December 17, 2008

ES-266-2008

Gov Rel 9

Mr. Brian Finneran Oregon Department of Environmental Quality

811 SW Sixth Ave Portland, OR 97204

Re: Preliminary Comments on Pr oposed Regional Haze Rules

Dear Brian:

Portland General Electric Company (PGE) apprec iates this opportunity to comment on the proposed Regional Haze rulemaking. As you know, the proposed rules are the result of the federal requirement that Oregon submit an initi al implementation plan for regional haze (the Regional Haze SIP). This plan must include a determination of Best Available Retrofit Technology (BART) for each BART-eligible source in the state that emits any air pollutant which may reasonably be anticipated to cause or contribute to visibili ty impairment in any mandatory Class I area. 40 CFR § 51.308(e)(1)(ii). The federal Clean Air Act contains specific criteria for establishing BART and these criteria are carried ov er into the regulations. In developing these regulations, EPA also promulga ted guidelines to be used by the states in developing BART determinations. These guide lines, found in 40 CFR § 51 Appendix Y, contain the majority of the detail regarding how BART determina tions are to be conducted.

1. Background

On November 2, 2007, PGE submitted a BART analysis for its coal-fired pow er plant located in Boardman, Oregon (the Boardman plant). 1 Sources in existence on August 7, 1977 and that both fall into one of the designated s ource categories and have the poten tial to emit more that 250 tons per year of a haze-causing pollutant are required to determine BART if they cause or contribute to visibility impairment in a mandatory Cla ss I area. 40 CFR § 51.308(e). DEQ previously determined that the Boardman power plant was in ex istence, as that term is defined in the federal

1 The Foster-Wheeler boiler is identified by the U.S. Environmental Protection Agency (EPA) as acid rain program ORISPL code 6106.Mr. Brian Finneran December 17, 2008 Page 2

Regional Haze program, on August 7, 1977. 2 The Boardman plant emits more than 250 tons per year of NOx, SO 2 and PM, is in one of the designated source categories and was determined by the Oregon Department of Environmental Qualit y (DEQ or Department) to cause visibility impairment in at least one mandatory Class I ar ea. Therefore, PGE engaged an extensive group of experts that assisted the company in prepari ng a BART determination for the Boardman plant. This report was submitted on November 2, 2007 and subsequently supplemented in response to dozens of questions posed by various state and federal agencies and interested third parties. The team of experts concluded that for the Boardman plant BART constituted the installation of new low-NOx burners with a modified overfire air sy stem for NOx control and the installation of a semi-dry scrubbing system w ith fabric filters for SO 2 and PM control. PGE concluded that due to the long lead time and complex engineering ch allenges the company needed five years from the date that the Regional Haze SIP is approved in order to engineer, bid, procure, install and start up the semi-dry scrubbing system. Federal law authorizes DEQ to allow up to five years from the date EPA approves the Regional Haze SIP. 40 CFR § 51.308(e)(1)(iv).

On December 1, 2008, the Department issued the proposed Regional Haze proposal for public comment. The proposal includes new regulations that would require the installation of the

controls identified below.

Limit (Assumed Control) Installation Deadline Authority 0.23 lb NOx/MMBtu (Low-NOx Burners/Overfire Air)* 7/1/2011 BART

0.12 lb SO 2 /MMBtu

0.012 lb PM/MMBtu (Semi-Dry Scrubber) 7/1/2014 BART

0.070 lb NOx/MMBtu (SCR) 7/1/2017 Reasonable Progress * If LNB/OFA doesn’t meet limit, SNCR required by 7/1/2014

2 40 CFR § 51.301 defines “in existence on Augus t 7, 1977” as “meaning that the owner or operator has obtained all necessa ry preconstruction approvals or permits required by Federal, State, or local air pollution emissions and air qua lity laws or regulations and either has (1) begun, or caused to begin, a continuous pr ogram of physical on-site constr uction of the facility or (2) entered into binding agreements or contractua l obligations, which cannot be cancelled or

modified without substantial loss to the owner or operator, to undertake a program of construction of the facility to be completed in a reasonable time.”Mr. Brian Finneran December 17, 2008 Page 3

The Department’s proposed BART determination is c onsistent with the controls determined to be BART by PGE’s experts. However, the schedule proposed for installation of the semi-dry scrubber system is shorter than that proposed by PGE. DEQ anticipates presenting the final BART determination package to the Environmen tal Quality Commission (EQC) at its April 2009 meeting. Assuming the EQC adopts the package in April 2009, it must then be submitted to EPA for approval into the State Implementation Plan (SIP). This process is anticipated to take a minimum of six months and more likely a year or longer. Assuming th at EPA does not approve the Regional Haze SIP until July 1, 2010, the proposed rule does not provide all of the time

allowed for PGE to insta ll the semi-dry scrubbers.

Although all that is required of DEQ at this time is to promulgate BART, DEQ chose to go further and also impose a requirement under the future “Reasonable Pr ogress” program. The first stage of the Regional Haze program is to determine and require BART. However, each state must subsequently develop a plan to ensure th at by 2064 visibility is restored to pre-human levels in mandatory Class I areas (BART and Re asonable Progress controls are evaluated based on benefits to mandatory Class I areas only). Co nsistent with this requirement, states must submit SIPs containing emissions limits, schedules of compliance and other measures as may be necessary to make reasonable pr ogress toward meeting the 2064 visibility goal. DEQ must also demonstrate to EPA every ten years that the state is making reasonable progress towards the ultimate visibility improvement goal. These “Reasonable Progress” demonstrations do not require any determination of cont rols on stationary sources at th is time and we are aware of no western state making Reasonable Pr ogress based control determinations at the same time that the state is making BART determinations. For exampl e, California just released its draft Regional Haze SIP and it is proposing no stationary source Reasonable Progress control determinations. Nonetheless, the Department has proposed as part of this rulemaking that the Boardman plant be required to install additional NOx controls, spec ifically selective catalytic reduction (SCR), in

2017. These controls were demonstrated not to c onstitute BART due to their extreme cost and

their limited effectiveness in a ddressing visibility impacts.

PGE has reviewed the Department’s proposed BA RT and Reasonable Progress rules in light of this regulatory and statutory background. Based on our review, we have the following

comments.

2. Comments on Proposed NOx BART Rule

NOx BART Limit DeterminationMr. Brian Finneran December 17, 2008 Page 4

PGE supports the Department’s NOx BART determination. The proposed NOx BART

determination will reduce NOx from the Boardm an plant by approximately 46% from current levels by preventing the formation of NOx in the first place. While this comes at a significant capital expense, we believe that these controls constitute BART and note that the Department’s

determination is consistent with BART determina tions throughout the western U.S. We believe

that the determination of feasible control level is aggressive and concur w ith the Department that it is appropriate to determin e compliance with the 0.23 lb/MMB tu heat input limit based on a rolling 12-month average.

NOx BART Compliance Schedule

PGE generally supports the NOx BART installati on schedule, but notes that compliance with these deadlines is dependent on EPA approvi ng the Regional Haze SIP and DEQ approving the necessary preconstruction permits in a timely manner. Because of the need to know with certainty that the SIP is approved and the need for preconstruction permits prior to commencing construction, PGE is faced with potentially critical delays beyond its control. In order to avoid PGE being placed in the untenable position of ha ving to proceed with millions of dollars worth

of controls in the absence of clear regulatory or permit auth ority, PGE requests that DEQ add language authorizing the Department to delay installation of the controls in the event of delays beyond PGE’s reasonable control. We recognize that under fede ral law the Department cannot extend the compliance deadline by more than five years after EPA appr oves the portion of the SIP containing the NOx BART limits.

Neither PGE nor the Department can have absolu te certainty that EPA will approve the Regional Haze SIP. Therefore, PGE believes that it is critical to add language to the proposed rules specifying that if the Regional Haze SIP provisions relating to the NOx BART determination is disapproved that PGE is not requir ed to proceed with installation of the controls as a matter of state rule. If EPA disapproves the SIP provi sions mandating controls, that agency will presumably require some other approach. Theref ore, we suggest that th e proposed rules provide a mechanism for staying the control requirement s in the event that EPA disapproves the SIP provisions mandating controls.

3. Comments on Proposed SO 2 BART Rule

SO 2 BART Limit DeterminationMr. Brian Finneran December 17, 2008 Page 5

PGE supports the Department’s SO 2 BART determination. The proposed SO 2 BART

determination will reduce SO 2 from the Boardman plant by approximately 80% from current levels through the installation of a semi-dry scrubber system. While this technology comes at both a capital expense and generation efficiency penalty, we agree that these controls constitute BART and note that the Department’s determinati on is consistent with ormore aggressive than BART determinations throughout the western U.S. We concur with the Department that it is appropriate to determine compliance with the 0.1 2 lb/MMBtu heat input limit based on a rolling 30-day average basis.

SO 2 BART Compliance Schedule

PGE generally supports the SO 2 BART installation sc hedule, but notes that compliance with the deadline is also dependent on EPA approving the Regional Haze SIP and DEQ approving the necessary preconstruction permits in a timely ma nner. As noted above PGE needs to know with certainty that the SIP is approved and that it has all permits in hand prior to commencing

construction of several hundred million dollars wort h of control equipment. In addition, if EPA does not approve the portions of th e Regional Haze SIP containing the SO 2 limits in a reasonable time frame then PGE will not have enough time to pr ocure and install the controls. Therefore, we suggest that either DEQ change the installati on deadline to be five years from the date of EPA approval of the relevant portions of the Re gional Haze SIP or that DEQ add a provision to the rules extending the deadline to five years pos t-SIP approval in the event that EPA does not approve these portions of the SIP by the end of 2009.

Alternative SO 2 BART Determination

PGE also requests that DEQ add an alternative SO 2 BART determination to the proposed regulations. Section 169A(g) of the Clean Air Act specifies that BART determinations must take into account the remaining useful life of the BA RT eligible emission unit. See, also 40 CFR § 51.308(e)(1)(ii)(A). EPA stated that this factor should be accounted for in assessing the cost impacts of a particular control technology. 70 Fed. Reg. 39127 (July 6, 2005). In its November 2007 BART determination PGE noted that the possi ble premature cessation of operations of the coal-fired boiler may be appropriate for consider ation in determining BART. Consistent with 40 CFR § 51, App Y Section IV(D)(4)(k) (“How do I take into account a project’s ‘remaining useful life’ in calculating c ontrol costs”), PGE r ecognized the possibility that it might be necessary to include a regulatory scenario that anticipated the early closure of the FosterWheeler boiler. Based on the continued uncerta inties about fuel cost/availability, replacement power, carbon regulation, control technologies and combustion technologies, PGE believes thatMr. Brian Finneran December 17, 2008 Page 6

including an alternative to the proposed BART determination is appropriate. EPA specifically anticipated sources needing flexib ility and seeking alternatives, a nd addressed this possibility in Section IV(D)(4)(k)(3) of 40 CFR § 51, App Y. In evaluatin g the cost-effectiveness of the proposed SO 2 controls, PGE assumed that the controls would be in place and operational for twenty years. As a result, the annualized capital cost was amortized over the full twenty-year life

of the control device. We believe that it is consistent with the Clean Air Act and EPA’s regulations to include an alte rnate BART determination for SO 2 that reflects a shorter facility life than the twenty-year life assumed in the current evaluation.

Incorporating an alternative SO 2 BART determination into the Oregon BART rules provides PGE the flexibility needed to best protect its customers while protecting the environment. PGE is requesting the option to assume a federally enforceable permit limit requiring cessation of the Foster-Wheeler boiler operations by the end of 2020 in lieu of installing the semi-dry scrubbers. In order to ensure adequate time to incorporate the permit limit into its permit as well as to ensure that the permit limit was in place pr ior to the 2014 deadline for installing the SO 2 controls, PGE would need to apply for this fede rally enforceable limit no later than July 1, 2012. If PGE submitted an application requesting the condition by that date, and responded in a timely fashion to any Department requests, PGE would be required to terminate operation of the FosterWheeler boiler by 2020. Alternativ ely, if PGE did not submit an application by July 1, 2012 requesting the permit limit, PGE would be bound by the Department’s proposed SO 2 BART compliance deadlines and would have to install the semi-dry scrubbers by July 1, 2014. Both options, including the requirement to submit th e permit limit application by July 1, 2012, would be placed in the rules. PGE, with guidan ce from the Oregon Public Utilities Commission (OPUC) and stakeholders, would then need to deci de no later than July 1, 2012 whether to install

the SO 2 BART controls or cease operating the Foster-Wheeler boiler by the end of 2020.

Incorporating the recommended alternative SO 2 BART determination with the 2012 decision point into the Oregon BART rules is consistent with all federal requirements. As noted above, not only is there no prohibition on the Departme nt incorporating alte rnative BART options, Appendix Y to the federal BART regulations states that alternatives are permissible so long as each option independently meets the BART criteri a. 40 CFR § 51, App Y, Section IV(D)(4)(k). The 2020 alternative BART determination clearly m eets the BART criteria. As noted above, the Clean Air Act requires consideration of the rema ining useful life of the plant. EPA’s rules recognize that if the remaini ng useful life is limited by pe rmit condition then the costeffectiveness needs to be determined based on amortizing the capital cost over the reduced equipment life. The cost-effectiveness of the se mi-dry scrubbers based on a useful life of 6.5 years (i.e., the number of years af ter July 1, 2014 that the control would be operated if the Foster-Mr. Brian Finneran December 17, 2008 Page 7

Wheeler boiler ceased operation in 2020) is approximately $5,200 per ton of SO 2 controlled (see attached spreadsheet for details of cost-effectiveness evaluation). 3 This cost-effectiveness far exceeds the range of SO 2 cost-effectiveness evaluated by EPA in establishing the presumptive BART limits. In EPA’s assessment they looked at costs ranging from $400/ton to $2,000/ton. The cost-effectiveness of the semi-dry scrubbers if operated only 6.5 years would be almost triple the high end of the range of what EPA c onsidered cost-effective. Therefore, with only a 6.5-year operational life it is appropriate to consider BART to require no additional SO 2 controls so long as the Foster-Wheeler boiler is requi red to cease operation by the end of 2020. This determination would not affect the requirement to operate the NOx BART controls and nor would it affect PGE’s obligation to control mercury emitted from the boiler.

It is also appropriate to consider the alternative SO 2 BART determination in light of the long term benefits to the environment provided by bot h options. If the plan t installed the proposed BART controls (i.e., low-NOx burners, modifi ed overfire air and semi-dry scrubbers) and operated through 2040, the aggregate vi sibility pollutant (i.e., NOx, SO 2 and PM) emissions calculated on a potential to emit basis would total 336,358 tons. 4 If the proposed NOx/SO 2 BART controls and SCR were installed, the aggregate visibility pollu tant emissions through 2040 would total 237,149 tons. If NOx BART but no other controls were in stalled on the boiler and the boiler ceased operation at the end of 2020, 232,453 tons of visibility pollutants would be emitted. A comparison of the aggregate emissions is presented below.

Total Visibility Pollutant Emissions (tons) Controls Installed Boiler Operated Through NOx SO 2 PM Aggregate

LNB/OFA 12/31/2020 63,588 158,311 10,554 232,453

LNB/OFA and SD scrubbers 12/31/2040 184,960 139,313 12,084 336,358
LNB/OFA, SD Scrubbers &

SCR 12/31/2040 85,752 139,313 12,084 237,149 Notes: All computations start 1/1/2011; emissions calculations based on plant potential to emit.

3 Section 4(k)(2) of Appendix Y specifies that the remaining useful lif e of a control is the

difference between the date the controls would go into place and the da te the controlled unit permanently stops operation.

4 2040 is the current projected life of the Fost er-Wheeler boiler that was identified in PGE’s BART analysis. However, there is no legal requirement to cease operation of the boiler at

that time and the actual life of the boiler could be longer.Mr. Brian Finneran December 17, 2008 Page 8

These suggested revisions are consistent with the BART requirements, are environmentally beneficial and also provide additional benefits . As the Department knows, the electrical generation business is in a time of tremendous tr ansition. Over the next decade we anticipate

tremendous advances in both elec tricity generation and control technology (e.g., carbon capture and sequestration). In addition, we anticipate that carbon will become subject to regulation. The

full costs and benefits of these changes cannot be fully assessed at this time. However, by the time that PGE must decide whether to apply for its federally enforc eable condition requiring cessation of operation of the Foster -Wheeler boiler or install the SO 2 BART controls, both PGE and the OPUC likely will have a better idea of the best future for the Boardman plant. As the Department knows, PGE is also regulated by th e OPUC, and resource decisions such as the

installation of BART controls mu st be fully vetted in the OPUC’s Integrated Resource Planning (IRP) process. That process includes extensiv e public and stakeholde r input and detailed modeling of resource decisions to yield the best combination of expected costs and risks. By building this decision point into the BART rules, it will help ensure that the decisions regarding Boardman are made with the most complete in formation. By enabling a more comprehensive and reasoned decision making process on the future of Boardman we also anticipate that DEQ will reduce the fiscal impacts to businesses in Or egon as compared to the Department’s proposed

BART rules.

Startup, Shutdown and Malfunction Exemption

We appreciate the recognition in the proposed rules that the tec hnology based limits do not apply during startups and shutdowns. EPA was clear in the BART regulations that startups and shutdowns were not normal operating conditions and that the BART visibility impact assessment was intended to assess normal operating conditions. Therefore, we believe that it is appropriate to not include periods of star tup and shutdown in determining compliance. However, it is equally true that the controls cannot be anticipated to perform as designed during a malfunction (defined under federal law, see, e.g. 40 CFR 63.2, as an upset that is not reasonably foreseeable or preventable and not resulting fr om inadequate design or maintena nce). Therefore, we suggest that the regulations similarly note that malf unction periods should similarly not be included when evaluating whether the controls are operati ng properly and compliance is being achieved.

PM Limit Error

The proposed BART rule identifies the PM lim it as 0.12 lb/MMBtu heat input, but PGE’s BART determination and the Department’s documentati on indicate that it should read “0.012 lb/mmBtu heat input.” We believe this was just a typographical error.Mr. Brian Finneran December 17, 2008 Page 9

Recommended BART Rule Edits

For the reasons stated above, we request that section 1 of the proposed OAR 340-223-0030 (the Boardman BART rule) be revised as follows:

340-223-0030 BART Requirements for the Foster-Wheeler boiler at the Boardman CoalFired Power Plant (Federal Acid rain program faci lity ORISPL code 6106) (1) Emissions limits: (a) On and after July 1, 2011, nitrogen oxides emissions must not exceed 0.28 lb/mmBtu heat inpu t as a 30-day rolling average and 0.23 lb/mmBtu heat input as a 12-month rolling average. (A) If it is demonstrated by July 1, 2012 that the emission limits in (a) cannot be achieved with combustion controls, th e Department may grant an extension of compliance to July 1, 2014.

(B) If an extension is granted, the nitrog en oxides emissions must not exceed 0.23 lb/mm Btu heat input as a 30-day rolling average on and after July 1,

2014. (b) On and after July 1, 2014, sulfur dioxi de emissions must not exceed 0.12 lb/mmBtu heat input as a 30-day rolling average. (c) On and after July 1, 2014, particul ate matter emissions must not exceed

0. 0 12 lb/mmBtu heat input as determined by compliance source testing. (d) The emission limits in (a) through (c ) above do not apply during periods of startup

, orshutdown or malfunction

. (e) The emission limits in (b) and (c) a bove do not apply if the operator has assumed a federally enforceable pe rmit condition prior to July 1, 2014 requiring that the Foster-Wheeler boile r cease emissions by December 31, 2020. In order to ensure adequate ti me for the Department to process the permit modification by this deadline, th e request for the federally enforceable permit condition must be submitted to the Department no la ter than July 1, 2012. If the permittee submits a permit application requesting the permit limit on or before July 1, 2012 and s ubmits to all Department information requests associated with the application in a timely manner, the permittee shall be deemed to have the permit condition in place. (f) The emission limits in (a), (b) a nd (c) above do not apply if EPA disapproves the portion of the Regional H aze SIP containing these limits or that portion of the Regional Haze SIP is otherwise invalidated.Mr. Brian Finneran December 17, 2008 Page 10

(g) If EPA fails to approve the portion of the Regional Haze SIP containing the emission limits and compliance deadlines in (b) and (c) above by December 31, 2009, then those deadlines shall automatically change to five years after approval of the portion of the Regional Haze SIP containing these

limits and deadlines. (h) The Department may extend the dead lines in (a), (b) and (c) above to account for delays beyond the reasonabl e control of the permittee, including delays in the issuance of permits aut horizing construction of the controls. The Department may not ex tend the compliance deadline more than five years after the date that EPA approve s the portion of the Regional Haze SIP containing these limits and deadlines.

4. Comments on Proposed Reasonable Progress Rule

SCR Is Not Justified by Reasonable Progress Requirements

PGE has significant concerns regarding DEQ’ s proposal that SCR is required under the Reasonable Progress program. In the Nove mber 2007 BART determination report, PGE

demonstrated that SCR is not BART for the Bo ardman boiler. The t echnology is not costeffective, does not provide materi al benefits to visibility in th e mandatory Class 1 areas and has material non-air quality envi ronmental impacts. For all these reasons DEQ reasonably

concluded that SCR is not BA RT. Section 169A(g)(1) of the federal Clean Air Act mandates that the same considerations must be applie d in determining what constitutes Reasonable Progress controls. Therefore, for the same reasons that DEQ determined that SCR did not constitute BART, it should not consider S CR to be required by Reasonable Progress.

DEQ Has No Basis For Imposing Reasonable Progress Requirements on Boardman At

This Time

PGE is similarly concerned about DEQ’s choice to proceed at this time with a Reasonable Progress determination for the Boardman Plant while not considering Reasonable Progress for any other emission sources in Oregon. We are not aware of any other stat e in the western U.S. addressing additional controls under Reasonable Pr ogress at this time. The Reasonable Progress assessment in the Department’s proposed Regional Haze SIP states that “it is not reasonable to require controls” for any of the stationary s ource categories reviewed and notes that the Department will be developing guidance for conducting Reasonable Progress controlMr. Brian Finneran December 17, 2008 Page 11

determinations over the next five years. Pr oposed Regional Haze Plan at 171. Putting aside the

fact that for the reasons stated in the previous paragraph S CR does not meet the Reasonable Progress guidelines established by statute and EPA guidance, it is arbitrar y for DEQ to single out one source for a program that is otherwise in it s nascent stages and where no other source in the

state is under consideration. For these reasons we propose that DEQ not include the Reasonable Progress component in the BART rules. DEQ can address Reasonable Progress for the Boardman plant when it develops its Reasona ble Progress SIP for the state as a whole.

Alternative Reasonable Progress Determination

Even if DEQ were to proceed with Reasonable Pr ogress at this time for the Boardman Plant and

SCR was determined to constitute a Reasonable Progress control, we believe that DEQ should

include an alternative determination similar to what is proposed above for BART. EPA’s June 2007 EPA Reasonable Progress guidance states:

“The fourth statutory factor is ‘the remaining useful life of any existing source subject to [reasonable progre ss] requirements.’ This f actor is generally best

treated as one element of the overall cost analysis. The “remaining useful life” of a source, if it repres ents a relatively short ti me period, may affect the annualized costs of retrofit controls. For example, the methods for calculating

annualized costs in EPA’s Air Pollution Cont rol Cost Manual require the use of a specified time period for amortiza tion that varies based upon the type of control. If the remaining useful life of the source will clearly exceed this time period, the remaining useful life factor ha s essentially no effect on control costs and on the reasonable progress determination process. Where the remaining

useful life of the source is less than the time period for amortizing the costs of the retrofit control, you may wish to use this shorte r time period in your cost

calculations.”

This statement supports a similar approach to th at required under BART wh ere a shorter facility life is taken into account when determining cost-effectiveness. In evaluating the costeffectiveness of SCR, PGE assumed that the co ntrols would be in pl ace and operational for twenty years. As a result, the annualized capital cost was amortized over the full twenty-year life

of the control device. We believe that it is consistent with the Clean Air Act and EPA’s regulations to include an alte rnate Reasonable Progress determination for NOx that reflects a shorter facility life.Mr. Brian Finneran December 17, 2008 Page 12

If DEQ proceeds with requiring SCR as Reasona ble Progress, PGE recommends incorporating an option under which PGE may assume a federa lly enforceable permit limit requiring cessation of the Foster-Wheeler boiler opera tions by 2029. In order to ensure adequate time to incorporate the permit limit into its permit as well as to ensu re that the permit limit is in place prior to the 2017 deadline currently proposed for installing SCR, PGE would need to apply for this federally enforceable limit no later than July 1, 2015. If PGE submitted an application requesting the condition by that date, and responde d in a timely fashion to any De partment requests, it would be required to terminate operation of the Foster-W heeler boiler by 2029. Alte rnatively, if PGE did not submit an application by July 1, 2015 reque sting the permit limit, PGE would be bound by the Department’s proposed Reasonable Progre ss NOx control compliance deadline and would have to install SCR by July 1, 2017. Both optio ns, including the requirement to submit the permit limit application by July 1, 2015, would be pl aced in the rules. PGE, with guidance from the OPUC and stakeholders, would then need to decide no later than July 1, 2015 whether to install SCR or cease operating the Fost er-Wheeler boiler by the end of 2029.

Incorporating the recommended op tion into the Oregon Reasonable Progress rules is consistent with all federal requirements. As with BA RT, there is no prohibition on the Department incorporating alternative Reas onable Progress options so long as each option independently meets the Reasonable Progress criteria. The alternative Reasonable Progress option clearly meets all the statutory and regulat ory criteria. As noted above, the Section 169A of the federal Clean Air Act requires consideration of the remain ing useful life of the plant for both BART and Reasonable Progress determinations. EPA’s rules recognize that if the re maining useful life is limited by permit condition then the cost-effectiv eness needs to be determined based on amortizing the capital cost over the reduced equipment life. 40 CFR 51, App. Y Section IV(D)(4)(k). The cost-effectiveness of the S CR based on a useful life of 12.5 years (i.e., the number of years after July 1, 2017 that the control would be operat ed if the plant had to close by the end of 2029) is over $7,300 per ton of NO

x controlled. This cost-effectiveness far exceeds the range of NO

x cost-effectiveness evaluated by EPA in establishing the presumptive BARTlimits. In EPA’s assessment they looked at costs ranging from $100/ton to $1,000/ton. The costeffectiveness of the SCR if ope rated only 12.5 years would be over seven times greater than the high end range of what EPA considered cost-e ffective. Therefore, with only a 12.5-year operational life it is appropriate to consider the cessation of op eration of the Foster-Wheeler boiler by the end of 2029 to constitute Reasonable Pr ogress. This determination would not affect the requirement to operate the NOx and SO 2 BART controls and nor would it affect PGE’s obligation to control me rcury from the boiler.Mr. Brian Finneran December 17, 2008 Page 13

It is also appropriate to consider the altern ative of cessation of the Foster-Wheeler boiler operations at the end of 2029 to be Reasonable Progress in light of the long term benefits to the environment provided by both options. If the pl ant installed the proposed BART controls (i.e., low-NOx burners, modified overfire air and se mi-dry scrubbers) and operated through 2040, the aggregate visibility pollutant emissions calcu lated on a potential to emit basis would total 336,358 tons. If the BART controls and SCR were installed, the aggregate visibility pollutant emissions through 2040 would total 237,149 tons. If the BART controls were installed on the boiler, no SCR was installed, and the boiler ceased operation at the end of 2029, then 231,292 tons of visibility pollutants would be emitted. By not installing the SCR, a material quantity of

ammonia emissions would be avoi ded. A comparison of the aggr egate emissions is presented

below.

Total Emissions (tons) Controls Installed Boiler Operated Through NOx SO 2 PM Aggregate

LNB/OFA and SD

scrubbers 12/31/2029 118,208 104,485 8,602 231,292

LNB/OFA and SD

scrubbers 12/31/2040 184,960 139,313 12,084 336,358
LNB/OFA, SD

Scrubbers & SCR 12/31/2040 85,752 139,313 12,084 237,149 Notes: All computations start 1/1/2011; emissions calculations based on plant potential to emit.

These suggested revisions are consistent w ith the Reasonable Progress requirements, are environmentally beneficial and al so provide additional benefits. As we discussed above, the electrical generation business is in a time of tremendous transition. Over the next decade we anticipate tremendous advances in both elec tricity generation and control technology (e.g., carbon capture and sequestration). In addition, we anticipate that carbon will become subject to regulation. The full costs and benefits of these changes cannot be fully assessed at this time. However, by the time that PGE must decide wh ether to apply for its federally enforceable condition requiring cessation of opera tion of the Foster-Wheeler bo iler or install SCR, both PGE and the Oregon Public Utilities Co mmission will have a much better idea of the best future for the Boardman plant. By building this decision point into the Reasonable Progress rules, it is possible to ensure that the decisions regardi ng Boardman are made with the most complete information. By enabling a more comprehensiv e and reasoned decision making process on the future of Boardman we also anticipate that DE Q will reduce the fiscal impacts to businesses in Oregon as compared to the Department’s proposed rulemaking.Mr. Brian Finneran December 17, 2008 Page 14

Startup, Shutdown and Malfunction Exemption

As noted above in relation to the BART controls we appreciate the recognition in the proposed rules that the technology based Reasonable Pr ogress limit does not apply during startups and shutdowns. EPA was clear in the BART regulat ions that startups and shutdowns were not normal operating conditions and that the BART vi sibility impact assessment was intended to assess normal operating conditions. Therefore, we believe that it is appropriate to not include periods of startup and shutdown in determining comp liance. However, it is equally true that the controls cannot be anticipated to perform as designed during a malfunction (defined under federal law as an upset that is not reasonably foreseeable or preventable and not resulting from inadequate design or maintenance). Therefore, we suggest that th e regulations similarly note that malfunction periods should similarly not be incl uded when evaluating whether the controls are operating properly and comp liance is being achieved.

For the reasons stated above, we request th at the proposed OAR 340- 223-0040 (the Boardman Reasonable Progress rule) be revised as follows:

340-223-0040
Additional NO

x Requirements for the Foster-Wheeler boiler at the Boardman Coal-Fired Power Plant (Federal Acid rain program facility ORISPL code 6106) (1) On and after July 1, 2017, nitrogen oxides emissions must not exceed 0.070 lb/mmBtu heat input, ex cluding periods of startup

, orshutdown or malfunction

. (a) Compliance with the NO x emissions limit must be determined with a continuous emissions monitoring syst em in accordance with OAR 340-223- 0030(2) and (3).

(b) The Department must be notified in wr iting within 7 days after any control equipment used to comply with the emission limit begins operation.

(c) A compliance status report, including CEMS data, must be submitted by January 1, 2018. (d) The emission limit in (1) above does not apply if the operator has assumed a federally enforceable permit condition prior to July 1, 2017 requiring that the FosterWheeler boiler cease emissions by December 31, 2029. In order to ensure adequate time for the Department to process the pe rmit modification by this deadline, the request for the federally enforceable pe rmit condition must be submitted to the Department no later than July 1, 2015. If the permittee submits a permit applicationMr. Brian Finneran December 17, 2008 Page 15

requesting the permit limit on or before July 1, 2015 and submits to all Department information requests associated with the application in a timely manner, the permittee shall be deemed to have the permit condition in place.

(e) The emission limit in (1) above doe s not apply if EPA disapproves the portion of the Regional Haze SIP containi ng that limit or that portion of the Regional Haze SIP is otherwise invalidated.

(f) If EPA fails to approve the portion of the Regional Haze SIP containing the emission limit and compliance d eadline in (1) above by December 31, 2009, then those deadlines shall automatically change to eight years after approval of the portion of the Regional Haze SIP containing these limits and

deadlines.

5. Conclusion

Attached please find spreadsheets documenting the cost-effectiveness values stated in our comments above as well as the comparative emissions between the different BART and Reasonable Progress alternatives. Please consider these spreadsheets to be an addendum to our November 2007 report. You will also find a flow diagram that visually presents the proposed

alternative BART and Reasona ble Progress determinations.

Thank you for your consideration of these comme nts. As you know, the OPUC and PGE must engage in a public IRP process th at includes considering alternativ es to the emission controls. By incorporating the BART and Reasonable Pr ogress alternatives discussed above DEQ will better align the DEQ and OPUC processes. This pr otects the best interest s of PGE, its customers and the Oregon economy while also satisfying al l state and federal requirements, including protection of Oregon air quality. Therefore, we believe that it provides an important improvement to the proposed rules. We hope that DEQ will recognize these benefits, incorporate our suggested edits into the proposed ru le and re-notice the package so as to enable the greatest degree of public participation.Mr. Brian Finneran December 17, 2008 Page 16

Please contact me if you have any questions or would like to discuss th ese comments further.

Sincerely,

Arya Behbehani-Divers

cc: Stephen Quennoz Loren Mayer

Attachments: Tables 1-4 Flow Diagram