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Powering Today. Protecting Tomorrow. Paula Soos VP Government Relations 

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### E;_^^i:,' 445 South Street Morristown, NJ 07960 Tel: 862.345.5348 Fax: 862. 345.5170 psoos@covanta.com 

### May 13, 2014



### The Honorable Gina McCarthy Administrator, Environmental Protection Agency 1200 Pennsylvania Avenue, NW, Washington DC 20460 Dear Administrator McCarthy, As you prepare to release a draft rule to address carbon pollution from existing power plants under section 111(d) of the Clean Air Act, I wanted to follow up on theJanuary meeting many of your staff had with local governments who utilize waste-toenergy plants. Our client communities said that Acting Administrator McCabe and Mr. Goffman indicated they wanted to hear from States about the need for WTE as a tool in the 111(d) proposed rule. Over the past several months, dozens of letters have been sent to your office by local government officials, state legislators, and state regulatory agencies expressing their view that Waste-to-Energy (WTE) could play a valuable and constructive role in reducing greenhouse gas emissions through the 111(d) rulemaking. I have attached a list of the government entities that we know have sent letters requesting Waste-to-Energy be included as a compliance tool in your forthcoming guidance to the states. These entities include Mayors from across the country including CT, CA and MI, County Commissions, State Legislators and other stakeholders. Importantly, they also include letters from the executive agencies of MN, HI, OR, AL and PA.Below are a few specific requests of governments who rely on existing waste-toenergy facilities as critical to their GHG programs: "The Southeast Resource Recovery Facility in Long Beach plays an important role in mitigating greenhouse gas emissions in this region, and we strongly encourage the EPA to recognize Waste-to-Energy facilities as infrastructure in the federal government's "toolbox" for reducing greenhouse gas emissions."

- Mayor Foster, Long Beach, CA

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### "Kent County and its local government partners have invested hundreds of millions of

dollars in a waste-to-energy facility. I urge your agency to allow states to use these greenhouse gas reductions in their state plans." - Mayor George Heartwell, Grand Rapids, MI "ADEM recommends that EPA provide for and quantify credits from waste-to-energy (WTE) plants and from recycling programs. With respect to WTE facilities, EPA has published a study which concludes that each ton of municipal solid waste not landfilled as a result of being processed through a WTE facility prevents the equivalent release of a ton of CO2. (www.epa.gov/epawaste/nonhaz/municipal/wte/airem.htm#7) " Lance R. LeFleur, Director Alabama Department of Environmental Management We ask that as you give final consideration to the draft guidance that you take into account the importance that states and local governments place on the greenhouse gas mitigation benefits of their waste-to-energy plants. Bestregard ,

Pau a Soos Vice President, Government Relations

Cc: Janet McCabe, Acting Assistant Administrator Joseph Goffman, Senior CounselAAP1pSf

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OFFICE OF THE MAYOR
G EORGE K. HEARTWELL

MAYOR March 21, 2013

The Honorable Gina McCarthy Administrator, Environmental Prote.ction Agency 1200 Pennsylvania Avenue, N.W. Washington, DC 20460 Re: Carbon Pollution Standards for Existing Power Plants Dear Administrator McCarthy: As EPA begins to develop Carbon Pollution Standards for Existing Power Plants, 1 encourage the EPA to recognize the long-standing international treatment of Waste-to-Energy (WTE) as a GHG initigation technology and include new and existing WTE in the compliance toolbox. Waste-to-Energy is recognized as a GI4G mitigation technology by the Intergovernmental Panel on Climate Change (IPCC), the World Economic Forum and European Union and WTE has been able to sell carbon offsets through the Clean Development Mechanism (CDM) of the Kyoto Protocol. In the United States, the Lee and Hillsborough County Resource Recovery Facilities in Florida are both generating carbon offset credits under theVoluntary Carbon Standard. The EPA-sponsored models (WARM and DST) llave both found that Waste-toEnergy facilities compared to landfilling reduce the total amount of GHGs in the atmosphere. The President's Climate Action Plan states, "Curbing emissions of inethane is critical to our overall effort to address global climate change." With the increased focus on niethane, state plans should be encouraged to prioritize technologies that reduce methane from landfills and avoid CO2 from fossil fuels. To ensure that the benefit of inethane mitigation is recognized, EPA should recommend that states use the US EPA municipal solid waste decision support tool (MSW-DST) for avoided emissions from Waste-to-Energy facilities. Kent County and its local governmental partner ' have invested liundreds of inillions of dollars in a wasteto-energy facility. I urge your agency to allow states to use these greenliouse gas reductions in their state plans. Thank vou for accepting comments on the Car Joll tion Standards for Existing Power Plants and for your consideration.

11 cc: Mark Rupp, Deputy Associate AdOlnistrator Office of Congressional and Intergovkrnmental Relations

300 MONROE AVENUE. N.W. • GRAND RAPIDS, MICHIGAN 49503 • (616) 456-316B • FAX (616) 456-3111 • gheartwe®grcity.us^p A A P/^^ V Q^`'{ r b

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OFFICE OF THE MAYOR
G EORGE K. HEARTWELL

MAYOR March 21, 2013

Ms. Janet McCabe Acting Assistant Administrator for Air and Radiation U.S. Environmental Protection Agency 1200 Pennsylvania Avenue NW Mail Code: 6101A Washington, DC. 20460 Re: Carbon Pollution Standards for Existing Power Plants

Dear Ms. McCabe: As EPA begins to develop Carbon Pollution Standards for Existing Power Plants, I encourage the EPA to recognize the long standing international treat(nent of Waste-to-Energy (WTE) as a GHG mitigation technology and include new and existing WTE in the compliance toolbox" Waste-to-Energy is recognized as a GHG mitigation technology by the Intergovernmental Panel on Climate Change (IPCC), the World Economic Forum and European Union and WTE has been able to sell carbon offsets through the Clean Developnient Mechanism (CDM) of the Kyoto Protocol. In the United States, the Lee and Hillsborough County Resource Recovery Facilities in Florida are both generating carbon offset credits under theVoluntary Carbon Standard. The EPA-sponsored models (WARM and DST) have both found that Waste-toEnergy facilities compared to landfilling reduce the total amount of GHGs in the atmosphere. The President's Climate Action Plan states, "Curbing emissions of inethane is critical to our overall effort to address global climate change." With the increased focus on metliane, state plaiis should be encouraged to prioritize technologies that reduce metliane from landfills and avoid CO2 from fossil fuels. To ensure that the benefit of inethane mitigation is recognized, EPA should recomniend that states use the US EPA municipal solid waste decision support tool (MSW-DST) for avoided emissions from Waste-to-Energy facilities. Kent County and its local governmental partners to-energy facility. l urge your agency to allow states to Thank you for accepting comments on the Carbon Poll^ consideration. /^l \ have invested hundreds of millions of dollars in a waste- (se these geenhouse gas reductions in their state plans. ion Standards for Existing Power Plants and for your



## ^ CC: Mark Rupp, Deputy Associate Admi Office of Congressional and Intergovernr

300 MONROE AVENUE, N.W- • GRAND RAPIDS. MICHIGAN 49503 • (616) 456-3168 • FAX (616) 456-3111 • gheartwe®grcity.usLON^

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### November 27, 2013

The Honorabie Gina McCarthv Administrator, Environmental Protection Agency 1200 Pennsylvania Avenue, N.W. Washington, DC 20460 Re: City of Long Beach Comments — Carbon Pollution Standards for Existitig Power Plants Dear Administrator McCarthy: On behalf of the City of Long Beach, I urge the US EPA to include Waste-to-Energy (WTE) facilities as a compliance n7echanism in programs developed by the federal government to reduce carbon pollution from existing energy facilities in the United States. As a city of the State of California, which has the most developed greenhouse gas (GHG) reduction measures in the nation, Long Beach owns and manages the Southeast Resource Recovery P'acility (SERRF). SERRF is a WTE facility that plays an important role in mitigating GHG emissions in the Long BeachlLos Angeles region. It is critical that as the EPA begins to develop Carbon Pollution Standards for Existing Power Plants, the Agency recognize the long-standing international treatment of WTE as a rnitigation technology. Waste-to-Energy is recognized internationally as a mitigation technology by the Intergovernmental Panel on Climate Change (IPCC), the World Economic Forum and European Union. WTE facilities have also been able to sell carbon offsets through the Clean Development Mechanism (CDM) of the Kyoto Protocol. The President's Cliniate Action Plan states, "Curbing emissions of inethane is critical to our overall effort to address global climate change." As currently recognized by the EPA, WTE reduces GHG emissions by approximately one ton of carbon dioxide equivalents (CO 2 e) for every ton of waste processed. These reductions result from prevention of uncollected fugitive emissions of landfill methane; avoiding fossil fuel combustion associated with grid electrical production; and the recovery of ferrous and non-ferrous metals for recycling, which reduces the greenhouse gas emissions associated with the production of these metals from raw materials. With the increasedfocus on methane, waste-to-energy should be included in the EPA's "toolbox" because of the cobenefit of reducing methane from landfills and reducing CO2 from fossil fuels.

333 WEST OC:EAN BovLEVARD, )_.ONC, BFJtCFi, CALIFORNIA 90802 TELZPHONE 562-570-6801 FAx 562-570-6538 h1AYOR@L0NGBEACH.GOv ^,.

### Carbon Pollution Standards for Existing Power Plants

November 27, 2013 Page 2 We respectfully request that EPA's Carbon Pollution Standards for Existing Power Plants include the following components: • As a compliance mechanism, new and existing renewables technologies should be specifically included as a compliance mechanism in all state programs; and State plans should use the broadest definition of renewable energy to ensure that viable and effective tools are not excluded. The definition of "renewable energy" found in Section 203 of the Energy Policy Act of 2005 and Executive Order 13514, which both include WTE, should be used as a base definition in EPA's Carbon Pollution Standards for Existing Power Plans. At a minimum, existing waste-to-energy facilities that have the co-benefit of mitigating methane gas must be included, regardless of placed-in-service date. • The Carbon Pollution Standards for Existing Power Plants should also direct states to determine the true value of renewables by assessing co-benefits, such as the significant mitigation of landfill methane achieved through WTE. This should be done utilizing an avoided emissions approach using recognized tools such as the EPA's Municipal Solid Waste Deeision Support Tool (MSW-DST) for evaluating the life-cycle environmental tradeoffs and fulI costs of solid waste management. • Standards should be based on the net greenhouse gas value determined, and encourage states to tie incentives to greenhouse gas benefit achieved. • They should require state renewable energy programs to avoid technology bias, set a minimum floor price for all renewables, and require a balance between base-load and intermittent renewables. • Last but not least, the EPA's Carbon Pollution Standards for Existing Power Plants should be eonsistent with the Agency's proposed carbon rule for new sources and specifically exempt municipal waste combustors from the definition of fossil fuel electric generating unit. Thank you for accepting the City of Long Beach's comments on Carbon Pollution Standards for Existing Power Plants, The Southeast Resource Recovery Facility in Long Beach plays an important role in mitigating greenhouse gas emissions in this region, and we strongly encourage the EPA to recognize Waste-to-Energy facilities as infrastt-ucture in the federal government's "toolbox" for reducing greenhouse gas eniissions. Should you have any questions, please feel free to contact Tom Modica, Deputy City Manager at (562) 570-5091.

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cc: Janet McCabe, EPA Acting Assistant Administrator Joseph Goffman, EPA Senior Counsel^uesn J. Bs*nc

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MICHAEL E. CHAMPLEY COMMISSIONER LoaaruNE H. AxiBA STATE OF HAINAII COb1MISSIONfR PUBLIC UT1LITiES COMMISSION 5 2G27 DEPARTMENT OF BUDGET AND FINANCE 465 S. KING STREET, #103 -' - fn au Ha.:a : PUC.,.

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. HONOLULU, HAWAII 96813 

## November 27, 2013

Ms. Deborah Jordan 

## Direction Air Division (Attention: Air-1) United States Environmental Protection Agency 75 Hawthorne Street San Francisco, California 94105 Subject: Comments on EPA's Action to Develop Carbon Pollution Guidelines for



## Existing Power Plants under Section 111(d) Dear Ms. Jordan: The Hawaii Public Utilities Commission regulates Hawaii's electric utilities and the implementation of state laws requiring increased use of renewable resources for the production of electricity, increased efficiency of electricity use, and reduced reliance on fossil fuels. As the Chair of the Commission, I am keenly aware of the importance of well-designed and effective regulation on the electric utility sector. Also, as the forrner Chair of the House Energy and Environmental Protection Committee of the Hawaii State Legislature in 2007 when Hawaii's Greenhouse Gas Emissions Law (Act 234, Session Laws of Hawaii 2007) was enacted, I have a strong interest in achieving, as it says in Act 234, "the maximum practically and technically feasible and 

## cost-effective reductions in greenhouse gas emissions," Therefore, I am pleased to have had the opportunity to work with the Hawaii State Department of Health and the Hawaii State Department of Business, Economic Development and Tourism on the attached Comments document. For Hawaii to be able to continue to achieve its energy and carbon reduction goals, which are critical to the health of our economy and the well-being of Hawaii's people, we need to work together to align both Federal and State regulations with Hawaii's unique 

## options and challenges.

Hawaii Dlstricl Office - 688 Kinaole Street, 4106, Hllo, Hawail 96720 • Telephone: (808) 974-4533, Facsimile: (608) 974-4534 Kauai Dislrict Office • 3060 Eiwa Street, #302-C. Lshue, Hawaii 96766 • Telephone: (808) 274-3232, Facsirrile: (808) 274-3233

(MaiEing address: Kauai District Ofiice • 3060 Eiwa Street, Suite 307, Lihue, Hawaii 96766) Maui District Office • State Office Building 91, 54 South High Street, #218, Waifuku, Hawaii 96793 • Telephone: (808) 964-8182, Facsimiie: (808) 989-8183

## Ms. Deborah Jordan

November 27, 2013 Page 2
I hope you find our suggestions and stated concerns to be helpful as you develop the guidelines. 1f I may be of help in any way, please do not hesitate to contact me. Sincere{y,

Hermina Morita Chair HM:MLT:rs Enclosuretf O.:r h, .

yr• , a N['L A6ERCAOMBiE ' E ^ ; IORETTA J. PUDDY, A.0 S.W . tA P hi

STATE OF HAWAII
DEPARTMENT OF NEALTH P t} BOX 3375 H NuLUL U, HI 56801 •3378 

### November 27, 2013 13-991 E CAB Ms. Deborah Jordan 

### Direction Air Division (Attn: Air-1) U.S. Environmental Protection Agency (EPA), Region 9 75 Hawthorne Street San Francisco, California 94105 Dear Ms. Jordan Subject: Comments on EPA's Actions to Develop Carbon Pollution Guidelines for

Existing Power Plants under Section I11(d) of the Clean Air Act The Hawaii Department of Health (DOH) appreciates the opport.unity to comment on EPA's actions to develop guidelines for reducing carbon pollution from existing power plants. The DOH 

### has been activeiy working with State partners including the Hawaii Department of Business, Economic Development, and Tourism (DBEDT) and the Hawaii Public Utilities Commission (PUC) to reduce greenhouse gas (GHG) emissions. Adverse effects from emissions that contribute to globai warming and climate change are a concern in Hawaii and the State has 

### been developing strategies to mitigate GHGs. These strategies were developed both before and after Hawaii Act 234 was passed in 2007 to regulate GHG emissions by faw. 

### Hawaii established the Renewab{e Portfolio Standard (RPS) in 2004, the Hawaii Clean Energy Initiative (HCEI) in 2008, and more recentiy, the GHG Rules that are currently being routed for approval to implement. The RPS, HCEI, and GHG Rules, described briefly in the attached GHG Reduction Strategies, were developed as combined measures to reduce GHGs. Comments in developing carbon pollution guidelines for existing power piants are provided in the attached Consofidated Comments with support letters from the Hawaii DBEDT and PUC. The comments are a coflaborative response among the Hawaii DOH, DBEDT, and PUC, to address State and National goals in reducing GHGs. If you have any questions regarding this matter, please contact Mr. Nolan Hirai of the Ciean Air 

### Branch at (808) 586-4200. Sincere{y,

Y GILL Deputy Director for Environmental Health
MM:nn Enclosures

### GHG REDUCTION STRATEGIES

RPS Hawaii established a Renewable Portfolio Goal (PRG) in 2001 that was replaced with an enforceable RPS in 2004. The RPS appiies to all electric utility companies selling electricity for consumption in the state. The Hawaii RPS requires the foflowing net renewable electricity sales: 

### 10% by December 31, 2010; 15% by December 31, 2015; 25% by December 31, 2020; and 40% by December 31, 2030. HCEI In 2008, the U.S. Department of Energy and the Governor of the State of Hawaii signed a memorandum to initiate the HCEI. The HCEI was designed to be a partnership among key stakeholders in Hawaii, including the government, nongovernmental organizations, the private 

### sector, and universities. The HCEI was established to meet 70°Jo of Hawaii's energy needs by 2030 through energy efficiency and renewable energy.
GHG Rules 

### The DOH amended the Hawaii Administrative Rules to regulate GHGs from large permitted 

### sources as a backstop to the RPS and HCEI emission reduction strategies. Simi{ar to the Prevention of Significant Deterioration regulations, the GHG Rules are based on a carbon dioxide equivalent (CO 2 e) threshofd of emission reduction rather than on a CO 2mass threshoid. The GHG rufes will require existing faciiities with potential CO 2 e emissions greater than or equal to 100,000 short tons per year to establish a faci{ity-wide CO 2 e emissions cap. The purpose of the rules is to reduce 2010 base{ine actual GHG emissions from each affected facility to at least 

### 16% by 2020. The 16°lo reduction percentage is based on GHG emissions inventory data for 1990 and 2010. To implement GHG reductions, the emissions cap will be incorporated into the permits of affected facilities providing a mechanism to guarantee GHG reductions. Violation of the cap will be subject to enforcement action. The cap requirement will affect power plants, refineries, and large commercial operations. These facilities represent about 88°!0 of Hawaii's 

### stationary source GHG emissions. The cap excludes municipal solid waste landfills with gas collection and control systems and municipal waste combustion operations. A GHG control assessment, similar to a best availabie control technofogy (BACT) analysis, is required from 

### facifities proposing an alternate cap that is iess than 16%. The GHG Rules provide a number of options for affected facilities to reduce GHG emissions. lncreasing plant efficiency is one option for reducing GHGs. Affected facilities may also use an 

### aiternate fuel that emits lower GHGs than the primary fuel to achieve the needed emission reductions. Biogenic COzemissions are excluded from the GHG cap requirements, which promote use of biofuels as an additional means to meet GHG reduction goals. Options are available to replace fossil fuel combustion with renewable energy such as wind and solar power. Affected facilities may also combine their facility-wide GHG emission caps to leverage emission 

### reductions among partnering faciiities in meeting an overali 16% GHG emissions cap.
Statewide GHG emissions will be tracked from the date the rules are issued untiV 2020 and beyond to determine whether or not Hawaii's GHG reduction goals are being met. The GHG Rules may be amended to specify a different GHG cap reduction percentage depending on what 

### is shown from the statewide GHG emissions inventory. ^9
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### CONSOLIDATED COMMENTS

From the State of Hawaii's
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### Department of Health

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### Public Utilities Commission

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### Department of Business, Economic Development, and Tourism

To the U.S. Environmental Protection Agency

Regarding Considerations in the Design of a Program to Reduce Carbon Pollution from Existing Power Plants

November, 2013

### The State of Hawaii appreciates the opportunity to work with EPA in developing guidelines for

State Pians to reduce carbon pollution from existing power plants. Available information from EPA indicates Section 111(d) will require state plans for existing sources of noncriteria pollutants whenever EPA promulgates a standard for a new source. These are referred to as Section 111(d) plans that must be approved by EPA. An EPA fact sheet specifies Section 111(d) as a state-based program for existing sources, with EPA establishing guidelines for states to deveiop pians to achieve the needed reductions. Hawaii has already developed a variety of strategies for its electricity sector, including increasing energy efficiency, significantly increasing the use of renewable resources for electricity generation, and reducing greenhouse gases (GHGs) to below 1990 leveis by the year 2020. Hawaii's standards are measurable, verifiable, and are on track to meet the requirements. The EPA held a video conference on November 1, 2013 at the Hawaii State Department of Heaith (DOH) to soiicit input from Hawaii on the design of a program to reduce carbon poilution from existing power plants. This document contains a consolidated set of comments developed by the Hawaii DOH, the Hawaii State Public Utilities Commission (PUC), and the Hawaii Department of Business, Economic Development, and Tourism (DBEDT) regarding guidelines for state plans to meet Federal carbon emission reduction targets for existing eiectricity generation units. Letters from the participating agencies are being transmitted with this document.!?A E 1IiZZj 13



## 1. What is State and stakeholder experience with programs that reduce COz emissions in the electric power sector?

In 2000, Hawaii's statewide energy objectives were amended to include: "Reduction, avoidance, or sequestration of greenhouse gas emissions from energy supply and use.i1
In 2001, Hawaii enacted a Renewable Portfolio Standards (RPS) requirement. 2The current law requires 40% of Hawaii's electricity to be generated from renewable sources by 2030. A related measure, the Energy Efficiency Portfolio Standards (EEPS) law, requires a significant portion of Hawaii's projected electricity needs to be displaced by energy efficiency measures by 2030.3

In 2007, Hawai'i became one of the first states in the nation to enact major climate change legislation, requiring statewide greenhouse gas (GHG) emissions to be at or below 1990 levels by lanuary 1, 2020.°
Hawaii's policies have been -- and are projected to continue to be -- effective, with electricity-sector greenhouse gases at or below 1990 levels before 2020.

Examples of Hawaii's greenhouse gas and energy laws are provided, in part, below; sources and links are provided in footnotes.
HAWAII'S GREENHOUSE GAS EMISSIONS LAW. `' §342B-71 Statewide greenhouse gas emissions limit, adoption. A statewide greenhouse gas emissions fimit to be achieved by 2020 is hereby established that is equal to or below the level of the statewide greenhouse gas emissions in 1990, as determined by section 3 of Act 234, Session Laws of Hawaii 2007; provided that for the purposes of this Act greenhouse gas emissions from airplanes shall not be incfuded.
OBJECTIVES AND POLICIES FOR ENERGY6 §226-18 Objectives and policies for facility systems--energy. (a) Planning for the State's faci{ity systems with regard to energy shall be directed toward the achievement of the following objectives, giving due consideration to all: (1) Dependable, efficient, and economical statewide energy systems capable of supporting the needs of the people; (2) Increased energy self-sufficiency where the ratio of indigenous to imported energy use is increased; (3) Greater energy security and diversification in the face of threats to Hawaii's energy supplies and systems; and (4) Reduction, avoidance, or sequestration of greenhouse gas emissions from energy supply and use.

1 Act 176, Session Laws of Hawaii 2000
2 Act 272, Session Laws of Hawaii 2001. 3 Act 155, Session Laws of Hawaii 2009. " Act 234, Session Laws of Hawaii 2007 5 Hawaii Revised Statutes ("HRS") §342B-71 to 73, htto://www.capitol.hawaii.Qov/hrscurrentNo106 Ch0321- 0344/HRS0342B/HRS 0342B-0071.htm
6 HRS Chapter 226, htt0://www.capitol.hawaii.¢ov/hrscurre nt o10 4 Ch0201-0257/HRS0226/HRS 0226-.htmDATF_ Y.f/1,173

§269 [PART V. RENEWABLE PORTFOLIO STANDARDS] §269-91 [Definitions.] For the purposes of this [part]: "Renewable electrical energy" means:' (1) Electrlcal energy generated using renewable energy as the source, and beginning January 1, 2015, includes customer-sited, grid-connected renewable energy generation; and (2) Electrical energy savings brought about by: (A) The use of renewable displacement or off-set technologies, including solarwater heating, sea-water air-conditioning district cooling systems, solar airconditioning, and customer-sited, grid-connected renewabie energy systems; provided that, beginning January 1, 2015, electrical energy savings shall not include customer-sited, grid-connected renewable-energy systems; or (B) The use of energy efficiency technologies, inciuding heat pump water heating, ice storage, ratepayer-funded energy efficiency programs, and use of rejected heat from co-generation and combined heat and power systems, exciuding fossil-fueled qualifying facilities that sell electricity to electric utility companies and centraf station power projects. "Renewable energy" means energy generated or produced using the following sources: B (1) Wind; (2) The sun; (3) Falling water; (4) Biogas, including landfill and sewage-based digester gas; (5) Geothermal; (6) Ocean water, currents, and waves, including ocean thermal energy conversion; (7) Biomass, including biomass crops, agricultural and animal residues and wastes, and municipal sofid waste and other solid waste; (8) Biofuels; and (9) Hydrogen produced from renewable energy sources. "Renewable portfolio standard" means the percentage of electrical energy sales that is represented by renewable electrical energy.

§269-92 Renewable portfolio standards.9

(a) Each electric utility company that sells electricity for consumption in the State shall establish a renewable portfolio standard of: (1) Ten per cent of its net electricity sales by December 31, 2010; (2) Fifteen per cent of its net electricity sales by December 31, 2015; (3) Twenty-five per cent of its net electricity saies by December 31, 2020; and (4) Forty per cent of its net electricity sales by December 31, 2030.
[§269-96] Energy-efficiency portfolio standards.10 (a) The public utilities commission shall establish energy-efficiency portfolio standards that will maximize cost-effective energy-efficiency programs and technologies. (b) The energy-efficiency portfolio standards shall be designed to achieve four thousand three hundred gigawatt hours of electricity use reductions statewide by 2030; provided that the commission shafl establish interim goals for electricity use reduction to be achieved by 2015, 2020, and 2025 and may also adjust the 2030 standard by rule or order to maximize cost-effective energy-efficiency programs and technologies.

HRS §269-91, http://www.caoitol.hawaii.Qov/hrscurrent/Vo105 Ch0261-0319/HRS0269/HRS 0269-0091.htm " HRS §269-91, htto:11www.caoito1.hawaii.ttov/hrscurrentNo105 Ch0261-0319/HR50269/HRS 0269-0091.htm 9 HRS§269-92, http;//

` www.capitol.hawaii.gov/hrscurrentivoIO5 00261-0319/1-IR502691HRS 0269-0092.htm 10 HRS §Z69-96. httD:/lwww.caDitol.hawaii.Rov/hrscurrentNo105 Ch0261-03191HR50269/1-IRS 0269-0096.htm

4■ Efficiency Solar Hot Water Solar (PV net metered) Solar (PV IPP) Wind • Hydro • Geothermal • Biomass Biofuels • Fossil 12,000 — 10,000

N 8,000 L 7 C L 6,000 ^ Y ^ 3 ^ 4,000 t7 2,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

7,482,839 7,099,533

2011 ^ 10,000,000 a m 5 8,000,000 v W p 6,000,000
u IN ^ 4,000,000 V 2,000,000
^ 0 f

2012 Soun:e: USEPA, httn:l/Qhadata.ena.eov/¢hrto/main.do r,A7E' J1/2:.'11, 

### The Hawaii Clean Energy Initiative (HCEI) calls for 70% clean energy (energy efficiency and renewable energy) for the electricity and ground transportation sectors by 2030."



### PROGRESS TO DATE. 

## Hawaii's poiicies have been effective. As shown in the graph below, electricity sources (including efficiency) have become more diverse and less carbon intensive over the past several years.'` 

## Sources Used to Meet Hawaii's Electricity Needs

Source Renewabie Portfolio Standards Reports fded with the Public Utilities Commission 

### A correspondingly 

## si9nificant reduction in carbon dioxide eguivaient emissions has been observed for large power plants in Hawaii, as reported in the Facility Level Information on GreenHouse gases Tool (FLIGHT)" and shown in the graph below.



## Greenhouse Gas Emissions Reported by Large Power Plants in Hawaii

tt HCE1 website, htto://www.hawaiicleanenergyinitiative.orp./ Last accessed November 18, 2013. 12 Hawaii PUC, httu://auc.hawaii.Rov/reaorts/enerrtv-reoorts/renewable-portfolio-standards-ros-annual-reoorts/

' sU S. Environmental Protection Agency, http://Qhadata.epa.Qov/QhAp/main.do
5

## 2. How should EPA set the performance standard for state 111(d)

plans?

Federal requirements should be statewide and flexible to allow for systems-based reduction measures such as renewable energy generation and energy efficiency to be included.
States should be required to provide projections of 2020 greenhouse gas emissions from either 1) existing in-state electrical generation units; 1 " or 2) total electricity (including existing, new, and zero-emission) sources.ls
States should show that, with their plans impfemented, greenhouse gas emissions are projected to decrease.
Credit should be given for efficiency measures that are verifiable.



### a. The EPA shoufd aliow states to incorporate existing programs as a basis for their Section 111(d) plan to regulate GHG emissions. Hawaii's current efforts (RPS, EEPS, HCEI, and GHG law) were developed with consideration of Hawaii's unique energy generation infrastructure and energy resources. Power plants in Hawaii rely aimost exclusively on imported oil and the infrastructure for importing liquefied natural gas (LNG) for farge scale power generation does not yet exist. As it develops its guidelines, the EPA should consider existing state laws and ongoing, complex, comprehensive utility regulatory initiatives and the unique energy challenges facing each state.
b. Basing Section 111(d) plans on existing state programs will also reduce the burden on permitting agencies and affected facilities in dealing with multiple regulatory requirements.

c. In Hawaii, numerous programs and projects to increase efficiency and renewabfe energy are under way in the electricity sector. Ongoing Public Utility Commission dockets include those relating to integrated resource planning (2012-0036); energy efficiency portfolio standards (2010-0037); as-available renewable electricity generation (2011-0225); investigating whether an Oahu-Maui interisland transmission system may be in the public interest (2013-0169); investigating the implementation of reliability standards (2011-0206); demand response (2007-0341); review of feed-in tariffs (2013-0194); the public benefit fee (energy efficiency) program (2007-0323); on-bill financing (201 1-01 136); rate cases; decoupling mechanisms; requests for proposals for renewable energy production; and a variety of other interconnection, financial, and tariff-related matters.
d. There is a concern that delays, additional complexity, or uncertainty due to EPA section 111(d) regufation could reduce the momentum and rate of progress in Hawaii.

14 From September 23, 2013 version of EPA's Considerations in the Design of a Program to Reduce Corbon Pollution from Ezisting Power Plonts: "Congress recognized that the opportunity to build emissions controls into a source's design is greater for new sources than for existing sources. Pardy for that reason, section 111 ailows for new source standards and existing source standards to be quite different" As described below, existing facilities may need to support new generation facilities, including those with zero carbon emissions. 15 If it is necessary to use a baseline year, it should be the year 2010, since all states have access to a consistent data source for that year. There does not appear to be a nationwide database of 2005 emissions.narF II/z2,"l3



### Delays and loss of momentum could slow the rate of improvement, resulting in increased carbon emissions. These concerns could be reduced to the extent that: - EPA guidelines are simple and clear; - If a state shows that its existing laws and activities are leading to reduced carbon emissions, it will be allowed to continue its programs without having new or different requirements imposed by the EPA; and - EPA's approval of the state plan is provided quickly. This would also allow EPA to focus more regulatory effort on states which are not yet engaged in energy efficiency, renewable energy, or greenhouse gas reduction efforts. e. In Hawaii, we view electricity generation, transmission, distribution, and use as one complex, integrated system. 16 

### " Components of the system include energy efficiency, demand response, a variety of grid management techniques and energy storage options, and all feasible e{ectricity generation technologies, energy sources, and fuels. It may be ineffective and possibiy counter-productive for the EPA to focus on the emissions of individual generation facilities, since increased emissions at one location may be in support of lower emissions — or zero emissions — from non-combustion technologies e{sewhere on the system. 18

### Therefore, allowing flexibility to include systems-based approaches 

### is needed. Although a system approach is recommended, Hawaii's pending GHG Rules would regulate emissions on a facility basis, to ensure that emission reductions are occurring at the largest facilities. Individual affected facilities are provided the opportunity to propose alternative caps that could include credit for measures that contribute to system-based reductions. Affected facilities are also offered the opportunity to partner with other affected facilities to propose separate facility reductions that meet a total combined 16% GHG reduction. 19

### Emission reductions

16 Integrated Resource Planning considers all demand and supply-side resources; see dockets 2009-0108 and 2012-0036. " Energy efficiency and renewable displacement technologies are both counted towards Hawaii's Renewable Portfolio Standards. See Hawaii Revised Statutes, §269-91 et seq., http://www.capitol.hawaii.Rov/hrscurrent/Vo105 Ch0261- 0319/HRS0269/ 1e For example, new generation may be provided by facilities (solar, wind) with zero carbon emissions but variabie and intermittent electrical output. It may be necessary for an existing fossil unit to provide firming (i.e. ramp up and down quickly, or start up and shut down more often) to support the use of these variable sources. This may mean increased emissions from that specific fossil unit, in support of a reduction in overall electricity-sector emissions. If a fossil source is precluded from providing the needed firming services, the renewables may be curtailed, resulting in higher emissions overall. See the November, 2013 report by the North American Efectric Reliabitity Corporation and the California Independent System Operator Corporation, here. http://www.nerc.com/pa/RAPA/ra/Reliabilitv%20Assessments%20DUNERC-CAISO VG Assessment Final.pdf . Please note that some of Hawaii's grids are already above 50% penetration of renewables, especially at times of tow load, so this may be a significant issue for some units. 19 However, the Hawaii PUC and DBEDT believe that reducing the ability of specific generators to be called on to support variable generation such as wind and solar may reduce the abdity of the grid to accept those sources of generation, which woutd be counterproductive to overall efPorts to reduce greenhouse gases. Further, facility-by-facility regulation of large and most cost-effective facilities may cause Hawan s already high electricity prices to increase. This may result in the unintended consequence of electricity customers seeking iower cost options to leave the grid and to install their own non-regufated on-site diesel or other fossil fuel generators, thus increasing overall pollution, not only of greenhouse gases but of criteria pollutants as well Therefore, a systems approach appears to be preferable in achieving emssions reduction.!)A7E:li 22113



### occurring from systems-based measures will complement and be credited under the pending GHG Rules. The determination of compliance with Federal requirements should be on a statewide basis. Doing so would be consistent with and supportive of the current Hawaii greenhouse gas law,` = 

### ' which established "a statewide greenhouse gas emissions limit," as well as Hawaii's energy laws, which allow related cornpanies (i.e. Hawaiian Electric Company, Maui Electric Company, and Hawaii Electric Light Company) to aggregate their data when calculating compliance with the Renewable Portfolio Standards. Z' 

### g. States should be required to provide projections of 2020 greenhouse gas emissions from either 1) existing in-state electrical generation units; or 2) total electricity (including existing, new, and zero-emission) sources.22 Flexibility should be allowed in what modeling approach or projections are used, since they may have been done on a system-wide basis (an assessment of future emissions from existing facilities only may not have been performed). h. The "best system of emissions reduction" (BSER) would include:

• Flexibility — to take into account changes in technologies, costs, market conditions, and policy developments.

• Transparency — to enable policy-makers, regulators, service providers, and investors to understand and participate in Hawaii's energy market.

• Predictability — to reduce financial risks, potential stranded investment, and unnecessary costs to Hawaii's ratepayers and taxpayers.

• Consistency with State laws, including Hawaii's greenhouse gas and energy laws and objectives — to reduce regulatory burden, reward progress to date, and maintain current momentum. i. Carbon pollution guidelines for existing power plants should exempt municipal waste combustors (MWCs) from GHG reductions. 23Burning municipal solid waste for power 

### production dispiaces the use of fossil fuels and ultimately lowers GHG emissions by avoiding the methane production that could occur if that waste were to go into landfills instead.24 Hawaii's greenhouse gas law includes consideration of what is feasible and cost effective: "practically and technically feasible and cost-effective reductions in greenhouse gas emissions."

20 Hawaii Revised Statutes ("HRS") §342B-71 to 73, htto://www.caaitol.hawaii.Qov/hrscurrent/Vo106 Ch0321- 0344/HRS0342B/HRS 0342B-0071.htm zl "An electric utility company and its electric utiiity affiliates may aggregate their renewable portfolios to achieve the renewabfe portfol o standard," Hawaii Revised Statutes (HRS) §269-93, htti)://www.capitol.hawaii.gov/hrscurrent/Vo105 Ch0261-0319/HRS0269/HRS 0269-0093.htm 22 From September 23, 2013 version of EPA's Considerations in the Design of a Program to Reduce Carbon Pollution from Existrng Power Plants "Congress recognized that the opportunity to build emissions controls into a source's design is greater for new sources than for existing sources. Partly for that reason, section 111 allows for new source standards and existing source standards to be quite different." As described below, existing facilities may need to support new generation facilities, including those with zero carbon emissions.

23 This is consistent with EPA's proposed standards for new power plants and Hawaii's proposed GHG rules. 20 Also, exempting MWCs was projected to have a minor effect on the percentage of GHG reductions needed to achieve the 1990 statewide GHG emissions level by 2020..'1 2,f13

While DOH determined that Life Cycle Assessment (LCA) should not be included in Hawaii's GHG rules because LCA standards and formulas had not yet been fully developed for stationary sources, the DOH recognizes the potential merits of LCA and its appiicability to alternate fuels Because of the unique nature of Hawaii's energy generation infrastructure and energy resources. biofuels have received significant attention for potential use in electricity generation. The DOH anticipates that LCA standards for stationary sources couid be developed by EPA in the future and looks forward to clarification from EPA on implementation. For its local biofuel purchase. a Hawaii utility requested that suppliers comply with the Roundtable for Sustainable Blofuels principles.z5 

## 3. What requirements should state plans meet and what flexibility should be provided to states in developing their plans?

Hawaii has laws to reduce greenhouse gases, 26increase energy efficiency, and increase the use of renewable sources for electricity generation.

Federal guidelines should allow those laws and plans to be accepted as the State Plan.

Emissions should be tracked using reporting mechanisms already in place and data from statewide emission inventories.

a. States should be allowed to propose plans that reflect activities already under way.
b. EPA should not develop guidelines or implement requirements that would be likely to lead to states and stakeholders delaying or interrupting actions that are already leading to greenhouse gas reductions.

c. State plans should specify annual GHG emission estimates out to 2020, and beyond.
d. Proposed measures should be verifiable and quantifiable.

e. Annual state- or system-wide emission targets should be stated in the plan.
f. If emission targets are not met, states should be able to perform a ten-year lookback to determine if previous carbon emission reductions could be used to generate credits. If so, states should be able to make use of those credits.

g. If sufficient credits are not available, states should propose plan adjustments or remedies. Remedies may include measures such as partnering with other state or regional GHG trading regimes, estabiishing carbon sinks, planting trees, or paying fees to support the establishment of carbon reductions or carbon sinks elsewhere.
h. After the target compliance date has been reached, if emissions targets are not met for three years in a row, and sufficient credits are not available, the EPA should propose plan adjustments, remedies, or fees.

25 Hawaiian Electric Company, Request for Proposals - Biofuel Supply, httr)://www.heco.com/heco/CleanEnerstv/Renewable-Energy-Basics/Biofuels, accessed on November 19, 2013.
26 Hawan s greenhouse gas law is comprehensive. It includes emiss ons from utility, transportation, and industrial sectors.DaTE. 11 22113



## 4. What can EPA do to facilitate state plan development and implementation?

The EPA should be careful not to inadvertently slow or interrupt regulatory progress being made at the state level in energy system transformation.
State plan development and implementation could be facilitated by EPA funding and technical assistance to update Hawaii's energy and greenhouse gas modeling tools.
The tools coutd serve as a basis for models in other states or regions.

a. Greenhouse gas inventories and modeling work have been done in previous years. Updates would be useful for evaluating and comparing the projected greenhouse gas emissions of power production scenarios currently under consideration.
b. As Hawaii is a relatively small area with well-defined boundaries, models may be relatively simple. The modeling toois used in Hawaii couid serve as an example, with further development for use in other states or regions.

c. Recent work by the University of Hawaii's Economic Research Organization could provide a starting point and serve as a data resource. From the website of the University of Hawaii's Economic Research Organization:
ENERGY & GREENHOUSE GAS SOLUTIONS

### Mission: To provide rigorous and timely information to decisionmakers and the public regarding energy and greenhouse gas related policy in Hawaii and beyond.
The Energy and Greenhouse Gas Solutions research program (EGGS) was launched in 2007 by the University of Hawai'i Economic Research Organi2ation (UHERO). It serves as a resource for those interested in issues of energy and greenhouse gas emissions reduction in Hawau and beyond EGGS takes a transdisciplinary approach to research by bringing together economists, planners, engineers and system modeling experts to address urgent issues of energy and climate change mitigation.
EGGS CORE GOALS

1. Engage in rigorous analysis that contributes to a global community of scholars. 2. Develop and maintain data and models on Hawai'i's energy. economy, and resulting greenhouse gas emissions. 3. Develop solution-oriented analyses for decision-makers and energy-related stakeholders. 4. Design interactive education and outreach programs for a variety of audiences 5. Showcase Hawai'i-based energy policy solutions that may benefit other jurisdictions, includin q olher States, the U.S., and island areas.

10

# ^

March 10, 2014 JOHN A. KITZHABER, MD 

## Governor

Ms. Gina McCarthy, Administrator U.S. Environmental Protection Agency 1200 Pennsylvania Avenue, N.W. Washington, D.C. 20460
Dear Administrator McCarthy:
I appreciate the invitation to provide comment to the U.S. Environmental Protection Agency (EPA) as the agency designs a Clean Air Act ("CAA" or "Act") Section I I I(d) program to reduce greenhouse gas pollution from existing power plants. I am writing to share Oregon's successes in emissions reduction and highlight key considerations for Oregon and other states similarly situated as substantial importers of greenhouse gas intensive electricity. As a party to collaborative initiatives addressing the proposed program, including ones led by the Georgetowrn Climate Center and the Attorneys General of multiple states, Oregon has provided joint comments to EPA on certain design considerations. My comments are supplemental and have been developed through consultation with staff of Oregon's Department of Environmental Quality, Department of Energy, and Public Utility Commission.
Energy is the issue of our tiine, and no sinale issue will have a greater impact on our state or nation's economy, environment, and quality of life in the coming decade. The central question is whether we will shape our energy future through intentional investment and development, or whether it will shape us. Oregon has a track record of successfully pursuing clean energy policy, programs, and practices that reduce energy use and promote renewable alternatives to fossil fuels. On December 5, 2012, I released Oregon's Ten Year Energy Action Plan lto build on existing programs and to provide the state a pathway to a clean energy future. As we move away from a boom and bust cycle that depletes our natural capital and leaves us vulnerable to fluctuations in global markets, this plan provides strategies to meld workforce development initiatives, higher education opportunities, and local job creation with clean energy priorities.The Ten Year Energy Action Plan spurs investment in clean energy, helps to develop homegrown renewable energy resources and keeps capital circulating in our region through local sourcing and supply chains while reducing our dependence on carbon-intensive fiaels and foreign

I "Oregon's Ten Year Energy Action Plan", December 5, 2012: http://w^N , ".orep,on.g,ov,'energ,yi"Ien Year/Ten Year EnerpN ,Action Plan Final.pdf 254 STATE CAPITOL, SALEM OR 97301-4047 (503) 378-3111 FAX (503) 378-8970 WWW.OREGON.GOVMs. Gina McCarthy

March 10, 2014 Page 2

oil. Creating this pathway and supporting programs is as much an economic development strategy as it is an energy strategy — it helps position Oregon in a way that we can keep energy costs low, diversify our energy portfolio, and take advantage of market opportunities to ensure that our citizens and businesses will not be left holding the bag as we wean ourselves off of fossil fuels.
In addition, I participate in the Pacific Coast Collaborative in partnership with British Columbia, Washington State, and California. With a combined population of 52 million and a GDP of $2.5 trillion, we are poised to emerge as a mega-region and global economic powerhouse driven by innovation, energy, geographic location, and sustainable resource management. On October 28, 2013, I joined the Premier and Governors to sign the Pacific Coast Action Plan on Climate and Energy. 2In this action plan, we support the President's federal actions to combat climate change and list a suite of policy items we have identified that will create a model west-coast-wide clean economy. In addition, we commissioned a study that analyzes the job creation and economic impacts of our action plan. The analysis indicates that progressive policy actions could expand the clean economy GDP contributions in the region to $142.7 billion by 2020, and could grow clean economy jobs by more than 200% over current numbers by 2020, equal to an estimated 1.03 million new jobs (net). Realizing the economic benefits of clean economy is the single most important global opportunity on the medium-term horizon, with revenues expected to reach $2.3 trillion by 2020, and we, along the entire West Coast, want to ensure that we are ideally positioned to realize the economic, social, and environmental benefits of clean economic growth.'
I conunend the President for moving forward with his Climate Action Plan and for EPA's action to create a new standard under CAA 111(d). However, it is important to recognize that EPA's action is not stand-alone; it is part of a broader economic and energy strategy to protect our nation from the global volatility of fossil fuels and to help us transition to a more resilient and energy independent economy. In conjunction with EPA's action on I 11(d), we commend the President and the Administration in advance for supporting efforts to link this important step by EPA with other critical actions that states and regions are taking now, or could take, to realize the opportunities of a clean economy. This could involve helping states develop their own long-

'- "Pacific Coast Action Plan on Climate and Ener gy", October 28. 2014: http: //www.p aci fi ccoastcollaborative. oro/Docmnents/Pac.ific%20Co ast%20Climate%20Action°io20Plan.pdf '"The West Coast Clean Economy: Opportunities for Investment & Accelerated Job Creation", March 2012: http:// , A , ww.pacificcoastcollaborative.orp

— /Documents/Reports%20and%20Action°'a20Iteins/WCCE Report WEB F 1NAL.pdfMs. Gina McCarthv

March 10, 2014 Page 3

term energy strategies to ensure that the nation continues to benefit from economically competitive energy prices and providing technical assistance, and ensure that resilient infrastructure systems are accelerated to deal with the effects of drought and extreme weather.
I strongly encourage EPA to meaningfully address the harmful effects of climate change in its CAA 111(d) guidelines by achieving significant, cost-effective emission reductions from existing power plants through facility upgrades, improvements in end-use energy efficiency, and increased reliance on renewable energy generation. EPA's regulatory framework will achieve the most significant, cost-effective emission reductions if States, utilities, and power plants have flexibility to choose from a range of emission reduction methods, engage in multi-state cooperation, and build on emission reduction accomplishments gained through the leadership of local governments and states like Oregon. EPA's CAA 111(d) guidelines should include three key components:
(1) A broad definition of the Best System of Emission Reduction (BSER) that encompasses the interconnected power system with flexibility to use a broad range of attendant compliance tools to achieve meaningful and eost-effective emission reduetions; (2) Strong incentives, clear criteria, and model rules for multi-state planning and cooperation that leverages the regional nature of our Nation's power system to encourage the greatest emission reduction at the lowest cost: and (3) Recognition of the progress of states, investments of utilities, and emission reductions already achieved through early action.
Broadlv Define BSER and Compliance Tools for Meaningful and Cost-Effective Emission Reductions
Through its guidelines, EPA has authority to define the BSER broadly with a system-based approach that is achieved by regulated sources using system-based emission reduction compliance tools. EPA also has the authority to deem a state plan satisfactory if it allows regulated sources to use those system-based emission reduction compliance tools. As a matter of policy, EPA should acknowledge the full breadth of reductions available throughout the power system. To leverage the most significant a.nd cost-effective emission reduction opportunities for existing power plants. EPA has the responsibility to define the BSER as the interconnected,interstate power generation and consumption system ("power system"). A less-effective. sourcebased approach would limit the range of emission reduction opportunities to those available inside a power plant's fence line. Furthen-nore, a source-based definition of the BSER coupled with system-based emission reduction compliance tools would not achieve meaningful emission reductions and may be detrimental to current efforts to address the harmful effects of climate

### Ms. Gina McCarthy

March 10, 2014 Page 4

change. Our Nation's electricity sector operates as complex, interconnected, regional power systems across multiple states. EPA's 111(d) regulatory framework must be flexible and include a broad range of compliance tools to successfully meet the challenges of an interconnected power system with plants that generate electricity to serve demand across multi-state energy markets.
In defining the BSER and attendant compliance tools through a system-based approach, existing power plants will be afforded greater flexibility in least-cost methods to reduce emissions. In addition to reducing emissions at existing power plants through facility upgrades, emission reductions could be achieved through end-use electricity demand reduction and cleaner electricity generatiori. Proven flexible and cost-effective methods to reduce power plant emissions in Oregon have included increased solar, wind, and geothermal energy generation through our Renewable Portfolio Standard and decreased energy demand through building codes, end-use energy efficiency programs, and Energy Trust of Oregon retrofit investnients. Energy efficiency and renewable energy policies have resulted in added benefits of saving business and ratepayer money and creating jobs as part of a clean energy economv in Oregon.
The best system of reducing emissions must account for the full extent of emission reduction measures available throughout the power system. The most cost-effective methods to achieve significant emission reductions at existing power plants include end-use energy efficiency measures, such as appliance standards and weatherization investnients, and transitioning to renewable energy sources, such a.s solar, wind, geothermal, and waste-to-energy generation. Therefore, EPA's guidelines should define the BSER and a range of emission reduction compliance tools through a system-based approach.
Greatest and Lowest Cost Emission Reduction through Strong Incentives for Multi-State Cooperation The interconnected, regional nature of our power system requires considerable coordination across state lines to leverage significant and lowest cost emissions reduction potential from existing power plants. According to research by McKinsey & Company, approximately half of all cost effective greenhouse gas reduction measures in the U.S. are available from end-use energy efficiency and changes to the electricity generation mix of the power sector. Multi-state cooperation is necessary to realize substantial energy efficiency opportunities and utilize renewable energy generation in states. like Oregon, that largely import electricity produced in other states with greenhouse gas intensive power plants.

### Ms. Gina McCarthy

March 10, 2014 Page 5

Multi-state planning and cooperation would introduce an opportunity to harmonize the EPA's regional haze rule with this CAA 111(d) rulemaking. Doing so would allow for efficiencies in power plant emission reduction opportunities and regulatory implementation. Through the regional haze rule, states will be producing plans to establish goals and emission reduction strategies to improve visibility, strategies that likely include existing power plants, similar to state plans produced through this CAA 111(d) rulemaking. In addition, EPA has encouraged states to form regional partnerships to develop and implement multi-state strategies to reduce emissions of visibility impairing fine particle pollution under the regional haze rule, which could be combined with a regional approach to reduce greenhouse gas emissions in this rulemaking. The nine northeastern states participating in the Regional Greenhouse Gas Initiative have reduced emissions from their collective power sectors by 40% from 2005 levels, largely by investing proceeds from auctioned emission allowances in end-use energy efficiency and renewable energy generation. Similar regional concepts could be implemented through a Regional Transmission Operator's or a multi-state utility's service territory. For example, Oregon is part of the Multi-State Process, which includes Idaho, Utah, Wyoming, and Washington as part of PacifiCorp's service territory. These states currently work together to negotiate regulatory policies that assign or allocate system costs and wholesale revenues related to PacifiCorp's generation, transmission, and distribution among the states. EPA guidelines should incent state plans to build on existing regional protocols for multi-state utilities or regional organizations to encourage cooperation across state lines for the greatest emission reduction.
Multi-state coordination will be vital for power plants to employ the most cost-effective emission reductions with regulatory certainty in regions, like the Northwest and Intermountain West, with significant exchanges of electricity between states. EPA guidelines should strongly encourage regional planning and cooperation among states by providing incentives to develop multi-state pla.ns, criteria for multi-state plans to demonstrate compliance, and model rules for connecting state plans together. As a result, the guidelines would provide regulatory certainty and greater uniformity across state lines and encourage cost effective methods to significantly reduce emissions.
Reco2nition of Early Action to Reduce Emissions
When identifying cost-effective emission reductions available throughout the power svstem. EPA should consider the successes already achieved by states and utilities through investments in energy efficiency, renewable portfolio standards, and other programs to reduce power plant emissions beyond standard business practice. Recognition of these successes and investments should be provided by accounting for action already taken by states, utilities, and power plantMs. Gina McCarthy

March 10, 2014 Page 6

operators in the assignment of emission reduction obligations. For example, Oregon passed landmark state legislation in 1999 to require a three percent charge on electric bills to provide stable funding for energy efficiency and renewable energy investments, which should be recognized as early action in settina an emission reduction obligation. Recognition of early action credit should be provided for achieving energy efficiency savings, renewable portfolio standards, clean distributed generation targets, and other programs that states and local governments enacted that reduce greenhouse gas emissions. In designing a fair regulatory system to achieve meaningful emission reductions, EPA should recognize the progress of states, investments of utilities, and emission reductions already achieved through early action. Many of the proposed goals and action items in the President's Climate Action Plan are ambitious. I believe, however, that because the stakes are high for our nation, we must be bold in our vision and committed to a full and honest examination of these and other issues as we build the consensus necessary to secure our common future.
Thank you for the opportunity to provide preliminary comment about this important opportunity to combat climate change through EPA's CAA 111(d) guidelines. I have directed my staff at Oregon's Department of Environmental Quality, Department of Energy, and Public Utility Commission to be available to you for any questions that arise regarding the policy recommendations in my comments. My energy policy advisor, Margi Hoffmann, wil] contact your office to follow up on this letter.
Sincerely,

hn A. Kitzhaber, M.D. Governor

JAK:mh

# Kecommenaea rrameworK ror tne 5ection lll^a)



# Emissions Guidelines Addressing Carbon Dioxide Standards for Existing Fossil Fuel-Fired Power Plants



# ^ ^ pennsylvania
DEPARTMENT OF ENVIRONMENTAL

PROTECTION Bureau of Air Quality

2700-UK-DEP4446 0

## Commonwealth of Pennsylvania's Recommended Framework for

the Section 111(d) Emissions Guidelines Addressing Carbon Dioxide Standards for Existing Fossil Fuel-Fired Power Plants

If EPA develops emissions guidelines, it should be done under Section 111(d). Section 111(d) of the Clean Air Act (CAA) is applicable for air pollutants that are neither regulated as a National Ambient Air Quality Standard (NAAQS) nor as a hazardous air pollutant (HAP) and where a New Source Perfonnance Standard (NSPS) would apply for new affected sources. This section specifies that the U.S. Environmental Protection Agency (EPA) shall develop regulations establishing a procedure similar to the state implementation plan process which must be followed by the states. Further, this section obligates the states to prepare and impleinent plans that establish standards of performance for existing sources as well as provide for the implementation and enforcement of such standards. Under Section 111(d), states have the authority to devise flexible programs for existing units that achieve the federal guidelines using provisions that work best for the individual states. Considering the dramatic differences among the states relative to fuel diversity and the market differences between rate-based markets and restructured markets, this state flexibility is critical. Therefore, Section 1 11(d) would be the most appropriate section of the CAA to regulate carbon dioxide (COz) emissions from existing large fossil fuel-fired electric utility steam generating units (EGUs) and fossil fuel-fired combustion turbines. Using the guidelines, states would be required to develop Section 111(d) plans for existing sources. These requirements can and should be less stringent than the NSPS, taking into account, among other factors, the remaining useful life of the existing source to which the standards of performance apply, additional environmental benefits of a fuel source, and other iinportant considerations including market impacts and electric grid reliability. Emissions guidelines should be developed in close consultation with the states. The EPA must recognize state leadership and authority to regulate pollutants within their borders and should ensure preservation of states' discretion in the development and implementation of flexible emission control programs that are consistent with Section 1 1 1(d) provisions. The EPA should develop emissions guidelines that provide for maximum flexibility to the states in meeting those guidelines. The emissions guidelines should establish targets, not mandate how to achieve the established targets. Only the states have the authority to design and implement pollution control programs to meet the requirements adopted to regulate carbon dioxide in accordance with Section 1 11(d), except in areas where the authority has been delegated to a local agency, or a state has failed to submit the necessary plan.The emissions guidelines should address CO Zemission reductions achieved by the affected

sou rces. Emissions guidelines should establish targets based upon actions that can be taken directly by and at existing sources affected by a Section 11 1(d) COz program. This approach is consistent with EPA's previous emissions guidelines promulgated for other source categories under the CAA. Furthermore, the EPA should limit the definition of '`best system of emission reduction" (BSER) to actions that ean be taken by the affected existing source without redefining the source. This will require the consideration of the inherent differences within the universe of existing boilers and combustors that are included in the fleet of fossil-fuel fired electric generation

sources. If an energy-efficiency project or some other project with unique environmental benefits (e.g., municipal waste-to-energy projects) associated witll a"non -affected" source is to be granted a "credit" under a Section I 11(d) program, the "credited" reductions must be quantifiable and enforceable consistent with the quantification by a souree affected under the program. The owner, operator or entity receiving credit for actions taken at a non-affected source must be responsible for ensuring that the COz reductions continue at the credited level. To ensure the integrity of Section 111(d) programs which include actions taken by non-affected sources, it is critical to have very high data quality standards. Absent high quality data, the effectiveness of the program would be compromised to the economic benefit of some and detriment of others. Consequently, it is suggested that the quantification methods for credits awarded to non-affected sources be standardized by or be required to receive approval from the EPA when using reductions from non-affected sources in a Section 111(d) program. It is important to note that energy efficiency projects not associated with existing sourees or facilities are actually emissions 

### avoidance efforts and not emissions reduction efforts. Consequently, only energy efficiency efforts at existing sources or faeilities, or new energy efficiency projects that are coupled with the replacement or retirement of an existing souree or facility, should be cor►sidered for crediting toward a Section 111(d) program. In the case of a project with unique environmental benefits, the amount of credit should be demonstrated on a continuous basis. Because of the complications of a program that includes non-affected sources.. EPA should establish Section 11 1(d) guidelines for CO, emissions that only consider currently available and economically feasible technologies that improve energy efficiency at affected

sources. Emissions guidelines should provide for unit averaging for a rate-based program or accumulation of emissions from multiple sources if the program is mass-based. Also, because CO, is not apollutant for which a short-term ambient air quality standard is ►necessary or desirable, a multiyear (e.g., five-year) rolling average can be used to demonstrate compliance. This methodology provides recognition of year-to-year variations in operations without requiring the use of emission allowances. After the close of the reporting period, a"true up" period should be

^provided to allow "over-e►nitters" and "under-emitters" to reach a negotiated settlement that

provides for "net" compliance with emissions obligations. This approach may be a very desirable option for restructured energy markets as it provides for flexibility without picking "winners and losers," as can oceur with allowance-based programs. These opportunities would enable states to design the most flexible programs and the owners and operators of affected sources to select the most cost-effective compliance options for meeting their compliance obligations. States must be allowed to join with other states in multi-state or regional programs. States must have the opportunity to collaborate with other states in either formal or ad-hoc forums while developing compliance demonstration options. The opportunity to collaborate should also be provided to t11e owners and operators of affected sources to allow them flexibility in achieving the most effeetive compliance options. This collaborative process should be provided for, but not obligated in the guidelines developed by EPA. The most critica) aspect of having creditable and high-functioning programs is the quantification of the emissions. In the case of EGUs, monitoring provisions are consistent and specified under federal regulation. This consistent quantification of emissions obviates the need of emission allowances for the success of multi-state trading programs. However, the decision to utilize an emission allowance-based program should be at the state's discretion. Importantly, the emission allowance-based program must also be reliant upon the consistent quantification of emissions. EPA must recognize the different makeup of existing power generation in each state and recognize flexible compliance pathways or mechanisms. The existing power generation fleet in Pennsylvania is extremely diverse in terms of fuel sources, combustion technology, and vintage. As the Commonwealth is intimately familiar with the exact composition of the fleet, Pennsylvania is best suited to design the plan to meet the final emissions guidelines promulgated by EPA and also to be adequately flexible to accommodate Pennsylvania's diverse resources. This is true for all state and local agencies. Importantly, states should also have the ability to exclude certain electric generators that have environmental benefits that are beyond the COz emissions from those sources. Exainples of fuel sources that this may apply to are coal refuse and coal bed methane. An excellent example of an electric generation source category with multi-media benefifs is coal refuse combustion units. In Pennsylvania, large piles of coal refuse are a legacy issue and these facilities turn this refuse into electrieity in a controlled combustion process rather than through uncontrolled burning, which occurs due to the exposure of coal refuse piles to air. The exposure of a mining refuse pile to atmospheric oxygen and pressure promotes heat generating reactions, primarily oxidation of the coal refuse itself (i.e., the coal refuse piles are slowly burning), releasing CO2 emissions as well as sulfur oxides, particulate matter.. and other pollutants

3associated with poor combustion. The benefits of utilizing this fuel source are that it is

essentially carbon neutral, emissions of other pollutants from coal refuse-fired sources are well controlled, and sources of acid mine drainage and ground water pollution are removed. Additionally, the use of coal refuse reduces the emissions from use of "new" coal or natural gas from being combusted to generate electricity in an amount that would reflect the amount of electricity generated by the eoal refuse-fired coinbustion units.

Because the ash from the controlled combustion of coal refuse is used to remediate the site where the coal refuse pile was located, these areas are reclaimed without any funding necessary from Pennsylvania taxpayers. At this point, over 7,200 acres of affected land in Pennsylvania have been reclaimed through the use of this fuel source. This represents savings to Pennsylvania taxpayers of $140 to $220 million dollars while providing jobs, environmental benefits, and taxes to the localities where these coal refuse-fired facilities operate. For perspective, tihe industry estimates there are still approxi►nately 170,000 acres affected by coal refuse remaining in the Commonwealth.
Emissions guidelines should provide for emission reductions compared to a designated baseline period. Regulating greenhouse gas such as CO, is unique when compared to criteria pollutants. Section 11 I(d) of the CAA allows EPA to consider flexible approaches when establishing the guidelines and allows states to utilize flexible approaches for compliance demonstrations. Potential strategies include state budgets, multi-year averaging, and early reductions. EPA should establish specific goals for the states based on standards of performance.. recognizing that existing sources have very limited options when compared to new sources. New sources have the opportunity to incorporate emissions controls and efficiency improvements into their design much easier than existing sources. Further confounding the installation of controls on existing units is the New Source Review (NSR) proeess specified in the CAA and the regulations. EPA should address the NSR ramifications of the installation of controls or modifications on existing units used to meet the standards of perfonnance established under the guidelines. NSR ramifications should not impede the maximum possible implementation of energy efficiency improvement projects at these affected sources. Pennsylvania recommends the EPA's emissions guidelines provide for a state budget approach option for only existing sources being regulated for CO, under a Section 1 1 I(d) program. This is beeause new affected sources will be regulated under Section I l l(b) through the New Source Performance Standards (NSPS), which, as proposed, establish unit-specific CO, limits. Under Section I 1 1(d), EPA should provide for a state budget based on achievable rate-based standards of performance which can then be converted to a mass-based target by multiplying the baselineyear energy output (i.e., the gross output in MWh for the baseline year) multiplied by the ratebased standard (expressed in Ibs/MWh (gross)) to determine the mass-based target in tons per

4year. Pennsylvania recommends that the EPA use 2005 as the appropriate baseline year as

suggested by President Obama's Climate Change Action Plan. The emission guidelines should allow compliance with the budget to be demonstrated using system-wide averaging or accumulation on a rolling five-year basis for facilities under common control. This system of implementation would provide states the ability to recognize and use all quantifiable and enforceable reductions including, but not limited to, source retirements, permanent eurtailments, and early reductions. EPA must recognize the differences inherent in regulated versus competitive energy markets and the need to provide for electric grid reliability. EGUs in Pennsylvania are participating in a competitive energy market. Therefore, the costs to comply with state plans implementing the emissions guidelines cannot be directly passed on to the customers. On the other hand, EGUs participating in a regulated rate-based market can directly reeover the costs of compliance after obtaining approval from the Public Utility Commission and will be compensated with a return on investment for costs associated with compliance efforts. EPA must recognize the fundamental differences in these marketplaces by recognizing the authority of the states to design and implement programs that best serve the affected sources located within their jurisdiction.Emissions guidelines mandating an electric grid system-based approach, which includes the redispatch of EGUs based on a lower CO, emission rate as proposed by regional transmission organizations (RTO), independent system operators (ISO), and the ISO/RTO Council (IRC) should not be used, as they further disrupt the competitive energy market. That type of interference would disproportionately affect coal-fired EGUs and place additional coal-fired EGUs at risk of early retirement, resulting in additional job losses and potential grid reliability issues. The dispatch of EGUs is beyond the scope of the EPA's authority, and the regulation of carbon dioxide emissions is beyond the authority of PJM or any other RTO or ISO. The operation of a competitive energy market is the role of RTOs and ISOs while the regulation of environmental pollution in Pennsylvania is the responsibility of the Pennsylvania Department of Environmental Protection. This type of interference by PJM would likely make it impossible for coal-fired EGUs to effectively and economically participate in the market, which can only impair the reliability and affordability of domestic energy supplies by diminishing the diversity of electricity generation sources that are vital to maintain the energy security and prosperity of the United States. Changes to major New Source Review regulations should be considered to encourage efficiency improvements. Any physical change or change in the method of operation relating to efficiency improvements at an affected facility would trigger NSR applicability deteniiinations. If NSR is triggered, the owner or operator may opt out of such efficiency improvement projects or choose not to

5optimize or maximize the benefits of the project, which is counter to the intent of the emissions

guidelines. Therefore, we recommend that NSR regulations for EGUs be amended to redefine major modification as a modification that increases any regulated air pollutant emissions in terms of the Ibs/M Wh (gross), rather than the current threshold of tons per year. There are likely other provisions in the CAA that have ``absurd results" when it is used to regulate CO, or other greenhouse gases. Those provisions should all be identified and "tailored" to provide for the greatest opportunity to avoid unintended or negative consequences should this program for EGUs be implemented under Section 1 1 1(d) of the CAA. As previously addressed by EPA, circumstances that have absurd results should be corrected through regulatory amendments as was done under the "Tailoring Rule."

0

## :'V+ Minnesota Pollution Control Agency

520 Lafayette Road North I St. Paul, Minnesota 55155-4194 1 651-296-6300 800-657-3864 1 651-282-5332 T1Y I wwwpca.state.mn.us I Equal Opportunity Employer

December 16, 2013

Gina McCarthy, Administrator U.S. Environmental Protection Agency Williarn Jefferson Clinton Building 1200 Pennsylvania Avenue Northwest Mail Code: 1101A Washington, DC 20460 RE: Clean Air Act 111(d) Rules for Existing Power Plants Dear Administrator McCarthy: I am pieased to offer the comments of the Minnesota Pollution Control Agency (MPCA) on this very important work of addressing greenhouse gas (GHG) emissions from existing power piants. As Governor Dayton said in his letter this past summer to President Obama supporting his Climate Action Plan, we beiieve it is necessary for the U.S. Environmental Protection Agency (EPA) to work wfth states to deveiop and impiement a pian to address power piant emissions. Minnesota stands as a ready and wiiiing partner.
Minnesota has reduced power piant GHG emissions, and wili continue to do so. Minnesota has accompiished significant reductions in GHG emissions. This work has been accompiished through a number of strategies, invoiving the state legislature, Minnesota's Department of Commerce, Public Utilities Commission, the MPCA, and mighty efforts by Minnesota's eiectricity producers. By 2010, statewide GHG emissions have deciined by about 3 percent from 2005 emissions, the baseiine year of Minnesota's statutory GHG reduction goais. Minnesota's poiicies and programs that have been in piace over the last two decades have acted to reduce GHG emissions from the eiectricity generating sector. We describe the poiicies and programs, goais and implementation dates beiow. Demand Side Management Since 1982, Minnesota has administered a demand side management program caiied the Minnesota Conservation Improvement Program (CIP), which is administered by the Minnesota Department of Commerce. The demand-side management program was estabiished by Minnesota statute and modified over time to estabiish investment requirements, energy savings goais, and CIP pianning requirements. Minnesota's CIP program is a low cost energy resource in comparison to suppiy-side options. With passage of Minnesota's Next Generation Energy Act in 2007, a 1.5 percent Energy Efficiency Resource Standard (EERS) for utiiity conservation improvement programs was estabiished beginning in 2010, meaning that utilities were required to deveiop pians to achieve savings of 1.5 percent of average annual retail saies annually . This standard remains one of the most aggressive standards in the country, especially considering that efficiency programs have been operating in Minnesota since the eariy 1980s.

. Minnesota statute aiso describes the conditions under which the Department of Commerce can adjust the savings rate to no less than 1.0 percent.Administrator McCarthy

Page 2 December 16, 2013

Minnesota utilities operate a wide array of residentiai, commercial, and industrial CIP programs targeted to both retrofits as wefi as new construction. CIP programs also heip create and retain jobs in a variety of market sectors and customers spend fess money on energy, freeing up dollars for other uses. The establishment of the 1.5 percent EERS in CIP increased the need for accurate and verifiabie savings. To this end, the Minnesota Department of Commerce undertook three major initiatives aimed at developing standard measurement and verification from CIP pro]ects: • Developed measurement and verification protocols for large commerciai/industrial projects. • Developed a technicai reference manual providing standard algorithms and assumptions for caiculating savings from a wide array of energy efficiency measures. • Deveioped a ctoud-based piatform for CIP data collection and program operations. Through this system, Minnesota utiiities are provided with a pre-approved set of caicufators called SmartMeasures°", reducing program costs by each utiiity not having to create and maintain a set of calculators to demonstrate achieved energy savings. The Department of Commerce collects the results of the CIP from 174 utilities in Minnesota using its Energy Savings Platform (ESP), a cioud based data collection program. ESP ailows the state, utilities, trade partners, and stakehoiders to coliaborate on energy efficiency standards, programs and reporting. The Department of Commerce's evaivation costs are also reduced and results in higher confidence in the reported savings. The MPCA continues to support the Department of Commerce in encouraging and expanding these programs, because the CIP demonstrates a very efficient, low cost method to reduce energy use and GHG emissions. In 2011, Minnesota's statewide eiectric CIP program resulted in an incremental reduction of neariy 880,000 tons per year of CO 2emissions. Repowering Projects in Minnesota Minnesota enacted an emissions reduction statute in 2001 that aliows special rate recovery consideration for air pollution controi projects, with the goal being to improve the emissions profile of Minnesota's aging coal fired utiiity boilers. Authorized in 2002, and finished in 2009, Xcel Energy, the state's (argest electric utifity, completed a project called the "Metro Emissions Reduction Project". The project repowered a 520 megawatt (MW) coal-fired power piant, lowering Its heat rate by 5 percent. The project aiso retired 642 MW of coal-fired electricity generation, repiacing it with 956 MW of intermediate load natural gas combined cycie generation. This emission reduction statute encouraged early action by Minnesota's utifities to seek multi-poliutant emission reductions that also resuited in reduced refiance upon coal-fired generation and reductions in GHG emissions. More changes in the fuel mix for Minnesota's electricity generation are in the works, with Minnesota Power announcing its Energy Forward pian to reduce their future suppiy mix to 33 percent from coai generation, down from 80 percent coal generation in 2013. Minnesota Power will repower about 175 MW of coal-fired electricity generation to natural gas by 2015. Renewable Energy Objectives/Renewal Energy Standards Minnesota has undertaken a number of legislative efforts over the past 20 years to expand the use of renewable energy generation and lessen the reliance on fossil fuel in meeting Minnesota's electricity demand. It began in 1994, as a part of legislation authorizing above-ground cask storage of nuciear waste. At that time, the Minnesota Legislature directed Xcel Energy to develop 425 MW of wind power capacity and 125 MW of biomass-fired capacity (referred to as "Prairie Island" in our figures toAdministrator McCarthy

Page 3 December 16, 2013

distinguish renewabie generation developed to meet this mandate). In subsequent Minnesota Pubtic Utllity Commission proceedings, Xcel Energy's wind mandate was raised to 825 MW. In 2001, Minnesota established Renewabie Energy Objectives which required electric utilities to "make a good faith effort" to obtain ten percent of their Minnesota retail energy sales from eligible energy sources by 2015, and to obtain 0.5 percent of their renewable energy from biomass technologies. In 2007, the Next Generation Energy Act established Minnesota's Renewable Energy Standards (RES) that mandates that electric utilities generate or procure a specified level of energy from renewable sources. The RES contains targets for 2012, 2016, 2020 and an ultimate target of 25 percent renewable energy generation by 2025. Xcel Energy received a separate RES schedule with an ultimate target of 30 percent renewable energy generation by 2025. Minnesota now has about 2,800 MW of renewable energy installed, and based on the utilities long-range resource plans, is on track to meet this renewable generation requirement by 2025. Minnesota continues to expand'its renewable energy goals. This past year, the Minnesota Legislature added a goal to the RES that 10 percent of retail eiectric sales will be generated from solar energy by 2030. Next Generation Energy Act The Next Generation Energy Act (NGEA), adopted in 2007, represents the most significant public policy action in Minnesota to reduce the state's GHG emissions. The NGEA has bolstered investments in renewable power, increased energy conservation and decreased Minnesota's contribution to climate change. As mentioned previously, the NGEA established Minnesota's RES requirements and changed the CIP program requirements. The cornerstone of the NGEA was establishment of state-level GHG emission reduction targets of 15 percent from 2005 levels by 2015, 30 percent from 2005 levels by 2025 and 80 percent by 2050. These emission reduction goals have driven significant attention to long-term planning for the GHG reductions in Minnesota's eiectric generation sector. In 2008, the MPCA began to biennialiy track the state's progress in meeting these GHG reduction targets. In tracking the GHG emissions from the eiectric power sector, the NGEA required the MPCA to include emissions from In-state generation plus emissions from net imports, including those associated with transmission and distribution losses.
Total GHG Emissions Avoided Without the poiicies and actions described above, annual GHG emissions from the Minnesota eiectric power sector would now total some 65 million tons. However, because of public and private actions in Minnesota, the MPCA estimates that in 2011, emissions of 14.7 million COz-equivaient tons from the electric power sector were avoided, primarily due to demand-side management, power plant repowering, and Minnesota's RES. The 14.7 million CO2-equivalent tons avoided amount to an emission savings of 22 percent.The MPCA has developed an electric power sector forecast out to 2025 that accounts for the emissionavoidance efPects of Minnesota's policies. Based on this analysis, the MPCA estimates that current policies and programs, if continued at present levels, in 2025 wili result in the avoidance of 23.8 million tons of GHG emissions, which would represent a 33 percent reduction in expected emissions. The MPCAapportions a reduction of 10.3 million CO2-e tons to Minnesota's RES; a reduction of 10.3 million COZequivalent tons to Minnesota's CIP program; and a reduction 3.2 miliion CO2-e tons from repowering projects in Minnesota.Administrator McCarthy

Page 4 December 16, 2013

The flgure below shows these various strategies and their associated reductions.

Historic and Forecasted GHG Emissions and Forecasted Ernissions-avaded from the Electric Power through State Policy eo,000,000 — ----------- ------

Historic I Forecasted ^

70,000,000 ,

Ionart 60,000,000

. . .. 611G

. . .^ MNrstonr

\ -4trWdad

50,000,000

.

40,0013,000
Y _^ ^•
v 30'OW,0010 ^MetropolitxnEmiss.cnReductlonProKct

■ Prairie Island Mandate ■ Renewahk Energy Standa rd/REO 20,000,000 rJEneigyEffiidencyRequin-ment/[IP

^ Net Electr7city Imports ■iransrnlnion System
10 000IDOO ■ MMSW/ROF/TOf

0011
Gas 0 Coal

I

-- 1990 1995 2000 2005 2030 2o15 102o 2025 wa^ Considerations of a Performance Standard for State Plans Given the significant impacts of climate change, Minnesota believes that U.S. Environmental Protection Agency's (EPA) performance standard for existing power plants must result in meaningful GHG reductions from electricity generation in all states. Minnesota's reliance on a substantial amount of outstate generation to meet its electricity demand (roughly 27 percent) highlights the need for regional cooperation, as well as the need to rely on a range of strategies and programs. Minnesota supports EPA's efforts to allow for a mix of policies and programs as the "best system of emission reductions" in addressing GHG emissions. Our experience and analysis shows that state level actions can potentially achieve a 20-30 percent reduction in GHG emission through generating source improvements, renewable energy development and demand side management programs. Based on Minnesota's experience, these emission reductions can be accomplished over periods as short as 10 to 15 years. Because of the reductions that have already been achieved in Minnesota as well as other states, with a considerable investment of time, capital and effort, it is vitally important that past actions be taken into account when establishing reduction goals or requirements. EPA's best system of emission reductions should provide a means of granting credit to early actions which resulted in GHG emission reductions from a state's electric generation profile. 'Administrator McCarthy

Page 5 December 16, 2013

Additionally, if EPA decides to credit emission-reductions from coal-to-natural gas conversions, EPA should take every action to control methane emissions from upstream natural gas production activities, including ernissions during hydraulic fracturing production of natural gas. State 111(d) Plan Guidelines Minnesota shares President Obama's commitment to reduce GHG emissions, as already demonstrated above in our detailing of current state programs and policies. Continued reductions will rely on successful implementation of a federal prograrn for existing power plants to ensure GHG emission reductions nationwide. Recognizing that each state in effect is responsible for the implementation of a federal program, the MPCA believes that there are a number of aspects that are required for an effective, equitable national reduction program: It is important that EPA's 111(d) program should be flexible. It should allow plant retirements, refueling, renewable energy (including biomass) and energy efficiency to be used to demonstrate compliance. It is aiso important that in EPA's consideration of alternative energy sources, EPA should consider how to address state-to-state differences. The definition of a renewable energy source is likely to be different based on current state laws or rules. EPA must consider that giving states one year to develop State 111(d) plans, even under the simplest of scenarios, is not enough time for many states to make statutory changes or adopt administrative rules. If states want to take more innovative or multi-state approaches, even more time will be needed to negotiate the details and adopt the necessary changes. EPA should develop a 111(d) plan approval process that allows states and EPA to meet the one year deadline outiined in the President's plan, while still providing states the opportunity to take additional time to develop a more flexible, innovative and cost-effective approach to implementing the guidelines. To accomplish this approach, the following suggestions are provided: • Promulgate a"model rule" for states to use initially; it would be very useful in streamlining initial 111(d) plans if EPA were to develop a model rule for data collection and identify alternative emission control strategies that EPA considers sufficient for meeting the rule. • Identify preferred procedures for "parallel" processing of 111(d) plans prior to rule proposal. EPA has a means of conditionally approving SIPs called "parallel processing" allowing states to submit an early plan that has compliance schedules, demonstration of legal authorities, etc. followed by a final plan that contains emission limits, enforcement mechanisms and other regulatory and legal requirements. Developing a sirnilar process for 111(d) plans would aid in states being able to provide initial plans on time. • Identify preferred procedures related to emissions quantification and other accounting requirements that recognize e.xisting data reporting mechanisms and procedures. This issue is critical to the overall success of any program, and will take some time for states to develop, particularly if other states are like Minnesota where state agencies other than the designated Clean Air Act agencies are collecting energy generation information that would be relied on to demonstrate GHG reductions. This would aid states in developing initial programs within the flrst year, and potentially avoid duplication of efPort for both states and utilities. As mentioned above, Minnesota would rely on energy information that the Minnesota Legislature has already determined is the responsibility of an agency other than the MPCA to collect and verify (e.g. Minnesota's SmartMeasures T "' mentioned above). Having to seek legislative action to redirect thisAdministrator McCarthy

Page 6 December 16, 2013

work would be make implementation of a 111(d) rule in Minnesota in a reasonable timeframe very challenging. o Provide as much guidance as necessary to allow for plan revisions, especially as technologies for carbon capture improve or costs change in response to marlcet changes. • The two-step approach is potentially applicable to the schedule for securing GHG reductions. EPA has already promulgated rules for emission guidelines stating that it will amend rules for existing sources should new information become available. EPA appears to have the authority to require reductions in the near term to reflect what states are currently demonstrating as achievable. These program requirements can then be followed by longer-term, deeper reductions that may be necessary to address the environmental impacts of climate change. • EPA must also ensure that EPA's regional offices work in concert with one another, having similar training, guidance and approaches to approving state plans, since multi-state plans could cross EPA region boundaries. EPA must also ensure consistency in the review and approval of state plans across EPA regions to ensure that state plans are consistently and expeditiously approved. • EPA's definition of best system of emission reductions should consider the impacts of such regulations on the transition of jobs from carbon-intensive energy sources to green energy sources. • EPA should also consider the critical need for carbon emission regulations to protect citizens who may be disproportionately impacted by the efFects of a changing climate and air pollution. The MPCA looks forward to EPA promulgating the new source performance standards for new fossil-fuelpower plants. It is critical that should the United States continue to invest in expanded coal or naturalgas electricity generation, the CO 2emissions be rigorously controlled. I understand that EPA has asked many interested and affected parties for their input, and that there are many complex legal, policy and technical issues. While recognizing all of these issues, EPA should strive to develop rules for both existing and new fossil-fuel electricity generation that minimizes compliance costs, maintains electricity reliability, and maximizes economic and environmental benefits. Along with the concerned citizens of Minnesota, I support EPA's careful, important work in developing these GHG control standards. If there are any questions, please contact Assistant Commissioner David Thornton at 651-757-2018. Sincerely,

in Lin_c Stilne Commissioner
1LS/AJ:Id

cc: lanet McCabe, Assistant Administrator (Acting), office of Air and Radiation Susan Hedman, Regional Director, EPA Region V George Czerniak, Alr and Radiation Director, EPA Region VAdministrator McCarthy

Page 7 December 16, 2013

Minnesota Pollution Control Agency Comments to Administrator McCarthy December 2013 Appendix
Table 1. Policies In Place in Minnesota that have reduced p ovuer sector GHG emissions year of starting compiiance or target ievei year completion Erwrgy Effidency (Minn. Stat. 216B.241) Conservation Improvement En.ergy savings goal: 1.5% average of 3 prior Program years' retaii sates, 2010 onward 2010 Various

1.5 to 2.0% of gross operating expenses committed to eiectric demand-side management programs,1994-2009 Coal-to-NGCC repowering (Minn. Stat. 2168.1692) Metropolitan Emission Reduction convert 642 MW coal to NGCC (956 MW); 2009 Project (MERP) repower 528 MW coal 2002 Renewabie Energy Devetopment (Minn. Stat. 21613.1691)

1% of retail saies 2005-2009 Renewable Energy 10% of retail saies 2010 REO: 2005; Various Standard (RES) 1% of retail saies 2011 RES: 2007 biomass: 2007 Prairie Island Mandate 825 MW wind, 125 MW biomass 1995 wind: 2008 Green Pricing voiuntary program 1998 None

0.5% 2005, 2% 2006-2008, 4% 2009, 5% 2010-2011 in eiectric utility-owned engines Various Biodiesei Mandate and turbines 2005 Solar Generation 10 percent of retail saies 2030Administrator McCarthy

Page 8 December 16, 2013

Table 2. MWH of Electriclty-Saved through the CIP or Generated with Renewable Energy Sources from Mlnnesota Policies and Programs
2000 2005 2010 2011 cumuiative, 1990-2011 Energy Efficienry 2,782,220 4,351,286 5,337,063 5,305,347 63,548,565 Renewable Energy Prairie Island Mandate(a) 719,769 1,690,061

- 8,722,810 Renewable Energy Standard (b)

- - 7,606,126 9,138,452 34,743,571
Biodiesel Mandate 4,159 7,580 7,055 90,522 Green Power Pricing

- - 65,270 73,809 291,224 (a) State statute allows renewable electricity generation to be counted under its renewable energy standard. After 2006, renewable generation stemming from the Prairie Island mandate is counted under the RES. (b) Includes generation at all renewable energy facllities within Minnesota that can generate Renewable Energy Credits (RECs) for use In meeting the State's RES requirements.
Table 3. Principal Data Sources Used in Minnesota to Evaluate Emissions-Avoided Effects of Historic and Current Day Policies and Actions
Data Source Years of Availabillty Facility emissions MPCA GHG emission inventory 1990-2011 MPCA consolidated emission inventory 2010-2012 US EPA CAMD database 1996-2012 EPA MRR data 2010-2011 Facility and Unit Level Net Generation EIA Form 923, EIA Form 906, EIA Form-759 1990-2012 M-RETs 2008-2012 MN Department of Commerce Annual Electric Report most years, 1990-2012 Independent Power Producer Sales to Grid FERC Form-1 1990-2012 DSM Energy Savings EIA Form-861 1990-2012 Green Pricing MWH-sales EIA Form-861 2007-2012 Renewabte Energy Standard/Renewable Energy Credit retirements, saies, purchases, baiances, and ownership M-RETs 2008-2012 Annual Compliance filings with Minnesota Public Utilities Commission various, 2007-2012 Regional Marginal Emission Avoided factor M. Silar-Evans, etal. (2012) 2006-2011ppm
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WS 17.0.31 Zebra ZP 460 61.11A 04/Y014

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# — Carriage hereunder may be subject to the rules relating to liability and other terms and/or conditions established by the Convention for the Unification of Certain Rules Relating to International Carriage by Air (the "Warsaw Convention") and/or the Co :arriage cf Goods by Road (the "CMR Convention"). These commodities, technology or software were exported from the U.S. in accordance with the Export Administration Regulations. Diversion contrary to U.S. law prohibited. 010195101 1/10 PAC United Parcel Servir