CAIR Replacement Rule Discussions b etween LADCO and EPA

March 16, 2009 I . Introduction On Monday , March 16, 2009, EPA held a call with the Lake Michigan Air Directors Consortium (LADCO) to discuss the CAIR replacement rule . See Appendix A for a list of the participants in the call . The notes that follow are a detailed summary of the call. II . EPA Opening Comments Sam Napolitano , CAMD, began with a short introduction , explaining that EPA was beginning the process of creating a replacement rule for CAIR . The Agency is reviewin g all options , setting up anal ys e s , and preparing technical models . The goal is to finalize a replacement rule within two years . The primary objectives are to help states compl y with the NAAQ S and to reduce interstate transport . Therefore, EPA has decided that it would be best to start working with states immediately . EPA would like to hear from the states about what type of replacement rule would most help them meet air quality requirements . Sam stressed that this is the beginning of a dialogue process , and that EPA intends to continue these types of discussions throughout the rule development process . This is a chance for the states to talk to the key EPA staff that will actuall y develop and write the rules , as wel l as the OGC attorneys as signed to the rule development . Sam stressed that EPA is interested in hearing the states ' thoughts and concerns . Every thing is on the table as EPA puts together ideas for the new Assistant Administrator f or Air and Radiation , wh o should arrive within the next couple of weeks . In the spirit of listening to the states, Sam asked Mike Koerber to lead the discussion through the topic agenda and to outline the states ' thoughts or ideas on the major issues : b aseline; significant c ontribution; remedies; and coverage and timing issues . II I . LADCO Opening Comments Mike Koerber , LADCO, began b y noting that LADCO and the states had anticipated listening more to EPA than speaking . However, they are excited and encouraged by EPA ' s desire for dialogue . LADCO has been working with the north east states and more recently the south east states through the state collaborative process , which has been going on for over four ye ars . In their efforts to meet the 1997 standards, states ban ded together to address regional transport . They found that individual state programs overlap ped and thought that it might be possible to develop consistent programs . While the states recognize that a federal program would achieve the desired consistency , there was not much federal action a few ye ars back, and so the states stepped in to fill the void .2

In June 2008, fifteen states and the District of Columbia signed a letter asking for di alogue about regional problems . Although there was no response to the letter , which Mike attribute s to the issues EPA has faced during the past year , it appears that EPA intends this meeting to be the beginning of the effort to re - establish a federal - state dialogue . LADCO and the states are very

interested in this an d appreciate EPA ' s efforts in this regard . A similar group of fifteen states and the District of Columbia created a framework document calling for a strategy to deal with power plant emissions in response to the court decision on CAIR . The n ear term focus is on the 1997 standards , which are s till an issue for many s t ates . Although p rogress has been made, nonattainment areas remain, and states continue to final iz e plans to meet the 1997 standard s . The framework document also recognizes the new , tight er standard s for PM 2.5 and ozone . The states believe that coordination with EPA will be critical to meeting those standards . A s trong federal program for PM 2.5 and ozone transport in the power sector and possibly in other sectors is necessary

to provide for attainment . IC I boilers are an example of non -power sector units that might need to be controlled . There were discuss ions with EPA recentl y about these boilers . Also, the state collaborative process established a workgroup that spent two years lo oking at options to meet the standards . The workgroup did not focus just on power plants because the states recognize that other sectors will need to be controlled to meet attainment . The workgroup developed performance -based standard s, did solid cost an al ys is , and performed emissions modeling and anal ys is . The entire p ackage is not yet complete, but the group should have a recommendation soon . While the states look forward to sharing the official recommendation, the key element that Mike said he wanted to highlight was the recognition by states that any program seeking to address the stricter PM 2,5 and ozone standards would have to include units other than large EGUs . IV . Importance of Regional Planning Mike said that before proceeding to addre ss each item of the agenda, he wished to speak briefl y about regional air quality planning . LADCO is the second oldest regional air quality planning group . Numerous benefits have been realized through 20 years of group collaboration, including improve d air quality , t echnical benefits from a common emissions inventory , and policy benefits . Although LADCO was established through a series of lawsuit s between the states and EPA , it is important to recognize that progress has been made since that time , and that there is now greater collaboration between LADCO and EPA . LADCO is grateful for the significant funding received from the states and other group s . While LADCO realizes that EPA has cut some funding , it h ope s that the Agency continue s to emphasi ze regional solutions . States will continue to fund some of LADCO ' s operations, though3

not likely at the 1 00 percent level . Thus, f ederal funding for RPOs and other regional initiatives is critical to the future of the regional planning process . Vinson Hellwig, M D EQ, reiterated that many of the air quality problems facing states are regional and that solutions will have to be broader than one state or local ity can deal with . Laure l Kroack, IEPA, voiced strong agreement on this . Mike concluded his open ing remarks b y noting that the technical work LADCO is undertaking in support of this framework includes the N ortheast , and that even some of the S outheast states are participating . While the S outheast states did not sign the framework document, they

were involved in some of the technical discussion s and participated in some of the modeling . He wanted to recognize their technical contributions even though those states might not be ready to sign policy documents . Mike then turned the discussion back to EPA . V . Core Issues Outlined by EPA Sam Napolitano said that EPA would lay out the issues , but that he w ould be unable to indicat e how EPA w ould eventuall y proceed, as the Agency is uncertain at present as to how to respond to the issues raised by the CAIR court decision . The purpose of this meeting is to gather different ideas and thoughts to present to the new A ssistant A dministrator for A ir , whose responsibility

it will be to decide how to address the ramifications of the court decision . Sam invited Tim Smith , OAQPS, to talk about the key issues EPA is considering in the CAIR replacement rule . He asked that speakers identify themselves as notes o f the meeting were being prepared and would be share d with LADCO. Tim outlined the following major issues : 1 . Baseline What is the starting point? What is the baseline? When the original CAIR rule was developed there were many questions about how to set up a baseline and what to take into account when creating th e baseline . The situation has co ntinued to change , and EPA would like to know how states believe the baseline should be created , and what factors should be considered in the baseline. 2 . Quantifying significant contribution This is one of the key

issues from the court decision . Th e court held that CAIR failed to quantify adequately each state ' s significant contribution . There are many s maller issues that come up under this general rubric, but the key questions pivot on how significant contribution is quantified . Sonja Rodman, OGC, noted that EPA is uncertain as to how to respond to the decision of the D.C . Circuit Court . In some ways , the decision is quite clear, but in others it is rather murky .4

For example, it is very

clear that the c ourt found what EPA did unacceptable . H owever, it is less clear precisel y what the c ourt would find acceptable . EPA continues to struggl e with what the decision means , as well as with how the decision limits EPA and/or might impact future programs. One of the biggest areas of uncertainty is how to define significant contribution . The court held that EPA had failed to identify and quantify

each state ' s significant contribution . Thus, th e Agency

is seeking new ways to think about significant contribution. 3 . Remedy What remedy

should be applied to the quantified significant contribution ? What ty pes of approache s should be considered ? I s the trading option p ractical? 4 . A ffected Area/Standards Which states or regions should be covered b y the rule? What should the timing of the rule look like? Should EPA start with existing standards? Or , should it try to integrate the newer standards into a replacement rule? Timing becomes a key element when considering which standards to target . Sam Napolitano n o ted that rule development might take considerably longer i f EPA tries to incorporate the newer standards . But if EPA relies o n older standards , the rule may be seen as irrelevant . The resource issue is linked to the timing issue because developing a program to meet new , stricter standards will require additional staff time and effort . In addition to dealing with th e se issues , EPA must address the court ' s concern about the attainment deadline s . EPA is seeking state input on how to address all of th e se issues and concerns . Lastl y , S am said that EPA career staff share LADCO ' s concern about industrial boilers and other boilers . M any questions remain about how to regulate those types of sources . Can they be treated in a manner similar to how large EGUs are treated ? Are there other so urces to consider in this rule? Or should other sources be left to a companion rule? Is there anything else EPA should be doing regarding the NAAQ S ? Now is the time to share views . As noted earlier, a goal of these discussions is to bring ideas to the new A ssistant A dministrator for Air , who se task it will be to set the agenda and priorities , and to implement and allocate resources . Sam encouraged the states to think broadly, suggesting that ideas can always be scaled back or s et aside . He also said that EPA is operating under the assumption that there will not be a legislative fix or a new court opinion . The Agency must create a rule that satisfies the current regulations and related court opinions . Because the legal landscape is complex, pragmati c decisions will have to be made about the new rulemaking process. Sam concluded b y saying that this is the first of a series of teleconferences with states and other stakeholders , including OTC , NA C AA , the southern states , Texas , industry representative s, and environmental group s . When this series has concluded, EPA will meet with states to report5

what EPA has heard from all of the groups . This will allow the states to react and respond, and to continue the general dialogue . VI . LADCO Response to Core Issues Mike Koerber mentioned that LADCO and the states had recentl y developed a one -page summary of the internal discussions concerning what LADCO states hope will emerge from the state collaborative framework discussions with the N ortheast and S outheast states . However, as the one -page summary is still out for comment he inquired whether the states would agree to sharing it s contents on this call . Dan Murray , IDEM, said he was comfortable with doing so . He did not think it would surprise EPA that states are talking about whether CAIR satisfies the BART or RACT requirements as it was supposed to do under the original rule . Indiana has continued to voice support in the LADCO discussions for meeting the BART and RACT requirements through the rep lacement CAIR rule . However, he has not been hearing as much about that in the collaborative process discussions and was interested in discussing it in this call . L aurel Kroack and Bob Hodanbosi agreed that the summary of discussions should be shared with EPA . There were n o objections from the other states on this matter . Mike noted that the summary document responded to most of the issues raised by EPA ' s agenda . The group agreed that th e summary

w ould provide a good framework for the discussion . But before moving to this discussion, several of the states asked for time to respond to some of the issues EPA had raised earlier . VI I . State Responses to EPA ' s Presentation 1 . Baseline Vinson Hellwig stressed that Michigan believes any replacement p rogram will have to consider source s other than EGUs . EPA must especiall y consider industrial boilers and cement kilns . Although these are of particular concern, there may be other sectors that should be included in the rule . Tim Smith responded that EPA is starting to look at non - EGUs , and is attempting to assemble data on inv entories and the percentage of contribution from each sector . EPA welcomes any

information the states might have about industrial boilers and cement kilns. L aurel Kroack agre ed that industrial boilers and cement kilns could be controlled in a highl y cost - effective manner . She suggested that EPA should at least c over the 1997 an d 2006 standards in any new rule . She was less certain about the 2008 standards , which Il linois is still grappling with . She also noted that the dates suggested in the LADCO summary were acceptable to Illinois . Larry Bruss, WDNR, agreed that any future rule would have to consider more than just EGU sources . He stressed that it is critical to have a broad view in developing a replacement rule . Issues can be looked at piece b y piece , but in the end the whole rule must work together . It6

is important that the same logic extends throughout the rule to avoid having one logic driv e the definition of contribution areas and another how a remedy is applied . Lastly , in reviewing the rule during development to ensure consistency it is absolutely

essential to be certain that the rule fully conforms to the court ' s decision . Dan Murray agreed with Larry . H owever, he cautioned that he would like to see modeling showing what level of reductions would be required from other source sectors to meet the requirements of s ection 110( a)(2)(D) . He would like to be certain that there are data to justify putting controls on additional sectors . Sam Napolitano then asked states which other sectors might need to be controlled and what data Dan would like to see to support further control efforts . Dan responded that his main concern was to be sure that the data jus tified controlling additional sectors . Furthermore, which units within a sec tor are affected should be driven by the data . For example, he agreed that large ICI boilers probably should be affected, but was less sure about smaller ones . His key point was that before deciding which classes of units and which sectors to look at , EPA should gather data and make the decision based on what would be most effective to control . Mike Koerber f

ollow ed up on Dan ' s point about ICIboilers , noting that states have many different boilers and fuel ty pes ; thus, it is difficult to fit one size to all the states . The M idwest s tates want to focus on coal boilers with over 100 mmBtu/hr, a s that is where the emission mass is concentrated in the M idwest inventories . Given it s various fuel ty pes , the N ortheast ha s a different perspective . Such fundamental regional differences will be a challenge. 2 . Standards Bob Hodanbosi discussed the standards that the rule should address . He n o ted that it would be perplex ing if EP A were to release a rule in 2011 that does not account for the 2008 standards . Even though looking at the new standards might require substantial effort, developing any typ e of rule will require a great deal of effort . It would be very confusing if EPA w ere to spend time and money

developing a rule to old standards , e specially a s those old standards would be met and exceed ed by the new ones . Laure l Kroack agreed that it was important to have a comprehensive approach . She reiterated, however, that Ill inois continues to review the 2008 standards to determine whether local VOC will be sufficient or whether regional NO x , or something even more stringent, would be required . It is difficult to discuss specifics without the modeling in hand . Bob respond ed that although modeling was certainly needed, it was already

clear that transport would be a component of the SIPs . He reiterated that people would be confused by a rule released in 2011 that does not consider 2008 standards . Bob Lopez, WDNR, said that o ne starting point is to determine what significant contribution is and to define i t in a replacement rule . As state air directors have discussed significant contribution at length , this might be a good place to start .7

VIII . LADCO ' s Summary Docume nt Mike Koerber agreed and noted that the discussion of significant contribution was a good segue into the three - step approach in the summary of LADCO ' s position in the state colla borative framework discussions . Mike noted that LADCO offers this approach as a way to deal with significant contribution to nonattainment and interference with maintenance . LADCO believes this approach would both deal with the transport problem and satisfy the requirements of section 110( a)(2)(D) consistent with the D.C . C ircuit Court ' s opinion . 1 . Coverage/Timing Areas of interest for nonattainment and maintenance should be identified through a monitoring plus modeling process, similar to the process for identif ying areas in CAIR . B oth the current monitoring and the future ye ar modeling would need to show nonattainment or maintenance issues in order for the area to be defined as an area of interest . The states suggest using the most current air quality data from 20 06

–20 08 . These data are already quality- assured and should provide a sound basis for anal ys is . With regard to future ye ar modeling , the states did regional anal ys is for 2012 and 2018 . The states realize that these dates may not fit EPA ' s schedule . However, because the y had the modeling framework and the inventories prepared , using th e se dates allowed the states to produce quick results . Inparticular, the states can provide EPA the data for nonattainment projections for 2012 and maintenance projections for 2018 . 2 . Significant Contribution The CAMx model was used to perform source apportionment for 2012 to help quantify significant state contribution to nonattainment . M odeling for 2018 continues, and although m ost of the results are available , they have ye t to be finalized . 3 . Remedy The states ' preferred remedy would be reduction requirements for states that contribute to nonattainment or maintenance issues . The states propose to use 1% and 4% as the levels of significant contribution that would trigger controls . States contributing 1% would be required to meet CAIR Phase I type reductions , while states contributing 4% would be required to make deeper emissions reductions . For the 1% base level of control , the states realize that EGUs are already subject to the CAIR reductions for 2 009 and 2010 . The y propose that if EPA includes large non - EGUs in the program , it use 2012 as the compliance date for those units . For the higher level of control, triggered at 4%, the states would like to see more stringent controls than CAIR . The s tates believe that this would most likely include large non - EGU8

sources . Also, because more time would be required for sources to prepare for the more stringent controls , the states propose a future compliance date between 2015 and 2018, depending on the stringency of the program . The 1% and 4% are relative to the total source contribution in the areas of interest . The states believe that using a relative metric is easier to understand and provides consistency across pollutants and standards . EPA use d a different metric in the past and may feel bound by precedent to use something other than a relative metric . However, although it appears that the courts approved EPA ' s previous metric, the states believe that the metric they are proposing is easier an d more straightforward . Trading and banking should be part of the program . While intrastate trading should be allowed freel y, interstate trading should have geographic controls . One option would be for s tates in the 4% bracket to be allowed to trade only with other states in the 4% bracket . Banking should be allowed , but with strong flow control . IX . Discussion of LADCO ' s P roposal 1 . Thresholds Tim Smith asked LADCO to clarify what 1% referred to . Mike Koerber responded that it was 1% of th e total contribution at a given downwind nonattainment area or monitor . Sam Napolitano clarified that LADCO was looking at total contribution -- not simply EGU contribution , but the total upwind state contribution for both the annual and the dail y PM 2. 5 , as well as ozone standards . He then asked why LADCO chose 1% and 4% as the thresholds for control. Mike indicated that the 1% was adopted from what EPA used in CAIR for PM 2.5 , with the difference being that EPA used 1 % of the standard , and LADCO is u s ing 1% of contribution . When LADCO looked at source apportionment it appeared that 1% would capture the largest mass of state emissions . Between 4% and 5% there is very little difference in which states are contributing . Four percent still captures a high percentage of the contributing states . Sam then asked the states what their goal was for reductions, and whether they had determined how much reduction would be required from upwind states . Mike responded that states would need to achieve whatever level of control their contribution percentage triggered . In summarizing his understanding of the states ' proposal , Sam noted that the states want the same cap levels as those outlined in the old CAIR plan, with stronger controls required in 2015 . He also asked the states to confirm that they had chosen 2012 and 2018 as their modeling ye ars because those data were available, and not because those years had some special significance . The states confirmed this understanding . They indicated that although they were uncertain as to what the stronger controls should be for 2015, LADCO and the member states would like to work with EPA to develop the specifics of those controls .9

Sam then told LADCO that EPA wants to be sure the Agency is helping states with attainment and maintenance . In response, Mike noted that attainment planning goes beyond the LADCO summary document , which is about the emissions transport provisions of section 110 ( a)(2)(D) . A program that both addresses transport and provides attainment in the downwind areas is desirable . However, there are numerous nonattainment situations in which local source contribution is very important . The s tates are dealing with such local issues, which will need to be addressed in conjunction with re gional controls . They understand that achieving attainment will require the right mix of local and regional controls . However, th e LADCO summary document is not actuall y intended to solv e nonattainment , but rather the transport issues associated with non attainment . 2 . Concerns about Significant Contribution Sonja Rodman expressed c oncern that the process LADCO propose s closely mirrors the process that was used for CAIR , a process that was rejected b y the court . The three steps seem very similar to the CAIR process : (1) identifying areas of interest; (2) establishing reduction requirements ; and (3) implementing a remedy . Sonja said that this approach does not appear to include the important step of quantifying each individual state’s significant contribution. Under the court ' s decision EPA is required to quantify each state ' s contribution, identify and quantify the part of the contribution that EPA deems to be significant , and eliminate all of the significant contribution . She expressed concern that if it fails to specifically quantify and then eliminate each state’s significant contribution this plan might encounter the same difficulties that CAIR did . The court was quite clear in deciding that EPA had failed to quantify each state ' s individual contribution in CAIR . Dan Murray replied that the states had been having a similar discussion and felt that the court recognize d that there is a significant contribution threshold . The issue is where that threshold lie s . The emissions do not need to be zeroed out from upwind sources but instead reduced below the significant contribution threshold . Sonja agreed that emissions from upwind sources do not need to be completely eliminated. However, it is important to remember that the threshold used in CAIR was part of the linkage anal ys is . For example for PM 2.5 , if the contribution anal ys is showed that a state ’s total contribution was over a certain threshold i t was required to participate in CAIR . However, that threshold was not used to define th e amount by which a state had to reduce emissions . The state specific emission reduction requirements were define d through a complex process that took into account cost and assumed interstate trading as a remedy. The court concluded that this anal ys is was not adequate to quantify each state’s significant contribution and that EPA had failed to eliminate each state’s significant contribution. Larry Bruss replied that he thought the summary document might be unclear about LADCO ' s proposal, and that all that was required of states is that they reduce to either a 1% or 4% level . Second, he said that eliminating all of the significant contribution from a source might10

be impossible . For example, southeast Wisconsin is immediately downwind from Chicago and will likely

always be a ffected on high ozone days . However, people still need to live and work in Chicago , making it nearly impossible to zero out all of Chicago ' s emissions . The same can be said for a number of other areas . It is impossible to remove en ough emissions from the atmosphere to eliminate significant contribution . That is why the states propose a plan in which all states must address some level of contribution (1%) , and that those states that hav e a sever e impact would reall y h ave to reduce emissions (4%) . Sonja suggested that the re might be some confusion in this discussion, and she explained that the statute requires the elimination of all significant contribution. In CAIR, however, significant contribution wa s defined , not on the basis of air quality threshold contribution , but on the basis of cost . Significant contribution was defined as the reduction s that a state could achieve through implementation of highl y cost - effective controls, and the highl y- cost - effective anal ys is assumed trading. Threshold s were used as justification for inclusion in the CAIR region . Thus, what should the role of the replacement plan be in reducing contribution ? Should the new rule eliminate all significant contribution, or only reduce it ? 3 . Modeling Turning to the specifics of the states ' modeling , Sam Napolitano asked about the CAMx modeling, and whether the states had enough information to say which sectors had the larg est role in significant contribution . For example, in a target area could the states say whether it was EGUs, large industrial boilers , or mobile sources that contributed the most? Mike responded that LADCO looked at contribution by chemical species and did its modeling based on geographic zones defined b y state boundaries . The data were then broken down by source sector, including EGU, non - EGU, on - road, and off - road . The results showed that the EGU contribution was important , but that it was not necessarily the largest at each location . Mike indicated that h e would have to re view the results to discuss this with m ore specific ity . He noted, however, that mobile sources were an important category at many locations . Sam confirmed with Mike that the geographical areas considered were onl y states, not partial states , and that LADCO had tri ed to use the same types of nonattainment areas that EPA uses so that everyone ' s data would be comparable . Sam concluded b y sayi ng that should the states fe e l comfortable sharing th ese data , EPA wo uld really benefit from the ir technical work . 4 . Timing Tim Smith next discuss ed the court ' s concerns about coordinating compliance schedules with achievement of reductions . In particular , the court found that EPA was not proposing to accomplish enough b y 2010 ; however, he noted, by its ruling the court made it impossible to have a rule in place b y then . He interpreted that as a general direction from the court to be more mindful of attainment deadline s in relation to compliance date s . He indicated that he thought EPA would have to better exp lain the relationship between the two in any new plan , and he asked whether the states had considered this issue , specificall y with regard to the 1% and 4% thresholds they were proposing .11

Mike Koerber responded that the 1% base level is from the existing CAIR program , and that those compliance dates have passed or will soon arrive . The states for e see a longer compliance timeline only if EPA decides to tighten the CAIR replacement rule by adding other sectors such as boilers . An additional 2 - 3 years might then be required . However, for the more stringent level of control, triggered at the 4% threshold, more time might be needed depending on exactl y where the thresholds were set, and on what ty pes of reductions were required . Either way , with a higher level of control the states thought it was only logical that it would take longer to implement . Tim asked what percentage of s t ates in the CAIR region LADCO thought would trigger the 4% threshold . After some discussion , Mike summarized by explaining that most CAIR states would end up in the 1% category . The 4% category would be a smaller subset of states, for the most part eliminating fring e states such as I ow a , Fl orida, Mississippi , and Louisiana . He added that Minnesota contributed at 1% in this s tudy . 5 . Trading Sam Napolitano then turned to interstate trading and asked how the restrictions would work . Mike Koerber noted that the c ourt had strong reservations about EPA ' s trading program , and that the need to preserve " linkages " must be c onsidered . The limits on interstate trading would be geographicall y based and would allow states in the 4% category to trade onl y with each other . The nonattainment demonstrations might need to be revisited if trades of large magnitudes were made . The s tates realize that these restrictions might be complicated, but they believe that trading is an important cost control element of the plan . Sam asked if the states had any special provision concerning intrastate trading . Mike replied that he would not speak in detail about intrastate trading, as it is fairly simple and would not be restricted . Laurel Kroack said she was not concerned about the Chicago area or the down - state utilities , n o ting that if the intrastate numbers are set correctly trading should not be a problem . She added that Illinois generall y supports trading as the most cost - effective way to get the deepest reductions . Regarding interstate trading, Rich Damberg , OAQPS, asked for a clarification as to whether states over the 4% threshold could trade with any state . For example, Illinois would be able to trade with Missouri , but could it also trade with New York ? Mike replied that Illinois could only trade with states with which it was also significantl y contributing to nonattainm ent . Dan Murray noted that the trading provision had been incorporated into the document during the group ' s last discussion , and that the group would have to discuss it further . He added12

that h e w ould like to pursue a greater degree of interstate tradin g . Further modeling and study would obviously

be required, and there might still be some geographic limitations, but a broader trading program would help to provide more cost - effective reductions . 6 . Banking and Flow Control Sam Napolitano raised th e subject of flow control , asking the states to explain the environmental objective and the protocols they foresaw implementing . Mike Koerber replied that the states had not discussed flow control in detail and thus could not offer a suggestion at pres ent . Tim Smith then raised the su bject of banking , noting that there was a large SO 2 bank , and that the manner in which any replacement plan dealt with those banked allowances would greatl y affect the nature and timing of the controls that companies might cho o se to add . Because of the high level of uncertainty , there is concern that many companies may

choose to use the bank until the regulatory

situation is more certain . This means that there is a potential for a short term increase in emissions while c ompanies use more banked emissions. EPA has encountered difficulties in model ing this situation , and Tim asked whether the states had thoughts to share on this issue . Bob Lopez replied that the importance of the bank had been implicit in the LADCO dis cussions , but that the su bj e ct had not been addressed internall y b y the states . 7 . BART and RACT Requirements Tim Smith asked how the states were approaching BART , and whether they would look at BART r elative to overall reduction s. Mike Koerber rep lied that LADCO had not addressed this issue in great detail, but that it intended to do so in future discussions . Tim explained that when EPA created CAIR p articipation in CAIR was defined as meeting BART requirements . EPA modeling showed CAIR would achieve greater reductions than BART guidelines . In the CAIR replacement rule, EPA will again need to address how the rule could be integrated with BART requirements. EPA also needs to address the degree to which a CAIR replacement rule could address RACT requirements. Bob Hodanbosi noted that some of the states had a longstanding disagreement with CAIR , and so had moved forward with the NO x RACT , putting on tighter controls irrespective of CAIR . Larry Bruss noted that other states had problems with a CAIR rule structure that did not provide for reductions in nonattainment areas . As a result, states pursued RACT as though CAIR did not exist . States did not see the same need for immediate action with visibility and took a longer range approach .13

As noted earlier in the discussion , all of these programs must fit together, and Tim thought industry

would be far more supportive if the regulatory community could show how the programs work together and provide co -benefits . He indicated that EPA would like to hear any thoughts the states have on sy nergizing the emissions control programs . Sam Napolitano added that EPA would be interested in any suggestions the states might have for further integrating anything from CAIR or the regional haze programs , an d that this was the opportunity

for states to raise th e se types of issues . Larry Bruss mentioned visibility requirements, noting that while the court did not address them, those requirements are still part of the act . Mike Koerber agreed that visib ility needs to be addressed, but he suggested that it might not be as much of a priority . He thought the CAIR SO 2 and NO x requirements would satisfy any section 110( a)(2)(D) visibility requirements . 8 . Coverage Sam then asked whether there were any other topics that states want ed to discuss . Larry Bruss mentioned that EPA might want to look beyond the traditional eastern U . S . group of states . Especially if EPA uses the suggested 1% threshold, the Agency will find states in the west that may

be significant contributors to nonattainment areas . For instance, California probably contributes at significan ce levels to areas of nonattainment in Arizona . Sam responded b y asking if Larry saw the replacement CAIR program as a fully national program . Larry replied that he thought it would have to be . Section 110( a)(2)(D) is applied in a similar manner regardless of where a state is located in the country . He suggested havin g a national perspective when evaluating replacement proposal s . Sam sai d that EPA understood the se concerns and will consider how much larger of a geographic area the Agency should include in the replacement CAIR rule . He noted that on e consideration is that 2/3 of western EGUs have scrubbers . Furthermore, the west in general, but California specifically , has a lot of large gas - fired units . 9 . Maintenance Tim Smith then asked Mike Koerber to again explain the section of LAD C O ' s proposal that covers maintenance . Mike replied that the proposal e xpands the lists of are as of interest by using a concentration threshold of 4% below the standard . Even though the list of areas would be expanded, he did not think the LAD C O plan would offer a lot of additional emissions reductions over the earlier CAIR plan .14

X . Conclusion Sam Napolitano concluded the call b y thanking the states for taking the time to discuss the CAIR replacement rule with EPA . H e noted that he considers the ideas they laid out to be a “work in progress ” , and that he appreciate s that states are willing to share idea s that might not be official positions but that are starting points for a strong dialogue between the states and EPA . He reiterated that EPA w ould hold a series of teleconferences with states, industry groups, and environmental groups , and would then share the results of all these meetings with LADCO and other states . Mike Koerber thanked Sam for establishing this l ine of communication . He said LADCO would forward its recommendation , along with the technical work and modeling done to suppo rt its proposal , once it is complete in another month or so . He indicated that LADCO would at that point like to meet with EPA to discuss its key recommendations in detail .15 Appendix A : Participants LADCO Mike Koerber (LADCO) Vinson Hellwig (MDEQ) Bob Hodanbosi (Ohio EPA) Laurel Kroack (IEPA) John Melby

(WDNR) Dan Murray

(IDEM) Larry Bruss (WDNR) Bob Lopez (WDNR) EPA CAMD Sam Napolitano Jenny Jachim Larry Kertcher Beth Murray Gabrielle Stevens Meg Victor OAPQS Bill Harnett Rich Damberg Todd H awes Gobeail McKinley Tim Smith Larry Sorells Chet Wayland OGC Sonja Rodman Representatives from EPA Regions 1, 5, and 6