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printed on recycled paper June 9, 2011

The Honorable Cass R. Sunstein

Administrator Office of Information and Regulatory Affairs Office of Management and Budget Eisenhower Executive Office Building 1650 Pennsylvania Avenue, N.W. Washington, D.C. 20503

Re: Clean Air Transport Rule , Docket ID No. EPA

— HQ

- OAR

- 2009

- 0491

Dear Administrator Sunstein :

On behalf of the citizens of the state of Texas, we request your attention to specific issues associated with the Clean Air Transport Rule (CATR), an EPA rule now before your office for

cons ideration that is scheduled for final approval in late July 2012. Despite significant concerns raised during the comment period, we understand that the final rule may include Texas in CATR. This inclusion would not be limited to ozone effects as proposed , but also for sulfur dioxide (SO2) emission contributions to concentrations of ambient particulate matter of less than 2.5 microns (PM2.5). This rule, if we correctly understand its final form, puts at risk the economic future of power generation and tho se dependent on affordable electricity in Texas. It also places vulnerable citizens at a significant health and safety risk. For example, elderly and

low

- income populations whose health and welfare are dependent on reliable energy would face significant adverse consequences of such a rule. While air pollution regulation is certainly necessary to protect the health of our citizens, the elements of this regulation pertaining to Texas’ SO2 emissions are not necessary for public health protection, and will o nly result in negative consequences.

The CATR, as proposed in August 2010 by EPA, did not include Texas in the annual program for nitrogen oxides (NOx) and SO2 emission reductions. EPA’s proposed rule acknowledges that Texas power plant emissions, as mod eled by EPA, do not exceed the threshold for inclusion in the PM2.5 portion of CATR. Within this rule, EPA has developed a questionable scenario under which CATR would make higher sulfur coals more cost effective than lower sulfur fuels. The cascading res ult of this price point is that Texas’ SO2 emissions would cause an air quality effect exceeding the threshold. EPA uses this scenario to take comment on whether Texas should be included in the program as a “group 2” state. EPA conjectures,

[I] f . . . p rice effects took place and if the rule is finalized as proposed, sources in states not covered by the proposed rule might choose to use higher sulfur coals.Increased uses of such coals could thus increase SO2 emissions in those states. 1 (Emphasis adde d.)

Please note that in no part of this 256

- page rule (or its subsequent three notices) does the EPA provide Texas with proposed emission limits, allocation budgets, or specify proposed requirements for Texas. Further, the rule does not address how Texas ’ inclusion would impact

other states.

Procedurally, this rule satisfies neither the Administrative Procedure Act nor the President’s Executive Order calling for adequate notice and participation from affected parties. We draw your attention to Executive Order 13563, “Improving Regulatory Review.” In a recent speech to the New York University School of Law 2 , you noted that “President Obama set out a distinctive approach to federal review” that calls for public participation. “Before rules are finalized, or even proposed, agencies are directed to ‘seek the view of those who are likely to be affected including those who are likely to benefit from and those who are potentially subject to such rulemaking.’” 3

Second, we draw your attention to the technical in adequacy of the rule. Consider that the inclusion of Texas relies first on the assumption from EPA’s models that the cost of low sulfur coal will increase and the cost of high sulfur coal will decrease. The second assumption on which their argument relie s is the notion that switching coal types is not only logistically possible, but also legally possible. All coal

- fired power plants in Texas operate under state and federal permits that have explicit restrictions on fuel types as well as SO2 emission limi ts. Significant emission increases resulting from fuel switching would require permit modifications that would certainly require an assessment and authorization of additional SO2 emissions. EPA ignores or disregards the significant effort that would be r equired to obtain this type of large

scale permit modification, especially in light of the recent revision of the SO2 National Ambient Air Quality Standard (NAAQS). In the TCEQ comments on the proposed rule, the agency also identified significant mischara cterizations of the current fuel mix for at least four facilities in Texas. This type of flawed logic and inaccurate technical analysis should not be used as a basis for any rule, much less under the hypothetical scenario that EPA devises as a means to in clude Texas in this program.

Finally, we point to the likely unintended consequences of this regulation. As you yourself have noted, the Executive Order calls for “ careful analysis of the likely consequence of regulation, including consideration of under lying science, or alternatives, of costs and benefits and of simplified, harmonized, and flexible methods for achieving regulatory goals.” 4 Because the possibility of including Texas was not adequately fleshed out as a part of the rule proposal, EPA

certa inly did not adequately assess the impacts of this rule on Texas, nor did Texas have the opportunity to comment on the possible consequences.

We anticipate that the proposal would require significant SO2 emission reductions to occur in a very short time p eriod in order to comply with the proposed effective date of January 2012. Our concerns pertain to both the timing and depth of the emission reductions. If coal

- fired power plants in Texas are faced with these significant emission reductions, decisions r egarding the

power generation of these plants may result in considerable reductions in the safety margins of power operation of this state. Said differently, the strong disincentives for operation of coal

fired power plants would undoubtedly result in significa nt cost to energy consumers including the possible shutdown of base

- load units. This economic “ripple effect” has certainly not been fully considered by EPA. Again, because the proposal did not contain any specifics on how Texas would be regulated under this scheme, we are not able to fully evaluate the significant effects, such as shutdowns, of this rule.

1 See 75 FR 45284.

2 “Executive Order 13563: Economic Growth and Public Protection” Speech delivered at New York University School of Law, April 4, 2011, Cass R. Sunstein.

3 Id

.On Friday, June 3, 2011, you gave testimony at the “The Views of the Administration on Regulatory Reform: An Update” hearing, held by the U.S. House of Representative’s Subcommittee on Oversight and Investigations. At this hearing you assured Texas Congressman Joe Barton that because the proposed rule “ has 100 million dollars in annual cost or a significant impact on a sector area, then it counts as significant. So if you like, I will definitely

look into it.” W e respectfully ask that you fully and carefully consider the likely consequences of this rule, and in particular the application of the PM2.5 transport portion to Texas , as promised

. The resulting effect of increased cost of power and power shortages, such as rolling blackouts, would not only jeopardize the personal and economic health of Texas citizens, but also endanger

lives. Whether it is cost

- prohibitive to generate electricity or electricity is sim ply unavailable, Texas and her citizens will be placed at significant risk if EPA pursues inappropriate regulation of SO2 in Texas under the guise of PM2.5 transport.

For your convenience, we have attached our comments on the proposed rulemaking and

sub sequent data proposals. We appreciate your consideration on this urgent manner and are

available for discussion if needed.



### Sincerely,

Chairman Bryan W. Shaw, Ph.D. Texas Commission on Environmental Quality

Chairman Barry T. Smitherman

Public Uti lity Commission of Texas

BS/sh

Enclosures

cc: The Texas Delegation

4 Id.