### BEFORE THEILLINOIS POLLUTION CONTROLBOARD AMERENENERGYRESOURCES, Petitioner, 

### v. ILLINOISENVIRONMENTAL PROTECTIONAGENCY, Respondent. ) ) ) 

### ) ) ) ) 

### ) ) 

### ) 

### PCB 12-
__ (Variance- Air)

NOTICE OFFILING To: ALL PARTIES ONTHE ATTACHED SERVICE LIST PLEASETAKENOTICEthat we havetoday electronicallyfiled withthe Office ofthe ClerkoftheIllinois Pollution Control Board a PETITIONFORVARIANCE, andthe APPEARANCES OFAMYANTONIOLLI andRENEE CIPRIANO, copies ofwhich are herewith serveduponyou.

Dated: May 3, 2012 

### Amy Antoniolli Renee Cipriano SCHIFF HARDINLLP 233 

### South Wacker Drive Suite 6600 

### Chicago, Illinois 60606 312-258-5500

# ~

# ~ Amy Antoniolli



# D.AECEJV"""

IVision otL 

## t:

# D ega./Coun



### . . set 

## MAY

## 0l 'i()**~** 

## 12 

# EnvironmentalP Agency

# rotecuon. - (1,.. A1TACHMENT

### CERTIFICATE OF SERVICE 

### I, the undersigned, certify that onthis 3rdday ofMay, 2012, I have served electronically the attached PETITIONFORVARIANCE, and APPEARANCES OFAMYANTONIOLLI and RENEE CIPRIANO, 

### uponthe following persons: ·JohnTherriault, Assistant Clerk Illinois Pollution Control Board James R. ThompsonCenter Suite 11-500 I00 West Randolph Chicago, Illinois 60601

and electronically and byfirst class mail, postage affixed, upon: Division ofLegal Counsel Illinois Environmental ProtectionAgency 1021 North Grand Avenue, East 

### P.O. Box 19276 Springfield, Illinois 62794-9276

Amy Antoniolli Renee Cipriano SCHIFFHARDINLLP 233 South Wacker Drive Suite 6600 Chicago, Illinois 60606 312-258-5500

.....**~** ,_' '

- 

### Amy Antoniolli

### SERVICELIST (PCB 09-21) 

### Jobn Therriault, Assistant Clerk DivisionofLegal Counsel IllinoisPollutionControlBoard Illinois Environmental ProtectionAgency James R. ThompsonCenter 1021 North GrandAvenue, East 100 WestRandolph Street, Suite 11-500 P.O. Box 19276 Chicago, Illinois 60601 Springfield, Illinois 62794-9276 therriajialiQCb.

### state.il.us

### BEFORE THE ILLINOIS POLLUTION CONTROL BOARD
AMERENENERGYRESOURCES, 

### Petitioner, 

### v. ILLINOIS ENVIRONMENTAL PROTECTIONAGENCY, 

### Respondent. ) 

### ) ) ) 

### ) ) ) 

### ) ) )


### APPEARANCE PCB 12- 

### (Variance- Air)

I, AmyAntoniolli, hereby file my appearanceinthisproceeding on behalfofPetitioner, AmerenEnergy Resources.

Dated: May 3, 2012 SchiffHardinLLP 233 South Wacker Drive Suite 6600 Chicago, Illinois 60606 312-258-5500 aantoniolli@schiffhardin.com 

# \

### BEFORE THE ILLINOIS POLLUTION CONTROL BOARD
AMERENENERGYRESOURCES, 

### Petitioner,
v. ILLINOIS ENVIRONMENTAL PROTECTIONAGENCY, 

### Respondent. ) 

### ) 

### ) ) ) ) ) ) ) 

### )


### APPEARANCE PCB 12- 

### (Variance- Air)

I, Renee Cipriano, hereby file my appearance inthis proceeding onbehalfofPetitioner, AmerenEnergyResources.

Dated: May3, 2012 SchiffHardinLLP 233 SouthWacker Drive Suite 6600 Chicago, Illinois 60606 312-258-5500 rcipriano@schiffhardin.comBEFORE THE ILLINOIS POLLUTION CONTROL BOARD AMERENENERGYRESOURCES, Petitioner,

. v. ILLINOIS ENVIRONMENTAL PROTECTIONAGENCY, Respondent. ) ) ) ) ) ) ) ) ) )

PETITIONFOR VARIANCE PCB 12- (Variance-Air)

NOW COMES AMEREN ENERGY RESOURCES ("AER" or "Petitioner"), by and through its attorneys, SCHIFF HARDIN, LLP, and, pursuant to Sections 35 and 37 ofthe Illinois EnvironmentalProtectionAct, 415 ILCS 5/35, 37, ("Act") and 35 Ill. Adm. Code Part 104, Subpart B, respectfully requests thatthe Illinois Pollution Control Board ("Board") grant Petitioners a variance from both the 2015 and 2017 sulfur dioxide (S02) emission rate provisions ofthe Illinois·Multi-Pollutant Standard ("MPS"), 35 Ill. Adm. Code § 225.233/ specifically the S02 emissions standards set forth in Section 225.233(e)(3)(C)(iii) and (iv). AER seeks relieffrom Section 225.233(e)(3)(C)(iii) for five years beginningJanuary I, 2015, and ending December 31, 2019, and relieffrom Section 225.233(e)(3)(C)(iv) for four years, beginning January 1,2017, and endingDecember 31, 2020. AER requests additional time to comply with the 2015 and 2017 S02 emission rates because, among other things, declining power market prices have resulted inan insufficient cash flow necessary to finance and maintain the construction completion schedule offlue gas desulfurization ("FGD") equipmentattheNewton Energy Center ("Newton FGD Project") in time to meet those rates. By seeking reliefnow, which is critical from a timing standpoint, AERwill conservecash flow and stave offdraconian operational measures withthe hope that

1Hereinafter, citations tothe Board's regulations will be by section number only.stability will eventually return to the marketplace thereby allowing the completion ofthe Newton FGD Project. Absent such stability and the improvement ofpower prices, AER will be left with no choice but to cease operations at additional energy centers as its only other viable compliance alternative. The mothballing ofsuch facilities would be disruptive to AER and its employees, the local communities, equipment suppliers and contractors, state taxing authorities and already struggling local school districts. The additional time AER seeks due to hardship will provide the needed time to allow recovery of the power market and the orderly planning, mobilizingand completion oftheNewton FGD Project. A series ofevents overthe past several months has contributedto the swift erosion of already declining power prices. The statewide**emis~ion** reduction requirements, including most pointedly the MPS, were adopted in anticipation of federal requirements that were subsequently vacated or remanded. Most recently, on December 30, 2011, the Cross-State Air Pollution Rule ("CSAPR"), the replacement regulatory scheme for the previously judicially-reversed national emission reduction program developed by the United States Environmental Protection Agency ("USEPA"), was appealed and stayed less than 48 hours before its effective date. Indeed, CSAPR, like the regulatory schemes before it, woi.!ld have brought the surrounding region back on more equal ground with Illinois. It is this action, coupled with other challenging market conditions that contributed to the collapse ofpower prices in 20 12 to the lowest they have been in decades. Poor economic conditions resulting in low .demand for power, increased natural gas supplies combined with one ofthe mildest winters ofrecord resulted· in a "perfect storm" of events, where cash flows have dropped precipitously and financing is simply not currently available to complete the Project in time to meetthe 20I 5 and 2017 system-wide rates.2

2AER is not the only**coal~fired** generation company feeling the devastating effects ofcurrent market conditions and seeking relieffrom Illinois emission reduction requirements -in recent months. Midwest GeD.eration. LLC has recently announced significant operational curtailments at its Fisk and Crawford facilities and, on April 10, 2012, filed a petition for variance with the Board from the Combined Pollutant Standard. Dynegy has

### Such events have been particularly onerous to downstate Illinois merchant generators such as AER who are at an economic disadvantage compared to generators in surrounding states. Illinois has adopted emission reduction requirements for coal-fired power plants, including the MPS, significantly more stringentthan requirements currently in place in most other states. For example, to comply with the MPS, AER must purchase pollution control equipment, incur high annual commodity costs associated with mercury control, and meet compliance deadlines not required ofcompanies in surrounding states. Such costs must be built into the AER'spowerprice structure further exacerbatingmarket inequities as compared to generators who have not made such investments, and, therefore are able to offer their products into the marketplace without such cost considerations. Illinois is a regulated power market ringed by regulated rate states.' As a result, merchant generators, who must finance pollution control equipment based upon market revenue, are competing with generators operating in a regulated regime that can finance capital projects based on a rate-based
revenue stream. Regulated generators are also able to offer their power into the market at levels below those needed to cover the costs ofthe investments due to this rate recovery mechanism. 

### In essence, this creates a double hit for AER that is subject to environmental requirements4 

### that competitors do not have and a pricing structure that limits recovery to marketconditions.
legislation pending in the Illinois General Assembly that would suspend portions oftbe MPS (HB 5!68, SB 3283).
3 Illinois deregulated its electricity market in 1997, following passageofthe deregulation Jaw. Atthattime, Ameren Corporation's.rateregulated utilities transferred generating facilities formerly owned by Central Illinois Public Service Company ("CIPS") andCentra! IllinoisLight Company ("C!LCO"), into merchant generating companies known as Ameren Energy Generating Company ("AEG") andAmerenEnergy Resources Generating Company ("AERG"). AERis theparentcompany ofAEG and AERG. (a.k.a. "GENCO" in federal securities

.filings and third party financial analysis). AERowns, respectively, theformer Central Illinois Public Service Company (Nevvton, Coffeen, Meredosia, Hutsonville) plants andCentrallllinois Lighting Company (Duck Creek, E.D. Edwards) plants. In addition, AERowns 80% oftbecommon stock ofEElwhich operatesthe Joppa Energy Center. 4 The potential mothballing ofgenerating units does not necessarily improve ambient air quality in the Illinois in thatpower producersfrom out ofstate who have notmade capital investments in pollution control equipment can continueto operate at potentially higher capacity and emission levels.AERhas instituted measuresto conserve cash and has already ceased operation attwo ofits leasteconomical facilities, all with thehope thatthe powerprice market will eventually
recover sufficiently to support future capital expenditures at its operating energy centers. In recentyears, thePetitioner has spent nearly $1 billion installing state-of-the-art FGD systems and ancillary pollution control equipment at its energy centers resulting in a drop in S02 emissions of79% since 1990 and 23%. over the pastfour years. Under AER's current MPS compliance plan, the completion ofthe Newton FGD Project isthe next step in complying with the 2015 and 20I 7 MPS S02 annual emission rates.5 In support ofits request for relief, and as part ofits variance compliance plan ("Compliance Plan"), AER expects to continue various limited construction activities at the Newton Energy Center to the extent it can financially do so. By continuing limited construction activities, AER will be in a position to respond quickly once power market prices and cash flows improve. Weighing these factors against the net benefit to the environment the Compliance Plan will provide, AER demonstratesinthis petition that compliancewith each the 2015 and 2017 S02 emissionrates will impose anarbitrary and unreasonable hardship andtherequested reliefis warranted.

1. AERILLINOIS FLEETINFORMATION A. 

### As of 2012, AER Generates Electricity in lllinois at Five Coal-Fired Energy Centers. AER owns seven coal-fired power plants for the generation ofelectricity in several locations in downstate Illinois.6 These plants are the Coffeen Energy Center located in

5 The FGD system atNewton would have also supportedcompliancewith the currently appealed and stayed CSAPR.
6 The Ameren :MPS Group includes units owned or operated by AEG, AmerenEnergy Resources Generating Company, and Electric Energy, Inc., all subsidiaries ofAER, which is asubsidiary OfAmeren Corporation. The IviPS required that the units ofall ofthese subsidiaries of Ameren Corporation be included in a single MPS group, 35 Ill. Adm. Code 225.233(a)(2)
.. The seven Illinois power plants owned and operated by AER include 21 individual electric generating units ("EGUs") that comprise the Ameren !vfPS Group. Please refer to the Affidavit ofRyan Martin for amore detailed explanation ofthe corporate structure ofAmeren Corporation and AER. 4Montgomery County, the Duck Creek Energy Center located in Fulton County, the E.D. EdwardsEnergy Center located in Peoria County, the JoppaEnergy Center located in Massac County, the Hutsonville Energy Center located in Crawford County, the Meredosia Energy Center located in Morgan County, and the Newton Energy Center located in Jasper County. As of January 20I2, AER generates electricity at five of these facilities, having ceased operation of the Meredosia and Hutsonville Energy Centers. All of these counties are currentlydesignated attainmentfor allpollutants.7 The Illinois Environmental Protection Agency ("Agency") maintains a comprehensive, state-wide network of air quality monitoring stations.8 The principal emissions atAER's coal-fired powerplants are S02 , nitrogen oxides ("NOx"), andparticulate matter ("PM"). AER generally controls S02 emissions with pollution control equipment at several facilities as well asthroughthe useoflow sulfur coal or blending low sulfur coal with Illinois coal containing higher levels of sulfur. Three scrubbers (a.k.a. FGD units) are in service at the Duck Creek and Coffeen Energy Centers. AER generally controls NOx emissions by burning various combinations oflow sulfur coal, low NOx burners, over-fired air, and selective catalytic reduction systems ("SCRs"). PM is generally controlled through
. the use of flue gas conditioning and electrostatic precipitators ("ESPs"). AER controls mercury emissionsthroughthe use ofscrubbers and sorbent injectiontechnologies. In 2011, the Ameren MPS Group achieved an overall NOx annual emission rate of 0.11 lb/mmBtu and·an overall S02 emission rate of 0.46 lb/mmBtu. The addresses ofthe
seven energy centers, their Illinois Environmental Protection Agency identification numbers,

1See the United States Environmental ProtectionAgency's ("USEPA") Green Book (list ofnational attainment and nonattainmentdesignations) at<http://www.epa.gov/oar/oaqps/greenbk/>.
8 Exhibit I, which consists ofselected pages ofthe Agency'sIllinoisAnnualAir QualityReport2010, includes a copy ofthemap atpage 34(http://www.epa.state.il.us/air/air-quality-report/20 !0/air-quality-report-2010.pdf) depicting the locations ofthe air quality monitoring stations with the locations ofAER energy centers superimposed.permit application numbers, and other pertinent information regardingtheir output, pollution control equipment, and S02 emissions areprovided in Exhibit 2, attachedto this Petition. As ofthe date ofthis filing, AER employs approximately 750 persons at these seven energy centers.
B. AER Has Not Received Any Other Variance of Similar ReliefAmendments to the MPS Were Adopted by theBoard in 2009. AER 

### has not received any other variance concerning similar relief. AEG, AER, and AERGfiled a petition forvariance from the2013 and 2014 MPS S02 emission rates in 2008. However, the Board denied the request for variance, finding that a variance was not the appropriate form of relief. Ameren Energy Generating Co. et al v. IEP A ("Ameren v. IEPA ''),PCB 09-21 (Jan. 22, 2009). However, atthetime ofthe variance denial, the Agency had a rulemakingproposal pendingbefore the Board to amendportions ofSection 225 to add mercury monitoring requirements. In the Matter ofAmendments to 35Ill. Adm. Code 225: Control of Emissionsfrom Large Combustion Sources (Mercury Monitoring), R09-10 (Jun. 18, 2009). AEG, AER, and AERG participated in that rulemaking, seeking revisions to the 2013 and 2014 S02 emission rates ofthe MPS and agreeingto additional and more stringent S02 and NOx emission limits. The final rule, including revisions to Ameren's MPS Group S02 emissionrates, became effective on July 15,2009.
ll. REGULATIONFROMWHICHVARIANCE IS SOUGHT AER seeks a variance extending compliancewith both the 2015 and 2017 S02 system annual emissionrates ofthe MPS. Section 225.233(e) states in relevantpart: e) Emission Standards for NO, and S02. 

### *** 3) Ameren MPS Group Multi-Pollutant Standard 

### *** C) S02 Emission Standards 

### *** iii) Beginning in calendaryear2015 and continuing in. calendaryear2016, fortheEGUs in theAmerenMPS hGroup, theowner and operator oftheEGUsmust complywith an overall S02annual emissionrate of 0.25 lb/millionBtu. iv) Beginningin calendaryear 2017 and continuing in each calendar yearthereafter, for the EGUs in the Ameren MPS Group, the ownerand operatoroftheEGUs must comply with an overall S02annual emission rate of0.23 lb /million Btu. The original MPS became effective on January 5, 2007. In the Matter Of Proposed New 35Ill. Adm. Code 225 Control of Emissions from Large Combustion Sources (Mercury), R06-25 (Dec. 21, 2006). Sections 225.233(e)(3)(C)(iii) and (iv) were added to the MPS on June 18, 2009 and became effective July 15, 2009. Mercury Monitoring, R09-IO (Jun 18, 2009). ill. NATURE OFVARIANCE RELIEFREQUEST AER seeks relieffrom Section 225.233(e)(3)(C)(iii) for five years beginning January I, 2015, and ending December 31, 2019, and relief from Section 225.233(e)(3)(C)(iv) for four years, beginning January I, 2017, and ending December 31, 2020. AER seeks the variance almostthree years in advance ofthe 2015 compliance date and five years in advance of 20I 7 because eroding financial conditions make compliance with those requirements untenable. As set forth more fully in this Petition, inadequate cash flow and restrictions on additional borrowings preclude the completion ofthe Newton FGD Project as scheduled.9 Since the timing of the construction and installation of the two Newton FGDs was coordinated so as to allow the Ameren MPS Group to meet 

### both the 2015 and 20I 7 S02 annual emission rates, AER will not under current market conditions be able to meet either compliance date, Ifreliefis not granted thenAERwill needto mothball multiple units across AER's coal fleet, which may include E.D. Edwards, Joppa, and/or Newton units, so as to comply with the MPS S02annual emission rates until such time as market prices recover to

9 TheNewton Energy Center FGD Project construction permit is attached as Exhibit 3. · 7the level thatthe NewtonFGD Project is financially viable and installation can be completed. As is described in more detail further in this petition, such decisions have broad impact and require adequate time to properly implement. A varianceterm offive years from Section 225.233(e)(3)(C)(iii) and four years from Section 225.233(e)(3)(C)(iv) would allow for power price market conditions to improve and regulatory certainty at the federal level to crystallize. The variance period would also afford AER sufficient time to implement the Compliance Plan as detailed below namely planning, mobilizing and completing the Newton FGD Project The Act allows the Board to grant variances "for such period oftime, not exceeding five years, as shall be specified by the Board
...." 415 ILCS 5/36(b) (2010). Binding declining emission rates to dates certain, Section 225.233(e}(3)(C) was not drafted with the variance strutures in mind. Nonetheless, the Board has authority to grant a variance with a term of five years from Section 225.233(e)(3)(C)(iii), and four years from Section 225.233(e)(3)(C)(iv). The Board has granted a prospective variance in the past (e.g. 

### ExxonMobil Oil Corp. v. !EPA, I1-86, 12-46 (Dec. I, 2011)), as well as a single variance from multiple Board regulations 

### (e.g. Citizens Utilities Co. of Illinois v. !EPA, PCB 85-95 (Oct. 24, 1991). The declining emission rates are tethered to dates certain in the MPS. Therefore, this petition does not request a variance exceeding five years from either ofthe two sections.


### IV. DETAILED COMPLIANCE PLAN A. AER's Compliance Plan Will Achieve Compliance with Section 225.233(e)(3)(C}(iii) by 

### January 1, 2020 and Section 225.233(e)(3)(C}(iv) by 

### January 1, 2021. As an integral partofits Compliance Plan accompanyingthis variance request, and in mitigation ofthe reliefrequested, AER first voluntarily offers that the Ameren MPS Group

8will meet an overall annual S02 annual emission rate in 2012 through 2019 of 0.38 lb/MMBtu, essentiallythetime period duringthependency ofthevariance. Importantly, committingto this voluntary S02 annual emission rate in its Compliance Plan, and in mitigation ofthe requested relief, will impose significant operational restrictions
on AER. The proposed voluntary rate will effectively commit AER to the cessation of operations at the Hutsonville and Meredosia Energy Centers while maximizing FGD performance at the Duck Creek and Coffeen Energy. Centers. Nonetheless, AER agrees to voluntarilymeetthis CompliancePlan rate in spite ofthe associated constraints and operating requirements, to mitigate any potential negative environmental impacts resulting from the variance. AER will also continue to bum low-sulfur coal from the Powder River Basin and manage operations as necessary to maintain compliance. Further, consistent with cash flows, AER expectsto maintain a continuous program ofconstruction atthe Newton Energy Center
so as to be in a position to have the Newton FGD Project completed and operational to meet compliance obligations. All major equipment components required to complete the Newton FGD Project has been procured and will be stored on site during the variance period. Site preparation, foundation work and ductwork fabrication will all be expected to continue over the next few years. Assuming power prices rebound, field construction activities including the mobilization ofskilled craft labor and the procurement ofcommodity items could take approximately 24 months to complete once the project ramps back up. Proceeding in this
mannerwill positionAER for compliance with the 2015 S02 annual emission rate by January I, 2020 with the installation ofthe Newton FGDs. AERrequires a four-year variance from Section 225.233(e)(3)(C)(iv), a year beyond compliance with the 2015 rate, to comply with the 2017 S02 annual emission rate, so that it can properly stage and stagger the in-servicedate ofeach ofthe two Newton FGDs and to ensure that the Project achieves the expected reductions.



### v. ARBITRARY AND UNREASONABLE HARDSHIP It is well-recognized that Illinois has adopted emission reduction requirements significantly more stringent than other states. Illinois adopted these requirements to satisf'y,
even exceed, federal requirements expected for Clean Air Mercury Rule, known as CAMR, and those requirements that were in effect at the time for the federal Clean Air Interstate Rule, known as CAIR. Subsequently, the federalrequirementswhich drove, in greatpart, the creation ofthe State's programs were vacated or remanded, while the State programs have remained intact, resulting in generally more stringent requirements in Illinois than surrounding states.10 In addition, as noted previously, Illinois' deregulated energy markets remain surrounded by states that allow generators rate recovery ofcapital projects including those relating to environmental mandates fi:om a captive consumer base, putting the deregulated generation at a competitive disadvantage. This gives rise to a crippling "double whammy" for Illinois coal-frred electric generators. Illinois merchant generators must install controls not required in surrounding states, withoutthe benefitofa regulated rate regime that allows recovery of the costs through captive customer rates. Rather, Illinois merchant generators are entirely dependent on the power price market for their revenue stream. With the price ofpower at or nearthe cost ofpower production, there is no excess revenue to fund capital projects such as the construction of Newton FGD Project or frankly, any similar

1

## °For example, Indiana, Kentucky, Missouri, Iowa and Ohio have no mercury rules. Wisconsin requires that large coal-fired EGUs apply control technology to reduce mercury emissions 90% by January 1, 2015, or comply with a multi-pollutant option that achieves 90% mercury reduction by January l, 2021. Wis. Adm. Code, Department ofNatural Resources, NR446 etseq. Michigan requires mercury reductions from coal-fired EGUs by January I, 2015, or achieve 75% reduction under amulti-pollutant option. Mich. Adm. Code, Part 15; R 336.2501 etseq .. Minnesota requires 90% mercury reduction by 2015 from the State's three largest electric pOwer plants; remaining facilities must reduce mercury emissions 70-90%by 2025. Minn. Stat. §115A.932 et seq. !0project. Given this context, these events result in a "Black Swan" 11 for Illinois merchant generation companies- no one, notAER, the Agency, the Board, nor the General Assembly could have foreseen this chain ofeventsnor their impacts atthetimethe State programs were proposed oradopted. AER contends that Illinois companies are now disproportionately bearing costs because of these unintended events. For AER, the requested variance helps address the compliance challenges temporarily while mitigating environmentalimpacts. For all ofthese reason.s, today's regulatory and economic environment has made compliance with the 2015 and 2017 MPS S02 annual emission rates an arbitrary and unreasonable hardship for AER. The following sections explainthe series ofevents leadingtothisrequest in more detail.
A. Regulatory Uncertainty Creating an Unlevel Playing Field and Eroding Market Conditions Have Made Compliance with the 2015 and 2017 S02 Annual Emission Rates an Arbitrary and Unreasonable Hardship for AER. I. Ameren'sMPS Group OptedIn the MPS in 2007 With the Expectation thatFuture Federal RegulatoryRequirements Were Imminent. In May 2005, the USEPA promulgated regulations requiring reductions ofemissions of S02 and NOx in the Clean Air Interstate Rule ("CAIR") to address ozone and fine particulate ("PM25") nonattainment areas, 70 Fed. Reg. 25162 (May 12, 2005), and of mercury emissions in the CAMR, 70 Fed. Reg. 28606 (May 18, 2005). The CAIR included most ofthe eastern United States aswell as several states west oftheMississippi River, while the CAMR applied to the lower 48 states. Both ofthese rules applied to coal-fired EGUs serving generators with nameplate capacities greater than 25 megawatts ("MW"). 12 Both of

11 The "Black Swan" phenomenon is ametaphor used to identify events that are (1) a surprise to the observer, (2) have a major impact, and (3) are susceptible to after-the-fact rationalization. The theory was developed by Nassim Nicholas TaJeb in his 2004 book FooledBy Randomness, which concerned financial events. His 2010**boo~** The Black**Sl~Fan** extended the metaphor to events outsideoffinancial markets.
12 The CAIR applied more generallyto fossil fuel-fired EGUs, whilethe CAMRwas limited in applicabilityto justcoal-firedEGUs. 11these programs established caps on emissions ofcertain pollutants·for each affected state and provided thatthe states could choose to participate in USEPA-administered emissions trading programs iftheir state programs met certain minimum requirements. Both federal programs applied toAER's coal-fired EGUs. The Board adopted the Illinois mercury rule on December 21, 2006, and the Illinois CAIR on August 23, 2007. 

### In the Matter 

### Of ProposedNew 35 Ill. Adm. Code 225 Control ofEmissionsfrom Large Combustion Sources (Mercury), R06-25 (Dec. 21, 2006); In 

### the Matter Of Proposed New Clean Air Interstate Rule (CAIR) S02, NOx Annual andNOx

. Ozone Season Trading Programs, 35Ill. Adm. Code 225 SubpartsA, C, D, E andF, R06-26

(Aug. 23, 2007). Even though the Illinois mercury rule proposed was among the most stringent in the nation and was proposed in advance ofan effective federal mercury reduction program, AER was the first power generator to work with the Agency in good faith on the proposal: Specifically, AER had approached the Agency with ·a proposal that is reflected in
. the MPS adopted by the Board as part ofthe Illinois mercury rule.at Section 225.233. 13 The MPS was intended tobe a comprehensive approachtothe Illinois mercuryrule that addressed mercury in coordination with other known air emission regulatory requirements, notably the CAIR, including use ofpotential co-benefit emission control technologies that reduce not only mercury but also NOx and/or S02• The Ameren MPS Group, indeed, opted in to the MPS on December 27, 2007 (the Ameren MPS Group opt-in letter is attached hereto as Exhibit4), and became subjectto theNOxand S02 provisions ofthe MPS atthattime.

13 The MPS is a rule of general applicability, available to any ofthe Illinois coal-fired generation companies who chose to take advantage of its provision-s. Nevertheless, it was the result of negotiations between the Ameren Jv1PS Group and the Agency and was born from Ameren's analysis of foreseeable regulatory requirements, the interrelationship and need for coordination between mercury, NOx, and S0 2 control planning, and its resulting business plan.
1?2. The Vacatur of the CAMR andRemand**oft~e** CAIR in 2008 Created Regulatory Uncertainty Leading to the Ameren .MPS Group's Request for.MPSRevisions in2009. At the time the Board adopted the MPS, power producers such as AER were finalizing compliance plans required by the CAIR, as adopted in 2005, including other regulatory schemes on the horizon including, CAMR. CAIR relied on an emissions cap and trade program with declining emissions rates beginning in 2009 and ending in 

# a final reduction phase for each pollutant in 2015. The MPS imposed more stringent reductions in NOx and S02, but at the time of the rulemaking, and despite the pending appeals, all stakeholders, includingAER, the Agency, and the Board, believed that CAMR and CAIR, or
some versionthereof, would become effective. Indeed, AER and others believed that Illinois power producers would be competing in a market where power plants outside Illinois would also be subject to similar schemes ofemission reduction requirements. However, the courts issued two unexpectedjudicial decisions. First, in February 2008, the U.S. Court ofAppeals for the District ofColumbia ("D.C. Circuit'') vacated the CAMR. See State of New Jersey v. EnvironmentalProtectionAgency, 517F.3d 574 (D.C. Cir. 2008). The court determined that the USEPA had erred in the methodology it had used to remove EGUs from the list of
sources subjectto the maximum available control technology ("MACT") requirements ofthe CleanAirAct. Second, on July II, 2008, the D.C. Circuitvacated the federal CAIR. North Carolina
v. EPA, 531 F.3d 896 (D.C. Cir. 2008). Subsequently, the court remanded the CAIR in its entirety without vacatur, North Carolina v. EPA, 550 F.3d 1176 (D.C. Cir. 2008), ordering thatthe CAIRremain effective untilthe USEPA replaced itwith a new rule. These decisions, although praised nationally by the industry as a whole, presented what has proved to be siguificantly more confining constraints for Illinois generating eompanies that had opted intothe MPS, as the impacts of having an uneven playing field began revealing themselves. Thesejudicial decisions, coupled with pending greenhouse gas emission regulations, severe market liquidity conditions, and the near collapse of the banking systemfirst presented difficulty for the Ameren MPS Group in 2008. At that time, the AER companies sought additional time to comply with the system-wide 2013 S02MPS annual emission rate in order to avoid stranded costs ofcompliance. Additional time allowedthe AERcompanies to make
more educated and sustainable investment decisions on howto comply with the MPS in light oftheregulatory uncertainty on boththe federal and regional levels.
3. The Appealof the CSAPR Has CausedaNew Wave ofUncertainty and an Unlevel Playing Field, With Greater Ramifications/or Merchant Generators in States with State-Only Emission Reduction Requirements. On July 6, 2011, the USEPA adopted the CSAPR as a replacement to the CAIR. 76 Fed. Reg. 48208 (Aug. 8, 2011). The final rule was designed to reduce the impactofS02 and NOx emissions from sources in upwind states to areas in downwind states by restrictingthe amount of emissions allowed on an annual or seasonal basis. USEPA claims the CSAPR wouldhave reduced power plants S02 emissions by 73% and NOxby 54% from 2005 levels. 76 Fed. Reg. 48349 (Aug. 8, 2011). Several parties challenged the rule immediately priorto theeffective date. EMEHomer CityL.P. v. EPA, No. 11-132 (D.C. Cir. filed Aug. 23, 2011). On December 30, 2011, the United States Court of Appeals for the District of Columbia issued an order staying the rule (and ordering the continuation ofthe previously remanded CAIR program) until final resolution ofthe appeals. EME Homer City Generation L.P. v. EPA, No. 11-1302 (D.C. Cir. filed Dec. 30, 2011). Since the fate ofCSAPRis uncertain, as is the continuation ofany federal emission reduction program, the very basis ofthe MPSthat is, an effective and permanentfederal program-hasyetto become areality.

14Certainly, the possibility offuture changes in the law does not alone constitute an arbitrary and unreasonable hardship. Unfortunately, the industry generally has been asked to operate in a continuing, uncertain environmental regulatory climate. But in this case, the impact ofthe CSAPR stay, felt nationally but most acutely in Illinois where a uniquely structured emission reduction program exists, coupled with the drastic changes in power prices and market conditions in the span ofseveral months preceding this variance request make compliance with the emission rates at issue an arbitrary and unreasonable hardship. Indeed, the reality ofthis hardship hit home for AER again in October 2011. Faced with deteriorating market conditions and compliance with what was anticipated to be an effective CSAPR program in 2012 compounded by other environmental mandates, AER announced the cessation ofoperations at its Hutsonville and Meredosia Energy Centers. At a loss of90 good payingjobs and much needed revenue to the local economy as well as the State, the cessation of operations at such plants demonstrates the vulnerability of coal-fired power producers when faced with an uncertain federal environmental regulatory landscape and an extremely volatile energy market. Importantly, and not intended as a criticism ofIllinois' environmental stewardship, the financial ramifications ofthe CSAPR appeal are exacerbated for Illinois power companies comparedto companies in other states forthetwo reasons noted previously. First, it is well-recognized that Illinois is in a "distinctive situation" because the MPS requires Illinois EGUs to control NOx and S02 emissions even in the absence ofapermanent and effective federal emission program like CAIR. Whereas, the financial markets, USEPA, and coal-fired power producers all expected CSAPR to take effect on January 1, 2012 as the replacement ofthe remanded CAIR, it is now unknown when or if CSAPR will become effective. AER believes that either CASPR or a regulatory replacement will be in place before the expiration ofthe requested variance term. However, such "crystal balling" has

1'i

### proven to be perplexing. Should it happen, though, AER may then be competing on a more equalfooting in the market place. Second, AER is a merchant generator in an unregulated or consumer choice market. AER and its subsidiaries face significant challenges that limit their ability to access third party capital to continue to invest in state and federally-mandated environmental control equipment. 14 

### Rygh Aff., Par. 4, 5. Unlike regulated rate utilities, merchant generators do not have rate-regulated revenue streams from a captive customer base that allow for the recapturing ofenvironmental compliance costs. 15 

### Martin Aff., Par. 5. Rather, merchant power companies' investment decisions such as the installation of pollution control equipment are based on the ability to recoup such expenditures from expected future market prices for power. As Illinois proceeded towards deregulation, regional transmission organizations formed through which power generators were more easily and efficiently able to sell power across state lines. As a result, AER now competes with generators in several nearby states that have neither deregulated their energy markets nor invested significant capital in 

### environmental pollution control projectsto address stringent state requirements. As such, requiring compliance with state-only emission reduction mandates in an unregulated state like Illinois places power generators in an unintended position offinancial inequity since merchant generators have to absorb internally the cost of compliance with those state-specific rules. This inequity is most significantly felt by merchant generators like AER because it competes with regulated power generators that are able to recover any compliance costs through customer rates. IfCSAPRhad gone into effect January 1, 2012, it wouldhave helped by at least leveling the playing field between Illinois merchant generators

14 The Affidavit ofGary M. Rygh is attached as Exhibit5 and will becitedto hereinafter as "Rygh Aff., Par. , 15 TheAffidavit ofRyan J. Martin is attached as Exhibit 6 and will be cited tohereinafter as "MartinAff., Par.

. 

### ,
lh

### and competitors in other states from an environmental compliance perspective. However, the appeal and stay of CSAPR on December 30, 2011, less than 48 hours before its effective date, injected additional regulatory uncertainty, a seeming tipping point for the industry. In fact, power prices declined 12% in the month following issuance ofthe stay. Martin Aff., Par. 13.
B. The Costs ofCompliancewith the MPS are Substantial and Certain. 

### The AER companies have been aware since approaching the Agency with the idea of the MPS that the costs necessary to comply with the MPS would be substantial and certain. But as illustrated, underlying conditions have changed dramatically. During the mercury rulemaking, the AER companies explainedthat the costs necessary to achieve the MPS would be greater than those required by the original proposal because ofthe added S02 

### and NOx controls, but should carry a "more**man~geable** 

### rate ofincrease in demands on cash flow." 

### Mercury Rule, R06-25, pg. 74, P.C. 6301, at 7 (Nov. 2, 2006) (second notice opinion and order). In analyzing the economic reasonableness ofthe mercury rule, including the MPS, the Board stated the economic impact ofthe rule was reasonable when weighed against the benefits of mercury emission reductions. 

### Mercury Rule, R06-25, pg. 74 (Nov. 2, 2006). AER is on track to meet all other components ofthe MPS, including the annual mercury emission rate effective in 2015 which was the driver behind the MPS, and Illinois will enjoy the benefits ofmercury emission reductions. However, compliance with the 2015 and 2017 S02 annual emission rates is no longer economically reasonable. In fact, compliance with those provisions will impose an arbitrary and unreasonable hardship.
l. 

### The AER Companies Have Spent Over $1 Billion To Date on the Environmentandto Comply With the MPS. The S02 

### provisions ofthe MPS do not mandate the installation of specific control technology. Specific technology choices are left to the discretion ofthe owner ofregulated
17EGUs subject to a compliance demonstration with the designated system rates. Compliance with the system rates can be accomplished through a series of mechanisms ranging from pollution control equipment, fuel content or quality, or operational changes such as unit retirements orcapacity restrictions. Since 2006, AERhas spent over $1 billion on pollution control equipment across its five active coal plants. Specifically with respect to the MPS, three scrubbers that control S02, mercury and hazardous gases have been installed at two plants. In addition, SCRs to control NOx have been installed at three fucilities. State-of-the-art landfills exist at four facilities andmercurycontrols are in placeacross the fleet. 16 AER; along with Ameren Corporation, has also been a leader inthe advancement of
new technology including the testing of various mercury control technologies in order to

h. ffi

. I 17 ac .1eve more e ect1ve mercury contra . AER has implemented and demonstrated alternative control technologies for mercury at the Duck Creek and Newton energy centers resulting in enhanced mercury removal. These expenditures and efforts to meet environmental requirements reflect AER's continued commitment to compliance and environmentbenefits despite negative economic forecasts.
2. 

### AER Incurred an Additional $237 Million to Fund the Newton FGD Project. AEG applied for a permit to construct two FGD units at the Newton Energy Center (previously referred to as the "Newton FGD Project" or "FGD Project") on January 27,2010. The FGD Project was to be completed in order to comply with both future environmental requirements but timing-wise, particularly for compliance with the MPS. The FGD Project

16 Despite deciding to close the Meredosia Energy Center, AER has remained committed to making the Meredosia site available for the FutureGen 2.0 project FutureGen 2.0 is an experimental project that would burn coal for power, but store carbon dioxide (C02) emissions underground. Ameren personnel have worked closely with the FutureGenAlliance and the Agency on avariety ofpermitting and regulatory approval issues in support ofthe project's cleancoal technology objectives.
17 In referenceto mercury control, "mOre effective" means higher mercury control in acost effective manner. 

### lRalso contemplated the construction ofa new chimney with separate flues for each unit; new induced draft fans for each unit; and gypsum and limestone handling facilities, among other impnilvements. On December 20, 2010, the Agency issued a construction permit authorizing the Newton FGD Project. 18 The Company immediately commenced engineering, procurement and construction activities, and continued construction activities even as market conditions began to erode. Facing insurmountable eroding cash flows and borrowing restrictions stemming from a faltering power price market, among other things, AER had no choicebutto initiate a deceleration ofits construction efforts. As a result, the Company will nothavetheNewtonFGD Projectcomplete in timeto meet eitherthe 2015 or2017MPS S02 annual emission rate compliance deadlines. Despite the need to decelerate the FGD project, AER has incurred $237 million on the Newton FGD Project to date and intends to continue thevarious engineeringand construction activities it can fund so as bepositionedto complete the FGD Project in time to complywith the 2015 MPS S02 annual emission rate by January 1, 2020 andthe 2017 rate by January 1, 2021. By the end of2012, AERwill have spent over 50% oftheproject cost.
3. Due to LowPowerPrices, AER Can No LongerFundthe NewtonFGD Projectin Time to Comply with the Current2015 and2017MPSS02Rates. Power prices in the Midwest impact both the cash flow ofAER and the borrowing capability of its subsidiary AEG. Sales of power from AER generating units and the associated power prices are the source ofcash flow and earnings for Ameren's unregulated merchant generation business segment. Martin Aff., Par. 12. During 2012, the market prices for power have collapsed, falling to levels not seen since 1978. The sharp decline in power prices is due to lower demand because ofthe recession, the exceptionally mild weather this winter, and an increased supply ofnatural gas from shale gas that has contributed to lower

18 S.ee Exhibit 3. 19natural gas prices. Given these conditions, AER's financial health and access to capital have both been severely impaired. Rygh 

### Aff, Par. 5. AEG, owner and operator of Newton Energy Center and publicly registered subsidiary ofAER, has seen its credit rating cut 3 notches by S&P and 4 notches by Moody's since 200S. Net income over the same time period has dropped by over 95%. 

### Id. The current outlook for the next several years is no better. Financial analysts predict low natural gas prices will continue to keep margins and cash flow under pressurefor mostunregulated power producers. 19 

### Id. atPar. 5-7. Further, as discussed previously, unliketheir regulated peers, unregulated power companies do not enjoy the benefits ofrate recovery assurance for capital investments. Instead, unregulated power companies can onlyturn to the markets to generate positive cash flow to help pay for capital investments. 

### Id. atPar. 13. In 2006 and 2007, the price per megawatt hour ("Mwh") was in the $60 range. At a February 16, 2012 auction, the purchase price per Mwh electricity for AER was in the range of $29.50 Mwh to $33.60 Mwh for June 2013 through May 2014.20 Based on available information, and analyst predictions, power prices over the nextthree years are not expected to improve tothelevelto support the installation ofthe Newton FGD Project by either 2015
or 2017. 

### Id. Again, as**previous!~** discussed, companies in rate-regulated markets ultimately can
recover large capital investments from rate payers and do notrequire market prices to be at a level necessary to fund the investments. Lenders look to this revenue stream in evaluating the credit worthiness ofcompanies and establishing lending terms. In contrast, a merchant

19 On April 17, 2012, USEPA issued final regulations delayingrequirements for capturing air emissions from oil and gas wells until 2015 (http://www.epa.gov/airguality/oilandgas/actions.htm!). The goal ofthe rules was to reduce methane emissions during hydraulic fracturing by requiring a gas capture method known as**~'green** completion." The extension is seen as a victory for finns that use hydraulic fracturing to tap natural gas resources trapped in shale rock and favors continued low natural gas prices. An article discussing the move is attached hereto as Exhibit 8.
20Public notice ofWinningBiddersandAveragePrices, (Feb. 16, 2012), attached as Exhibit9. ?n

### generator's revenues are determined through power prices established by a dynamic and competitive energy market and by power supply contracts. Martin Aff. Par.5. Lenders typically look to a projection offuture power prices in assessing the creditworthiness ofa borrower and potential investment risk. !d. The dramatic dive in market prices for power
over the last three years has adversely impacted AER's source of revenue and ability to
access short-term and long term capital markets? 1 

### !d. AEG's operating proceeds are now insufficientto fully fund large-scale capital projects such as the Newton scrubbers. Martin Aff, Par. 6. As explained, AER has already spent over $1 billion on the installation ofpollution control facilities, including scrubbers, SCRs, landfills, cooling basins and towers, and precipitators,.at Duck Creek, E.D. Edwards, Coffeen, and Newton, not includingthe Newton FGD Project. MartinAff., Par. 7. To fund its business operations, includingthe $1 billion in environmental compliance capital projects, AEG issued an $825 million secured debt heldby bondholders. As conditions ofvarious loan agreements for the secured debt issued between 2002 and 2008, AEG agreed to operate the business in particular manner to provide additional assurances to bondholders that they would be repaid. In order to be eligible for ! 

### additional borrowings, AEG must maintain specified interest-coverage and debt-to-capital ratios. See Martin Aff., Par. 8 for specific ratios. AEG's operating cash flow has been adversely affected by the decreasing market price for power over the last few years. In fact,

.despite a number of steps taken to reduce cash flows and capital expenditures, including cessation of operations at the Hutsonville and Meredosia Energy Centers and decelerating construction ofthe Newton FGD Project, AEG's interest rate ratio is expected to fall below the required minimum contained in the debt covenants by 2013. Accordingly, unless and

21 AEG's recentrating downgrade by Standard & Poor's places it within the uppertier of junk grade status, which increasedfinancing costs and applicable.interest rates. '}1until power price market conditions improve, AEG will not be able to borrow additional funds to finance any project ofthe magnitude oftheFGD Project. Martin Aff., Par. 9. AEG's bond maturities also require AEGto preserve cash until marketprices recover. Approximately $300 million ofAEG's $825 million in long-term public bonds matures in 2018, and approximately $250 million ofthis debt matures in 2020. Generally, AEG would plan to refinance these bonds in the public market and extend the maturity ofthe debt. However, if AEG's interest coverage ratios do not improve materially by 2018, indenture borrowing restrictions will prohibit refinancing the 2018 maturity, and the $300 million will have to be repaid to bondholders. Aninabilityto repaythe bonds when due would constitute
an event of default under the AEG bond indenture, which would likely lead to an AEG bankruptcy. The same is true for the 2020 maturity. Giventhese pendingmaturities, aweak financial forecast, and covenant provisions that are expected to restrictAEG's access to debt capital market, 

### it is vitally important that AEG preserve cash until market prices recover, operating results and cash flows improve, and borrowing capacity is restored. Failure to do
so could threaten the long-term viability ofthe business and result substantial losses for all AER stakeholders, including both investors and those in the communities in which AER operates. MartinAff., Par. 9. Additionally, funding from Ameren Corporation is also not a viable option because merchant business segment must be self-funding and its expenditures must be supported by its operating revenues. Ameren Corporation must balance the credit and lending needs ofall ofits businesses, and similar to third party lenders, it cannot assume additional unsecured debt on behalf of AER where there is not a secure revenue stream to. support such an obligation. Martin 

### Aff., Par. 9. Furthermore, creditrating agencies have been very clearthat ifAmeren Corporation were to lend additional monies to AER such a capital injectionwould have adverse financial consequences on the ratings ofthe parent corporation. Rygh Aff., Par.
22 i11. As such, the financial distress ofAER and its subsidiaries cannot extend to the parent company. 

### C. If 

### Denied Relief, AER Must Cease Operations at Two of Its Energy Centers--Joppa, E.D. Edwards and/or Newton-Which Would Substantially Impact AER Employees, the Surrounding Community, and Ultimately, lllinois Electricity Consumers. With power prices at depressed levels and restrictions ofadditional borrowings, there is no viable funding mechanism for completion oftheNewton FGD Project by 2015 or 2017. Without relieffrom the Board, and in the absence ofthe Newton FGD, AER's only other compliance alternative has severe consequences. At this time and under existing conditions, retiring at least two plants· across AER's fleet such as, for example, Joppa, E.D. Edwards, and/orNewton, would be necessary in orderto maintain compliance in absence ofcompleting theNewtonFGD Project. Martin Aff., Par. 9. One ofthemain drivers for AER's petition for reliefnow is that ifmothballing offacilities must occur, AER must have the necessary time to make and effectuate these critical decisions in the bestpossibleway. 

### 1. RetiringPlants WouldSubstantially ImpactAEREmployees andLocal Communities. The economic hardship experienced as a result ofAER's failure to obtain regulatory reliefwill not be limitedto AER alone. AERcurrently employs approximately 750 people at energy centers acrossthe State. Bothoptions negatively impactthe company, local economy, and State. Should AER be forced to mothball power plants as a direct result ofeconomic hardship brought on by compliance with the MPS, AER employees, contractors andthe State will bear a significant portion ofthe economic impact as well as the almost certain loss of employment. Indirect effects will be felt in communities hosting AER Energy Centers as well as communities that host suppliers. The devastating impact ofthis on the State and citizens ofIllinois cannot beunderstated given the current economicconditions.

### At the request ofAER, consultant Development Strategies performed an independent analysis ofthe economic impact the E.D. Edwards and Joppa Energy Centers have on the Illinois and local economies.22 

### Development Strategies estimated the direct economic impacts, 

### which includethe dollars AER spends at each energy center on capital expenditures, non-payroll operations, and salaries paid to employees, and the indirect economic impacts, 

### which include the multiplier ("ripple") effect of wages and expenditures associated with AER's direct spending. Employees living in Illinois spending a portion oftheir earnings on housing and at local businesses (i.e. restaurants, mechanics, and grocery stores) are examples ofthe indirect economic impacts 

### category. According to Development Strategies, AER puts $44.4 million into the local economy surroundingthe E.D. Edwards energy center, including Peoria; Fulton, Mason, and Tazwell counties, and $76.7 million into the local economy surrounding the Joppa Energy Center, including Johnson, Pulaski, and Massac counties. Combining the direct and indirect economic impacts, Development Strategies estimates that the E.D. Edwards Energy Center has a $124,071,000 impact on the State's economy and the Joppa Energy Center has a $214,221,000 impact onthe State's economy annually. Together the energy centers provided 274 good paying and much neededjobs for Illinois residents. Development Strategies estimates that because the AER facilities contribute to additionaljob support in the community and the State ofIllinois, the two plants supported an additional 1,209 totaljobs held by Illinois residents. Thus ceasing operations at facilities such as the E.D. Edwards and JoppaEnergy Centers would cause dramatic "ripple effect" impacts to the regional and state-wide market economies. Such closures would cause the loss of good paying direct and indirectjobs for Illinois residents, reduce household earnings in regional

22 Economic impacts ofE.D. EdwardsandJoppaEnergy Centers of Illinois andsurroundingmarket areas, Memorandum to Mike·Kearney, Manager,Economic Development, Ameren Services from Development Strategies (Apr. 19, 2012), attached asExhibit 10. 

### 24

### labor markets, and result in the Joss of significant economic output that helps drive the Ill. . 23 

### mo1s economy. 

### 2. Ceasing Operations atPlants WillIndirectly ImpactIllinois Electricity Consumers through the PowerMarket Illinois consumers ofelectricity could also feel the effects ofreduced competition and the retirement ofefficient plants ifAER must mothball units. AER's units are some ofthe
more efficient units in the power markets serving Illinois customers?4 

### Schukar Aff., Par. 3. If the requested relief is not granted and multiple units are shuttered, there will be Jess competition in AER's area, which will negatively affect markets. Power producers typically bid generating units into the marketplace based on the marginal cost ofthe unit. When efficient units are removed, they are replaced by Jess efficient units with a higher marginal cost. Power prices would likely increase appreciably for consumers. 

### Id. at Par. 6. In addition, AER's higher efficiency units that cannot continue to operate because ofJack of
access to financing options could be displaced by less efficient units from generation companiesthat do nothave these same environmental mandates.
VI. ENVIRONMENTAL IMPACT A. AER's Compliance Plan Will Provide Overall Greater 802 

### Reductions Under the Requested Variance Than Anticipated Under Current MPS Requirements. In a variance proceeding, a petitioner must demonstratethat the hardship resulting from a denial would "outweigh any injury to the public or the environment" from granting the relief. 

### Marathon Oil Co. v. EPA, 242 Ill. App. 3d 200, 206, 610 N.E.2d 789, 793 (5th Dist. 1993). AERhas crafted its mitigation and Compliance Plan with such demonstration in

23 Exh. I0, Tables 2through 4. "TheAffidavit ofShawnE. Schukar is attached as Exhibit II and will be citedto hereinafter as "SchukarAff .• Par.

- 

### 25mind. Despite delaying the effective date ofthe 2015 and 2017 MPS S02 annual emission rates during the variance period, AER has voluntarily offered to meet an earlier more stringent S02 emissions rate in mitigation resulting in total S02 mass emissions lower than the projected emissions under the current MPS S02 annual emission rates, and providing a net environmental benefit to the State. Table I below sets forth projected S02 emissions through 2021 ifthe variance were not granted, the projected emissions under the variance S02 annual emissionrates and Compliance Plan, and the cumulative S02 reduction underthe requested reliefthrough 2021.25 The cumulative S02 reduction reflects the cessation of operations atthe Hutsonville and MeredosiaEnergyCentersthrough 2021.

Ameren Energy Resources Alternative S02 Limit Comparison to the Current MPS

MPS Baseline Cumulative S02Variance 

# so2 Variance S02 Reduced Year Tons Tons Tons 2010 85,112 70,560 14,552 2011 85,112 72,539 27,125 2012 85,112 56,986 55,251 2013 85,112 56,986 83,377 2014 73,196 56,986 99,587 2015 42,556 56,986 85,157 2016 42,556 56,986 70,727 2017 39,151 56,986 52,892 2018 39,151 56,986 35,058 2019 39,151 56,986 17,223 2020 39,151 34,857 21,518 2021 39,151 31,452 29,217 Total 694,510 665,294 29,217

25 SeeAffidavit ofSteven Whitworth, attached as Exhibit7. 

### 26AER specifically offers to meet an annual emission rate of0.38 lb/mmBtu S02 on a yearly system average from 2012through 2019 (with a 0.55lb.mmBtu orless S02 coal on the non-scrubbed units) that is more stringent than the existing 2012 and 2013 S02 emission rate of0.50 lb/mmBtu and the 2014 S02 emission rate of0.43 lb/mmBtu. By offering to meet this mitigation rate, the total projected S02 emissions from the Ameren MPS Group will be lower than anticipated under the current MPS from 2012 through 2021. Therefore, AER's Compliance Plan results in a net benefit to the environment that exceeds the little; if any, harm that would result from the grant of this variance. Indeed, the Agency's 2010 Air QualityReportshows that air quality in Illinois is steadily improving_26 Statewide trends for the S02 24-hour average and !-houraverage maximums have been overall downward for the period of2001-2010.27 AER anticipates the Newton FGD Project can be completed by January I, 2020 and the Ameren MPS Group SO, annual emission rate will reduce to 0.25 lb/mmBtu, and then to 0.23 Ib/mm.Btu by the end of2020. Again, the extra time during 2020 will allow AER to properly state and operate the newly installed FGD and allow for any further refinement to meet the lower rate. AER contends that, given the net benefit to the environment that granting the variance would impart, AER has met the demonstration required by the Board for variance relief.

26 See Exhibit 1, JllinoisAir QualityReport, pg. ix.
27 !d. at Fig. 6, pg. 11. 27B. AER Will Continue to Comply with NOx and Mercury Control MPS Annual Emission Standards. AER has worked diligently to comply with all other components ofthe MPS. The Illinois MPS mercury emission limit (0.008 pounds per gigawatt hour (lb/GWH)) applicable January 1, 2015 is stricter than the recently adopted federal limit. The current federal mercury standard under the MATS requires existing coal-fired sources to comply with a mercury emission limit of 0.013 lb/GWH by 2015, by 2016 if granted by state permitting authorities, orby 2017 ifnecessaryto mitigate risks to electricreliability. 77 Fed. Reg. 9304 (Feb. 16, 2012). AER has installed activated carbon injection ("ACI") systems on 12 units at4 plants to control mercury emissions at a capital cost in excess of$20 million. The operating costs associated with these systems exceed $17 million annually in procurement of expensive activated carbon and fuel additives commodities (in addition to capital expenditures, these operating and maintenance expenditures must be built into AER's pricing structure, again, a cost generators in surrounding states have not yet incurred). Four SCRs and three wet FGD systems have been installed on AER units to control mercury as well as NOx and S02• Ameren spent $813 million installing the three wet FGD systemsand spends approximately $3.5 million annually in operating and maintenance costs. Capital costs for installing the SCRs totaled $177 million and operating and maintenance costs for the SCRs amount to approximately $3.9 million peryear. AER continues to test and evaluate the performance of fuel additives to enhance mercuryremoval. Earlier than anticipated mercury reductions will also provide a benefit to human, plant, and animal life impacted by mercury emissions from the Ameren MPS Group fleet.
28C. AER Continues to TakeAction to Reduce Greenhouse Gases. Ameren Corporation continues to support research into clean coal technologies, voluntarily reduce greenhouse gas emissions, and purchase offsets to address climate change. In collaboration with the U.S. Department ofEnergy, Ameren Corporation researches the feasibility ofcarbon sequestration, the capture and underground storage ofC02 emitted from coal-fired EGUs, in Missouri and Illinois; increases the operating efficiency and capacity of nuclear and hydroelectric facilities to further offset fossil fuel generation; funds the investigation of ways to reduce nitrous oxide from agriculture; reduces coal ash waste in landfills by recycling more than halfofthe coal combustion wastes into beneficial uses; and participates in areforestation organization which funds projects as a means ofremoving COz.
D. Cross-media impacts are not an issue in this matter. The slight increase in AER's S02 annual emission rate during the pendency ofthe variance should have no significant impact on water quality. In fact, there will be a net benefitwithrespectto airemissions associated with grantingthe variance.


### VII. COMPLIANCE WITHFEDERAL LAW The Board may grant the variance consistent with federal law and, specifically, with the Clean Air Act, 42 U.S.C. 7401 

### etseq. The requested variance is consistent with current federal law. However, on June 24, 2011, the Agency submitted portions ofthe MPS to USEPA for inclusion in the Illinois' SIP addressing Best Available Retrofit Technology ("BART'') and regional haze. The proposal has not yet been adopted as final and it is not known at this time when and iffinal adoption will occur. Also, as noted above the CSAPR has been stayed pending the outcome ofcurrent litigation regarding the rule. The following paragraphs explainwhy the Board can granttherequestedreliefconsistentwith the Clean Air Act and pending regulations.



### 29A. The Terms ofthe Requested VarianceAre Consistentwith Federal BART RegionalHaze Requirements. The state ofIllinois submitted a regional haze plan, including revisions to the Illinois SIP to address regional haze, on June 24, 2011. USEPA regulations mandate that regional haze plans include emission limitations representing BART for each BART-eligible source. 40 C.F.R. §51.308(e). BART is defined as follows: "an emission limitation based on the degree of reduction achievable through the application of tht; best system of continuous emission reduction for each pollutant which is emitted by an existing stationary facility." 40 C.F.R. §51.301. For coal-fired EGUs, BART guidelines provide presumptive emission limits for various boiler type and coal type combinations?8 These emission limits are whatthe Agency calls "presumptive BART" emission limits. The Agency compared presumptive BART to Illinois' "on the books" emission reduction requirements in Illinois and determined that Illinois' approach will "yield much larger reductions of NOx and S02 than will implementation ofBARTcontrols onjustsubject-to BART emission units."29 Despite the delay in complying with the 2015 S02 annual emission rate, the variance will be consistent with federal BART requirements. First, according to BART guidelines, a
source "contributes" to visibility impairmentifit imparts achange ofvisibility ofat least 0.5 deciviews. Illinois adopted this threshold as adequate and, using this threshold, concluded thatPM emissionsfrom its subsetofBARTsources have anegligiblevisibility impact. Second, USEPA stated in the proposed BART/regional haze SIP revisions that "[t]he MPS and CPS provide emission reduction well.in excess ofsimply implementing BART on

28 Selected pages oftheAgency's Technical SupportDocument forBestAvailableRetrofit Technology Under the RegionalHa::e Rule ("TSD"), Illinois Environmental Protection Agency, AQPSTR 09-06,pg. 23 (Apr. 29, 2011) are attached as Exhibit 12. 29Exh. 12, TSD, pg. 25. 30the subject units."30 Illinois estimated that its plan will require 96,927 tons Jler year lower S02 emissions by 2015 than simply requiring BART and USEPA accepted Illinois' plan as satisfYing BARTrequirements.31 AER's system-wide emissions under the proposed variance will provide even greater reductions compared to presumptive BARTby 2015. Giventhe voluntary compliance with a lower emission rate of 0.38 lb/MMBtu beginning in 2012 (as opposed to 0.50 lb/MMBtu through 2013 and 0.43 lb/MMBtu during 2014) through 2019, thevariancewill result in mass emissions of S02 by 2015 even lower than Illinois' estimates under current MPS requirements. The net reduction in S02 emissions continues to 2020 and beyond and, thus, does notimpactthe state's BARTdeterminations.
B. Once Effective, theAmeren MPS Group Will Comply with CSAPR. As withthe Illinois BART/Regional Haze SIP, CSAPR is notyet effective. However, AER must comply with CSAPR when it becomes effective. USEPA released the final CSAPRregulation onJuly 7, 2011. There are important differences between the CSAPR and the MPS. As currently promulgated, theCSAPR is not as onerous asthe MPS because while the MPS requires a stringent emission rate, CSAPR is based on mass emissions. Also as currently promulgated, the CSAPR allows for compliance to be achieved through the purchase allowances while the MPS does not. The anticipated cost ofbuying allowances to comply with the proposed the CSAPR is not anticipated to be as financially challenging for

30USEPA'sproposedApprovalandPromulgation of AirQualityImplementation Plans; Illinois; Regional Ha::e, 77 Fed. Reg. 3973 (Jan. 26, 2012) is attached as Exhibit 13.
31 !d. In its TSD,theAgency recognized thatBART-eligibleunits must comply withBARTcontrols within five years ofUSEPA's approval ofthe State's SIP. Exh. 12, TSD, pg. 25. Ifapproved in 2012, for example, the compliance date for BART controls would be in 2017. The Agency also recognized that the agreements between Illinois and the utilities contain compliance dates that extend through 2019. Illinois' demonstration, however, relied on emission reductions required under the MPS and CPS by 2015, and emission reductions occurring after that date would simply serve to further improve visibility in Class I areas impacted by Illinois sources. USEPAacceptedIllinois' plan for S02 emissions reductions by 2015 as satisfyingBART. !d. 31AER as installing the pollution control technology in the current time frame required to meet current MPS emission rates. 

### C. AERMustAlso Complywith the MATS. In responseto the vacatur ofthe CAMR in 2008, USEPA proposed national emissions standards for hazardous air pollutants and for coal and oil-fired EGUs on March 16, 2011, known as the MATS. For coal-fired EGUs, the rule sets emission limits for mercury, PM, hydrogen chloride, and trace metals. The rule also establishes alternative numeric emissions limits. The final rule became effective on April 16, 2012,32 and allows at least three years and, in certain circumstances, up to five years to achieve compliance with the standards. AER intends to comply with the MATS at its facilities through the use ofa combination of existingFGD systems and sorbent injectiontechnologies.

VIII. 

### REQUEST TO WAIVE HEARING AER does not request that the Board hold a hearing in this matter. A hearing is not necessary atthis time, but once the Illinois' BART/SIP is adopted as final, Illinois must seek revisions to the SIP reflecting the terms of the variance. The SIP revision process will require a public hearing.


### IX. CERTAIN PROVISIONS OF THE BOARD'S VARIANCE PROCEDURAL RULES ARE NOTAPPLICABLE TO THIS REQUEST Thisrequest does not involve any existing permitor pending permit application.


### X. CONCLUSION AER's goal through this request is not to increase the burden on the consumer or
cause additional environmental impact. Illinois strove to achieve early and more stringent reductions in air emissions from power plants. As a result, plants across Illinois have made

32Therule becameeffective 60 days afterthedate ofpublication in theFederal Register onFebruary 16,2011. 77 Fed. Reg. 9304 (Feb. 16, 2012). 

### 32

### great strides in reducing air emissions. AER does not take its variance request lightly nor does it intend to be critical ofIllinois' achievements that ittoo has been apart of Section 35(a) ofthe Act states that "theBoard is not required to find that an arbitrary
or unreasonable hardship exists exclusively because the [state] regulatory standard is under review and the costs ofcompliance are substantial and certain." 415 ILCS 5/35(a)(2010). However, the Board has recently granted a variance to a petitioner faced with unique regulatory uncertainty where the costs ofcompliance were also determined both substantial and certain. ExxonMobil Oil Corp. 

### v. !EPA, 

### 11-86, 12-46 (Dec. I, 2011). Like ExxonMobil, AER is faced with stringent Illinois requirements in a landscape ofregulatory uncertainty at the federal level and deteriorating market conditions. Additional time will allow for the CSAPR appeal to be resolved and the possibility of federal regulation putting companies backon equal footing. AER, however, does not come to this Board and seek relief solely on the basis of regulatory uncertainty. Although AER wishes it did not exist, the "perfect storm" of regulatory uncertainty, state mandates that impose capital costs which cannot be financed through the rate base, unique market conditions, and severely depressed power price brings AERbeforethe Board as its lastand onlyresortfor temporary relief WHEREFORE, for the reasons set forth above, Petitioner AMEREN ENERGY RESOURCES, respectfully requests that the Board grant AER a variance from the requirement that it comply with a system-wide S02 

### annual emission rate of0.25 lb/mmBtu for the period from January I, 2015, through December 31, 2019, and from the requirement that it comply with a system-wide S02 

### annual emission rate of0.23 lb!JnmBtu for the period from January 1, 2017 through December 31; 2020.

33Dated: Amy Antoniolli Renee Cipriano SCHIFFHARDIN, LLP 233 South WackerDrive, Suite 6600 Chicago, Illinois 60606 312-258-5550 Fax: 312-258-5600 aantoniolli@schiffhardin.com by: Respectfully submitted, AMEREN ENERGYRESOURCES

# a~-

# ~ne oflts Attorneys

14EXHIBIT LIST Exhibit I.
.Selected Portions ofthe40'hAnnualIllinoisAirQualityReport, 2010 Exhibit 2. Table I: AmerenMPS Group Information Exhibit 3. NewtonEnergy CenterFGDProject Construction Permit ·Exhibit4. Ameren's MPS Opt-in letter

Exhibit 5. Affidavit ofGaryM. Rygh Exhibit 6. Affidavit ofRyan 

### J. Martin Exhibit 7. Affidavit ofSteven C. Whitworth Exhibit 8. EPA gives oil companies more time to capture emissionsfrom wells, Washington Post, Apr. 18, 2012. Exhibit 9. PublicNotice of WinningBidders andAverage Prices, (Feb. 16, 2012). Exhibit 10. Development Strategies Memorandum Exhibit 11. Affidavit ofShawn E. Shukar Exhibit 12. Selected Pages ofthe Technical SupportDocument for BestAvailable RetrofitTecJmology Under the RegionalHaze Rule Exhibit 13. Proposed Revisionsto Illinois SIP for Regional Haze

35