce d b y tb e Agenc y prior t o th e "stakeholders " meetin g tha twa s hel d o n Februar

y 2 and 3 aa d provide s a basi s fo r seriou s discussion s wi n th e Agenc y an d stakeholders . I n puttin g thi s propose d altemativ e together , w e hav e tried t o b e responsiv e t o issue s aa d concern s raised b y others . I n thi s regard , w e hav e ha d thre e meeting s with stat

e regulator s o a NS Ralternatives an

d ar e encourage d b y thei r response . W e wil l hav e furthe r discussion s with Stat e regulator

s ove r th e nex ttw o week s an d expectfurthe

r inpu ta tth e STAPPA meetin g o n th t 15 * an d 16 * o f Ma y i n Phoenix . I als o pla n t o talk to Davi d Hawkin s durin g thi s perio d abou t UARG' s proposal . W e woul d Hk e t o mee twit

h yo u an d you r staf

f i n Ma y after gettin g STAPPA' s comments . Th e curren

tNS Rprogra

m Is incredibly comple

x an d i s characterized b y misunderstandings b y al ! a s t o it s applicability . Th e EP A proposal s t o chang e th e NS Rprogram , i n ou r view , wil l aggravate , no talleviate , thi s situ^ion . I f adopted , th e revise d rule s wil l lea d t o 

# 3-e-a- i

basi s for beginnin g discussion s ta d lo r delayin g actio n o n finalizing A e Agency' s NS R proposals . Thes e discussion s shoul d includ e il l industr y tn d shoul d cove r th e propose d progra m for th e utility isdustt y a s wel l i s change s tailored t o the need s o f

the manufacturing sector . W e loo k forward t o discussin g thi s proposa l wit h yo u sa d other stakeholders . SmcertryyMBS ,

Enclosur e
ec : (w/ej-cJosure ) Mr . Rober tPerciasep e Mr . To m Cum n Lydi a Wegman , Esq . Mr . Bil l Harnet

t Mr . Davi d Solomo n Bruc e C . Bucfcheit

, Esq . Gregor y B . Foote , Esq .

/ » 

# 4P. 6

Apri l 28,199 9 

# MEMORANDU M

Achievin g Ne w Score * Emissio n Reduction s from Existin g Electri c Gen cratin g Unit s - Prf.pi-.-- i tVi^r--. - B m , Ptmt v Ai r ttffalatorv Cror o Tni s paper outline s s progra m fo r electri c generating unit s metaddresse s tw o objectives . First , simplificatio n an

d clarificatio n o f

tb e Clea n Ai r Ac t("CAA" ) ne w sourc e revie w ("NSR" ) progra m fo r th e electri c generatin g mdust y i s neede d b y bot h permittin g authoritie s sa d regulate d industry . Th e curren tprogra m i s undul y comple

x ta d conftiSing end , e s recentl y interprete d b y EPA , i s disetungm g desired improvement s i n uni tefficienc y en d reliability . Second , i n spite o f

recentCA A program

s directe d a texistin g source s (e.g. , m e Titl e I V aci d rai n program , th e revise d ozon e an d particulat

e matte r NAAQS , A e regiona l haz e program , an d th e regiona

l SI P caS) , there i s continued interes ti n ensuring tha tne w sourc e level s o f

contro l ar e achieve d a

texistin g electri c generatin g units . NS Rlevel s o f emissio n reduction s ca n b e achieve d mor e efficientl y sn d cost-effectivel y i f addresse d directl y throug

h s progra

m designe d fo r th e electri c generatin g industry , a s oppose d t o attempting t o forc e thi s resul to n a n a d ho c basi s throug

h revision s t o th e NS R*_)odification"nile . Existin g electri c generatin g station s consis to f numerous , comple x aa d integrate d systems . Thes e source s ar e designe d t o hav e a lon g life . Fo r example , i n analyse s underlyin g th e 199 0 CA A Amendments , EP A assume d tha

tutilit y boiler s woul d las tfo r u p t o 6 5 years . Becaus e the industr

y ha s traditionally had a statutor y obligatio n f

o provid e a safe , reliabl e an d efficien tsuppl y o f

electricity , existin g generating unit s ar e routinel y kep ti n goo d worlcing orde r throug h repair, replacementan

d maintenanc

e activity . A s a result , existin g electri c generatin g station s hav e bee n regulate d primaril y unde r th e CA A stat

e implementatio n pla n C*SIP* ) progra m and , more recently , under th e CA A Titl e I V aci d rai n program . Th e CA A modificatio n rul e has had littl e impacton thes e units . Th e progra

m outline d below , therefore , represent s a significantdepartur

e from ho w existin g electri c generatin g unit s hav e bee n regulated unde r A e CAA , as wel l a s a significantl y mor e stringen texistin g sourc e progra

m Aan A e progra

m describe d b y industry a f A e Fcbru.u y 2 - 3,199 9 EP

A stakeholde r meeting . Unde r thi s program , NS Rrec^uiremeait s woul d continu e t o appl y t o ne w an

d modifie d sources , tn d existin g electri c generating units woul d als o b e require d to achieve , individuall y o r throug h emission s trading or averaging , NS Rlevel s o f emissio n reductions ove r time , o n a schedul e Aa twoul d begi n i n 201 0 afte r A e oAe r existin g sourc e CA A contro l program s note d abov e hav e bee n defined . Thi s woul d assur e tha timplementatio n o f

thi s ne w pTO£r?j

n fcr existin g electri c generatin g unit s coul d b e coordinated wi A Aes e oAe r programs . The parameter s o f thi s progra

m ar e outline d below . 

# 5P. 7

'. * 

### 1 . Continu e th e existin g NS Rprogram , wit h a simplified •ppUcibllir y testfo r modifie d wafti,

• . CovtJnve ^pHeaMlf o n f n—1»« ^ tpqnf^mtBiit e „Ne w tmire * wvie w 

### requirements, deludin g BACT w LAER , woul d continu e t o appl y t o se w n d tnodifie d aleetri e generatin

g tmits . NSPS woul

d continu e t o ap p ty t o al l acrw

, reconstructe

d an d modifie d electri c generatin

g units . b . ptrtft ; "m^irfnf^^ftion^tett .-Tli e WEPC

o rul e woul d b e revised . Tn e ter m * 4 

### cu y o r modification " woul

d b e clarifie

d t o provid e Aa l physica

l o r operationa l change s mus tincreas e fbs maximu

m achievabl

e emissio n rat

e (measure d i n kgAir ) befor e an d afte r a chang e i n orde r to trigge r NSR . Tni s clarificatio

n woul d remov

e uncertaint

y tha tha s discourage

d efficienc y aa d reliabilit y improvemen

tprojects , an

d woul d addres s confusio n tha tba s complicate

d aa d delaye d permi tproceedings . C . Pperla l O O rtrrtetr fmetdnrea -Wit h A e exceptio n e f OO tal l criteri a 

### pollutant s (includin

g psrticulsle matter

) woul d be subjec

tto thi s simplified modificatio

n tes tC O woul

d b e evaluste

d a s pa n e f A e "environmentall

y beneficial " testapplie

d to NO , contro

l project s (i.e. , A e types o f

project s tha t typically raise C O issues) . Because C O release s from elevate

d poin tsource s d o no thav e a significan

tambien taf tqualit y impact , 0 0 emission increase

s woul d ao toAerwis c b e subjec

tt o A e modificatio

n program . 2 . N o pettfn f

on f o f ceBfro trequirement* fo r eTtefarf e f epcratfof f UBft i - T o ensure mnre 

### widesprea d use o f ne w sourc e controls , ne

w electri c generatin

g unit s coul d not*ae tout " o f contro l technolog

y requirements. A s unde

r curren tlaw , a uni

tcoul d continu

e t o se t ou to f ai r qualit y analysis requirements

, includin g ambien tai r qualit y modeling . 3 . Subjectexistin g electri c generatin g unit s to ne w sourc e level s o f emfssfo n contro l ove r time , i n a manne r coordioste d wit h A e fmplemeBtaflo

n o f othe r existin g sourc e contro l pro f

rami . ! _ _ a . Pro g ram ifir tdat e -Th e eTocfn e f encratfn g Industr y f tcurrently pTannfa

g tf r 

### implemen ta numbe r o f ne w contro l program s fo r existing source

s over A e nex t decade , includin

g A e revise

d NAAQS fo

r ozon e an d PM U 

### , A e regiona

l haz e program , A e regiona

l N0 4 

### SI P call , sn d Phas e I I o f A e Titl e I V aci

d rai n program. I n ordt j to allo w for coordinatio

n wi A Aes e oAer programs, A e existin g sourc e contro l progra m woul d begin i n 2010 . T o A e exten tan y o f Aes e oAe r CA A existin g sourc

e program s d o no tg o forward

, A c progra

m outline d her e woul d serv e a s a "backstop, " ensurin

g level s o f emissio n reductio n Aatg o a

s fa r o r furthe r tha n wha tmigh tb s required unde

r Aes e oAe

r programs . b . Unitapplicabilit

y mectaflftrp

y - Ther e woul d b e tw o option s fo r complying wit h this backsto

p progra m - A e "ag

e based " optio

n an d A e "glid

e paA* * option . Companie s would b e require

d t o op tint o one o r A c oAe r b y A c yea

r 2010 . -2 - 

# C pP.8

_

t » • 

# f*

e . . Unde r A e ag e base d option , progra m appBcabiBtywiBuld b e triggere d o n a nmt-bymni tbasi s starting i n A tyea r 2010 , whe n a uni tha s bee n operated fer 5 5 years . Unit s enterin g A e progra m woul d b e require

d t o achiev e ne w aourc e contro l level s a tAs ! unito r atother unit s throug h trading o r averagin g systems . I n prio r CA A aaatyses , EP A has eonsfsteotly assume d boile r lif e u p t o 6 5 years . an d industry therefor

e originall y suggeste d 6 5 yea n as s trigge r ag e i n EPA' s Februar y 2d - 2 d stakeholder meeting . A55yearhfcisthc_h__^boilerlif e use d b y EP A fa inatyse s undertake n i n connectio n wi A A c 1 W O Amendment s an d wi A subsequentrulemakings unde r thos e amendments . O f thos e units tha

treac h ag e 5 5 durin

g A e cours e e f

A e "ag e based " program , A e las tuni twil l cate r A e progra m i n 203 0 (i.e. , Aos e unit s thatbega n operatio n i n 1975) . Tb e number o f unit s tha twoul d este r A e progra

m i n eac h yea r it elos s t o linear , a s ar

e th e ton s o f

-emission s (base d o n 199 6 emissio n levels ) tha

tcom e int o A e progra

m i n eac h year . I n 2030 , al l remainin g unit s unde r 5 5 year s o f

ag e (i.e. . units beginnin g operation i n 197 6 an d after ) woul d ente r A e progra

m a f th e sam e time . Mos to f

Aes e younger , large r units ar e A e units As ! wil l b e overcontrolle d t o offse temission s from olde r unit s uade r this program , t o mee tTitl e I V requirements , o r t o compl y wi A othe r ambien tdrive s tradin g programs . A s a result , mos to f Aes e unit

s wi D have , lon g befor e 2030 , bee n controlle d t o ne w aourc e level s either throug

h A e NS Rprogra

m itsel f e r throug h Titl e I and I V amissio n reductio n programs . Unde r A e glid e pa A option , a utilit y compan y woul d elec tt o hav e al l e f it s fossi l fiiel-fired unit s subjecte d t o thi s progra m i n 2010 , an d A e system-wid e averag e emissio n rat

e fo r Aos e unit

s woul d Ae n b e reduce d proportionatel y eve r A e lif e o f A e progra

m (e.g. , 5 percentreduction pe r year ) i n orde r t o reac h overal l ne w sourc e contro l level s b y A e progra m en d dat e o f 2030 . Amon g othe r reasons , thi s optio n i s neede d t o provid e flexibility fo r companie s Aa f migh toAemis e hav e multipl e retrofit

s lumpe d togethe r i n a shor ttime frame unde r A e age-base d option . Progra m sa d .i

f ti e - Al l unit

s woul d b e brough

tint o A e ag e base d progra m b y 203 0 (a s compare d t o A e 204 0 dat e originall y suggeste d b y industry) . Similarly , al l reduction s unde r A e "glid e path " optio n woul d hav e t o b e complete d b y 203 0 an d Aos e reduction s woul d b e equivalentt o A e "age based* * progra m reductions . Sourc e applf

f ifrPIt y - Thi s progra

m woul d appl y t o fossi l fuel-fire d stea m electri c generatin g units . Consideratio n shoul d b e give n t o reasonabl e exemptions , fo r example , fo r smal l unit s an d lo w capacit

y facto r units . Pja^iIlajil^pjilfcabflU y - Th e backsto p progra m woul d appl y t o SO , an d NO, . Particulat e matter C'PM" ) woul d continue t o b e subjec

tt o th e NS Rprogra

m and oAa r existin g sourc e programs a s discusse d above . FurAermore , A c backsto p progra m woul d addres s emission s o f fine P M throug h it s contro l requirement s fo r SOj&ndNO, . • ••* " *


### -3 - 

# 7

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# ' a 

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# '»*** »

Th e enclosure s t o thi s document can b e foun d I n Ai r Docke t A-90-37 , Ite m IV-D-343 .



# 8 P. 9
I

• r
» IP.1 0



# A N ALTERNATIV

E T O TH E NE W SOURC E REVIE

W PROGRA M

Presente d o n behal f of f th e Clas s of

f 8 5 Regulator y Respons e Grou p

tfV 1 

### * 4 

### -' b y Willia m Ivi ! Jumper s Debr a J . Jezou K Bake r & Botts , L.L.P .

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

«•*«•*.•«*

. 

# Detail s o f th e Alternativ e
§ .. . . 

### I Th e alternativ e progra m mus t b e voluntary

. I t o encourag e participation , nettin g woul d be eliminate d fro m th e NS

R progra m I Source s coul d op t i n u p t o 5 year s afte rEP A establishe s th e progra m o ru p t o 2 year s afte r EP A sets presumptiv e BACT/LAE R limits , whicheve rI s later

. * ~ " I Once a source opt s in , BACT/LAF R v/oul d b e suspende d fo ra 10-yea rperiod

.

. . • * * - " —- i

; . I—..JS . .-.• : 

# m• ' 1 . 1 •. •

J . .- « P.1 1



# Applicabilit y o f BACT/LAE R TTrr^^-*l>''fff'«IT,Kr l h • • % »fwMlttMm^^vv,,•• „ m - r L .. , ..... . 

## I Durin g th e suspensio n period , BACT/LAE R requirement s woul d continu e t o appl y to :
I significan t ne

w units < V: 

### . I reconstructe d units 

## I BACT/LAE R woul d no t appl y t o repowerin g pr o

.*"*•'•- i !••'' ;



# Othe r t ,vw •tfffi^ffiA' B -, ' •v?Aa3aBiB!&^ ^

. ; •-,.;, . a . « • ^.v , Srf_

. 

## I PAL s shoul d becom e a mor e viabl e applicabilit y optiori ! unde rth e regula rNS R program . • : 

## ^ J 

## 7 I EP A shoul d no t revie w pas t project s fo r potentia l NS R applicabilit y Q.e. n o look
back)

. ~'*' ; 

## ''":••-.-.•-

.

..fp v•:'••.,

. --. -P.1 2

> • ' 

# Presumptiv e BACT/LAE R

itttirniitnrmttTtUf/i

''TO^., ^ 

### I EP A shoul d se t presumptive.BACT/LAE R limits . I Unit s woul d b e exemp t fro m presumptiv e BACT/LAE R i f the y mee t th e following : I BACT/LAE R o r BACT/LAER-equivalen t limit s withi n 5 year s prio r t o optin g i n l recentl y promulgate d MSP S (i.e . w'thi n pas t 5 years ) I federally-approve d cap-and-trad e program s for complianc e wit h NAAQ S {i.e . NO x SI P Call ) I permi t limit s 'close * t o th e presumptiv e limit s

« . «.... . i)..i...»» . 

# Safeguard s t o Maintai n Ai r Qualit y ±.-**.-»Ji~& I Source s mus t continu e t o mee

t permi t limits . •<fiok?.-: : 

### -"i - •-»«. * • 

## I NSP S woul d continu e t o apply

. I Source s woul d b e subjec

t t o subsequen t SI P requirements.;
- ;; ; I Modelin g woul d b e require d fo r"majo r modifications ?

t 'P.1 3 -—•»-»—*-•-•»— «-*

— f •» ' i g j|i u —

"Tr "



# Issue s t o B e Addresse d i;.¥i.»^"*''»'iroV'*^^''^'V»»'»w ' ! 

### ^g.tr^igfBfek " 

## I Ho w sources locate d nea rClas s I area s shoul d b e treated

.
I Coordinatio n wit h (State/loca l NS R permittin g authorities

.

- • la

. >..!»,
.

:v S W" , ,



# :2 -P.1 4 

# Th o Clea n Energ y Brou p

Con&ofidae d Edison , Inc . KeySpa n Energ y Niagar a Mohaw k

Powe r Corporstio n
Northeas t Utilitie s

PEC O Energ y Compan y
PG& E Generatin g
Publi c Servte e EJectrl c an d Ga s Compan y
Rocheste r Ga s an d Electri c Corporatio n Sempr a Energ y Novembe r 10,199 9

Michae l Bradle y Executiv e Directo r Th e Clea n Energ y Grou p 4 7 Junctio n Squar e Driv e Ccncord , M A 0174 2 3 97aW69-553 3

_978-369-771 2 Joh n S . Seitz , Directo r Offic e o f Ai r Qualit

y Plannin g an

d Standard s U.S . Environmenta

l Protectio n Agenc y MD-1 0 Researc

h Triangl e Park , N C 2771 1

Dea r Mi . Seitz : I a m writin g o n behal f

o f th e Clea n Energ

y Grou p (CEG) , respondin g t o a number o f question s tha

tyo u an d you r staf

f raise d atou r meetin g o f

Septembe r 30,199 9 regardin g tiie CE G integrated ai r qualit

y strategy . Sinc e w e las tmet , w e hav e mad e severa l improvement

s an d clarification s t o th e proposa l (attached) . I loo k forwar d t o meetin g wit h yo u regarding thes e changes , and pleas e contactm e i f yo u nee d an

y additional clarificatio n on th e issue s w e hav e addressed . Questio n 1 : Doe s th e existin g Clea n Ai r Ac tauthoriz e th e EP A t o create a dua

l definitio n o f

"modification" , wit h on e definitio n (usin g th e actual-to-actual test ) applie d t o source s whic h d o no topti n t o th e integrate d strategy , an d anothe r definitio n (usin g th e potential-to-potential test ) applie d t o source s which d o op tin ? Response : Yes , th e Clea n Ai r Ac tauthorize s EP A t o create a dua l definitio n o f "modification " a s lon g a s an y alternativ e definitio n tha ti s adopted results i n equa l or greater environmenta

l results . Thi s typ e o f

"equivalency " tes tha s bee n use d b y th e Agenc y in th e pas ti n approvin g altemativ e definition s o f wha tconstitute s a "modification " fo r NS Rapplicabilit y determinations . On e exampl e o f thi s i s th e RECLAI M progra m i n California . Anothe r exampl e i s th e PA L concep twhic h EP A i s considerin g adoptin g fo r th e comple x industria l secto r a s a n alternativ e t o th e traditiona l NS Rapplicabilit

y determinatio n methodology . I n th e cas e o f

th e multi-pollutan tca p off-ram p tha ti s bein g proposed , th e equivalenc y tes ti s clearl y me tUnde

r th e existing , an

d eve n th e propose d revision s t o th e NS R regulations , th e numbe

r o f facilitie s thatbecom e subjectt o NS Ri s relativel y small . Applyin g control s o n facilitie s whic h op tinto th e off-ram p progra m by certai n dates , for no tonly regulated pollutants such a s SO * NO * an d particulate , bu tals o currently unregulated pollutants includin g mercur y an d C0 2 , wil l provid e greater environmenta l benefits tha

n ca n b e expecte d from th e traditional NS Rprogram . Th e essentia l elemen ther e i s makin g i tclea r i n th e preambl e o f th e supplemental rul e tha tthe "potential-to-potential " NS Rapplicabilit y determinatio n tes tca n onl y b e justifie d i f

i ti s inextricabl y linke d t o voluntar y acceptanc e o f

enforceabl e multi pollutantcaps . Questio n 2 : Wha

tfacilitie s mus tb e include d whe n a compan y opt s int o th e integrated strategy ? Ca

n a compan

y op ti n facility b y facility , o r mustal l facilitie s owne d o r operate d b

y th e compan

y op tin ? I f

several subsidiarie s o f

th e sam e paren

tcompan y eac h ow n o r operat

e on e or mor

e facilities , can on e subsidiary' s facilitie s op ti n whil e th e other subsidiaries ' facilitie s d o not ? Response : Companie s shoul d hav e th e optio n o f optin g i n individual "facilities , a s oppose d t o requiring company wid e participation , fo r three basi c reasons . First , i t



# \2>P.1 5

seem s unlikel y tbatcompanie s woul d opt-i n onl y low-emittin g source s or onl y higher-emittin g source s t o take advantag e o f

th e program . A n incentiv e exist s t o opt-i n highe r emittin g source s becaus e o f th e flexibilit y allowe d unde r th e progra m (i.e. , highe r emittin g source s ca n ove r compl y and sel l exces s allowance s tha

tare generated) . Similarly , a n incentiv e exist s t o opt-i n lowe r emittin g source s i n order t o generat

e exces s allowance s fo r trading . Second , man y generatin g station s ar e owne d and operate d b y join tventure s betwee n tw o o r mar e unrelate d companies . Generally , on e o f th e facilit y co-owner s (eve n th e majorit

y owne r in th e join tventure ) coul d no tforc e th e other co-owner s t o op tth e facility into th e integrate d strategy . Fo r thi s reason , requiring company-wid e participatio n woul d effectivel y preclud e a compan y whic h participate s i n join tventure s from optin g i n atal l unles s join tventure s ar e exclude d fro

m th e company-wid e requiremen tThird , i f al ) facilitie s owne d or operate d b y a compan y mus toptin , administratio n an d enforcemen to f

th e progra

m woul d b e complicated . Fo r reason s unrelated t o NS Ro r ai r qualit y generally , a paren

tcompan y ma y create a numbe

r o f subsidiaries , eac h o f whic h woul d ow n an d operat e on e facility . I twoul d b e burdensome fo r th e EP A to trac k al l companie s withi n a corporat e famil y i n order t o ensur e tha tal l facilitie s owne d and operate d b y al l of a company' s affiliate s are participatin g i n th e integrated strategy . Questio n 3 : Ho w woul d th e propose d integrate d strateg y addres s PM-1 0 and CO ? Response : Th e integrate d strateg y ha s bee n revise d t o includ e reductio n targets fo r PM-1 0 an d CO . C O emission s woul d b e controlle d by exercisin g bes tcombustio n contro l practices . Thi s requiremen t woul d b e effectiv e whe n a facility firs topts-i n t o th e program . PM- Q emission s woul d b e cappe d a ta n averag e annua

l emissio n leve l o f

0.0 3 Ibs/mmBt

u beginnin g i n 200748 . Qnestio n 4 : Doe s optin g into th e integrate d strateg y foreve r insulate a company from th e nee d t o reduce emission s belo w th e level s prescribe d i n th e integrated strategy ? Or , woul d th e NS Rflexibilit y i n th e integrate d strategy en d after a specifie d amoun to f time ? Response : Languag e ha s bee n adde d t o th e integrated strateg y clarifyin g th e nex tstep s after th e 1 5 yea r period : "After I S years , emissio n performance targets unde r th e progra

m woul d b e subjec tt o renegotiatio n base d o n a n analysi s o f

ai r qualit

y need s t o b e conducte d i n advanc e o f th e I S yea r deadline . Thi s negotiatio n proces s woul d no ttake plac e o n a company-by-compan y basis , rather th e performanc

e targets fo r th e overal l progra m woul d b e evaluated . I f a company opt s ou to f

th e progra

m afie r it s I S year s o f

participation , i twoul d defaul tback t o traditiona l NS Rrequirements , whil e th e cap s committe d t o a tth e outse to f th e progra

m woul d continu e t o apply . Th e decisio n t o op tou to f th e progra m woul d no tsubjecta company t o a retroactiv e revie w o f modification s mad e durin g th e I S year s tha ti toperated under th e multi-pollutan tcaps. " Questio n S : Th e integrate d strateg y provide s fo r a cap-and-trad e progra m fo r mercury - Eac h sourc e subjectt o a MAC T standard , however , mus tachiev e th e standar d individually . I f

th e EP A promulgate s a mercur

y MAC T standard , shoul d source s whic h hav e opte d int o th e integrate d strategy be exemp twhil e source s o f th e sam e typ e whic h hav e no topte d i n mus tcomply ? I f th e source s whic h hav e opte d int o th e integrate d strategy canno tb e exempted , can the y nonetheles s b e excuse d from complyin g with th e standar d individuall y and b e allowe d t o compl y throug h trading ? Response : EP

A appear s t o hav e som e flexibilit y i n ho w i tdefine s a n affecte d sourc e under Sectio n 11 2 o f th e Clea n Ai r Act . W

e woul d b e intereste d i n you r analysi s o f whethe r thi s apparen

tflexibility woul d b e sufficien tt o allow facilitie s tha top ti n t o th e integrate d strategy t o compl y wit h a mercur y reductio n targetthrough tradin g (i.e. , ca n "affecte d source " b e define d t o exclud e facilitie s participatin g i n th e Integrated Strategy. ) 

# 14

- Tb a eiaa i Entrs v Grou pP.1 6

Questio n 6 : Can natura

l gas-fired unit

s which hav e opte d int o th e integrated strategy trad e SO * allowance s wit

h coal-fire d unit

s which hav e als o opte d in ? I f so , doe s thi s amountt o a straightforwar d subsid y o f

th e gas-fire d units ? Response : Th e Integrate d Strategy doe s notpropos e an y change s t o th e existin g operatio n o f th e Aci d Rai n S0 2 tradin g program . However , with respectt o other pollutant s tha twoul d b e cappe d (e.g. , NOx , mercuty , etc. ) w e se e n o reaso n wh y ga s units thathav e opte d int o th e Integrate d Strategy shoul d no tb e allowe d t o participat e i n allowanc e tradin g wit h coal-fire d units , whic h hav e als o opte d in . W e d o no tconside r thi s a subsid y o f gas-fire d units , bu

trathe r a n equitabl e treatmento f

unit s that hav e alread

y investe d heavil y i

n low-emittin g generatin g technology . Questio n 7 : I f

a company opts int

o th e integrated strategy , bu tdoe s no tcompl y wit h on e o r mor e o f th e emissio n reductio n target s b y th e dat

e specified , wha

tsanction s shoul d b e brough tt o bea r o n that company ? Ho w woul d th e EP A ensure tha

ta facilit y whic h opte d into th e integrate d strategy remain s bound b y it s emissio n reductio n commitments eve n after th e feci!ity change s hands ? Response : Languag e ha s bee n added t o th e integrated strategy addressin g bot h o f thes e issues : "Emissio n cap s t o b e incorporated int o facility Titl e V permit s (wit h th e obligation s i n th e permi t carrying ove r t o th e ne w facility owne r i f purchased) , an

d penalt y provision s simila r t o thos e availabl e unde r th e Aci d Rain SO

2 trading progra

m (i.e. , penalt

y per to n o f exces s emission s plu s offsets ) woul d apply. "
Sincerely , Michae l Bradle y
Attachments :
ec : CEG Integrated Ai r Qualit y Strategy (11/9/99 ) Pau l Baile y BU I Becke r Kare n Blanchar d Elle n Brow n Rober tBrenne r Bruc e Buckheit , Esq . Jo n Devin e Gregor y Foote , Esq . Jason Grume

t Willia m Harnet

t Davi d Hawkin s Denni s Crumpler Henr y Nicke l Bil l O'Sulliva n Pete r Tsirigoti s John Pau l RobertPerciasep e Rober tRoberts Davi d Solomo n Susan S.G . Wierma

n 

### Tb a Clea n Enero y Grea t 

# 1 5P.1 7 

# Th e Clea n Energ y Grou p

Comotidate d Edison , Inc . KeySpa n Energ y Niagar a Mohaw k

Powe r Corporatio n
Northeas t Utilitie s
PEC O Energ y Compan y
PG& E Genergin g
Publi c Servic e Electri c an d Ga s Compan y Rocheste r GI B an d Electri c Corporatio n Sempr a Energ y

Michae l Bradle y Executive Directo r Th e Clea n Energ y Grou p 4 7 Junctio n Squar e Driv e Concord , M A 0174 2 ) 978-369-553 3 S 978-369-771 2 

# Integrated Ai r Qualit y Strateg y fo r th e Powe r Generatio n Industry Introductio n Th e followin g framework i s offere d a s a starting pointt o initiat e discussio n of a national , voluntar

y progra m fo r th e powe r generatio n industr y tha twoul d integrate futur e emissio n reductio n targets wit h enhance d Ne w Sourc e Revie w (NSR ) flexibility (se e discussio n o f

principle s below) , an

d i s offere d in th e contex to f EPA' s on-goin g effort s t o refor

m th e NS Rprogram. 1 Initially , whe n th e Clea n Energy Grou p began t o conside r a

n integrate d ai r qualit

y strategy fo r th e powe r generatio n industr y i n April 1999 , th e objectiv e wa s t o develo p a national unifor

m multipl e pollutan tregulator y strateg y wit h date s certai n fo r th e implementatio n o f

cap-and-trade program

s fo r NOx , SO2 , mercury , an d CO * However , after evaluatin g EPA' s regulator y authorit y under th e Clea n Ai r Act , i twa s determine d thata mandator

y nationa l progra m wa s no tpossibl e withou tamendmento f th e Ac t Face d wit h thi s constraint, th e concep tthen evolve d into a voluntary program , implemente d unde r th e auspice s o f th e NS Rprogram , a s outline d i n thi s document . Mor e specifically , thi s propose d voluntar y alternative woul d allow participatin g companie s flexibility unde r th e NS Rprogra

m i n exchang e fo r a

n enforceabl e commitmen tt o operat

e unde r cap-and-trad e programs for NOx , S0 2 , CC

_an d mercury . Thes e cap-and-trad e program s woul d provid e participatin g companie s wit h a se to f emissio n targets tha

twoul d no tchang e fo r a perio d o f I S years , unles s further reduction s ar e neede d t o attai n and maintai n healt h base d standards . Afte r I S years , emissio n performance targets unde r th e progra

m woul d b e subjec tt o renegotiatio n base d o n a

n analysi s o f

ai r qualit y need s t o b e conducte d n o late r than S year s i n advanc e o f

th e I S yea r deadline . Thi s negotiatio n proces s woul d no ttak e plac e o n a company-by-compan y basis , rathe r th e performance targets fo r th e overal l progra m woul d b e evaluated . I f

a company opts ou to f

th e progra

m afte r it s I S year s o f participation , i

twoul d defaul tback t o traditiona l NS Rrequirements , whil e th e cap s committe d t o a tth e outse to f th e progra

m woul d continu e t o apply , subjec tt o adjustmen

ti f necessary t o attai n and maintai n health-base d standards . Th e decisio n t o op touto f th e progra

m woul d no tsubjecta compan y t o a retroactiv e revie w o f modification s mad e durin g th e I S year s tha ti toperate d unde r th e multi-pollutan tcaps . Th e objectiv e o f

th e framewor

k i s t o achiev e substantia l ai r qualit

y benefit s i n a cost effectiv e manner . Thre e basi c principle s hav e guide d th e developmen to f thi s framewor

k t o date : 1 . Th e alternativ e framewor k ha s bee n designe d i n th e contex to f existin g Clea n Ai r Ac tauthority ; 2 . I tma y b e necessar y t o hav e a critical mas s o f companie s opte d i n t o th e progra m befor e i twoul d tak e effect ; and 3 . Th e emissio n cap s develope d under th e progra m are t o b e base d o n publi c healt h an d environmenta

l qualit y objectives .
I .Ontari o Powe r Generation

, a membe r o f th e Qea n Energ

y Group . I

s no ta tthi s time a part

y t o thi s proposal, a s th

e Ne w Sourc e Revie w progra m doe s notappl

y t o facilities outside the U.S . 

# [ ^P.1 8

Strswma n Framewor k Nationa l cap-and-trad e programs unde r declinin g tonnag e caps , implemente d ove r th e cours e o f th e year s 2003-201 2 consisten twit h th e principle s outline d above , fo r NOx , SO * mercur y and COj b y date s certain . Afte

r a perio d o f

1 S years , emissio n performance targets unde r th e progra

m woul d b e subjec tt o renegotiation . A tleas tfiv e year s i n advanc e o f th e I S yea r deadline , EP A woul d conduc ta n analysi s o f

ai r qualit y need s t o infor

m th e renegotiatio n process . Th e reductio n targets liste d belo w are base d o n publi c healt h an d environmenta

l qualit y objective s and promis e t o delive r significan tan d timel y improvements i n ai r qualit y o n bot h a nationa

l an d internationa

l scale , dependin g upo n tiie. leve l o f participatio n i n th e program . Emissio n level s liste d belo w representnationa l targets assumin g participatio n b y th e entire electri c generatin g industr y i n th e program . Performance target s fo r participatin g facilitie s woul d b e establishe d consisten twith thes e targets . Reduction s propose d fo

r NO x an d SO 2 emission s woul d significantl y mitigate th e problem s o f fin e particulat e pollution , ground-leve l ozone , aci d rain , regional haze , an d th e nitrificatio n o f

certai n bay s and estuaries . Reduction s fo r NO x ar e propose d i n tw o phases . Th e firs tphas e woul d begi n i n 200 3 wit h th e implementatio n o f

th e NO x SI

P Cal l i n th e eastern U.S . Beginnin g i n th e 2007-200 8 time frame, a secon d phas e o f NO x reduction s wil l b e achieve d b y extendin g di e firs tphas e program t o a national progra

m and requirin g NO x reduction s t o b e me tyear-roun d a s oppose d t o onl y durin g th e ozon e seaso n a s required i n phas e one . Thi s wil l resul tin approximately a S O percentreductio n i n emission s from th e phas e on e ca p level . Ozon e season NO x level s i n th e 22-stat e NO x SI P Cal l regio n wil l no tb e tightene d i n phas e tw o beyon d level s consisten twit h a n emissio n rat

e o f 0.1 5 Ibs/mmBtu . S0 2 emission s woul d b e limite d t o level s S O percentbelo w Clea n Ai r Ac tTitl e I V commitments . Thes e propose d targets ar e consisten twit

h EPA' s findin g tha

tfurthe r reduction s i n NO x an d SOj ar e require d t o addres s th e continue d impact s o f aci d deposition . Reduction s i n emission s o f mercur y ar e propose d t o addres s th e healt h effect s currently unde r investigatio n b y EP A and other researchers , and reduction s i n CO 2 emission s ar e propose d t o mitigat e th e risks o f

climat e change . Th e performance targe tpropose d fo r mercur y ha s bee n presente d a s a two-phas e program , includin g a 5 0 percentreductio n b y 2007-200 8 an d a mor e significan treductio n i n 2012 . Thi s rang e o f

value s i s presente d i n recognitio n o f EPA' s on-goin g effort

s t o investigat e th e mercur y emissio n inventory , potential healt h and environmental risks o f mercury , an

d mercur y contro l technologies . Th e performance targetfo r C0 2 emission s i s base d upon th e targetestablishe d b y th e Ri o Accord , whic h wa s ratified b y Congress . B y addressin g thes e pollutants under th e auspice s o f a n integrate d strategy , multipl e ai r qualit y objective s wil l b e achieve d whil e deliverin g substantial economi c benefit s relativ e t o a strateg y that addresse s thes e ai r qualit y problem s separately . Pollutan treduction s for NOx , mercury , an d C0 2 woul d b e implemente d under a nationa l ca p an d trad e program , with allowance s allocate d o n a tota l energy/outpu tbasi s an d credi tawarded fo r earl y action . Th e abilit y t o participat

e i n th e aforementione d cap-and-trad e program s woul d b e incorporate d int o facility Titl e V permit

s (with th e obligation s i n th e permitcarryin g ove r t o th e ne w facility owne r i f purchased) , an

d penall y provision s simila r t o thos e availabl e under th e Aci d Rain SO j tradin g progra

m (i.e. , penalt

y per to n o f

exces s emission s plu s offsets ) woul d apply . SO areduction s woul d b e implemente d under th e existin g Aci d Rai n program . Furthe r emissio n reduction s beyon d th e national , propose d target

s ma y b e required i n orde

r t o insur e attainmen

tan d maintenance o f

existin g health base d standards . Carbon monoxid e (CO ) and coars e particulat e (PM l0 ) woul d als o b e incorporate d int o th e program ,
Integrate d Strat*© * 11/9/9 9 • Pag e 3 o f $ 

# n Ti a eita a fntrg y Graa pP.1 9

although tradin g an

d averagin g o f

emission s reduction s woul d no tb e allowed . Rather , C O emission s woul d b e controlle d b y exercisin g bes tcombustio n contro l practices . Thi s requirementwoul d b e effectiv e whe n a facilit y firs topts-i n t o th e program . PM. o emission s woul d b e cappe d a ta n averag e annua l emissio n leve l o f

0.0 3 Ibs/mmBt

u beginnin g i n 2007-08 . Summar y o f

Pollutan tCap s for NS RAlternativ e Proposa l Th e followin g tabl e presents th e propose d reductio n target s and schedul e fo r th e Clea n Energy Crou p Integrated Ai r Qualit

y Strategy . Individua

l facility cap s woul d b e establishe d atlevel s consisten twit h th e propose d reductio n target s outline d below , wit h th£ abilit y t o participat

e i n th e cap-and-trad e programs incorporate d int o a participatin g facility' s Titl e V permit. Pleas e not e thatth e followin g target s shoul d b e reviewe d i n th e contex to f a n integrate d NS R flexibility program . A s envisioned , th e Integrated Strateg y outline d belo w woul d serv e a s a n alternativ e t o th e traditional NS Rprogra m fo r thos e source s tha

tchoos e t o participate . Th e reductio n targets an d schedule s hav e bee n carefull y develope d an d coordinate d t o delive r timel y ai r qualit y improvements , whil e creatin g a n incentiv e fo r participatin g companie s t o evaluat e th e impac to f thei r complianc e strategie s o n al l o f th e pollutant

s liste d (e.|g. , optimizin g scrubber s fo r mercur

y control) . Becaus e o f

th e aggressiv e targets proposed an d th e substantia

l cost s associate d wit h meetin g thes e targets , th e principle s outline d abov e {e.g., tradin g an d banking , a s wel l a s th e allocatio n o f allowance s t o ne w sources ) are especiall y importan tAlso , befor e an y compan y opts t o participat

e i n th e off

ramp , itwil l nee d t o conside r the implication s o f participatio n o n its competitiv e position , includin g whether or no tcompetin g companie s have opte d t o pirticipate . Clea n Energ y Group companies , whil e the y endors e th e concep to f thi s alternativ e program , Jik e al l othe r companie s woul d nee d t o evaluat e th e impacts o f

participatio n o n thei r individual competitiv e position s befor e optin g t o participate . Thi s highlights th e issu e o f

critical mas s outline d i n th e principle s abov e tha tguide d th e developmen to f th e framework.

Integrate d Strateg y 11/9/99 -Pag e 4 o f

5 \ % 

### Tb t Clea n Enero ¥Brtu pP.2 0

i »
CE G Integrate d

Pollutan t NO ,

SQ .

PM I 0
C O

mercur y

CO , 

### Ne

w Sourc e Revie w Alternativ e Reductio n Target s an d Emissio n Level s Aisomin g Ful l Electri c Industr y Participatio n NO x reduction s implemente d i n tw o phases . Phase-on e woul d begi n i n 2003 , wit h reduction s consisten twit

h curren tcommitments , includin g implementatio n o f th e NO x S I P Cal l Rul e m th e 22-stat e SI P cal l regio n (Le. , national emission s o f 4.2 2 millio n tons) . Phase-tw o woul d begi n i n 2007-08 , with th e extensio n o f phase-on e t o a national/annua l progra m o rroughl y a 50 % reductio n from phase-on e level s (i.e. , nationa l emission s o f 2.1 1 millio n tons) . Environmenta l benefit s resultin g from implementatio n o f th e NO x SI P Cal l ar e no tt o b e affecte d i n transitionin g t o a national/annua l NO x progra

m i n phase-two . Also , ozon e seaso n NO x level s in di e 22-stat e NO x SI P Cal l regio n wil l no tb e tightene d i n phase-tw o beyon d level s consisten twit h a n emissio n rate o f

0.1 5 lbs/mmBtu . SQz reduction s 50 % beyon d Phas e I I Aci d Rai n requirement s (Le. , nationa

l emission s o f 4. 5 millio n tons ) beginnin g m 2007-08 . Thi s schedul e i s consisten twil h tb e second-phas e NO x schedule , PM-1 0 schedule , and phase-on e mercur y targe tto tak e advsntag e o f an y co-pollutan treductio n benefits . Coars e particulat

e reductio n targetata n averag e annua l emission , leve l o f

0.0 3 lbs/mmBtu beginnin g i n 2007*08 . Reduction s achievabl e b y exercisin g bes tcombustio n contro l practices , effectiv e immediatel y upo n opting-i n t o di e program . Mercur y reduction s implemente d in tw o phases . Phase-on e woul d begi n m 2007-08 , wit h a reductio n targe t50 % belo w currentemissio n level s (i.e

_national emission s o f 2 6 tons) . (Tb e flexibility o f

trading i s deeme d critical atthi s phas e o f di e progra

m in order t o incentiviz e th e testin g o f

advance d mercur

y contro l technologies. ) Accordin g t o EPA , we tscrubber technolog y installe d t o achiev e Phas e U SO areduction s i n thi s sam e tim e perio d ar e capabl e o f

reducin g mercur

y emission s a minimu m o f 35 % and up t o 50 % i f scrubbe r technolog y i s optimize d fo r mercur y reduction . Phase-tw o woul d begi n i n 2012 , with reduction s i n th e rang e o f 70 % t o 90 % belo w curren temissio n level s (Le. , national emission s o f 5-1 6 tons) . Give n th e uncertaint

y surroundin g mercur

y contro l technolog y effectivenes s a s wel l a s th e feettha

tEP A continue s t o evaluate th e scientifi c evidenc e regardin g th e health effect s o f mercury , thes e propose d mercur y reductio n targets may b e revise d t o b e consisten t wit h EPA' s on-goin g regulator y determinatio n process . CO j reduction s implemente d i n tw o phases . Phase-on e woul d begi n i n 2008 , with a reductio n targe trepresentin g stabilizatio n at199 0 emissio n level s (i.e. , nationa l emission s o f roughl y 1,92 5 millio n tons) . Phase-tw o woul d begi n i n 2012 , with a reductio n targe t consisten twit

h th e national reductio n targett o b e determine d b y Congress .

Integrate d Strategy 11/9/9 9 • Pag e 5 o f 5 

# n Th i Clea n Enari v 8rao pP.2 1 

# A^-3 7 NATUR E RESOURCE

S DEFENS E Befoieth e . COUNCI L UNITE D STATE S ENVIRONMENTA L PROTECTIO N AGENC Y ' Comments o f

' Natura l Resource s Defens e Counci l
o n Notic e o f Availability ; Alternative s fo r Ne w Sourc e Revie w (NSR ) Applicabilit

y fo r Majo r Modifications . - —

• . . . . 6 3 Federa

l Registe r 39857-3986 6 (Jul y 24,1998 )

• : " * Docke tNo . A-90-3 7

. Octobe r 8,199 8

• a9 I . Introduction an

d Summar

y Th e alternative s se tfort

h i n EPA' s Jul y 24,199 8 notic e stil l fai l t o implemen tth e basi c purpose s o f

th e Clea n Ai r Act' s Ne w Sourc e Revie w (NSR ) an d Preventio n o f

Significan t Deterioratio n (PSD ) programs fo r pre-constructio n revie w o f ne w source s an

d modification s i n dirt y ai r an d clea n airregions . A s stated i n ou r earlie r comments o n thi s rulemaking' , th e purpose s o f

thes e programs ar

e twofold : t o assure tha

tne w investment s do no tdegrad e ai r .

* • • . . qualit y an d t o assur e tha twhe n ne w investments ar e made , emission s ar

e minimize d b y requirin g
ne w an d modifie d source s t o meetperformanc e standards tha

treflectmoder

n emissio n • .

„ preventio n capabilities .

. . Th e secon d o f

thes e function s ha s becom e increasingl y importan ta s th e impac to f grandfathere

d ai r pollutio n source s o n ai

r qualit y become s more and. more th e centra l impedimentt o clea n air progress . Contrar y t o th e intento f

Congress , investment s i n ne w productio n hav e notcause d existin g grandfathere d source s t o b e replace d b y facilitie s tha tmus t
mee tmoder

n performance , standards . A s a result , grandfathere d source s dominate th e pollutio n
1 0 u rcomment s o f

Januar y 21,197 7 are incorporate d b y referenc e i n th e instant ' comments , a s modifie d b y today' s comments . .••".* ' . " * „
120 0 Ne w Yor

k A.* , N.W . Suit e 40 0 Washington , D C 2000 5 202289-686 8 "Fa x 20 2 289-106 0 •fcvvjvdfcoi j 7 1 Stevenso n Stree t Suit e 182 5 San Francisco , C

A 9410 5 41577y-Q22 0 Fax4.5495-599 6 

# 2o 631 0 Sa n Vicente Boulevar d Suit e 25 0 Lo s Angeles . C A 9004 8 213934*90 0 Fa x 2l i 934-121 0 40West20lhSue « NevrVoi-MCY 1001 1 21 2 727-270 0 Fa x 21 2 727-177 3P.2 2

inventory throughoutth e Unite d States . EPA need s t o reexamin e th e ke y policie s o f NS Ran d PS D applicabilit

y an d nettin g t o enabl e thes e programs t o functio n a s drivers o f modem performance requirements . Th e simpl e facti s tha

tmos tsignifican tinvestments ar e no w avoidin g th e PS D and majo r NS Rprograms becaus e th e existin g rule s provid e fa r to o man y opportunitie s t o avoi d applicability . A s stated i n our earlie r comments , EP A shoul d no tsee k t o "reform " NS Raa d PS D b y adoptin g additiona

l exclusion s an

d exemption s from applicability . Th e opposit e approach i s neede d t o make inroad s o n th e excessiv e impacto f grandfathere

d source s o n ai r qualit

y goals . EP A shoul d us e it s authorit

y t o mak e NS Ran

d PS D appl y more broadly , whil e takin g appropriat

e step s t o streamline th e processe s employe d i n th e revie w activities . However , creating more exemption s i s not a legitimate streamlinin g activity ; i ti s simpl y
p a way t o weake n th e effectivenes s o f th e ne w sourc e programs . Provision s tha tallo w ne w investment s t o escap e revie w whil e maintainin g emissions a tcurren to r pas tlevel s hel p perpetuat e th e pollutio n impacto f

grandfathere

d sources . Mos to f

th e alternative s i n di e agency' s Jul

y 24,199 8 notic e woul d hav e thi s effec tan d they ar e therefore objectionable . NRD C submits tha

tEP A shoul d adopttest s fo r applicabilit y tha tinsur e tha

temission s from grandfathere

d source s wil l declin e ove r tim e a s intende d b y Congress . NRD C agree s with EPA' s intentt o abandon th e "deman d growt h exclusion* * from calculation s o f

futur e emissions . W e als o suppor tEPA' s positio n tha

tpost-constructio n emissio n forecast

s relie d o n t o avoi d NSR/PS D applicabilit y mus tb e full y enforceable . However , w e objectt o EPA' s suggestio n tha tth e perio d fo r enforceabl e emissio n limit s migh tb e limite d t o te n years . W e objec tt o EPA' s proposal t o allo w us e o f histori c emissio n level s that
ar e highe r tha

n curren tlevel s t o establis h baselin e emissions . Indeed , fo r th e electri c generatin g industr y i n particular , w e submi ttha tth e onl y permissibl e baselin e i s on e tha treflects wha t futur e emission s woul d b e i n th e absenc e o f th e investmen ttha

tconstitute s th e physica l o r operationa

l change a

tth e facility . W e presentdat a showin g tha

tabsentsuch investments ,P.2 3

operation s an

d emission s wil l declin e ove r time . W e submi ttha ta declinin g pat

h mus tb e use d
a s a baselin e to calculate whethe r tb e chang e results i n a n emission s increase . Regardin g othe r positions , w e urge EP A t o narrow tb e availabilit y o f nettin g an

d t o broaden th e definitio n o f "change" . W e als o objec tt o EPA' s approac h t o th e PA L concep tTh e PA L provision s outline d b y th e agenc y certainl y ar e outsid e EPA' s lega l authorit y becaus e the y permi trelianc e o n emissio n reduction s tha

tar e no tcontemporaneou s wit h th e change s a

tth e facility . I f

ther e i s an y legall y permissibl e rol e fo r th e PA L concept , i tca n onl y b e a s par tof a structur

e thatensure s that emission s from th e facility wil l declin e an d approac h ne w sourc e performance level s ove r a reasonabl e period .

II . Actual t o Futur

e Actual Emission s Calculatio n A s th e agency notes , th e approac h t o determin e whethe r a

n emissio n increas e occur s i s t o compare emission s withou tth e chang e t o emissions afte r th e chang e ha s bee n made . Whil e som e woul d styl e thes e emissio n profile s a s "pre-change " an d "post-change " emissions , w e believ e i t i s mor e accurat e t o label them "no-build " an d "build " emission s cases . W e objec tt o mos t aspects o f

EPA' s handlin g o f

thes e calculations . A . Calculatio n o f

Baselin e o r "No-build " emission s EP A propose s t o allo w source s t o rel y o n maximu m emission s from th e sourc e durin g th e pas tte n years . W e objec tstrongl y t o thi s approach . First , it s impacti s clear : allowin g suc h a hig h baselin e definitio n wil l resul ti n fa r more source s evadin g NSR/PS D review , thu s perpetuatin g th e environmentall y harmfu l grandfather statu s o f

highl y pollutin g sources . Unde r EPA' s approach , th e mor e pollutin g a grandfathered sourc e is , th e easie r i ti s fo r th e sourc e t o preserv e it s grandfathe

r exemption . Give n th e pronounce d advers e impacto f grandfathered
source s o n ai

r qualit y (note d b y EP

A i n it s NAAQ S RIAs , regional haz e proposals , OTA G SI P cal l proceedings , an

d othe r rulemaking s an

d studies) , i ti s arbitrar

y an d a n abus e o f

discretio n fo r EP A to selec ta definitio n o f baselin e emission s tha

twoul d perpetuat

e exemption s fro

m modern 

# 72 ZP.2 4

performanc

e standards fo r th e mos tpollutin g facilities . Second , us e o f

a n maximu

m emissio n leve l u p t o te n year s ol d virtuall y ensure s tha ttn e
sourc e can increase emission s ove r curren tlevel s withou tbein g subjec tt o NSR/PS D review . Thus , source s coul d seriousl y degrad e existin g ai r qualit

y withou tundergoin g review . Thi s * resul ti s contrar

y t o on e o f

th e centra

l purpose s o f

pre-constructio n revie w an d i s therefore unlawful . EPA' s approac h woul d allo w firms tha

thav e mothballe d major source s fo r u p t o a decad e t o putthem back i n operatio n with grandfathere d emissio n level s and with n o majo r
sourc e review . Both EP

A an d Michigan authoritie s hav e recognize d i n th e recentConnors Creek matte r tha tthi s resul ti s contrar

y t o goo d publi c policy . Ye tEPA' s approac h woul d allo w mothballe d unit

s t o restar twithou trevie w eve n though emission s woul d increas e i n majo r amounts . Third , EPA' s approac

h ignore s th e onl y appropriat e tes tfo r determinin g whethe r a chang e has resulted i n a

n emission s increase : tha ti s t o compar

e wha temission s woul d b e absen t th e chang e t o emission s afie r th e change . A s EPA' s ten-yea r lookbac k concep tsuggests , ther e
ar e man y source s whic h ten d t o operat e les s an d therefor e emi tles s ove r tim e absentsignifican t upgrading an

d related investments . Thi s i s understandable , sinc e olde r source s ofte n us e productio n processe s tha

tar e les s efficien ttha

n newe r facilitie s an

d thu s th e marke

toperate s t o shif tdeman d to more efficien tfacilitie s an d awa y from facilitie s tha

thav e no tbee n modernized . I n addition , facilitie s deteriorat e ove r time , ofte n resultin g i n increase d productio n expenses . Th e tren d toward decrease d operation s an d emission s ove r time a

tspecifi c olde r unit s i s wel l documented for th e electri c generatin g sector . Attache d t o thes e comment s i s a recen t analysi s performe

d for NRD C b y Synaps e Energ y Economics , Inc. , tha

tdocuments a reductio n i n capacit y factor s fo r coal-fire d generatin g unit s a s such units age . Synaps e finds tha toperation s
a texistin g unit

s decreas e at"roughly on e percentag e poin tfor eac h yea r o f age." 8 A s Synaps e notes , significantongoin g capital investments hav e bee n mad e a texistin g units , s o th e one -

' Synaps e Energ

y Economics , Inc. , "Coa

l Uni tCapacit

y Facto r Declin e Wit

h Age, " Augus t12,1998 * a t1 . 

# 2 3percen

tper year declin e understate s whatwoul d hav e occurred i n th e absenc e o f suc h investments . Synaps e states , "i n th e absenc e o f significan tongoin g capita l investment , tn e declin e i n capacit

y facto r with ag e woul d likel y b e muc h greater." 3 NRD C submit s tha

tEPA shoul d adop ta

n applicabilit

y tes ttha trecognize s th e fac ttha t absentinvestments a

ta facility , it s rat

e o f operatio n an

d its annua

l emission s wil l inevitabl y

- declin e ove r time . Th e appropriat e baselin e agains twhic h t o measure th e emissio n increasin g effec to f a n investmen ti s no ttoday' s emissio n level s an d certainl y no tlevel s of a decad e ago . Rather, i ti s th e pat

h tha temission s woul d b e expecte d t o follo w i n th e futur e absen tth e investment . Iti s obviou s tha

tinvestments a

texistin g plants ar

e aime d a tmodifyin g tiie futur

e characteristics o f

th e facility from whatthe y woul d b e i n th e absenc e o f th e investmen tI n profi t .oriente d operations , includin g electri c generatin g facilities , th e economi c rational e fo r makin g a n investmen ti s t o captur

e a futur e retur n greater tha

n th e investmen tO f

course , i n calculatin g th e economi c impac

to f th e investment , th e firm compare s the future revenue s from facility operatio n wit h an d withou tth e investmen tItdoe s no tloo k bac k te n year s no r confin e compariso n t o
curren tactivit y levels . EP

A shoul d adop ta simila r approac h fo r determinin g th e emission s effec to f a n investmen t Fo r units wher e change s ar e proposed , EP A shoul d presum e tha temission s from th e uni t woul d declin e with ag e i n th e absenc e o f th e change . Base d o n th e Synaps e dat a analysis , NRD C submits tha

tfor electric , generatin g unit s EP A shoul d presum e a declin e significantl y greate r than
on e percentpe r year , absentinvestments tha timprov e productivity . NRD C believe s thata presumed declin e o f

3-5 % pe r yea r woul d b e reasonable . T o avoi d NSR/PS D applicability , a
sourc e operato r woul d hav e t o commi tt o a n enforceabl e limi to n emission s tha tkep tth e facility' s emission s belo w th e declinin g pat h tha twoul d b e presumed t o occu r i n th e absenc e o f
Id . 

# 24-P.2 6



### th e investment. 4 

### B
. Calculatio n o f

"Future Actual " Emission s EPA' s supplementa

l notic e identifie s severa

l aspect s o f

th e existin g treatment

o f "futur e actual " emission s for

electri c utilit

y unit s (tii e "WEPCO " rule ) that h finds ar e especiall y troubling: '

• . Th e lack

o f enforceabl e provision s fo

r futur e emissio n projections ;

• . Th e limitatio n o f

futur e emissio n projection s t o 5 years ; an d

• . Th e exclusio n fo

r deman dgrowth

. We agre e tha

t al l thre e o f

thes e feature s o f

th e existin g WEPC O rul e are unsupportabl e froma lega l an dpolic y standpoint

an dmus t b e changed

. However , th e change s propose db y EP A ar e insufficien t t o comply wit

h th e Act' s requirement s andwit h soundpolicy

. First , w e agre e tha

t i f afutur e actua l calculatio n metho di s t o b e use da t all , i t mus t b e accompanied b y full

y enforceable lega

l obligation s tha

t require th e sourc e operato r t o kee p tn e facility' s emission s a

t or belo w th e "futur

e actual " emission s tha

t are th e basi s fo

r th e clai mtiiat th e chang e i s no t

amodification

. A s EP

A notes , asystemtha

t relie s o n potentiall y self-servin g calculation s b y asourc e operator , ofte n conductedwithout

notic e o r revie w b y an

y agenc y o r

tiie public , canno t

provid e reasonabl e assuranc e tha t th e Act' s ne w sourc e requirement s are bein g met. 6 

### Absen

t alegally enforceable obligatio n t o limi t emission s ther e i s n o basi s t o suppor t a source' s claimtha

t it s futur e emission s wil l remai n belo w som e forecas t leve l tha t i s les s than tiie source' s physica

l potential t o emi t

Accordingly , absent

suc h enforceabl e provisions , ther e i s n o basi s fo r such a"futur

e actual " calculatio n t o b e ground s fo r a n exemptio n fromth e Act* s majo r ne w sourc e revie w requirements

.

4 Application o f

the declinin g emission s presumption indefinitel y woul d result

I n a n emission s limit

approachin g zer o afte r afe w decades

. Thi s would correspond i n mos t case s t o aful

l amortizatio n o f

th e origina

l plant investment an dthu s appear s t o b e areasonabl e basi s fo r conditionin g acontinue d exemption fro mNSR/PS D applicability

. Congres s didno

t inten d tha t the grandfathe

r statu s conferred o

n existin g source s i

n 197 0 shoul d las t

forever. 5 See , 6 3 Fed

. Reg
. 39860-61 , July 24,1998 . *6 3 Fed

. Reg
. A

t 39860-62
. 

# 2. 5P.27

_

Moreover , sinc e th e exemptio n atissu e woul d rende r federally enforceabl e rule s (majo r NSR/PS D revie w requirement s an d permi tlimits ) inapplicable , EP A canno tlawfull y o r logicall y premis e th e exemptio n o n anythin g les s tha n a federall y enforceabl e limi to n projecte d fixtur e actua l emissions . Becaus e th e actua l sourc e i s capabl e o f

emittin g i n amounts tiiatwoul d trigge r NSR/PS D review , i ti s necessary t o creat e a lega l fiction i n th e for m o f a n enforceabl e emissio n limi tt o transfon n th e sourc e a s a federa l lega l matte r int o a non-majo r source . Sinc e th e source' s statu s a s non-majo r i s a creatio n o f federa l law , th e instrumen

trelie d o n t o achiev e this lega l status als o mus tb e imbued with th e attributes o f federa l law , includin g enforceability equa l i n exten tt o th e federa

l NSR/PS D requirement

s tha tar e rendere d inapplicable . Ful l federa

l enforceabilit

y i s critica

l t o th e structur

e o f th e Ac tbecaus e onl y b y thi s
mean s can EP

A an d citizen s enforc e th e limit s tha tar e th e basi s fo r th e exemptio n from NSR/PS D requirements . Congres s provide d i n section s 11 3 an d 30 4 o f th e Ac ttha tth e limit s i n state-issue d NS Ran

d PS D permits mus tb e enforceabl e a s wel l b y EPA an d citizens . Congres s coul d hav e decide d tha

tstate enforceabilit

y o f th e specifi c sourc e obligation s unde r th e NSR/PS D programs were sufficien tbuti tdi d no td o so . Th e limit s o n futur e actua l emission s tha tEP A i s proposin g as a basi s fo r a clai m o f exemptio n from th e NSR/PS D revie w requirement

s ar e jus ta s muc h a par

to f th e NSR/PS D progra

m requirement

s a s are th e limit s containe d i n state-issue d NSR/PS D permits . I twoul d b e anomalou s t o constru e th e Ac tt o allo w EP A t o creat

e a n exemptio n from NSR/PS D revie w base d o n limit s tha twer e no ta s enforceabl e
a s th e limit s tha

totherwis e woul d hav e applie d t o th e source . Accordingly , w e submi ttha t EPA' s final rul e mustinclud e a n expres s requiremen

ttha tlimit s o n futur

e actua l emission s mus t b e full y federall y enforceabl e (whic h include s citize n enforcement ) t o b e recognize d a s a basi s for NSR/PS D inapplicability . Second , EP

A propose s tha

tlimit s o n futur

e actua l emission s b e enforceabl e onl y fo r a perio d ofte n years afte

r th e chang e i s made . W e objec tt o thi s concep to f disappearin g enforceability . Ther

e i s no lega l o r polic y basi s fo r limitin g th e operator' s obligatio n t o a ten 

# 2k >P.2 8

yea r period . Source s ar

e physicall y capabl e o f

operating fo r mor e than te n year s an d th e pre constructio n permit

s issue d t o source s d o no tprohibitoperation after te n years . Sectio n 11 1 o f th e Ac trequires change s tha tresul ti n emissio n increase s t o trigge r NSR/PS D applicability . Ther e i s no provisio n i n th e Ac ttha tsay s such increase s may b e ignore d i f the y occu r mor e tha n te n years after th e change . EP A appear s t o propos e creatio n of a non-rebuttabl e presumptio n tha tan y increase s occurring te n years afte

r a chang e di d no t"resul f from tiie change . Bu tther e i s n o basi s fo r suc h
a presumption an

d EP A point s t o nothin g i n th e recor d o f thi s rulemakin g tha twoul d suppor t
such a presumption . EP

A ha s no tpropose d an

d doubtles s woul d no tpropos e a n NSR/PS D exemptio n fo r entirel y ne w majo r units base d o n th e source acceptin g a ten-yea r limi tt o kee p it s actua l emission s belo w th e majo r sourc e threshold . Suc h a n approac h woul d allo w th e creatio n
p of a physical facility with th e ability t o emi ti n majo r amount s fo r a n indefinit e perio d i n retur n fo r onl y a temporar

y limi to n it s emissions . Similarly , th e approac h propose d b y EP

A i n it s supplementa

l notic e woul d allo w th e creation of a modifie d facility tha tcoul d resul ti n majo r increase s i n emission s fo r a n indefinite perio d i n retur n fo r onl y a temporar

y constrain t EP A note s tha

tchange s whic h increas e th e desig n capacit y o r PT E of a uni tar

e "clearl y connected " t o futur

e increase d emission s levels. 9 Accordingly , EPA solicit s commen to n whethe r i tshoul d presum e tha tsuc h a source' s futur

e emission s resul tfrom th e chang e eve n when th e increase s occu r more tha n te n year s after th e change . EP A obviousl y shoul d mak e suc h
a presumption fo r suc h change s sinc e th e increase s ar e clearl y connecte d t o th e change . Bu ti ti s equall y correc

ttha tman y othe r change s ar

e clearl y connecte d t o futur e increase d emissions . Source operator

s make investment s no tonl y to respond t o today' s market s bu ti n anticipatio n o f marke ttrends . In a marke

teconom y th e leve l o f

operatio n o f

an y particula r facilit y i s a function , notonl y o f

th e facility' s physica l productio n capacity , butals o o f th e facility' s relativ e productio n costs . Bot

h o f thes e factors ar

e clearl y connecte d to a facility' s us e th e da y after a
'6 3 Fed. Reg. 39862 . *

_,P.2 9

chang e an d t o it s us e te n year s after a change . EP A cannotlawfull y presum e tha ta n increas e whic h occur s te n year s late r i s i n n o wa y connecte d t o th e wa y th e plan ti s configured . Tb e chang e whic h ma y hav e occurre d te n year s earlie r i s par

to f th e plant' s configuration . EPA ha s n o basi s t o presum e tha ta source' s future emission s i s driven solel y b y th e source' s "pre-change " configuratio n an d tha tth e chang e ha s nothin g t o d o wit h th e source' s activity level . I ti s th e plantwith th e chang e tiiati s experiencin g th e emission s increas e an d i ti s a n exercis e i n fantas y t o clai m tha tth e emission s increas e woul d hav e occurred eve n withou tth e change . Accordingly , EPA' s final rul e shoul d provid e tha tth e enforceabilit

y o f limit s o n a source' s futur e actua l emission s mus tlas ta s lon g a s th e sourc e operates . Third , EP A propose s eliminatio n o f th e "deman

d growth " exclusio n from th e calculatio n
o f futur e actua l emissions . NRD C full y support s thi s action . EP A neve r had a permissibl e rational e for thi s egregiou s concep tan d i ti s on e o f

th e ground s o n whic h NRD C filed a lega l challeng e t o th e agency' s 199 2 WEPC O rule . A s se tfort h i n ou r comment s o n th e 199 2 rul e an d thi s rulemaking , ther

e i s no basi s fo r treatmen to f demand growt

h a s a legall y distinguishabl e
reaso n fo r increase s i n emissions . Source operator s d o no tmake investment s a tproductio n facilitie s i n a paralle

l univers e tha

texclude s al l consideration s o f demand fo r thei r products . T o th e contrary , productio n facilitie s ar e instrument

s use d t o respond t o an

d tak e advantage o f marke topportunities , includin g growt h i n overal l demand fo r a produc tWhe n a sourc e operato r make s a chang e a

ta facility t o positio n itsel f t o mee tdemand , there i s simpl y no logi c t o suppor t
a clai m tha

tdeman d growt h resulte d i n a

n emissio n increas e bu tth e chang e itsel f di d no t Accordingly , EP

A shoul d abandon th e deman d growt h exclusion . C . Rol e o f

Nettin g A s EP A notes , a

n elemen to f

th e calculatio n o f

emissions afte

r a chang e i s a

n accountin g fo r contemporaneou s reduction s a ta sit e tha

tma y allo w a source t o "ne

tout " o f review. 1

1 6 3 Fed. Reg . 39861 . _



# 2 3P.3 0

1 0
EP A propose s t o continu e th e us e o f th e actual-to-potentia

l metho d i n conductin g a nettin g analysis . NRD C support s th e us e o f

th e actual-to-potentia

l tes tt o the ' exten tnettin g i s permitted . However , w e submi ttha

tEP A shoul d conside r th e impacto f curren tnettin g polic y o n th e purpose s o f

th e PSD/NS Rprogram . I s essence , th e nettin g approac h merel y preserve s tiie statu s quo , perpetuatin g excessivel y hig h level s o f pollutio n an

d distortion s create d b y th e continue d operatio n o f

poorly-controlle d grandfathere d pollutio n sources . Nettin g reward s source s tha thav e managed t o manipulat e th e curren

tsyste m t o preserv e high level s o f

emissions . Curren

tnettin g polic y allow s thos e hig h emissio n level s t o functio n a s
a n asse ttha

tca n b e deploye d t o avoi d NSR/PS D review . Thus , nettin g operate s a tcros s purpose s with soun d ai r qualit y objectives . I tcreate s incentive s t o kee p emissions a t unnecessaril y hig h level s an d perpetuates a

n inefficien tallocatio n o f emissio n "shares " b y providin g th e greates treward s t o th e mos tpollutin g sources . Nettin g frustrates on e o f tile primar y objective s o f

th e NSR/PS D program , whic h i s t o lin k requirement s fo r mode m emissio n performanc

e standards t o investments , s o tha temission s ar

e reduce d a s th e econom y expands . Instead , nettin g allow s existin g emissio n level s t o b e perpetuated indefinitely . Th e tim e ha s com e fo r EP A t o conducta thorough revie w o f it s nettin g rule s t o eliminat e
curren tpervers e effects . Th e agenc y shoul d constrai n nettin g t o th e ful l exten tpermitte d b y
curren tlaw , t o reduc e th e advantag e accorded t o grandfathere d source s ari

d produc e a reductio n i n emission s a s investment s ar e made , consisten twith th e purpose s o f th e NSR/PS D programs . Adoptio n o f

th e baselin e emission s calculatio n approac h w e outlin e i n sectio n A woul d assis ti n promotin g a reductio n i n emissions ove r tim e butothe r change s ar e needed . First , EP A shoul d refor

m it s definitio n o f

contemporaneou s s o tha tonl y activitie s whic h
ar e par to f th e projectfo r whic h th e nettin g clai m i s mad e ca n qualify. * Second , EP A shoul d reduc e th e nettin g credits availabl e for shuttin g dow n o r limitin g operation s a texistin g unit s t o reflec tth e obviou s fac

ttha tth e ne w emission-increasin g projects wil l hav e greater longevit y tha n

* Thi s approac h run s directl y contrar y t o EPA' s propose d PA L concept , whic h w e critiqu e later in thes e comments .



# %°\P.3 1

. r % « 1 1

th e olde r existin g unit

s tha tar e generatin g th e nettin g credits . Fo r example , conside r a sourc e tha tpropose s t o buil d a 100-ton-per-year ne w uni twith a 35-yea r usefu l lif e an d t o ne tou ttiie increas e wit h th e shutdown of a 100-to n sourc e tha tha s onl y 5 year s o f

lif e remaining . Th e strea m o f emissio n reduction s from th e shutdow n sourc e end s after 5 year s butth e emissio n increase s from th e ne w sourc e continu e fo r a n additional 3 0 yean . There clearl y i s a n enormou s

' increas e i n th e cumulativ e emission s from th e facilit y ove r th e lif e o f th e ne w projectthati s no t capture d i f nettin g credit

s ar e give n fo r th e shutdow n uni tbase d onl y o n a compariso n on e year' s emissions . Wit h respectt o NSR , th e Supreme Cour ti n Chevron mad e i tclea r tha tEP A ha s tiie authorit y t o eliminate th e availabilit y o f nettin g altogether. 1 0 A s tiie agenc y i s aware , on e pervers e effec to f

nettin g i n NS Ri s tha

tne w equipmen ti s installe d withou tmeetin g LAE R performance standards . Thi s i n tur n mean s tha

ta greater leve l o f

emissio n reductio n i s require d t o offse tth e ne w equipment' s emission s tha n i f th e ne w equipmentha

d metLAE Rstandards . Thes e greate r emissio n reduction s mus tcom e from a finite poo l o f existin g emissio n source s whos e total pollutio n loa d mustb e furthe r reduce d fo r th e are

a t o attain th e ambientstandards . Thus , th e effec to f

NS Rnettin g i s to allo w source s t o unilaterall y dedicate th e cheapes tan d easies temissio n reduction s i n a nonattainmen tare a t o offse tpoorly-controlle d ne w units , leavin g stat e an d loca l control agencie s wit h th e difficul ttas k o f

developin g a

n attainmentpla n from th e
more expensive , politicall y controversia l remainin g emissio n reductio n opportunities . EPA' s origina

l defens e o f

it s 198 1 chang e t o allo w nettin g unde r th e NS Rprogra

m wa s tha tnonattainmentarea

s choosin g such a

n approac h woul d b e require

d t o develo p timel y attainmen tplan s i n an

y even ts o tha

tther e woul d b e n o environmenta l harm . I ti s no w 199 8 and EP A mus tacknowledg e tha tth e theor

y i tpresente d t o th e Supreme Cour ti n th e early 1980 s ha s
n o basi s i n reality . I n th e rea l world , area

s hav e no tsucceede d i n developin g timel y an d adequat e attainmen t

, c Chevron. U.S.A.. Inc v . NRDC, 467 U.S . 83 7 (1984) . 

# .So1 2

plans . Stat

e an d local agencie s hav e proteste d repeatedly t o EP A tha tthe y canno tidentif

y sufficient , politicall y feasibl e emissio n reduction s t o demonstrat e timely attainmen tEP A ha s responde d with policie s tha thav e permitted length y delay s i n tiie submissio n o f adequat e plans . Give n tha tth e premis e fo r EPA' s initial adoptio n o f NS Rnettin g i n 198 1 ha s no tbee n achieved , NRD C submit s tha

tth e agenc y shoul d actt o eliminate nettin g from th e NS Rprogram . T o fiul t o do s o woul d b e arbitrar

y an d capricious , give n tiie length y recor d o f empirical evidenc e contradictin g th e assumptio n tha tarea s woul d i n factdevelo p timel y an d adequat e attainmen t plans . D . Exclusion s from th e Definitio n o f Chang e In th e cours e o f

thi s rulemakin g has note d th e existenc e o f certai n exclusion s from th e definitio n o f

"physica l change " i n EPA' s curren trules. " Whil e NRD C agree s witi i EPA' s observatio n tha

tCongres s di d no tinten d t o mak e "ever y activit y ata source " subjec tt o NSR/PS D review, 1 3 i ti s equall y clea r tha tCongres s di d no tintend tha tth e grandfather statu s conferre d o n existin g source s i n 197 0 an d 197 7 shoul d las tforever . NRD C submits thattiie existin g categorica

l exclusion s fo r "routine maintenance , repai r an d replacement " ca n b e applie d
s o broadly tha

tthe y frustrate th e purpos e o f th e PSD/NS Rprogra

m t o achiev e reduction s i n overall emission s as industria l investments ar

e made . EP

A shoul d narro w thes e exclusions . Change s which caus e th e facility t o operat e a ta greate r rat

e and/o r fo r a longe r perio d tha n woul d hav e occurred i n th e absenc e o f th e chang e shoul d b e include d i n th e definitio n of a "physica l o r operationa

l change. " A s th e agency knows , mos tchanges , includin g change s tha tinvolv e majo r capita l investments avoi d NSR/PS D review , typically throug h a combinatio n o f

th e exclusion s t o th e definitio n o f

"physica l o r operationa

l change, " th e "significance " level s applie d t o emissio n increases , an

d th e availabilit

y o f netting . Th e effec to f

thes e exemptio n provisions , eac h o f which EP A ha s th e authorit

y t o narrow o

r eliminate , i s t o allo w mos tgrandfathered source s t o

" See , e.g. , 6 1 Fed . Reg . 38253 , Jul y 23,1996 . 

# 31P.3 3

1 3 perpetuat e thei r excessiv e emission s i n a manner tha timpede s achievemen to f ai r qualit y goal s
and frustrates th e objectiv e o f th e NSR/PS D programs . NRD C ask s tha tEP A can y ou ta comprehensiv e reevaluatio n o f al l o f thes e provision s s o tha

tNSR/PS D revie w wil l b e applie d
mor e broadly t o grandfathere d source s makin g change s tha tmftititrw- . thei r operation s an d prolon g thei r life .

HI . Plantwid e Applicabilit y Limitatio n (PAL ) In NRDC' s Januar

y 21,199 7 comments w e state d our positio n tha tn o PA L concep twa s defensibl e i f

i tallowe d source s t o perpetuat e thei r curren

temissio n levels . W e reiterat e tiiat positio n i n thes e comments an d provid e additiona

l lega l an d polic y argument

s i n suppor

to f tiiat position . EPA' s supplementa

l notic e point s outtha

tth e PA L concep ti s no tcompatibl e wit h a basi c lega l constrain

to f th e PSD/NS Rprogram—th e requirementfo r contemporaneit y betwee n creditabl e emissio n reduction s an d emissio n increasin g activities. 1 9 EP A note s correcti y tha

tth e PA L concep ti s simpl y a for m o f netting . A s such , i tmus tcompl y wit h th e requirementthat emissio n reduction s b e contemporaneou s with emissio n increase s t o b e creditable. 1 4 Th e PA L concep tpropose d b y EP A doe s no trespectth e principl e o f contemporaneity . EP A propose s a PA L tha

tcan operat

e a s a n exemptio n from NSR/PS D fo r a s lon g a s te n years . In addition , EP

A propose s tha

tPA L baselin e emission s ca n b e base d o n th e highes tyea r i n th e te n years precedin g th e creatio n o f th e PAL. " Thus , under EPA* s approach , a n emissio n increasin g activit

y a ta PA L sourc e coul d b e shielde d from NSR/PS D base d o n a n emissio n reductio n tha

toccun-ed twent

y years earlier . Suc h a

n approac h stretche s th e notio n o f

15 6 3 Fed . Reg . 39863 . A s discusse d belo w i n th e text , there ar

e major polic y objection s t o EPA' s PA L approac h a s well . "A s the agenc y notes , th e contemporaneit y requiremen

tstem s from

Alabama PowerCo. v . Costle, 63 6 F.2 d 32 3 (D.C . Cir . 1979) . Th e cour tconstrued th e Ac ta

s allowin g PS D source s t o ne tou to f revie w provide d tha

tth e claime d emissio n reduction s wer e contemporaneou s with th e emissio n increase s tha totherwis e woul d hav e require d review . " 6 3 Fed . Reg . 39863-64 . 

# 211 4

contemporaneou s beyon d al l reasonabl e bounds . N o doub ta geologis twoul d vie w event s separate d b y twenty year s a s contemporaneou s bu tth e deadline s i n th e Clea n Ai r Ac tmak e i t clea r tha tCongres s di d no tinten d EP A t o justif y it s policie s base d o n geologica l tim e scales . W e agre e with EPA' s observation s o n tiie polic y problem s with permittin g a PA L baselin e tha

ti s base d o n historicall y hig h emissions. M First , such a n approac h perpetuate s th e hig h emissio n privilege s o f grandfathere

d sources . Second , i tdistort s a n area' s growth opportunitie s b y givin g grandfathere d source s a privilege d clai m o n scarc e ai r qualit y resources . Third , i tmake s th e jo b o f developin g adequat

e attainmen

tplan s mor e difficul tthan i talready is . Source s with PAL s base d o n twenty-yea r ol d emissio n level s coul d dramatically increas e emission s withou trevie w i n amount s tha tcoul d jeopardiz e attainmen tan d maintenanc e o f ambien tstandards . A sourc e unde r suc h a progra

m i s no ta "PAL" ; i ti s a "GLUTTON" . Apar tfrom th e advers e programmati c implication s o f EPA' s propose d approach , conside r th e impact

s o n a mor

e huma n scale . Unde r EPA' s proposa l a n 18-yea r ol d youth livin g near a majo r source woul d b e tol d sh e ha d no rights t o see k revie w o f dramati c increase s i n emissions from ne w constructio n becaus e th e sourc e ha d mad e a n emissio n reductio n tw o year s befor e sh e
wa s bom . Suc

h a disconnec twith th e common-sens e understanding of a reasonabl e time scal e for evaluatin g change s i n ai r qualit y woul d bring justifie d disreput e o n EP A an d othe r agencie s embracin g thi s approach . Bot h th e legal an

d polic y problem s o f

EPA' s PA L proposal flo w from th e agency* ! proposed choic e of a baselin e calculate d from histori c hig h level s o f emissions . Th e agenc y solicit s commento n several altemativ e method s fo r adjustin g a n initia l PA L baseline : shutdowns ; unused capacity ; expiration ; goo d control s an d pollutio n prevention. 1 7 Th e difficult y wit h eac h o f thes e approaches i s tha

tthe y ar e predicated o n a

n initia l excessiv e baselin e and depend o n voluntai y sourc e action s t o retriev e som e o f th e exces s tha

twa s incorrectl y hande d
ove r t o th e PA L source a

tth e outset . Adjustin g for uni tshutdown s an

d unuse d capacity woul d

M See , 6 3 Fed. Reg

. 39863 . "6 3 Fed . Reg. 39864-65 . •c p OP.3 5

I S
b e easil y gamed an

d invite s criticis m fo r creatin g pervers e incentive s t o maintai n emission s a ta high leve l t o avoi d "losing " them . Th e expiratio n optio n simpl y replace s a twenty-yea r ol d excessiv e baselin e wit h a ten-yea r ol d excessiv e baseline . Tn e furthe r propose d exceptio n from adjustment

s fo r "goo d controls " an

d "pollutio n prevention " ha s th e aroma o f appl e pi e bu tinvite s gaming , enforcemen tdispute s an d hug e progra

m complexity . Th e agenc y solicit s commen to n alternative method s t o calculate a PAL . NRD C submit s tha tth e mos tstraightforward , protective , an d legall y defensibl e approac h i s t o require commitmentt o a declinin g ca p a s th e eligibility criterio n fo r a PAL . Th e PA L concept , i f i ti s legall y permissibl e a

tall , i s no ta

n approac h tha tEP A i s mandated t o adop tI ti s a n optiona l approac h tha tEP A ma y hav e authorit

y t o make available , provide d i trespect s th e dutie s impose d
o n EP A b y Congres s t o implemen tNSR/PS D programs . Accordingly , EPA ha s ampl e authorit y t o conditio n th e availabilit y of a PA L o n criterio n tha tar e designe d t o b e protectiv e o f th e emissio n reducin g objective s o f th e PSD/NS Rprograms an d supportiv e o f

othe r Clea n Ai r Ac t goals . I f EP A pursue s th e PA L concept , rathe r tha n usin g a stati c baselin e base d o n excessiv e historica l emissions , EP

A shoul d requir

e a PA L limitatio n tha

tbegin s wit h curren

temissio n level s (averag e o f

th e immediatel y precedin g two-yea r period ) an d decline s annually ove r a reasonabl e perio d t o a

n emissio n leve l tha

treflects th e applicatio n o f NSR/PS D performance standard s t o th e plan ta s a whole . Such a n approac h migh tsuffic e a s a metho d o f satisfyin g th e Act' s requiremen

ttha temissio n reductions b e contemporaneou s t o justif y exemption s from review . I f

th e tim e perio d t o reac

h plantwid e PSD/NS Rperformance level s i s no tto o attenuate d
an d reduction s ar

e required annually (possibl y usin g two - t o three-yea r runnin g averages) , EP A mightreasonabl y suppor ta conclusio n tha

tth e require

d plantwid e reduction s provid e a n emission s profil e a s goo d o r bette r tha

n tha twhic h woul d occu r unde r a case-by-cas e contemporaneou s nettin g program . A declinin g ca p woul d als o b e consisten twit h th e NSR/PS D progra

m objectiv e o f 

# 34-. .P.3 6

16
achievin g emissio n reduction s reflectin g mode m pollutio n preventio n capabilitie s a s investment s
ar e made . Tb e perio d ove r whic h such a cap shoul d achiev e NSR/PS D performance level s should , i n NRDC' s view , no texcee d a reasonabl e amortizatio n perio d fo r th e existin g facilitie s a t th e site . Som e o f

th e mos tvoca l industria

l supporter

s o f th e PA L concep thav e argue d tha tthei r investmen tcycl e i s muc

h more rapid tha

n tiie 2 0 t o 30-yea r timescal e tha tma y hav e prevaile d earlie r i n th e 20 * century . B y definition , PAL s woul d appl y t o plant s with facilitie s thatare already partiall y amortized . Give n thi s factan d tiie nee d t o respec tth e lega l an d polic y ground s fo r contemporaneity , NRD C recommend s a cap tha tdecline s t o NSR/PS D performance level s
ove r a perio d n o longe r tha n 1 0 t o 1 5 years. 1 '

IV . PA L Terminatio n NRD C pointe d ou

ti n it s Januar

y 21,199 7 comment s tha tallowin g a PA L t o terminat e presente d opportunitie s fo r gamin g tha twoul d frustrate clea n air objectives . I f a PA L terminate s afte r 1 0 years , source s coul d schedul e constructio n o f major source s during th e las tseveral year s
o f th e PAL , avoi d NSR/PS D revie w fo r al l such sources , an d the n procee d t o operat

e the m a t full y ramped-u

p capacit y immediatel y upo n terminatio n o f th e PAL . EPA' s supplemental notic e doe s no taddres s thi s fundamenta l proble m wit

h th e PA L concep tNRD C submits tha ta ca p o n plantwid e emission s shoul d continu e permanently (atNSR/PS D performance level s a s discusse d above ) s o tha

tsource s constructe d durin g th e PA L tenur e ar e no tallowe d t o creat

e unreviewe d emission s increases .

Conclusio n Th e NSR/PS D programs wer e intende d b y Congres s t o operat e ove r a reasonabl e perio d
o f time t o reduce tota

l emission s a s th e econom y grows—through a proces s o f old , grandfathered
source s bein g replace d b y source s subjectt o mode m NSR/PS D performance standards .

" A s discusse d belo w i

n th e text , NRD C doe s notbeliev e a sourc e shoul d b e allowe d t o unilaterall y terminat e a PA L afier a 10-yea r period . 

# 35P.3 7

1 7
However , th e combinatio n o f exemptions , exclusions , an d la x nettin g rule s unde r th e existin g NSR/PS D programs hav e prevented th e programs from fulfillin g th e role intende d b y Congress . Mos tinvestmen taction s ar e neve r subjectt o th e NSR/PS D requirements , regardles s o f tiie project' s emissio n increasin g effects or tiie opportunitie s fo r emissio n reductio n tha tare available . EPA' s curren

trulemaking woul d exacerbat e th e environmenta

l problem s cause d b y -the inadequat

e coverag e o f

th e existin g NSR/PS D programs . Instea d o f seekin g way s t o exten d th e shiel d tha

tallow s continue d operation o f modifie d grandfathere

d source s with excessiv e pollutio n levels , EP

A shoul d adoptchange s t o thes e programs , a s advocate d i n thes e comments , tha twoul d hel p achiev e Congress * cleane r ai r goals .



# 3hP.3 8



# Synapse Energ

y Economies , Inc . 2 2 Crescen tStreet , Cambridge

, M A 0213 8 • 617-6611-324

8 • fax : 661-059

9 • www.svnapse-energy.co

m

To : Davi d Hawkins , NRD C From : Bruc e Biewal d an d Davi d White , Synaps e Energy Economics , Inc . Date : Augus t12,199 8 Topic : Coa l Uni tCapacit y Facto r Declin e Wit h Ag e
Summar y
p 

### Thi s mem o present

s th e results o f

a n analysi s o f

capacit y factors fo r th e fleeto f

coa l units i n th e US . W e find tha

tcapacit y facto r i s related t o generato r age , wit h olde r unit s operating a

tlowe r capacit

y factors , b y rougM

y on e percentag e poin tfo r eac h yea r o f age. Th e olde r unit

s als o tend t o hav e highe r O& M cost s pe r kW h an d highe r heatrates . Thes e tw o factors ar

e presumably responsibre fo r th e lowe r capacit y factor s o f

th e olde r generators , althoug

h th e relationship s among ] th e variable s ar e complex . Ther e has been significan tongoin g investmen ti n th e flee to f coa l generators , fo r emission s control s an

d equipmen

trepai r and-replacemen

tt o maintai n plan tperformance . In th e absenc e o f

significan tongoin g capital investment , th e declin e i n capacity facto r wit h ag e woul d likel y b e muc h greater . W e hav e not , however , bee n abl e t o analyz e thi s connectio n betwee n investmen tan d performance . Moreover , w e hav e no tanalyze d othe r potentiall y interestin g technical and economi c variables , som e o f whic h may b e specifi c t o particula

r regions , companies , o r plants . Nonetheless , i tappear s reasonabl e t o conclud e a

tthi s tim e tha

ta capacit

y facto r declin e o f

on e percentag e poin tpe r yea r i n th e absenc e o f

significantcapita

l investmen ti s a conservativel y lo w presumption .


# 3'" 7P.3 9



## Figur e 1

% t o 

### u I B
- 

## a C O 

### O 

## Coa l Uni t Capacity Facto r by Vintag e

193 0 194 0 195 0 196 0 197 0 

### Inservlc e Year 198 0 199 0 200 0

Capacit y Factor s b y Vintag e 

### Figure 1 i s ascatter

plo t o f capacit y factor s fo

r 88 6 coa l unit s b y installatio n year . Th e databas e fo

r thi s analysi s wa s develope d fo r Synapse' s recent

repor t fo r NARUC A I t include s virtuall y al l o f

th e coa l capacit y currently operatin g i

n ti e Unite dStates
. Th e dataplotte d are fo

r 1996
. Whil e ther e i s considerabl e scatter , aclea r tren di s als o discemable

. Older coa l unit s are , o n average , operatin g a

t lower capacit y factors

. Th e tren dline , asimpl e leas t square s fit

1 Grandfathering and

Environmental

Comparability: An Economic Analysis of Air Emission Regulations and Electricity Market

Distortions, prepare d fo

r th e Nationa

l Association o f

Regulator y Utilit y Commissioner s b

y Bruc e Biewald , Davi

dWhite , an

d Ti mWoolf , o f Synaps e Energ y Economics , Inc. , an d Fran k Ackerma n an d Willia m Moomaw , of

th e Globa l Developmen

t an d Environmen

t Institute , June 11,1998 . 

# * 3 8P.4 0



### t o th e data , ha s a slop e o f 0.9 5 pe r year . Tha

tis , for thi s dat

a se to f coa l units , capacity factors o f olde r unit

s averag e abou

ton e percentag e pointlowe r tha n th e capacit

y factor s o f newe r unit

s fo r each year o f

difference i n th e installatio n date . Th e adjusted R-square d fo r thi s regression , 0.22 , indicate s tha tth e independen tvariabl e (installatio n year ) explain s onl y a small portio n o f th e variatio n i n th e dependentvariabl e (capacit y factor) . A tth e sam e time , however , th e t-statisti c o f 15. 6 indicate s tha

ttiie correlatio n betwee n installatio n yea r an d capacit y facto r i s statisticall y significan tt o a .ver y hig h degre e o f

confidence . Whil e ag e i s onl y on e o f man y importan

tfactors influencin g capacit

y factor , w e ca

n b e quit e sure tha ti ti s one o f

th e factors . Anothe r wa y o f

lookin g a

tthi s dat a i s b y binned averages . I n Tabl e 1 , simpl e averag e an d weighte d averag e (b y capacit y rating ) capacit

y factors ar

e liste d fo r five yea r bins . Th e tren d i s clearl y upward , with averag e capacit y factors fo r th e firstthre e bin s (befor e 1950 ) al l belo w 3 0 percentan d averag e capacit

y factors fo r th e las tthre e bin s (afte r 1985 ) al l abov e 7 0 percen t I tshoul d b e note d tha

tth e dat a se tthin s ou

ta tth e ends . Thi s ca n b e see n i n th e plo tand th e table . For example , th e bin s for th e oldes t(193 5 t o 1939 ) an d newes t(199 5 t o 1998 ) unit s eac h contai n onl y tw o observations . Ninet y on e percen to f th e tmit s i n th e databas e began operatin g i

n th e perio d betwee n 195 0 an d 1984 . Table l Coa l Uni tCapacit y Factor s Binne d b y Vintag e
Installatio n Yea

r 193 5 to 193 9 1940 to 194

4 194 5 t o 1949 195 0 t o 195 4 1955tol95 9 196 0 t o 196 4 196 5 t o 196 9 197 0 to 197

4 197 5 to 197 9 198 0 to 198

4 198 5 t o 198 9 1990 to 199 4 199 5 t o 199 8 Tota l Numbe

r o f Unit s 2 1 0 2 8 14 4 155 10 7 108 U l 9 5 8 6 3 3 5 2 88 6 Simpl e Averag e Capacit y Facto r 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 % Weighte

d Averag e Capacit y Facto r 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.4 1



### Hea tRat e an d O& M Cos tb y Vintag e Th e cause s o f

capacit y facto r declin e with ag e ar e complex , with many force s interactin g i n differen

tway s fo r individua

l units . In th e aggregate i ti s reasonabl e t o conclud e that th e olde r unit

s ar e les s efficien ttha

n th e newe r units , an

d s o ar e dispatche d les s often . Heatrat e i s a measure o f

th e physical efficienc y of a generator . Becaus e i tspecifie s th e amoun to f fuel tha tmus tb e burne

d t o produc e a uni to f

electricity , an

d becaus e fue l cost s dominat e tota l operatin g cost s for coal plants , hea trat e i s a n excellen tindicato r o f economi c efficienc y o f

operation . I n Figure 2 , coa l uni theatrates ar e plotte d agains t vintage . Th e expecte d tren d i s clear , with newe r units o n averag e operatin g mor e efficientl y tha

n olde r units . O& M cos ti s another indicato r o f generato r economi c efficiency . In Figur e 3 , coa l uni t O& M cost s ar

e plotte d agains tvintage . Again , th e expecte d tren d emerge s from th e scatter . Newe r coa l unit

s have , o n average , lowe r O& M cost s tha n olde r units . I tshoul d b e note d tha

tthere i s n o simpl e caus e an d effec trelationshi p amoun tth e dat a plotte d in th e thre e figures. Whil e heatrat e an d O& M cos tbot

h influenc e capacit

y factor , th e capacit

y facto r wil l als o influenc e heatrat e an d O& M cos tLowe r capacit y factor s generall y indicate operatio n of a uniti n a cyclin g mode , wit h th e unitshutdown and restarte d as demand s fall an

d rise, an d als o operated a

tpartia l capacit y states . Unit s operate d i n thi s manner wil l tend t o bur n mor e fue l t o produc e a kW h than d o generator s operate d a s baseloa d units , wit

h highe r capacit

y factors . Similarly , intermediat

e unit s wil l ten d t o hav e highe r O& M cost s pe r kW h simpl y becaus e som e O& M cost s ar e "fixed* * (no trelate d t o th e amoun to f kW h produced) . Tha t is , i f a planti s operate d a

tlowe r capacit

y factor , the n som e o f

th e expense s incurred i n operatin g an

d maintainin g th e plantar e no tcorrespondingl y reduced , an d henc e th e pe r kW h cos ti s higher . Caveat s an d Direction s fo r Furthe r Researc h Th e analysi s describe d abov e i s a quick an d straightforwar

d wa y o f lookin g a

tchange s i n coal uni tcapacit y factor s ove r time . I hop e an

d expec ttha

titi s useful . A tth e sam e time , it s limitation s shoul d b e noted . W e hav e notaddresse d man y potentiall y importan

t factor s includin g th e following : 

# PP.4 2



### • Ho w doe s generato ravailability (a s measure d b y "equivalen tavailabilit y factor*' ) chang e wit h age ?
• Ho w woul d th e result s of a multi-variabl e regressio n analysi s diffe rfrom th e simpl e regressio n result s presente d here ?
• Ho w specificall y doe s capital investmen ti n powe rplant s relate t o capacit y facto rove r time ?
• Thi s analysi s examine s a sampl e o f generator s o f

differen tvintage s aton e poin ti n time . Ho w d o th e trend s loo k fo rgenerator s ove rtim e - fo reithe ra serie s o f actua l year s o rprojecte d condition s int o th e future ?
• Ar e ther e region , company , o rplant-specifi c consideration s thatshoul d b e factore d int o th e analysis ? Futur e researc h o n thi s topi c migh tusefull y b e directe d towar d addressin g som e o f thes e issues . 

# Figur e 2

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# 42 - >• ? .Anthon y Alexande r Executiv e Vic e Presiden

tan d Genera l Counse l FirstEnerg

y .7 6 Sout h Mai n Stree t Akron , Ohi o 4430 8
Pravee n Ama r NESCAUM 12 9 Portlan

d Stree t Boston , M

A 0217 3

Icla l Ata y NJDE P 40 1 Eas tStat e Stree t Trenton , N

J 0862 5

Ben e Bauerei s BGE

An n Berwic k M . J . Bradle

y Assoc . 4 7 Junction Squar

e Driv e Concord , M

A

Joe l Bluestei n EEA/TRIGE

N

To m Bonner MidAmerica

n Energy

Kare n Britt o DetroitEdison 60 1 Pennsylvani a Ave. , NW , Suite 35 0 Washington , D C 2000 4

William Brownel l Hunto n & William s 190 0 K Street, NW , Suite 120 0 Washington , D C 2000 6

Rober tL . Brubaker, Esq . Porter , Wright, Morri s & Arthu r Columbus , Ohi o Bruc e Alexande r PEC O Energy

Jane t Anderson WHCCT F

Pau l Bailey EE I 70 1 Pennsylvani aAve. , N

W Washington , D C 2000

4 ATTACHMEN

T 5 Addresse e Lis t (Thi s lis ti s stil l unde r construction. ) P.4 4



# T3 Carme n Bende r Detroi tEdiso n

Juli e Blackenshi p Cinerg y Corp . P O Bo x 96 0 Cinncinati , Ohi o 4520 1

Jerr y Bolden/Jane tLeatt

s TV A 110 1 Marke

tStreet-LT5 D Chattanooga , T N 37402-280 1

Terr y Bower s Departmen

to f Defens e

Sara h Brow n Wester n Resource s Inc .

Mar k Brownstei n PSE G 8 0 Par k Plaz a MC-17 G Newark , N

J 07102-419 4
Jac k Brunton Sempre Energy 10 1 As h Street Sa n Diego , C

A 9210 1P.4 5

Davi d Buente , Esq . Sidle y & Austi n 172 2 Ey e Street

, N W Washington , D C 2000 6 William Bumpers Bake r & Bott s 129 9 Pennsylvani a Ave . Washington , D C 2000 4

Bruce Carhar

t Ozon e Transpor

tCommissio n 44 4 N . Capitol Street, NW , Suite 60 0 Washington , D C 2000 1 Chuc k Carli n Northeas tUtilitie s P O Bo x 27 0 Hartford , C N 0614 0

Mar k Carne y U S Generating CO./EG

A 750 0 Ol d Georgetown Rd. , Bethesd a M D 2071 4 Mik e Cashi n Minnesota Powe r Duluth , Minnesota

Davi d Cesare o PEC O Energ

y (MC-S21-2 ) 230 1 Marke

tStreet Philadelphia , P

A 19101-869 9 Richar d H . Chastain Souther n Companie s Birmingham , A L

Carolin e Choi CP& L POBoxl551-CPB132 7 Raleigh , N C 2760 2 Rei d Clemme r PP&L,Inc . 2 Nort h 9 1 Street(MD-Gentw8 ) AHentown , P

A 1810 1

Richar d Corde s Minnesot a Pollutio n Control Agenc y 52 0 Lafayett

e Rd . St . Paul , M

N 5515 5 Ra e Cromillar NREC A

N . N . Dharmaraja

n Centra l & Southwes tService s Dallas , T X Lenny Dufiii s Virgini a Powe r

Henr y Eb y Lowe r Colorad o Rive r Authorit y MD-S51 9 370 0 Lake Austi n Blvd . Austin , TX 7870 3 E . Donal d Elliott , Esq . Paul , Hastings , Janofsky & Walke r 129 9 Pennsylvani a Ave. , N W Washington , D C 20004-240 0

Tiffan y Elliot t EPSA 140 1 H Street , N W (Suit e 760 ) Washington , D C 2000 5 Pa m Faggert Virgini a Powe r 500 0 Dominio n Blvd . Gle n Allen , V A 2306 0

Joe Fontain e N H Dept . o f

Environmenta

l Service s 6 4 Nort h Mai n Street Concord , N

H 03302-203 3 

# *T4 - Barabar a F . Gambill , Esq . Bernar d L . Huf f Cinerg y Corp . P O Bo x 96 0 Cinncinati , Ohi o 4520 1P.4 6

Kevin Gaynor, Esq . Vinso n & Elkins , LL

P 145 5 Pennsylvani a Ave. , N W Washington , D C 2000 4 Stev e Geh l EPR I

Felici a R . George , AssistantCommissione r Offic e o f Enforcemen

t Indian a Departmen

to f Environmenta

l Management 10 0 Nort h Senate , Roo m 100 1 Indianapolis , Indian

a 46206-601 5 JeffGleaso n Sourthe m Environmenta

l La w Cente r 20 1 Wes tMain Street , Suite 1 4 Charlottesville , V A 2290 2

Glenn Golso n A L Dept . o f

Environmenta

l Managemen

t P O Bo x 30146 3 Montgomery , A L 3613 0 Ro n Gore , Chie f Ai r Divisio n A L Departmen

to f Environmenta

l Management 140 0 Coliseu m Blvd . Montgomery , A L 3611 0
Pa m Graik e NS P Davi d Grilbrer t Constellatio n Energy Group (BGE ) 130 1 Pennsylvani a Ave. , NE , Suit e 105 0 Washington , D C 2000 4

Jaso n Grume t NESCAUM P O Bo x 6459 6 St . Paul , MN 55164-059 6 Mar k Hal l Trigen-Energy Corp . 1 Water Street Whit e Plain , N Y 1060 1

Ro y Hamme Duke Energ

y Ra y Harr y Souther n Compan

y 113 0 Connecticu tAve. , NW , Suit e 83 0 Washington , D C 2003 6

Davi d Hawkin s Natura l Resource s Defens e Counci l 135 0 Ne w Yor

k Ave. , NW , Suite 30 0 Washington , D C 2000 5 Susa n Hedma n Environmenta

l La w & Polic y Cente r 3 5 Eas tWacke r Driv e Chicago , I

L 6060 2

Ne d Helm e Center fo r Clea

n Ai r Polic y 7501-Street , NE , Suite 114 0 Washington , D C 2000 2 Gordo n Heste r EPR I

Dav e Heydlarf

f AE P Linda D . Hicko k Sith e Energies , Inc .

Rober tHodanbosi , Chie f Divisio n o f

Ai r Pollutio n Contro

l Ohi o EP A 160 0 Watermar

k Driv e Columbus , Ohi o 4321 5 

# 4 5 Patric a Hoffma n DO E - Cogeneratio n Progra m Manage r 100 0 Independenc e Ave. , S W Washington , D C 20585-012 1P.4 7

Alexandri aHol

t Chicag o Dept
. Environmen

t Joh n Homback , Director Division fo

r Ai r Qualit y K Y Departmen

t fo r Environmenta

l Protectio n 80 3 Schenkel Lane Frankfort , K

Y 40601-140 3 Jacqueline Howell s PNM/SPP C 33 2 Constitution Ave. , N

E Washington , D C 2000 2 Crai g Jakubowic s Ediso n Electri c Institut

e

Debr aJezoui t Bake r & Bolts , L.L.P
. 129 9 Pennsylvani aAve
. Washington , DC 2000 8 EricKuh n Cinergy Corp
. (RM552A ) P O Bo x 96 0 Cinncinati , Ohi o 4520 1
Mik e J
. Kenned

y FloridaPowe

r Corporation St
. Petersburg , Florida Joh n Kinsma n Edison Electri c Institut

e 70 1 Pennsylvani aAve. , N

W Washington , D C 20004

Kri s W
. Knuden s ' Duk e Energ y Corporation Charlotte , N

C David Kolaz , Chief Complianc e an

d System s Managemen

t Section Burea u of Air , Illinoi s Environmenta

l Protection Agency 102 1 Nort h Gran dAve
. Eas t Springfield , Illinoi s 6270 2 Joh n Krissma n EE I 70 1 Pennsylvani aAve. , N

W Washington , DC 2000

4 JohnKrog h Minnesot aPowe r

Edwar dL
. Kropp , Chie

f Offic e o f Ai r Qualit y Wes t Virgini aDepartmen

t of Environmenta

l Protectio n 155 8 Washington Street , Eas t Charleston , W

V 2531 1 Denni s Limbac h Alleghen y Powe r 800 Cabi n Hil l driv e Greensburg , P

A 1560 1

Jeffre y Levin e Cauthe n an dAssoc
. 127 5 Pennsylvani aAve. , NW , IO * Floor Washington , D

C 2000 4 Willia mH
. Lewis , Jr
. Morgan , Lewis , Bochiu s Washington , D C

Lewi s Leubac

k Alleghan y Energ y Eugen e Marshal l Pacificor p Sal t Lak e City , Uta

h

C
. V
. Mathia

i APS 

# +1* Janet McCabe , Assistan

t Commissione

r Offic e o f Ai r Managmen

t IndianaDepartmen

t o f Environmenta

l Managemen

t 10 0 Nort h Senate , Roo m100 1 Indianapolis , Indian a46206-601 5P.4 8

Collee n McCarth

y N Y Stat e DE C Dav e McCarth y IPSLC O Enterprises

Yvonn e Mclntire KCPL/Empire/St. Jo e Ligh t& Powe r 70 1 Pennsylvani a Ave , N W (3 r tFloor ) Washington , D C 2000 4 John M . McManu s America n Electri c Powe r Columbus , Ohi o

Mike Menn e AMERE N Ronal d Methier , Chie f Ai r Protectio n Branch , EPD G A Dept . o f

Natura l Resource s 424 4 Internationa

l Parkway , Suit e 12 0 Atlanta , G A 3035 4 Joseph Miakisz , Directo r Niagar a Mohaw k Powe r Corp . Env . Regulator

y Affairs. , 30 0 Eri e Blvd . W . Syracuse , N Y 1320 2 D . Micheal Miller , Chie f Counse l Powe r an d Generatio n an

d Directo r o f

Litigatio n American Electri c Powe r 1 Riversid e Plaz a Columbus , Ohi o 4321 5
Pa m Mill s Alleghan y Energ

y 130 1 Pennsylvani a Ave , N W (Suite 1030 ) Washington , D C 2000 4 Donal d Mohnin g MidAmerica

n Energy Company 40 1 Dougla s Sioux , I A 5110 1

Larr y Myers Henr y Nickel , Esq./F . Willia m Brownell , Esq . Hunton & William s 20 0 Pennyslvani a Ave. , NW , Suite 900 0 Washington , D C 2000 6

Joh n Nova k EE I 70 1 Pennsylvani a Ave. , N W Washington , D C 2000 4 Judy Odoulam y Dept . o f Energ y - GC- 1 100 0 Independenc e Ave. , S W Washington , D C 2058 5

Bil l O'Sulliva n N J Dept. o f Environmenta

l Protectio n 40 1 E . Stat

e Stree t Trenton , N Y 0862 5 JeffPardu e Florid a Powe r Corp . 26 3 13 * Ave . Sout

h (MACBB1A ) St . Petersburg , F L 33701-551 1

Vicki e Patto

n ED F Rock y Mnt . Office , 1405 Arapahoe Ave . Boulder , C O 8030 2 Joh n Pau l RAPCA 45 1 W . Thir

d Street Dayton , OH 4542 2

Mik e Polin g Kansa s Cit y Powe r & Light/Empir

e Distric tElectri c Co . 70 1 Pennsylvani a Ave , N W Suit e 30 0 Washington , D C 2000 4 

# 4 7 Georg e Porch , Esq . Genera l Counse l fo r SIGEC O Bamberger , Foreman , Oswal d an d Hahn , L.L.P . 7 * Floo r Huma

n Bldgs. , 20 , h N . W . 4* Street Evansville , Indian a 4770 4-*-^— —— P.4 9

Howar d Pyl e ReliantEnerg

y "801 Pennsylvani a Ave. , N' V (Suit e 620 ) Washington , D C 2000 4 JohnQuin n Baltimor e Gas & Electri c

Ratric k Raher, Esq . 55 5 Thirteent

h Street, N W Washington , D.C . 20004-110 9 Rober tRaine y T N Valle y Authorit

y 110 1 Marke

tStreet Chattanooga , T N 3740 5

Ra j Rao N Y Stat e DE C Divisio n o f

Ai r 5 0 Wolf e Roa d Albany , N Y 1223 3 Howard Rhodes , Directo r Ai r Resource s ManagementDivisio n F L Departmen

to f Env . Protection , Mai l Statio n 550 0 260 0 Blai r Ston e Road Tallahasee , F L 32399-240 0
June Robinso n Illinoi s Power 30 2 Shorelin e Driv e Decatur , I

L 6252 1 Roge r Schwarz PSE G

Chri s Shave r Nationa l Par k Servic e Ai r Qualit

y Divisio n P O Bo x 2528 7 Denver , C O 8022 5 Quinta n She a National Minin g Assoc .

Bo b Shinn N J Dept . o f

th e Env . LeoSicuranz a U.S . Generating Company One Bowdoi n Square , Suit e 60 0 Boston , MA 02114-291 0

Gre g Signe r TV A 40 0 W . Summi

tHill Drive , E T 10A- K Knoxville.T N 37902-149 9 John Slad e P A Dept . o f

Environmenta

l Protectio n 40 0 Marke

tSt. , Rachel Carson Stat e Offic e BIdg . Harrisburg , P

A 17105-846 8

Rober tSliwinsk i N Y Stat e DE P 5 0 Wolf e Roa d Albany , N Y 12233-325 1 Rebecc a Stanfiel d USPIR G 21 8 D Street , S E Washington , D C 2000 3

Barr y Stephens , Directo r Div . o f Ai r Pollutio n Contro

l TN Dept. o f

Environmen

tan d Conservatio n 40 1 Churc

h Street, 9

A Floor , L & C Anne x Nashville , T

N 37243-153 1 Danie l V . Stee n FirstEnergy Arkron , Ohi o

Ms . Lea h Stetzner Vic e President, Genera

l Counse l and Corporat

e Counse l Illinoi s Power Compan

y 50 0 Sout h 27 l h Stree

t Decatur , Illinoi s 6252 1 

# 49 N . Tequ e H& WP.5 0

.Pats y Thompson PSE G
" 1 Massachusette s Ave. , NW , Suite 71 0 •Washington, D C 2000 1 Eugen e Trisk o Attorney fo r Unite d Min e Worker s o f Americ a P O Bo x 59 6 Berkele y Springs , W V 2541 1

Willia m Tyndal l VP/Environmenta

l Services , Cinergy corp . 13 9 Eas tFourt h Street, Roo m 500- M Cincinnati , O

H 4520 1 Jerome A . Vennermanh , Esq . Actin g Counsel CINERGY Service s 13 9 EastFourt

h Street Cincinnati , Ohi o 4520 2
Jea n Veme t Dept . o f Energ y Sara h Wade ED F 187 5 C T Ave. , NW , Suit e 101 6 Washington , D C 2000 9

Davi d Wallenberg STAPPA/ALAPC O 44 4 N . Capito

l Street, NW , Suite 30 7 Washington , D C 2000 1 An n B . Week s Clea n Ai r Task Forc e 23 0 Congres s Street Boston , MA 0211 0

Dick Whit

e Texa s Utilit

y 160 1 Brya

n Stree t Dallas , TX 7520 1 Susa n Wierma

n Mid-Atlanti c Regiona l Ai r ManagementAssoc . 71 1 Wes t40 l h Street , Suit e 31 8 Baltimore , M D 2121 1

Bil l Wemhof

f APP A Jane tWatt s TV A 40 0 W . SummitHil l Drive , E T 10A- K Knoxville,T N 37902-149 9

Bil l Wemhof

f APP A 230 1 M Street, N W Washington , D C 20037-148 4 Samuel A . Wolf e Publi c Servic e Electri c & Ga s Company 8 0 Par k Plaza , 17 G Newark , N Y 07102-419 4 Dwigh tWylie , Chie f Ai r Division , Offic e o f

Pollutio n Control M S Dept . o f

Env . Qualit

y P O Bo x 1038 5 Jackson , M S 3928 9 Sheldo n Zabel Schiff , Hardi n & Wait e 720 0 Sear

s Towe r Chicago , IL 60606-647 3

EP A Joh n Bachman

n Elle n Brow

n Bria n McLea n Sa m Napolitan o Elle n Brown Davi d Solomo n


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