P.1 

OAR Box 1802 

Prepped by Charmelle Mathews 

Document Number: 

52) IV-E-47 

Docket Number: 

A-90-37 

Printed 11/4/2008 11:57:59 AM Sheet 52 of 117 
P.2 

"* -

US EVIRONMENTAL PROTECTION AGENCY 

Office of Air Quality Planning and Standards 

Research Triangle Park, North Carolina 27711 

"ffi-ET-47 

Date: February 22,2000 

To: Air and Radiation Docket # A-90-3 7 

From: Dennis Crumpler, Integrated Implementation Group, 

ITPID, MD-12 

Re: Meeting with Clean Energy Group 

On September 30,1999, the EPA met with representatives of a group of utilities called 

the Clean Energy Group (attendee list is attached). The discussion focused on a draft discussion 

paper of an alternative new source review (NSR) compliance strategy that this group of power 

generators was developing for utilities. The proposal stemmed from the NSR Reform 

rulemaking stakeholder meeting on February 2-3,1999. The draft strategy that was presented by 

the Clean Energy Group is also attached. 

cc: Pam Smith, (MD-12) 

Jon Devine, OGC 

Attendees: 

Pete Jonker, Sempra Energy 

Michael Bradley, M.J. Bradley & Associates 

Bill Harnett, OAQPS 

Carol Holmes, OECA 

Sam Wolfe, Public Service Electric & Gas 

Ellen Brown, OPAR 

Joe Miakisz, Niagara Mohawk 

Chuck Carlin, Northern Electric 

Mike Sewell, OAQPS 

Karen Blanchard, OAQPS 

Bruce Buckheit, OECA 

John Bachman, OAQPS 

Anna Wood, OPAR 

Jon Devine, OGC 

Sam Napolitano, OAP 

Mark Brownstem, PSE & G 

Bruce Alexander, PECO 

Greg Foote, OGC 

EPA Office Abbreviations: OAQPS- Office of Air Quality Planning and Standards; OGCOffice of General Counsel; OECA-Office of Enforcement and Compliance Assurance; 

OAP-Office of Atmospheric Programs; and OPAR-Office of Policy Analysis and Regulations. 

l 
SEP-29-1999 14:27 P.82/04 

DRAFT - FOR DISCUSSION PURPOSES ONLY 

Gean Energy Group 

Integrated Air Quality Strategy for the Power Generation Industry 

Introduction ' 

The following framework is offered as a starting point to initiate discussion of a national, voluntary 

program for the power generation industry that would integrate future emission reduction targets with 

enhanced New Source Review (NSR) flexibility (see discussion of principles below), and is offered in the 

context of EPA's on-going efforts to develop an enhanced NSR program. More specifically, this proposed 

alternative would allow participating companies flexibility under the NSR program in exchange for an 

enforceable commitment to operate under a system of pollutant caps for NOx, SO* CQj, and mercury. 

The objective of the framework is to achieve substantial air quality beneits in a cost-effective manner. 

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

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

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

effect 

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

quality objectives 

In addition to ensuring environmental benefits, the advantages of an integrated regulatory strategy include: 

1. the potential to provide regulatory stability (over 10-15 years) for new capital investments and 

facilitate the management of existing assets; 

2. facilitates the elimination of certain existing regulatory barriers to new source developments and 

efficiency improvements by streamlining New Source Review (NSR) requirements; 

3. internalizes environmental costs for all generators in the competitive market; and 

4. reduces compliance costs and helps protect asset value. 

As the electric generating industry enters a period Of unprecedented change precipitated by restructuring 

developments and technological progress, a premium has been placed on regulatory certainty. The 

concepts envisioned in this framework would provide a higher degree of regulatory certainty by allowing 

electric generating companies the option of opting in to a voluntary program of declining pollutant caps 

very similar to the "plantwide applicability linn" concept as it applies to industrial sources. 

Framework Objectives 

• Achieve air quality improvements that will contribute to the attainment and maintenance of the nation's 

air quality standards and goals. 

-_•,' • -.' • '• • 

• Streamline NSR requirements and encourage the development of new clean energy generation. 

• Establish an integrated air pollution management system which relies on market based mechanisms. 

9/27/99 z 
P.4 

\ 

* • 

•7 

• Implementation of emission reductions at least cost -

• Achieve regulatory certainty over a period of 10 to 15 years. 

Framework Principles 

The following principles are suggested for discussion when considering a multiple poUutant regulatory 

strategy: 

1) national declining tonnage caps for NOx, SO* mercury and CQj to be achieved by dates certain; 

2) allocations under tonnage caps based on a portfolio output basis (Le-. total energy), insuring that new 

and existing sources receive equal treatment; 

3) NOx cap should vary during tiie summa- ozone season versus non-ozone season; 

4) reward early reductions and efficiency; 

5) mercury control requirements should avoid a iommand-aod-control approach, based on a source-bysource control requirement that would limit compliance options and increase costs; 

6) national trading and banking of allowances; 

7) within the bounds of existing Clean Air Act authority revise the new source review program to enable 

sources to operate under a series of emission caps and to use a potential-to-potential test for NSR 

applicability determinations; 

8) an allowance reserve should be set aside for new sources entering the market 

StnwmajD Framework 

National tonnage caps, implemented over the course of the years 2003-2012 consistent with the principles 

outlined above, for NOx, SOa, mercury and COsby dates certain. The pollutant caps listed below are 

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

improvements in air quality on both a national and international scale. Tonnage caps represent national 

targets for the entire electric generating industry. "Performance targets would be established consistent with 

these targets. '." 

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

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

estuaries. The national tonnage caps for NOx are proposed in two phases. The first phase would begin in 

2003 with the implementation of the NOx SIP Call in the eastern U.S. Beginning in the 2007-2008 time 

frame both NOx and S02 would be limited to annual caps nationwide af a level 50 percent below current 

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

and SO2 are required to address the continued impacts of acid deposition. 

Reductions in^missions of mercury are proposed lo address the health effects currently under investigation 

by EPA and other researchers, and reductions in COj emissions are proposed to mitigate the risks of 

climate change. The performance target proposed forinercuiy has been presented as a two-phase program, 

including a 50 percent reduction by 2005-2006 and a more significant reduction in 2010. This range of 

values is presented in recognition of EPA's on-going efforts to investigate the mercury emission inventory, 

potential health and environmental risk of mercury, and mercury control technologies. The performance 

target for CO* emissions is based upon the target established by the Rio Accord, which was ratified by 

Congress. 

9/27/99 
P.5 

'SEP-29-1999 14:29 P.04/04 

• 9 

I '. 

^ f 

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

will be achieved while delivering substantial economic benefits relative to a strategy that addresses these air 

quality problems separately. 

"Fp*.;«|l 

Pollutant caps for NOx, mercury, and CO2 to be implemented under a national, cap and trade program, 

with allowance allocated on a total energy/output basis and credit awarded for carry action. SO2 reductions 

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

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

standards. 

Please note that the targets presented have not been endorsed by the Clean Energy Group companies, but 

are intended as a starting point for discussions. 

PoUutant 

NO. 

r 

-

SO, 

mercury 

COj 

Natiooal Toanage Cap 

Two-phase program: 

4.22 million tons 

• r2.11 million ions 

4.5 million tans 

Two phase program:; • 

26 tons 

5-16 tons 

Two phase program: 

1,914 million tons 

Unknown 

Kcooctioa Target 

'(astv_ia_ fkO iadtstry partldpattw) 

Two-phase program: 

Reductions consistent with 

tiie objectives of tiie NOx SIP 

Call Rule (0.15 Ibs/MMBtu 

inthe22-stateSIPcaIl 

region) 

50% reduction* 

50% reduction beyond Phase 

IT Acid Rain requirements 

Two phase program**: 

50% reduction 

70%-90% reduction 

*v* 1 

Two pnaac program* 

Stabilization at 1990 

emission levels 

Consistent vnth national 

emission goal 

Schedale 

2003 

2007-08 

2007-08 

2005-06 

2010 

2008 

2012 

* Environmental benefits resulting fron Implementation of the NOx SIP.Call are not to be aflected in transitioning 

to a national/annual NOx program. r. .;•".*"" 

** Mercury reduction targets to be consistent with EPA's on-going regulatory determination process. 

9/27/99 4 

TOTAL P. 04