This comment letter response contains two parts:

(1) The original submittal from the commenter. (2) A data base printout of EPA’s response to each point raised by the commenter.

Notes about the response letters:

• The response letters were generated by a data base used to track the content of all public

comment submittals and ensure that the Agency responds to each. Each comment letter

was assigned a Letter ID that corresponds to the last four digits of the docket number of the

original comment (as posted on www.regulations.gov).

• Each response letter includes: comment text; an EPA

‐ assigned comment code; and an

individual response. These are described and explained below.

• The data base contains Comment text from the letters submitted by commenters.

Many hard copy letters were scanned into electronic format for inclusion in the data

base. As a result, there may be some typographical errors attributable to optical

character recognition issues. However, all original submittals were reviewed in the

process of drafting responses to ensure that the comment content was understood and

appropriately addressed.

• The content of each comment letter was divided into topic areas and assigned a unique

Comment ID. Additionally, one or more Comment Codes (i.e., unique topic area ID) was assigned to each discrete point raised by a commenter. This information was added to

the data base. To inform final rulemaking decisions, all comments and information

received on a given topic were reviewed by technical experts in each rule area (e.g., on

construction requirements).

• Following decisions on the final rule requirements, Individual responses were drafted

by topic area to ensure completeness and consistency of the responses with the final

rule and other responses to similar comments. Each discrete point made by a

commenter was given a unique response.

• Upon completion of comment responses, all information was entered into the data base.

Each letter response is a compilation of each comment and its individual response, compiled in the order of the original comment letter. As a result of this process, there is

repetition in the response text. The Agency believes this approach ensures completeness

and attention to each comment letter that was submitted.

• All comments in a topic area were reviewed, evaluated, and responded to concurrently.

Responses on each topic area are compiled and are also available in the rulemaking docket.

# Am

A subsidiary of Pinnacle West Capital Corporation

Scott Davis, Director Tel. 602-250-3225 Mail Station 8376 Environmental, Health & Fax 602-250-3872 PO Box 53999 Safety e-mail Scott.Davis@aps.com Phoenix, Arizona 85072-3999



### December 23,2008

Water Docket

Environmental Protection Agency

Mailcode: 2822T 1200 Pennsylvania Ave., NW. Washington D.C. 20460

Attention: Docket ID No. EPA-HQ-OW-2008-0390

Dear SirIMadam:

Arizona Public Service Company ("APS") appreciates the opportunity to offer comments in

reference to the Environmental Protection Agency's ("EPA") proposal to establish a regulatory program addressing sequestration of carbon dioxide ("CO2") under the Underground Injection Control ("UIC") program pursuant to the Safe Drinking Water Act.

APS is the largest electric utility in Arizona serving over a million customers. APS owns or

operates a number of fossil fuel-fired power plants, including two large coal-fired power plants, and the nation's largest nuclear generating station. Accordingly, the proposed UIC program would have considerable impacts on APS and its customers.

APS is an active member of the Utility Solid Waste Activity Group ("USWAG"), which

submitted a detailed set of comments on this regulatory proposal. USWAG is an informal

consortium of approximately 80 energy industry operating companies and associations,

which together represent more than 85% of the total electric generating capacity of the

United States, and service more than 95% of the nation's consumers of electricity and more than 93% of the nation's consumers of natural gas.

APS would like to go on record voicing its support of the USWAG comments and urge EPA

to carefully consider USWAG's comments as it develops this program. In particular, APS

would like to emphasize the following points, which are discussed in detail in the USWAG

comments together with comments on several other key issues associated with the proposal.

- 

### The final rule must resolve several key policy and legal questions regarding underground injection of COz, including but not limited to implications under the

Resource Conservation and Recovery Act ("RCRA") and the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), and limiting post injection liability.- 

### The final rule must be flexible and structured such that it has the ability to respond appropriately to the development of future carbon sequestration technologies. In this regard, performance-based standards allowing for a site tailored approach are critical.



### - The final rule must ensure protection of underground sources of drinking water, but not be overly burdensome or subject COz sequestration operations to unnecessarily more stringent regulation than is warranted based upon the risks.

- 

### The final rule must limit open-ended financial liability by developing the appropriate financial responsibility mechanisms. As pointed out in USWAG's comments, EPA

should retain the option of self-insurance instruments, which have worked successfully under the 

### RCRA program. Failure to adequately address the issue of open ended liability in this rule making would be a mistake.

EPA's proposal represents an important first step in developing a sequestration regulatory

program, and APS commends EPA for its effort. Again, APS appreciates the opportunity to

comment on this important rulemaking initiative.

~irKtor Environmental Health and Safety, APS

Chairman, USWAGLetter ID: 0187

Commenter: Scott Davis Organization: Arizona Public Service Company

Letter ID: 0187 Comment ID: 25219 Letter Lines: 61 to 65

Comment Code: 1000 1. General and Administrative Comments

Comment: APS would like to go on record voicing its support of the USWAG comments and urge EPA to carefully consider USWAG's co mments as it develops this program. In particular, APS would like to emphasi ze the following points, which are

discussed in detail in th e USWAG comments together wi th comments on several other key issues associated with the proposal.

Individual Response: EPA acknowledges the comment. Pleas e see the remainder of EPA's responses to this comment and USWAG’s co mment for further details. For additional information on EPA's final regulatory approach, pl ease see the final rule and preamble as well as the rulemaking docket.

Letter ID: 0187 Comment ID: 25220 Letter Lines: 67 to 71

Comment Code: 1630 1.3.3 RCRA/hazardous waste i ssues (seeking comment)

Comment Code: 1640 1.3.4 CERCLA issues (seeking comment)

Comment Code: 5460 2.9.2 Comments on transfer of lia bility for long-term care

Comment: - The final rule must resolve several ke y policy and legal questions regarding underground injection of CO2, including but not limited to implications under the Resource Conservation and Recovery Act ("RCRA") and the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), and limiting post injection liability.

Individual Response: Under the final GS rule, once an owne r or operator has met all regulatory requirements under Part 146 for Class VI wells and the Director has approved site closure pursuant to requirements at §146.93, the owner or opera tor will generally no longer be subject to enforcement for regulatory noncompliance. Furtherm ore, their financial instrument as required under §146.85 will be released if it was not used. However, even if a site closure is approved under §146.93, an owner or operator may be held liable for regulatory noncompliance (including violation of 40 CFR 144.12) in ce rtain circumstances. For example, an owner or operator may be held liable for regulatory noncompliance even afte r site closure was approved if the Director relied on erroneous information (e.g., erroneous modeling data) provid ed by the owner or operator when approving site closure.

Separate from EPA's authority to enforce regul atory compliance, an owner or operator may be subject to a §1431 response orde r even after proper site cl osure is approved under §146.93. Under §1431 the Administrator may require an ow ner or operator to take necessary response

1measures if he or she receives information that a contaminant is present or is likely to enter a public water system or an USDW, which may pres ent an imminent and s ubstantial endangerment to the health of persons, and the appropriate Stat e and local authorities ha ve not acted to protect the health of such persons. Th e action may include issuing admi nistrative orders or commencing a civil action for appropriate relief against the ow ner or operator of a Class VI well. If the owner or operator fails to comply with the order, they may be subject to a civil penalty for each day in

which such violation occurs or failure to comply continues.

Furthermore, after site closure an owner or ope rator may remain liable under tort and other

remedies, or under other federal statutes includi ng, but not limited to, Clean Air Act, 42 U.S.C.

§§ 7401-7671; CERCLA, 42 U.S.C. § 9601-9675; and RCRA, 42 U.S.C. § 6901-6992. EPA does not have authority to transfer SDWA or other legal liability for Class VI wells to the State or federal government or a third-party fund. See the final rule preamble for further discussion of EPA's final approach.

EPA received many comments regarding the applicab ility of the RCRA regulations and statute to CO2 streams that are geologically sequestered under the final Cl ass VI UIC well requirements. As a result, EPA has decided to initiate a sepa rate proposed rulemaking specifically to examine the issue of RCRA applicability to CO2 stream s being geologically sequestered, including the possible option of a conditional exemption from the RCRA requirements for CO2 GS in Class VI wells. EPA will consider these comments as pa rt of its development of that proposal. The Agency will consider issues particular to RCRA in the context of that separate rulemaking, and recommends that the commenter read that propose d rule when it is published. The Agency notes

that commenters who wish to submit comments on the RCRA proposal will need to do so during the comment period for that rule. Finally, EPA also notes that the final GS rule, which adds new regulations for Class VI wells under the Safe Drinking Water Act (SDWA), is not making any changes to the RCRA regulations.

EPA also clarifies that CO2 itself is not listed as a hazardous substance under CERCLA; however, the CO2 stream may contain a listed hazardous substance (such as mercury) or may

mobilize substances in the subsurface that could react with ground water to produce listed hazardous substances (such as sulf uric acid). Whether such subs tances may result in CERCLA liability from a sequestration f acility depends entirely on the composition of the specific CO2

stream and the environmental media in which it is stored (e.g., soil or ground water). CERCLA exempts from liability, under CERCLA section 107, 42 U.S.C. 9607, certain "federally permitted releases" (FPR) as defined in CERCLA, 42 U.S. C. 9601(10). Class VI permits will need to be carefully structured to ensure that they prevent potential releases from the well which are outside the scope of the Class VI permit.

Letter ID: 0187 Comment ID: 25221 Letter Lines: 73 to 76

Comment Code: 1250 1.1.1.4 Flexibility is needed (p erformance-based standards)

Comment: - The final rule must be flexible and stru ctured such that it has the ability to respond appropriately to the developm ent of future ca rbon sequestration technologies. In this regard, performan ce-based standards allowing for a site

2tailored approach are critical.

Individual Response: EPA is using an adaptive appro ach to regulating GS under the UIC Program. Even after finalization of the GS regulat ion, EPA plans, every six years, to collect and review project data on GS research projects to determine whether the appropriate amount and types of information and appropriate documenta tion are being collected, and to determine if modifications to the requirements are appropriate or necessary.

Letter ID: 0187 Comment ID: 25222 Letter Lines: 78 to 80

Comment Code: 1600 1.3 Risk Associated with CO2 GS

Comment: - The final rule must ensure protectio n of underground sources of drinking water, but not be overly burdensome or subject CO2 sequestration operations to unnecessarily more stringent regulation th an is warranted based upon the risks.

Individual Response: The GS rule balances the need for site-specific decisions with the need for

minimum standards to ensure national consis tency and USDW protection from endangerment, while also ensuring that states have the da ta they need to make permitting decisions.

Letter ID: 0187 Comment ID: 25223 Letter Lines: 82 to 86

Comment Code: 5430 2.9.1 Comments on proposed financia l responsibility requirements (40 CFR 146.85)

Comment: - The final rule must limit open-ended financial liability by developing the appropriate financial responsibility mech anisms. As pointed out in USWAG's comments, EPA should retain the option of self-insurance instruments, which have worked successfully under the RCRA program . Failure to adequa tely address the issue of open ended liabili ty in this rule making would be a mistake.

Individual Response: EPA will retain the use of self-insurance as an instrument for financial responsibility for Class VI wells. Owners or operators may provide self insurance through a financial test provided certai n conditions are met under the final rule. For example, these conditions include the demonstration of profitab ility and stability. EPA is developing guidance that describes the types of financial instrument s, including self insurance, which owners or operators can use to meet financial responsib ility requirements for GS wells. The financial responsibility guidance will include considerations for Directors regarding how to evaluate the appropriateness of a specific financial responsibi lity instrument for a specific project. This guidance is available on EPA's website at http://water.epa.gov/type/groundwater /uic/wells_sequestration.cfm.

Owners or operators have the flexibility to choose from a variety of financial instruments to meet their financial responsibility obligations. Owners or operators may use one or multiple financial responsibility instruments for well plugging a nd PISC (§146.85(a)(6)). However EPA will not

3allow for a separate financial responsibility demonstration fo r well plugging and PISC (i.e., a demonstration submitted prior to well plugging and the beginning of the post-injection site care period rather than with the permit application). A demonstration of financial responsibility for all phases of the GS project will be required prior to the issuance of a Class VI permit (§146.85(a)(5)(i)). See the final rule and preamble for further discus sion of EPA's final approach to financial responsibility.

EPA disagrees that caps should be placed on financ ial responsibility requirements in the rule. The goal of financial responsibility is to assure that resource s are available to prevent the endangerment of USDWs from improper plugging, remediation, and management of wells in the event that the owner or operator experience s financial difficulties. EPA believes that the

instruments chosen for financial re sponsibility must cover the comple te costs of these activities.

The cost of meeting the financial responsibility requirements is expected to be proportionate to the expected costs of each GS activity. EPA anticip ates that the availability of third-party GS financial instruments will grow in response to demand for such instruments by Class VI well

owners or operators.

Letter ID: 0187 Comment ID: 25224 Letter Lines: 88 to 90

Comment Code: 1410 1.2.1 Comments in support of EPA/rulemaking

Comment: EPA's proposal represents an important fi rst step in developing a sequestration regulatory program, and APS commends EPA for its effort . Again, APS appreciates the opportunity to comment on this important rulemaking initiative.

Individual Response: EPA acknowledges the comment and belie ves that the creation of a new injection well class (VI) under the existing UIC Program is necessa ry to enable the deployment of GS as a climate change mitigation tec hnology in a manner that protects USDWs from endangerment. EPA believes that the UIC Progr am, under the authority of the SDWA, provides a strong framework for regulating inje ction of CO2 for GS and adds that the GS regulation tailors the UIC requirements to address the unique issues associated with large- scale GS including large injection volumes, the relative buoyancy of CO2, its corrosivity in the presence of water, the potential presence of impurities in captured CO2, and its mobility within subsurface geologic

formations.

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