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**., i~**  **{._** U.S. Environmental Protec ti o n 1\gency Washington. D.C.

July 24. 20 IS MEETING W IT H B USINESS RO UNDTABLE (B RT) CEO J O HN ENGLE R & 

### AME RICAN ELECT RIC P O WER CEO NI CK A KI NS

DATE: LOCA T I ON: MEETIN G TIME: CONTACT : I. 

### Purp ose: 

### Jul y 27, 20 I S YOU R OH" I CE 11 : OOAM

- II :45AM Brian Bond (202-S64-6498)

YOU wi ll have a meeting with former Michigan Governor Joh n Eng l er. Pre si de nt of th e Busi ness R

oundtable (B RT)

- a l eadi ng trade assoc iation for Fortune SOO co mp an i es- to discuss the pending C lean Power Plan and Ozone standard rule s. Governor E ngler w ill be acco mp anied by Nick Akins. CEO of Amer i ca n El ectri c Power (AE P) and other senior executives from AE P and BRT. T hi s m eeting. will be YOU R third engagement with BRT ove r the last yea r. In J une of20 14, YOU had a meet and gr eet session with Governor Eng ler at EPA HQ here in Washington , D. C. Additionally. in June 2014. YOU met with company executives fro m BRT" s Ener gy and Environ ment Co mmittee to di scu ss th e then-recentl y released C l ea n Power Pl an proposal. BRT is an association ofCEOs of l eading U.S. companies wi th $7.4 tri lli o n in annual r evenues and mor e than 16 million empl oyees. Altho u gh the EPA and B R T di s agree o n some key policy iss ue s. the assoc iati o n tends to be more pragmatic in th eir advocacy and ou treach efforts th an the more co ntenti ous U.S. C hamb er of Com m er

ce an d Nat i ona l Assoc iati on of Manufacturers. Additio nal l y, BRT and many of i ts affi liate CEOs have good working r e l

at i ons hip s w ith the White House. In 20 13, B R T r el

eased a s ustai nabi lity r eport e ntit l ed. ··Create. Gr ow. Susta in : How Co mpani es Are Doing We ll by Doing Good'" th at feature s narrative s from 1 47 CEOs o n the ir compa nies' s ustainability efforts. As an association , BRT' s top ener gy and e nvironment priorities inc lud e:
• Enhanced production oftraditional ene r gy so urc es such as oi L coa l and natural gas • Keystone XL Pipeline Extension • Energy Efficiency • C limate Change • El ec tricit y Generation • Renewable Energy • Sustainabilit y

### MEETING PARTICIPANTS John Engler, Pres ident, Bus in ess Roundtable (BRT) Eng l e r is a former three-term govern or of Mic hi gan and assu me d l eaders hip of the Bus iness Rou ndtable in 20 II after six yea rs as Presiden t and CEO of the Nationa l Assoc iation of Manufacturers. H e had pr eviously served for 20 yea rs in the Michi gan Leg islatu r e and in 19 70 he was the youngest person ever e l ected to the Mic hi gan State Ho use of R epr esentatives
. Born in Mt. Pl

easa nt, Michigan in 1948 , Engler graduated from Mi c higa n State Uni vers i ty with a bache l or of sc ience degree in agri cultural eco nom i cs. Late r, he earn ed a law degree fi·om Th o mas M. Cooley Law School in Lansing , Michigan. H e and hi s wife , Miche ll e, are par e nts to triplet daughters who ar e in co ll ege. Engler and hi s wife reside in Virgin ia .



### Marian Hopkins, Senior Vice Pres ident for Policy , Bu s iness Roundtable Hopkin s heads up the Bus in ess Roundtab le ' s (B RT) public policy and legislati ve o utreach init iat ives . Pri or to jo ining BRT , Hopkins worked as a lobb y i st for the U.S. Chamber of Comm e rc e. She also served as a Legislative Assistant for U.S. Senator S. I. Hayakawa (R-CA). H op kin s has a B ac helo r ' s of Sci ence in Bio logy fro m the Uni vers ity of Ca li forn ia , Irv in e.



### Nicholas "Nick" Akins , C hairman, Bus iness Roundtable's Energy and Environment Committee & CE O of American Electric Power Akins has served as CEO of American Electri c Powe r (AE P) si nce 

### 20 10
. Prior to becoming CEO , he served as AEP ' s Exec utive Vice President. Previou s ly , he was President a nd COO for So uthwe stern Electri c P ower Compan y. Aki n s is an e lectric al engi neer b y trade and earned hi s bac he lor's and master ' s degree in e lectri cal enginee ring from Loui s i ana Tech University
. H e is a n at ive of Louisiana and he and his wife , Donna, live in Dublin , Ohio.

## THE 2015 OZONE NAAQS REVIEW

# B~ Business Roundtable · 

## TWO PERSPECTIVES , ONE LOGICAL CONCLUSION AN AlTERNATIVE PERSPECTIVE : REGULATING THE INEVITABLE According to EPA analysis, the vast majority of monitored areas are already on a g lid e path to achiev in g the EPA's air quality goals by 2025. Ho wever, in the meantime, many of these areas may rece ive a non-atta in ment designat i on (and bear the economic costs associated with it)

. 

### UNPACKING EPA' S PROJECTIONS The EPA projects that, due to regulations already in place, the vast majority of areas will reach 70 ppb or below by 2025 even if the current ozone standard is maintained. 687 Co u nties* Just over half (53%) of counties have existing ozone l evels equa l to or below 70 ppb
. Nearly half (43%} of co un ties have existing ozo n e levels about 70 ppb but are projected to reach 70 ppb or below by 2025 due to ex i sting regulations
. Only 28 counties (4%} are projected to fall short of70 ppb by 2025 if t he ozone standard is not lowered. ·Counties with o valid 2013 design value. less 29 monitored counties that exceed 70 ppb but do not hove o 2025 projection. See the followmg link foro mop lflvscrotmg the number of counties that ore on o glide path to 70 ppb by 2025: www.epo.gov/groundlevelozone/mops

. html
. 

### THE NON - ATIAINMENT GOTCHA GAME : AN ILLUSTRATIVE EXAMPLE Assuming EPA 's projections are accurate, many counties could receive non-attainment designat io ns in 2017 - 18 despite being on a glide path to achieving the EPA's air quality goa l s in 2025. Washtenaw County, Michigan (Ann Arbor}**~** .. Designation nmeframe



# - - - -**~iifl!,@i@IHQ•IJ1titW1MjfiiflfflbiiihJ4i.lt§4itd5M** lO 

# t EPA's Proposed Range 

# -- --

20 ll 

# -- 

# -- -- 

# --- --- -- 2025 EPA Projection 

### 2021 

### 202S 

### THE ECONOMIC IMPACT OF NON -ATTAINMENT ON LOCAL COMMUNITIES 

# 4.8% 9.0% 20.0% PRODUCTIVITY PENALTY ECONOMIC LEAKAGE LOST WORKER EARNINGS 

### THE BOTIOM LINE Plants in non-attainment areas experienced a 4.8 % d ecli ne in total factor productiv i ty , equiva l ent to approximately $21 billion per year. -Greenstone eta/. {2012) U
. S

. -ba se d mult in ational f i rms increased foreign production by 9 % and fore ign assets by 5% i n response to toug h er regulation under the CAA Amendments
. - Hanna (2010) Followin g a non -a tta inm ent designation, the average worker in a regulated sector experienced a total earnings Joss equa l to 20 % of their pre-regulatory earnings. - Walker (2013)

I f EPA' s projections are correct, lowering the ozone standard will inflict unnecessary economic pain on many areas that are expected to ach i eve substantial ozone reductions by 2025. Maintaining the current standard would avoid these unnecessary designations while still ach i ev in g the EPA's air quality goa l s.

# B~ Business 

# Roundtabl e '"

Randall S tephenson AT&Tinr. Chauman Urs 1ta tv' Ourns Xerox Corporal•on V1ce Chatr Dav•d r.1 Cote Honeywl'll V1ce Chair Andrew N L1vens The Dow ChPill i Ca l Company V1ce Cha1r John fnqler Pres1dent Jess c.1 Bot Ianger Semor Vtce Prestdent t,1anan Hopk 1 ns Sentor Vtce Prestdent W i lham C M 1 1le r J r Sen1or V1ce President Lef,nne RediCk WIISOI1 Semor Vtce Pres1dent July 27, 2015 300 N ew J e rse y A ven ue NW Su1 1 e 800 Wash 1 11g l on DC 20001
The Honorable Gina McCarthy Administrator U.S. Environmental Protection Agency 1200 Pennsylvan i a Avenue, NW Wa shington, DC 20460 Dear Administrator McCarthy: Telephone 202.872 1260 Facsimile 202.4 66 3509 Website brt o rg

Thank you for meeting with us to discuss your pending decision regarding whether it is appropriate to lower the existing ozone National Ambient Air Quality Standard (NAAQS) from its cur rent level of 75 ppb to a level somew here within the range of 65-70 ppb. We appreciate fully the statutory and judicia l constraints placed on your decision but believe that you have the policy d i scretion to maintain the standard at the current level based on the facts that are in the record of this proceeding. We urge you to do so. One of the most important issues relating to ozone levels that has emerged over the pa st several years has been a greater appre ciation for the role of background levels of ozone. This issue has taken on increasing significance, because the standards being proposed by EPA approach background levels in many areas of the country, especially the western United States. Studies by NOAA researchers, the We ste rn States Air Resources Counci l , Clark County, Nevada, and others have s hown that background level s of ozone are very high in the west. In a recent article in Science, scientists associated with NOAA pointed out that EPA' s own research showe d that the magnitude of background ozone in Utah, Arizona , Colorado , New Mexico, Nevada and Wyoming can approach that of EPA's proposed range of 65-70 ppb. 1 The authors also point out that to ensure the standard does not create unnecessa ry control obligations, EPA and the sta te s must be able to quantify background ozone accurate l y, which is not the case today. To do this first requires improvement in measurement of baseline ozone, which can then be u se d to improve the accuracy of global models , which in turn can be u sed to improve the regional model s used by EPA to model attainment efforts by states. Many states filing comments on the proposed ozone sta ndard echoed our concern about the need to recognize and account for background levels in any new ozone regulation. The Western States Air Resources Council (WESTAR),

1 Cooper, O.R., e t at., " Challenges ofo Lowered U.S. Ozone Stondord."Science, Vol. 34 8 no. 6239, at p. 1097 (June 5, 2015); DOl: 10.1126/science.aaa5748
.July 27, 2015 Pa g e 2 representing 15 western state air quality managers , argued that "EPA downplays the ongoing significance of background ozone in the west and overstates the capability of the tools available to adequately address the regulatory requirements imposed on states." 2 WESTAR further maintained that "[m ] aking th e ri g ht choices about how to improve air quality in ozone nonattainment areas will depend on how well we understand the s cience, and our understanding of the science needs to improve. Given the absence of indu strial development in numerous area s of the intermountain we s t , nonattainment area control s s imply will not work to achieve attainment. Neither will interstate contribution reduction s be sufficient in many areas to reduce ozone to levels below the propo sed standard." 3 The Association of Air Po ll ution Contro l Agenci es (AAPCA) noted in a recent survey of comments on the propo sed ozone standard s fil ed by s tate environmental agencies that " [a] majority of state agency comments raised con cern s about the role of ba ckg round ozone , including both naturally- oc curring and internationally
-transported contribution s to ground - level ozone , as an achievability or implementation challen g e (26 states) ." 4 Mo s t of the commentin g states that raised concern over the role of background ozone also maintained that EPA's exi sting policies are ill-equipped to address this issue. 5 The AAPCA survey found that "a majority of state comments identified limitations to the Cl ean Air Act tools highlighted by U.S. EPA for regulatory relief to address background ozone (24 states) ." 6 EPA ha s acknowled ge d th e limitation of exi stin g poli cie s and sugge sted th at modifications may b e made after the ne w standard i s adopted. Howeve r , it is not clear if policie s can or will be

2 Western States Air Resources Counci l , Comments in Docket ID No. OAR
- HQ·OAR-2008-0699, filed March 16, 2015, p. 2, available at: http://www.westar.org/Docs/03NAAQS/WESTAR 03 -final - signed.pdf

. l id. 4 Associa ti on of A ir Pollut i on Cont rol Agencies, Stat e Environmental Agen cy Per s p ectiv es on Background Ozon e & R egula tory Re lief: R esults o f o Survey by th e Association of A ir P ollution Control Agencies (AA P C A ), J une 2015, at p. 2, avai l ab l e at: http://www.csg.org/aapca site/documents/AAPCASurvey
StateEnvironmenta1AgencyPerspeqivesonBackgroundOzoneandRegulatoryRelief

- June201.pdf (AAPCA Survey). s For example, the comments filed by the Colorado Department of Public Health and Environment, dated Ma rch 1 7, 2015 (see https://www.colorado

. gov/pacific/sites/default/files/AP-PO-ColoradoCommentsOzoneNAAQS

. pdf ) explained at p. 5 that EPA's existing exceptional events rule- the primary means identified by EPA of addressing background ozone issues - imposes a "huge administrative burden without a corresponding public health and environmental benefit." Similarly, the N evada Division of Environmental Pro t ection (NDEP), in its comments submitted March 12, 2015 (see http ://www.csg.org/aapca site/news/documents/NevadaDEP

. pdf) t o l d EPA that in l ight of the " f ew implementation t ools available to st ates (e.g

. , exceptiona l events exc lu sions, ru ral transport areas and i nternational transport)
.... [c ] ont rol of local sources i n w es t ern states wi ll h ave little effect o n lowering mon i tored ozone concentra ti ons .... Loca l con t rib u ti ons are so minor that, if a reas w ith i n N evad a's j urisdictio n a re i n nona t tainment w ith the n e w proposed standa rd, t h e ND EP w i ll be in t h e untenable posi ti on of ha vi ng no mean i ngful control strategies to ach i eve atta i nment with the ne w standard." See ND EP Technical Comments at p. 3. The March 17, 2015 comments of the Wyom i ng Departmen t of Env i ronmental Qua l ity, Air Quality Division to EPA on the proposed ozone standards (see http ://www

. csg . org/aapca site/news/documents/Wyoming 3- 17- 15 DEQComment 20150zoneNAAQSProposedRule

. pdf) questioned the usefulness of the Rural Transport Areas (RTA) classification as a regulatory relief method, given that the RTA classification has only been approved for two areas since the RTA's inception (p. 3), and expressed the view that "EPA's recognition of the influence of International Transport on ozone levels under Section 1798 of the Clean Air Act
... to be too limiting, with little to no effective applicability in non - border states" (/d.). 6 AAPCA Survey, pp. 2, 5.July 27, 2015 Page 3
modified in time to add ress the background ozone issue adequate ly prior to the time nonattainment designations will be made. If fundamental changes are not made to address the contr ibution of background ozone and the ozone NAAQS is lowered, large numbers of areas may be cast into nonattainment status without effective tools to come into compliance with a lower standard

. We also are concerned about EPA' s acknowledgment that " unknown" cont rol s increasingly will be required to brin g nonattainment areas into compliance. The EPA's Regulatory Impa ct Analysis (RIA) suggests that more than one-fifth of the NOx re ductions needed to meet a 70 ppb standard will need to come from unknown em i ssions controls. 7 The share rises to more than one-th i rd under a 65 ppb standard. 8 Our companies are concerned that if currently non - existent technolo g ie s fail to materialize , sca le , and reach commercialization on the timetable that the agency has assumed , compliance with a lower ozone standard could be virtually impossible for many communities. The consequences of nonattainment designation are not to be taken lightly. Nonattainment brings with it retrofit requirements for ex i sting sources, lowest achievable emissions rate techno l ogy (regardless of cost) for new or modified exist in g sou rces, the n eed to offset increased emission s by more than one-to-one, additional permitting burdens, and transportation consistency requirements. Numerous studies have cata l ogued the conse quences of a nonattainment designation , including lower productivity , loss of economic output, and lower wages in the affected industries. 9 In short, nonattainment designation acts as a brake on economic development. As business l eaders, we are greatly concerned about erecting new barriers to economic growth.

7 U.S. EP A, Regulatory Impact Analysis of th e Propos ed R evi sions to th e N ational Ambi ent Air Quality S t andards for Ground
Level Ozo ne 2014, p p. 4 -21 - 4-23. Available at: http://www.epa.gov/ttn/ecas/regdata/R I As/20141125ria.pdf

. 8 /d. 9 Studies have found that "more stringent environmental regulation deters new plant openings and may even ca use firms to reloca te plants to areas w i th more lax environm ental regulations." Shadbegian, R. and Wolverton, A., "Location Decisions of U.S. Polluting Plants: Theory, Empirical Evidence, and Consequences," EPA National Cen t er for Environmental Economics, 2010, p . 38, available at: http://yosemite.epa.gov/ee/epa/eed.nsf/ec2c5e0aaed27ec385256b330056025c/81d7332051b52ed88525772700744a02/SFILE /2010
-0S.pdf

. A 2012 study estimated a 4.8 percent decline in total f actor productivity levels for emitting plants located in non atta i nment a reas , wh ich corresponds to a n nual l ost ou tp ut in the manufacturing sector of nearly $21 billion (2010 dollars). See Greenstone, M. , et al., "The Eff ects of Environmental Regu l ation on th e Competitiveness of U.S. M an ufactur ing, " MI T Center for Energy and Environmenta l Policy Re sea rch 2012 (Green stone et a l. 2012), pp . 2, 31 - 32. Avai l ab l e at: http://web.mit.edu/ceepr/www/publications/workingpapers/2012

-013
. pdf

. US-based mu l tinational firms are estimated to have increased their foreign production by 9% and their foreign assets by 5 % in r espon se to tougher regulation under the Clean Air Act Amendments of 1990. See Hanna, R., 2010. "US Environmental Regu l ation and FDI: Evidence f rom a Panel of US-Based Mult ina tional Firms" (Hanna 2010). American Economic Journal: Applied Economics, 2(3): 158-89, p. 187. Available at: http : //scholar.harvard

. edu/files/remahanna/files/fdi ae1 JUly 2010
. pdf

. A 2013 analys is concluded that follo w ing a nonattainment designation, "I t]he average worker in a regulated sector experienced a total earnings loss equivale nt to 20% of their preregulatory earnings." Walker, W
. R ., "T he Transitional Costs of Sectoral Reallocation: Eviden ce from the Clean Air Act and the Workforce, " The Quarterly Journa l of Economics (2013) (Walker 2013), pp. 1787- 1835 , at pp. 1791, 1830. Available at: http://faculty.haas.berkeley

. edu/rwalker/research/walker transitional costs CAA.pdf.July 27, 2015 P

age 4
We are aware that section 109 of the Clean Air Act requires the Administrator of EPA to estab li sh the NAAQS at a l evel "requ i site to prot ect " the public h ea lth with an "adeq uate margin of safety." We also app r ec iat e that the courts have determin ed that cost and technical feasibi lit y are not relevant factors in s etting the NAAQS. However, EPA long has recognized the role of background ozone and has specifically declined to establish an ozone standard at a lower recommended level by citing proximity to background levels. Amon g the factors Administrator Browner cited in rejecting a 70 ppb s tandard in 1997 wa s the proximity of background levels to s uch a standard. 10 The Policy Assessment associated with this rulemaking acknowledges that " in identifying the range of policy options supported by the evidence and information, staff has not considered proximity to background 

### 0 3 concentratio n s. The Administ rator , when eva lu at in g the range of possible standards that are s upp o rt ed by the scient ifi c evidence , 

### could consider proximity to background 0 3 

### concentrations as onefactor in s electing the appropriate s tandard
. " 11 Indeed , in i ss uing the 1997 ozone standa rd , Administrator Brown e r did just this. EPA' s modeling that mo s t a reas will meet lower s tandard by 2025 doe s not adequately take into consideration background ozone. Even if exi s ting policies on the books would allow these areas 

### to come into attainment at some point in the future, in the meantime they become nonattainment. The states are already strugg lin g to implement requiremen t s associated with the 2008 standard. Ea r lier thi s month, EPA found that some 24 states had failed to s ubmit infrastructure State Implementation Plan s to meet the inters tate tran sport provision s of the 2008 ozone NAAQS. Setting a s tandard that is so low that it brings more areas into nonattainment , particularly if they lack the tools that allow them to reach attainment and relies on what the agency concedes are " unknown controls," make s l ittle sense. Setting the ozone NAAQS s hould not be an unreali s tic admin i strative goal. In stead, it should be an achievable goal that recognizes the rea l world con sequences for tho se living, working and investing in areas that may be designated as nonattainment. Unfortunately , the rigidity of the Clean Air Act eliminate s much needed flexibility to reduce the compliance burden on areas once they fall into nonattainment status
. As we have noted above , the i ss ue of background pollution and " unknown " controls leads us to believe many ar eas desi g nated as nonattainment may lack any good way of coming into compliance

. Accordingly, we reque s t that you be

10 Environmen t al Prot ection Agen cy, Natio n al Ambient Air Qual i ty Standards f or Ozone, Fi na l Rule, 62 Fed. R eg. 388 56 (Ju l. 18, 1997), at p. 38 8 68 ("
... the Admin i s t rator gives significant weigh t to the follow i ng cons id erations: * * • (3} As many comme nters have noted, based on in f ormation in the Criteria Document wi t h regar d to ambient conce ntrations of 0 1 from background sources, an 8-hour standard set at [a 70 ppb]level wou l d be closer to peak background levels that infrequen t ly occur in some areas due to nonanthropogenic sources of 0 3 precursors, and thus more likely to be inappropriately targeted in some areas on such sources. " ) 11 U.S. Environmental Prote ction Agency, Policy Assessment for the Review of the O z

one Notional Ambient Air Quality Standard s {Policy Assessment) , p. 1-42 (2014), avai lab l e at: http://www

. epa . gov/ttn/naags/standards/ozone/data/20140829pa.pdf (emphasis supplied).July 

### 27 , 2015 Page 5
mindful that while the Clean Air Act requires review of the NAAQS every 5 years, it does not require a change i n the standard. For these reasons, we urge you to: 1. maintain the current standard and undertake further research into the role of background ozone given new science that has emerged in the last few years and the need for improved measurements of baseline ozone and ozone modeling; 2. announce revisions to the exceptional events, international transport and rural transport policies to streamline the process for states faced with high backgrou n d levels of ozone; and 3
. provide further flexibility for the states in imp lementing the ozone standards. Our recommended approach would give the agency time and data necessary to address the background ozone issue before the next scheduled review of the ozone NAAQS. Sincerely,

Nicholas K. Akins Chairman, President and Chief Executive Officer American Electric Power Chair, Energy and Environment Committee Business Roundtable NA/mh John Engler President Business Roundtable