### Electronic Filing- Received, Clerk's Office, 8/10/2012 *****PC# 2410 * * * * *

BEFORE THE ILLINOIS POLLUTION CONTROL BOARD AMEREN ENERGY RESOURCES Petitioner,
v. ILLINOIS ENVIRONMENTAL PROTECTION AGENCY, Respondent. ) ) ) ) ) ) ) ) ) ) PCB 12-126 (Variance- Air)

NOTICE OF FILING TO: SEEATTACHED SERVICE LIST PLEASE TAKE NOTICE that I have electronically filed today withthe Dlinois Pollution Control Board the Post-Hearing Comments ofthe illinois Attorney General's Office, a copy of which is hereby servedupon you.
Dated: August 10, 2012

BY: Respectfully submitted, PEOPLE OF THE STATE OF ILLINOIS byLISA MADIGAN, Attorney General ofthe State ofillinois

JAMES P. GIGNAC Environmental and Energy Counsel Illinois Attorney General's Office 69 W. Washington St., 18th Floor Chicago, Illinois 60602 (312) 814-0660 jgignac@atg.state.il.us



# 31 ATTACHMENT
___ _

### Electronic Filing- Received, Clerk's Office, 8/10/2012 *****PC# 2410 * * * * *

Carol Webb Hearing Officer Illinois Pollution Control Board I02I North Grand Avenue East P.O. Box 19274 Springfield, IL 62794-9274 Gina Roccaforte SERVICE LIST

Illinois Environmental Protection Agency I02I North Grand Avenue East P.O. Box 19276 Springfield, IL 62794-9276 AmyAntoniolli Renee Cipriano SchiffHardin, LLP 6600 Willis Tower 233 S. Wacker Drive Chicago,IL 60606-6473

### ·~ I**·~**., -"-. 

### Electronic Filing- Received, Clerk's Office, 8/10/2012 *****PC# 2410 * * * * *

BEFORE THE ILLINOIS POLLUTION CONTROL BOARD AMEREN ENERGY RESOURCES Petitioner,
v. ILLINOIS ENVIRONMENTAL PROTECTION AGENCY, Respondent. ) ) ) ) ) ) ) ) ) ) PCB 12-126 (Variance

- Air)

POST-HEARING COMMENTS OF THE ILLINOIS ATTORNEY GENERAL'S OFFICE
The illinois Attorney General's Office, onbehalfofthe People ofthe State ofillinois (the "People"), hereby submits its post-hearing comments in this matter, pursuant to 415 ILCS 5/32, 35 lll. Adm. Code§ l04.224(d), and the comment deadline set forth inthe Hearing Report dated August 2, 2012. These comments supplement the People's initial comments dated July 23, 2012 (PC #249) and the oral statements offered atthe August 1, 2012 public hearing. For the reasons set forth below, the People continue to believe that the Board should require Ameren to submit a comprehensive analysis ofthe various compliance alternatives and to denythe petition ifAmerenis unable or unwilling to do so. Detailed information on options to reduce sulfur dioxide ("S02') pollution is needed to assist the Board in evaluating conditions that could or should be attached to the variance that will help minimize deviations from the MultiPollutant Standard ("MPS"). The People urge the Boardto give careful considerationto these potential conditions and, to the extent the Board determines that a variance is warranted, consider limiting the termto two years to allow for reassessment ofthe rapidly changing energylandscape
we confront today.

1

### Electronic Filing- Received, Clerk's Office, 8/10/2012 *****PC# 2410 * * * * 

## *

I. Ameren Must Submit More Information on Alternative Compliance Strategies. The People asserted in its initial comments that Ameren's petition had failed to properly articulate and documentthe alleged hardship that it would face ifrequired to comply with the MPS. PC #249 at 6-7. Ameren has since provided additional information inresponse to written questions from the Board (see AER's Responses to the illinois Pollution Control Board Technical Unit's Questions (July 30, 2012) and AER's Responses to the illinois Pollution Control Board Technical Unit's Second Set ofQuestions (July 30, 2012)) and in verbal testimony provided at the August I, 2012 public hearing (Tr. 12-56). The additional information, however, is still not sufficient to determine whether various pollution control strategies, either alone or in combination with one another, are available to reach compliance or to minimize the gap ofnon-compliance. Indeed, Ameren is still not quite clear onwhat exactlyitwouldhave to do ifthe variance request is unsuccessful. As pointed out in the People's initial comments, the affidavits submitted to verify the claims in the petition do not match Ameren's assertion that it would have to close two entire plants ifit is unable to receive a variance. See PC #249 at 6. At the public hearing, Amerenwitness Michael Menne testified only that "probably" anywhere from one to three plants could "very likely" need to shut down, Hearing Tr. 21:9-15, and went on to mention other pollutionreduction strategies contemplatedby the companyto meet pending federal mandates that it has apparently chosennot to offer hereto help reduce the departure from the MPS. 1 In order to get to the bottom ofthis, the Board should require that Amerenprovide a comprehensive
When askedby Member Zalewski about the company's compliance plan for the CrossState AirPollution Rule ("CSAPR") that is currently stayed on appeal, Ameren witness Michael Menne statedthat operating at the proposed variance level of.35 lb/mmbtu would place the company "well on [its] way" to meeting CSAPRlimits butthat "we are anticipating that we are going to have to take some additional measures" includingbuying lower sulfur coal,using sorbent injection, and buying allowances to the extent available. Hearing Tr. 41-43. 2

### Electronic Filing- Received, Clerk's Office, 8/10/2012 *****PC# 2410 * * * * *
analysis on its alternative compliance options-includingthose discussed below- before granting anyvariance to the company. IfAmeren cannot or will not provide the analysis, then the petition shouldbe denied. 

### A. Use ofDry 

### Scrubbing 

### Systems Pollution control ofS02 emissions through flue gas desulfurization (FGD) canbe accomplished through eitherwet or dry scrubber systems. Ameren is planning a wet FGD system at Newton. It had previouslyplanned to utilize a dry scrubbing application-Dry Sorbent Injection or DSI-atboth its Joppa and Edwards facilities 2 Other types ofdry scrubbing applications include Furnace Sorbent Injection (FSI), Spray Dry Absorption (SDA), Flash Dry Absorption (FDA), and Circulating Dry Scrubbers (CDS).3 Dynegyhas recently installed or is in the processes ofinstalling dryFGD systems at fourunits located atits Baldwin and Havanna facilities.' AjointUSEPA-CICA5 fact sheet offers the following succinct description ofdry scrubbing applications: "Dry scrubbers have significantlylower capital and annual costs thanwet systems becausethey are simpler, demand less water and waste disposal is less complex. Dry

2 "We are nowplanning to use dry sorbent injection at Joppa
...." Ameren Corporation Q12010 Earnings Call Transcript (May 5, 2010), available athttp://bit.ly/0LMip6. "[W]e will use DSI at our Edwards energy center." Ameren Corporation Q2 2011 Earnings Call Transcript (Aug. 4, 2011), available athttp://bit.lv/NduGIX.
3 Dry Scrubber Fundamentals, WPCA/Duke Seminar (Sept. 3, 2008), available at http://bit.lv/RA03hw. 4 Dynegy, Inc., Form 10-Kfor fiscal year ended December 31, 2011, available at http:/ /1.usa.gov/0Masnf. 5 CICA is sponsored by USEPA's Clean Air Technology Center (CATC) and provides a variety oftechnical assistance on air pollutants and control strategies, emissions inventories and emissions factors, dispersion modeling, ambient monitoring, emissionmeasurements, and risk analysis. http:/ /www.epa.gov/ttncatc1/cica/about e.htrnl. 3

### Electronic Filing- Received, Clerk's Office, 8/10/2012 * * * * *PC# 2410 * * * * *
injection systems install easily and use less space[;] therefore, they are good candidates [for] retrofit applications." 6 While aclmowledging that dry scrubbing applications typically have lower removal efficiencies thanwet scrubbers, USEPA and CICApoint out that "[n]ewer dry scrubber designs are capable ofhigher control efficiencies, on the order of90%." 7 Indeed, the U.S. Energy Information Administration states that dry sorbent injectionmay serve as a key pollution control technology at powerplants and that 

### "DSI systems can [] significantly reduce sulfur dioxide (S02) emissions." 8 USEPA predicts that in coming years, 56 GW ofcoal-fired capacity will install DSI9 Despite having announcedprevious plans to use DSI atthe Edwards and Joppa plants to complywith the MPS, Ameren is now saying that it believes the use ofsorbent has too much variability in the removal efficiency (supposedly anywhere from 10 to 90 percent) and would put too much strain on other equipment such as electrostatic precipitators. Response to Second Set ofQuestions, at 2; Hearing Tr. 23:3-24:12. Yet, at the same time, Ameren is also apparently contemplating the future use ofDSI anyway, either ifit does not get the variance levels it wants
or ifit needs to achieve additional reductions to complywiththe Cross-State Air Pollution Rule ("CSAPR"). See Hearing Tr. 42:10-13 

### ("Ifwe have to do some sort ofadditional sorbent injection [to comply with CSAPR], it wouldn't be enough to get us to these MPS rates but we 

### might have to enhance it some."). This raises the obvious question as to why Amerenhas not

6 See EPA-CICA, Air Pollution Control Technology Fact Sheet: Flue Gas Desulfurization, EPA-452/F-03-034 (2003), available at http://www.epa.gov/ttncatcl/dirllffdg.pdf.
7 

### !d. 8 U.S. Energy InformationAdministration, Today in Energy (March 16, 2012), available at http://www.eia.gov/todayinenergv/detail.cfm?id=5430.
9 Regulatory Impact Analysis ofthe Proposed Toxics Rule: Final Report (March 2011), at 8-13, available athttp://www.epa.gov/ttnecas1/regdata/RIAs/ToxicsRuleRlA.pdf. 4

### Electronic Filing -Received, Clerk's Office, 8/10/2012 * * * * *PC# 241 0 * * * * *

considered or proposed some kind ofpartial use ofsorbent application to reduce the size ofMPS deviationnow when it is already considering using the technology to meetpending federal standards. Ameren should be required to submit the details ofits evaluation ofDSI (including partial applications rather than what it wouldneed to install for full MPS compliance) and any other dry scrubbing technologies for the Board's review. The emergence ofDSI and other dry scrubbing applications as cheaper, faster ways to reduce S02 emissions means that Amerenmust demonstrate that ithas thoroughly analyzed the viability ofusing these approaches to comply with the MPS or to minimize deviation from it. B. Generation Management Ameren states that itinvestigated curtailment ofplant operations as a compliance alternative andthat the evaluation revealed the following: "[I]n order to comply with the proposed MSP S02 emission rates, AERwould need to lower capacity factors on suchunits [Edwards, Joppa, Newton] to between 22% and 38%." Response to Questions, at 2. Ameren witness Michael Menne also addressed this topic at the public hearing, stating that the curtailment ofplants to complywith the MPS would exacerbate the company's financial problems as it would mean less revenue from thoseplants without a concomitantreduction inthe fixed costs that are necessaryto operate a plant at any level ofoutput. Hearing Tr. at 22:9-20. Ameren shouldprovide its evaluation and analysis onunit curtailments or deratings to the Board. While it may indeed prove too much ofa financial hardship to require Ameren to rely on curtailment as a single compliance strategy, there couldbe cost effective pollution reductions through partial curtaihnent that, when combined with other compliance strategies, wouldbring the company closer to complying with the MPS and should therefore be considered as potential

5

### Electronic Filing- Received, Clerk's Office, 8/10/2012 *****PC# 2410 * * * * *

conditions to a variance. Indeed, Ameren is already planning to use "generation utilization" to complywitli its proposed emission rate. Response to Second Set ofQuestions, at 2; Hearing Tr. 26:1-5. The company shouldbe required to submit tlie information necessary for tlie Board to discern whether additional generationutilization should in fact be included as a condition to help minimize departure from tlie MPS. C. 

### Maximization ofExisting Pollution Control Equipment It appears tliat Ameren is committing to run the Duck Creek and Coffeen scrubbers at a 98-99 percent S02 removal rate. See Response 2 at 2 (stating that "tlie operation ofFGD systems at tlie Duck Creek and Coffeen Energy Centers will be fully maximized
. . . The removal efficiencies for the FGD systems will range between 98-99%"); Hearing Tr. 25:15-17 ("The removal efficiencies for tlie scrubber system will range between 98 and 99 percent."). This commitment shouldbe incorporated as a condition to any variance tliat maybe granted. 

### D. Procurement ofLow-Sulfur Coal Ameren has stated its intent to procure low-sulfur coal as an operational step to meetits proposed emissionrateunder tlie variance. Responseto Second Set ofQuestions, at 2. In fact, 99 percent ofAmeren's coal supply for its lllinois plants already comes-fromthe western lowsulfur coalregion called the Powder River Basin (PRB). 10 But the sulfur content in coal from the PRB can vary from mine to mine witli the lowest content sometimes being referred to as "ultra low-sulfur" or "super-compliant" coal. 11 Indeed, Ameren's counterpart subsidiary in Missouri,

10 Ameren Corporation, Form 10-K for fiscal year ending Dec. 31,2011, at 12, available at http:/ /www.sec.gov/Archives/edgar/data/18654/000119312512085489/d260990dlOk.htm. Unfortunately, even during its highest revenue years, Amerenhas never taken steps to equip all its Illinois plants to use Illinois coal and continue to meet emission standards. II See, e.g., PRB Coal Makes tlie Grade, Platts Power (Oct. 2003), at 31, available at http://www.prbcoals.com/pdf/PRBCoallnformation/Power-Oct03-PRBCoal.pdf 6

### Electronic Filing- Received, Clerk's Office, 8/10/2012 

### * * * * *PC# 2410 

### * 

## * * 

## * *

the regulated utility AmerenMissouri, has recently entered in to a five-year contract for ultra low-sulfur coal as its strategy to achieve compliance with the pending Cross-State Air Pollution

Given Ameren's intentto rely on procuring low-sulfur coal to meet its proposed emission rate, the Board should ensure that Ameren maximizes this operational step to reduce emissions
as much as possible. To do this, the Board shouldrequire Ameren to certify on an ongoing basis that ithas procured the lowest sulfur coal to the greatest extentpossible and that it has fully exhausted this strategyto reduce emissions. Indeed, it appears there maybe additional roomto leverage fuel procurement, as Ameren is already contemplating further improvements it could make onthe fuel side to comply withpotential federal regulations that are apparently notpart of its current variance request. See Hearing Tr. 43:3-5 ("On the S02 side, we will still have to be able to take some additional measures [to comply with CSAPR], and we're looking at possibly
... bringing in more low sulfur coal or lower sulfur coal."). This action would be consistent with whatthe Ameren Missouri subsidiaryhas already done and should be considered here to assist with the MPS. 

### II. Ameren's Proposed Conditions are Inadequate. In evaluating whetherAmerenhas satisfied its burden ofshowing that its hardship outweighs harm to public health and the enviromnent, the Board should consider conditions that would attach to a variance ifthe Board decides to grant one. Some ofwhich have already been mentioned above, these should or could include:

12 "InJuly 2011, Ameren Missouri entered into a coal contract for the purchase of approximately 90 million tons ofu1tra low-sulfur coal to be delivered between 2012 and 2017'' Ameren Corporation, Form 10-Q Quarterly Report (Aug. 9, 2011), available at http://biz.vahoo.corn/e/110809/aee10-g .htrnl. 

### 7

### Electronic Filing- Received, Clerk's Office, 8/10/2012 * *. * * *PC# 2410 * * * * *

• Setting ofa revised S02 emissionrate based on additional measures Amerenmight take to limit excess pollution;
• The Hutsonville and Meredosia stations remainnon-operational; 13

• Require the use ofdry sorbent injection or other dry scrubbing applications as a partial 

### if not full compliance measure;
• Require the partial curtailment or derating ofcertainunits to assist with compliance;
• Require Ameren to operate the Duck Creek and Coffeen scrubbers at 98-99% S02 removal efficiencies;
• IfAmeren continues to procure low-sulfur coal as an operational step to meet emission rates, require Amerento procure the lowest sulfur coal available andto submit regular verified certifications; and
• Anyother conditions as determined by the Board that would minimize deviation from the MPS andprovide a more proper balancebetween the hardship to Ameren andthe harmto public health and the environment thatthe variance would allow. III. IfGranted, the Variance Should be Limited to Two Years with the Ability of Ameren to Petition for Extension. As stated in the petition, the reasonAmeren is seekingreliefnow (in 2012) from 2015 and 2017 standards is that it would have to resume normal construction oftheNewton scrubbers in early 2013 (whichAmeren says it cannot due to lack offinancing) orbegin the process of mothballingunits around the same time (which it does not want to do) in order to beready for the 2015 standard14 The People respectfully suggest that a two-year variance 15 wouldprovide the companywiththe reliefit needs now but provide the added benefit ofallowing the Board and

13 Ameren asks thatthe proposed FutureGenproject at its Meredosia facility be exempt from this restriction. Response to Questions at 11. The People have no objectionto that request. 14 "One ofthe main drivers for AER's petition for reliefnowis that ifmothballing of facilities must occur, AERmusthave the necessary time to make and effectuate these critical decisions inthe bestpossible way'' Petition at 

### 23. 15 Inkeeping withthe proposals that Ameren has made, the Board could grant a variance of the 2015 standard to 2017 and the 2017 standard to 2018. 8

### Electronic Filing- Received, Clerk's Office, 8/10/2012 *****PC# 2410 * * * * *

the illinois Environmental Protection Agency an opportunity for reassessment if, two years from now, Ameren still believes it needs more time under a variance. There are many factors currently at play in the power sector, factors that are discussed throughout Ameren's petition. A two year variance-with a strict emissions limit and set of conditions such as those discussed above-would allow Ameren to maintain the decelerated status ofthe Newton scrubberproject and to hold offon making any decisions about placing plants in cold standby. But it would also preserve the chance for the Board to keep the MPS on track to the fullest extentpossible and to keep excess pollutionto a minimum. There are a number offactors that could lead to an increase inpowerprices and an improvement in Ameren's financial position and therefore its compliance strategy:

16 • Rise in natural gas prices. There is currently a glut ofnatural gas because ofoverproduction and the verywarm 2011-2012 winterthat resulted in lesser amounts ofgas being used for heating. This has led to extremely low prices for gas in 2012. However, many analysts expectprices to rise once the gas market has a chance to rebalance (although gas prices could dip even lower ifstorage capacity maxes out this summerand early fall). Demand is continuing to go up as utilities switch from coal to gas, and producers have started to scale back supply. 16 Once the balance between supply and demand shift, it is possible that gas will price out between $4/mmBtu and $6/mmBtu or perhaps even higher in the next couple ofyears. 17 This would ease the downward pressure that cheap gas is currently exerting onpowerprices.
• Compliance with CSAPR and MATS. As notedby Ameren witnesses at the public hearing, the Cross-State Air Pollution Rule ("CSAPR") or some version ofit is likely to be inplace and require compliance from coal-fired powerplants, perhaps in 2014. In addition, the federal Mercury and Air Toxics Standard ("MATS"), assuming it survives pending legal challenges, has compliance dates beginning in 2015. The effective dates of these rules maymeanthat coal plant owners will choose to retire additional older, smaller, inefficient coal plants to avoid the cost ofmaking investments in them. This will
"Natural gas prices surge 70%," CNNMoney (July 25, 2012), available at http:/ /monev.cnn.corn/20**12/07/24/investing/natural-gas-pt~ces/index.htm;** "Chesapeake to throttle back on gas, bank on oil," Platts (Aug. 7, 2012), available at http://www.platts.com/RSSFeedDetailedNews/RSSFeed/NaturalGas/6534891.
17 See here for a discussion ofsome ofthe trends and dynamics affecting the price ofgas: http://www.cleveland.com/business/index.ss£'2012/07/natural gas pnces for winter.html. 

### 9

### Electronic Filing -Received, Clerk's Office, 8/10/2012 *****PC# 2410 * * * * *

remove some ofthe cheapestunits from the generation stack and reduce the current oversupply ofgeneration capacity, two factors that will likely contribute to an uptick in powerpnces.
• Economic improvement. Ofcourse, no one knows for sure what our economy will look like intwo years. Ifindustrial, manufacturing, and other types ofactivity pickup, demand for electricity will pickup and powerprices will rise along with it.
• Weather patterns, price ofcoal, renewable energy policy. Various other factors can also influence energy prices, such as whether we experienceparticularlywarm summers or cold summers or v,:hether the seasons are milder and require less load for air conditioning and heating. Just like the price ofnatural gas, the price ofcoal canvary depending on demand both domestically and overseas and the contracts that utilities are able to negotiate with railroads and coal suppliers. 

### In terms ofrenewable energypolicy, decisions that are made about things such as the ProductionTax Credit (PTC) can influence how quickly renewable energy like wind is entering the market and exerting pressure onincumbent generators and power prices. Depending on how all ofthese factors trend and interactwith each other-for good or for
worse in terms ofpowerprices-Ameren's fmancial position could improve and re-acceleration ofthe Newton scrubber project couldbecome feasible in the company's eyes orperhapsjustify the investment in additional controls at Edwards orJoppa. On the other hand, Ameren's position could erode further and it could be forced to mothball additional units with our without a variance from the MPS. The point is that no one canknow for sure how all ofthese dynamics will play out. A two-year variance wouldprovide Ameren withthe reliefit needs now (i.e., a delayfrom havingto make a complianceroute decision in 2013). Itwould simultaneously preserve the opportunity for the Boardto reevaluate the situation assuming more clarity emerges
onthe price ofgas, the status ofthe federal rules, etc., while also allowing for Amerento make its case for an extension ofthe variance ifit feels it is necessary whenthe time comes. 

### In conclusion, a two-year variance would be a more narrowly tailored approach for the Board to take and would keep the option open for maintaining the MPS as close as possible to the original framework. This, coupled with a strict emission limit and set ofconditions required
10

### Electronic Filing- Received, Clerk's Office, 8/10/2012 *****PC# 2410 * * * * *
during the two-year variance term, will help to minimize the amount ofexcess pollution permitted by a variance.

Dated: August 10, 2012

MATTHEW J. DUNN, Chief Environmental Enforcement/ Asbestos LitigationDivision BY: Respectfully submitted, PEOPLE OF THE STATE OF ILLINOIS byLISA MADIGAN, Attorney General ofthe State ofIllinois 

# a ··4';:·- c: 

# ,.**~** JAMES P. GIGNAC Environmental and Energy Counsel illinois Attorney General's Office 69 W. Washington St., 18thFloor Chicago, illinois 60602 (312) 814-0660 j gignac@atg.state.il.us

11

### ElectronicFiling -Received, Clerk's Office, 8/10/2012 * * * * *PC# 2410 

## * * * 

## * *

CERTIFICATE OF SERVICE I, James P. Gignac, an Assistant Attorney General inthis case, do certify that I caused to be served this lOth day ofAugust, 2012, the foregoing Post-Hearing Comments ofthe Illinois Attorney General's Office upon thepersons listed on the Service List by depositing same in an envelope, first class postage prepaid, with the United States Postal Service at 69 W. Washington St., Chicago, Illinois, at orbefore thehour of5:00 p.m.

JAMES P. GIGNAC