BEFORE THE ILLINOIS POLLUTION CONTROL BOARD 

AMEREN ENERGY RESOURCES, 

Petitioner, 

v. 

ILLINOIS ENVIRONMENTAL 

PROTECTION AGENCY, 

Respondent. 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

PCB 12-__ 

(Variance- Air) 

NOTICE OF FILING 

To: ALL PARTIES ON THE ATTACHED SERVICE LIST 

PLEASE TAKE NOTICE that we have today electronically filed with the Office of the 

Clerk of the Illinois Pollution Control Board a PETITION FOR VARIANCE, and the 

APPEARANCES OF AMY ANTONIOLLI and RENEE CIPRIANO, copies of which are 

herewith served upon you. 

Dated: May 3, 2012 

Amy Antoniolli 

Renee Cipriano 

SCHIFF HARDIN LLP 

233 South Wacker Drive 

Suite 6600 

Chicago, Illinois 60606 

312-258-5500 

~ ~ Amy Antoniolli 

D.AECEJV""" IVision ot L t: D 

ega./ Coun . . set 

MAY 0 l 'i() 

~ 12 

Environ mental P 

Agency rotecuon. - (1,.. A1TACHMENT 
CERTIFICATE OF SERVICE 

I, the undersigned, certify that on this 3rd day of May, 2012, I have served electronically 

the attached PETITION FOR VARIANCE, and APPEARANCES OF AMY ANTONIOLLI 

and RENEE CIPRIANO, upon the following persons: 

·John Therriault, Assistant Clerk 

Illinois Pollution Control Board 

James R. Thompson Center 

Suite 11-500 

I 00 West Randolph 

Chicago, Illinois 60601 

and electronically and by first class mail, postage affixed, upon: 

Division of Legal Counsel 

Illinois Environmental Protection Agency 

1021 North Grand Avenue, East 

P.O. Box 19276 

Springfield, Illinois 62794-9276 

Amy Antoniolli 

Renee Cipriano 

SCHIFF HARDIN LLP 

233 South Wacker Drive 

Suite 6600 

Chicago, Illinois 60606 

312-258-5500 

..... 

~ ,_' ' -

Amy Antoniolli 
SERVICE LIST 

(PCB 09-21) 

J obn Therriault, Assistant Clerk Division of Legal Counsel 

Illinois Pollution Control Board Illinois Environmental Protection Agency 

James R. Thompson Center 1021 North Grand Avenue, East 

100 West Randolph Street, Suite 11-500 P.O. Box 19276 

Chicago, Illinois 60601 Springfield, Illinois 62794-9276 

therriaj iali QCb. state.il. us 
BEFORE THE ILLINOIS POLLUTION CONTROL BOARD 

AMEREN ENERGY RESOURCES, 

Petitioner, 

v. 

ILLINOIS ENVIRONMENTAL 

PROTECTION AGENCY, 

Respondent. 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

APPEARANCE 

PCB 12-

(Variance- Air) 

I, Amy Antoniolli, hereby file my appearance in this proceeding on behalf of Petitioner, 

Ameren Energy Resources. 

Dated: May 3, 2012 

Schiff Hardin LLP 

233 South Wacker Drive 

Suite 6600 

Chicago, Illinois 60606 

312-258-5500 

aantoniolli@schiffhardin.com 

\ 
BEFORE THE ILLINOIS POLLUTION CONTROL BOARD 

AMEREN ENERGY RESOURCES, 

Petitioner, 

v. 

ILLINOIS ENVIRONMENTAL 

PROTECTION AGENCY, 

Respondent. 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

APPEARANCE 

PCB 12-

(Variance- Air) 

I, Renee Cipriano, hereby file my appearance in this proceeding on behalf of Petitioner, 

Ameren Energy Resources. 

Dated: May 3, 2012 

Schiff Hardin LLP 

233 South Wacker Drive 

Suite 6600 

Chicago, Illinois 60606 

312-258-5500 

rcipriano@schiffhardin.com 
BEFORE THE ILLINOIS POLLUTION CONTROL BOARD 

AMEREN ENERGY RESOURCES, 

Petitioner, 

. v. 

ILLINOIS ENVIRONMENTAL 

PROTECTION AGENCY, 

Respondent. 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

PETITION FOR 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 of the 

Illinois Environmental Protection Act, 415 ILCS 5/35, 37, ("Act") and 35 Ill. Adm. Code Part 

104, Subpart B, respectfully requests that the Illinois Pollution Control Board ("Board") grant 

Petitioners a variance from both the 2015 and 2017 sulfur dioxide (S02) emission rate 

provisions of the 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 relief from 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 1, 2017, and ending December 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 in an insufficient 

cash flow necessary to finance and maintain the construction completion schedule of flue gas 

desulfurization ("FGD") equipment at the Newton Energy Center ("Newton FGD Project") in 

time to meet those rates. By seeking relief now, which is critical from a timing standpoint, 

AER will conserve cash flow and stave off draconian operational measures with the hope that 

1 Hereinafter, citations to the Board's regulations will be by section number only. 
stability will eventually return to the marketplace thereby allowing the completion of the 

Newton FGD Project. Absent such stability and the improvement of power 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 of such 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, mobilizing and completion ofthe Newton FGD Project. 

A series of events over the past several months has contributed to 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 of power 

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 of the mildest 

winters of record 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 meet the 20 I 5 and 2017 system-wide rates.2 

2 AER is not the only coal~fired generation company feeling the devastating effects of current market conditions 

and seeking relief from 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 stringent than 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 of companies in surrounding states. Such costs must be 

built into the AER's power price structure further exacerbating market 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 of the 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 

market conditions. 

legislation pending in the Illinois General Assembly that would suspend portions of tbe MPS (HB 5!68, SB 

3283). 

3 Illinois deregulated its electricity market in 1997, following passage of the deregulation Jaw. At that time, 

Ameren Corporation's.rate regulated utilities transferred generating facilities formerly owned by Central Illinois 

Public Service Company ("CIPS") and Centra! Illinois Light Company ("C!LCO"), into merchant generating 

companies known as Ameren Energy Generating Company ("AEG") and AmerenEnergy Resources Generating 

Company ("AERG"). AER is the parent company of AEG and AERG. (a.k.a. "GENCO" in federal securities 

. filings and third party financial analysis). AER owns, respectively, the former Central Illinois Public Service 

Company (Nevvton, Coffeen, Meredosia, Hutsonville) plants and Centrallllinois Lighting Company (Duck 

Creek, E.D. Edwards) plants. In addition, AER owns 80% oftbe common stock of EEl which operates the 

Joppa Energy Center. 

4 The potential mothballing of generating units does not necessarily improve ambient air quality in the Illinois in 

that power producers from out of state who have not made capital investments in pollution control equipment 

can continue to operate at potentially higher capacity and emission levels. 
AER has instituted measures to conserve cash and has already ceased operation at two 

of its least economical facilities, all with the hope that the power price market will eventually 

recover sufficiently to support future capital expenditures at its operating energy centers. In 

recent years, the Petitioner 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 of 79% since 1990 and 23%. over the past four years. Under AER' s current MPS 

compliance plan, the completion of the Newton FGD Project is the next step in complying 

with the 2015 and 20 I 7 MPS S02 annual emission rates. 5 In support of its request for relief, 

and as part of its 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 

demonstrates in this petition that compliance with each the 2015 and 2017 S02 emission rates 

will impose an arbitrary and unreasonable hardship and the requested relief is warranted. 

1. AER ILLINOIS FLEET INFORMATION 

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 of electricity in several 

locations in downstate Illinois.6 These plants are the Coffeen Energy Center located in 

5 The FGD system at Newton would have also supported compliance with 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 of AER, which is a subsidiary Of Ameren Corporation. The 

IviPS required that the units of all of these 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 of Ryan Martin for a more detailed explanation of the corporate structure of Ameren Corporation and 

AER. 

4 
Montgomery County, the Duck Creek Energy Center located in Fulton County, the E.D. 

Edwards Energy Center located in Peoria County, the Joppa Energy 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 20 I 2, AER generates electricity at five of these facilities, having ceased 

operation of the Meredosia and Hutsonville Energy Centers. All of these counties are 

currently designated attainment for all pollutants.7 

The Illinois Environmental Protection Agency ("Agency") maintains a 

comprehensive, state-wide network of air quality monitoring stations. 8 The principal 

emissions at AER's coal-fired power plants are S02, nitrogen oxides ("NOx"), and particulate 

matter ("PM"). AER generally controls S02 emissions with pollution control equipment at 

several facilities as well as through the use of low 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 of low 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 emissions through the use of scrubbers and sorbent injection technologies. 

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 of the 

seven energy centers, their Illinois Environmental Protection Agency identification numbers, 

1 See the United States Environmental Protection Agency's ("USEPA") Green Book (list of national attainment 

and nonattainment designations) at< http://www.epa.gov/oar/oaqps/greenbk/>. 

8 Exhibit I, which consists of selected pages of the Agency's Illinois Annual Air Quality Report 2010, includes a 

copy of the map at page 34 (http://www.epa.state.il.us/air/air-quality-report/20 !0/air-quality-report-2010.pdf) 

depicting the locations of the air quality monitoring stations with the locations of AER energy centers 

superimposed. 
permit application numbers, and other pertinent information regarding their output, pollution 

control equipment, and S02 emissions are provided in Exhibit 2, attached to this Petition. As 

of the date of this 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 the Board in 2009. 

AER has not received any other variance concerning similar relief. AEG, AER, and 

AERG filed a petition for variance from the 2013 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, at the time of the variance denial, the Agency 

had a rulemaking proposal pending before the Board to amend portions of Section 225 to add 

mercury monitoring requirements. In the Matter of Amendments to 35 Ill. Adm. Code 225: 

Control of Emissions from Large Combustion Sources (Mercury Monitoring), R09-1 0 (Jun. 

18, 2009). AEG, AER, and AERG participated in that rulemaking, seeking revisions to the 

2013 and 2014 S02 emission rates of the MPS and agreeing to additional and more stringent 

S02 and NOx emission limits. The final rule, including revisions to Ameren's MPS Group 

S02 emission rates, became effective on July 15,2009. 

ll. REGULATION FROM WHICH VARIANCE IS SOUGHT 

AER seeks a variance extending compliance with both the 2015 and 2017 S02 system 

annual emission rates of the MPS. Section 225.233(e) states in relevant part: 

e) Emission Standards for NO, and S02. 

*** 

3) Ameren MPS Group Multi-Pollutant Standard 

*** 

C) S02 Emission Standards 

*** 

iii) Beginning in calendar year 2015 and continuing in. 

calendar year 2016, for the EGU s in the Ameren MPS 

h 
Group, the owner and operator of the EGUs must 

comply with an overall S02 annual emission rate of 

0.25 lb/million Btu. 

iv) Beginning in calendar year 2017 and continuing in each 

calendar year thereafter, for the EGUs in the Ameren 

MPS Group, the owner and operator of the EGUs must 

comply with an overall S02 annual emission rate of 0.23 

lb /million Btu. 

The original MPS became effective on January 5, 2007. In the Matter Of Proposed 

New 35 Ill. 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 OF VARIANCE RELIEF REQUEST 

AER seeks relief from 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 almost three years in advance of the 2015 compliance date and five years in advance 

of 20 I 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 of the 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 20 I 7 S02 

annual emission rates, AER will not under current market conditions be able to meet either 

compliance date, If relief is not granted then AER will need to 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 S02 annual emission rates until such time as market prices recover to 

9 The Newton Energy Center FGD Project construction permit is attached as Exhibit 3. · 

7 
the level that the Newton FGD 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 variance term of five 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 of time, 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, I 1-86, 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 of the 

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 part of its Compliance Plan accompanying this variance request, and in 

mitigation of the relief requested, AER first voluntarily offers that the Ameren MPS Group 

8 
will meet an overall annual S02 annual emission rate in 2012 through 2019 of 0.38 

lb/MMBtu, essentially the time period during the pendency of the variance. 

Importantly, committing to this voluntary S02 annual emission rate in its Compliance 

Plan, and in mitigation of the 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 

voluntarily meet this Compliance Plan rate in spite of the 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 expects to maintain a continuous program of construction at the 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 duct work fabrication will all be expected to continue over 

the next few years. Assuming power prices rebound, field construction activities including 

the mobilization of skilled craft labor and the procurement of commodity items could take 

approximately 24 months to complete once the project ramps back up. Proceeding in this 

manner will position AER for compliance with the 2015 S02 annual emission rate by January 

I, 2020 with the installation of the Newton FGDs. AER requires 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-service 
date of each of the 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 federal requirements which drove, in great part, the 

creation of the 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 of capital 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, without the benefit of a 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 of power at or near the cost of power 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 of Natural Resources, NR 446 et seq. Michigan requires mercury reductions from coal-fired 

EGUs by January I, 2015, or achieve 75% reduction under a multi-pollutant option. Mich. Adm. Code, Part 15; 

R 336.2501 et seq .. 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. 

!0 
project. Given this context, these events result in a "Black Swan" 11 for Illinois merchant 

generation companies- no one, not AER, the Agency, the Board, nor the General Assembly 

could have foreseen this chain of events nor their impacts at the time the State programs were 

proposed or adopted. 

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 environmental impacts. For all of these 

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 explain the series of events leading to this request 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's MPS Group Opted In the MPS in 2007 With the Expectation 

that Future Federal Regulatory Requirements Were Imminent. 

In May 2005, the USEPA promulgated regulations requiring reductions of emissions 

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 as well as several states west ofthe Mississippi River, while 

the CAMR applied to the lower 48 states. Both of these 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 a metaphor 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 Fooled By Randomness, which concerned financial events. His 2010 

boo~ The Black Sl~Fan extended the metaphor to events outside of financial markets. 

12 The CAIR applied more generally to fossil fuel-fired EGUs, while the CAMR was limited in applicability to 

just coal-fired EGUs. 

11 
these programs established caps on emissions of certain pollutants· for each affected state and 

provided that the states could choose to participate in USEPA-administered emissions trading 

programs if their state programs met certain minimum requirements. Both federal programs 

applied to AER'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 Proposed New 35 Ill. Adm. Code 225 Control 

of Emissions from Large Combustion Sources (Mercury), R06-25 (Dec. 21, 2006); In the 

Matter Of Proposed New Clean Air Interstate Rule (CAIR) S02, NOx Annual and NOx 

. Ozone Season Trading Programs, 35 Ill. Adm. Code 225 Subparts A, C, D, E and F, 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 of an 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 of the Illinois mercury rule.at Section 225.233. 13 The 

MPS was intended to be a comprehensive approach to the Illinois mercury rule that addressed 

mercury in coordination with other known air emission regulatory requirements, notably the 

CAIR, including use of potential 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 

Exhibit 4), and became subject to the NOx and S02 provisions of the MPS at that time. 

13 The MPS is a rule of general applicability, available to any of the 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 S02 control planning, 

and its resulting business plan. 

1? 
2. The Vacatur of the CAMR and Remand oft~e CAIR in 2008 Created 

Regulatory Uncertainty Leading to the Ameren .MPS Group's Request 

for .MPS Revisions in 2009. 

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, including AER, the Agency, and the Board, believed that CAMR and CAIR, or 

some version thereof, 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 of emission reduction requirements. However, the courts 

issued two unexpected judicial decisions. First, in February 2008, the U.S. Court of Appeals 

for the District of Columbia ("D.C. Circuit'') vacated the CAMR. See State of New Jersey v. 

Environmental Protection Agency, 517 F.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 subject to the maximum available control technology ("MACT") requirements of the 

Clean Air Act. 

Second, on July II, 2008, the D.C. Circuit vacated 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 

that the CAIR remain effective until the USEP A replaced it with 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 into 
the MPS, as the impacts of having an uneven playing field began revealing themselves. 

These judicial decisions, coupled with pending greenhouse gas emission regulations, severe 

market liquidity conditions, and the near collapse of the banking system first 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 S02 MPS annual emission rate in order 

to avoid stranded costs of compliance. Additional time allowed the AER companies to make 

more educated and sustainable investment decisions on how to comply with the MPS in light 

of the regulatory uncertainty on both the federal and regional levels. 

3. The Appeal of the CSAPR Has Caused a New Wave of Uncertainty 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 impact of S02 and 

NOx emissions from sources in upwind states to areas in downwind states by restricting the 

amount of emissions allowed on an annual or seasonal basis. USEPA claims the CSAPR 

would have reduced power plants S02 emissions by 73% and NOx by 54% from 2005 levels. 

76 Fed. Reg. 48349 (Aug. 8, 2011 ). Several parties challenged the rule immediately prior to 

the effective date. EME Homer City L.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 of the previously remanded 

CAIR program) until final resolution of the appeals. EME Homer City Generation L.P. v. 

EPA, No. 11-1302 (D.C. Cir. filed Dec. 30, 20 11). Since the fate of CSAPR is uncertain, as 

is the continuation of any federal emission reduction program, the very basis of the MPSthat is, an effective and permanent federal program-has yet to become a reality. 

14 
Certainly, the possibility of future 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 of the 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 of several months preceding this variance request 

make compliance with the emission rates at issue an arbitrary and unreasonable hardship. 

Indeed, the reality of this 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 of operations at its Hutsonville and Meredosia Energy Centers. At a loss of90 

good paying jobs 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 of Illinois' 

environmental stewardship, the financial ramifications of the CSAPR appeal are exacerbated 

for Illinois power companies compared to companies in other states for the two 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 of a permanent 

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 of the 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 of the 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 

equal footing 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 of environmental 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 projects to 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 of financial 

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. IfCSAPR had gone into effect January 1, 2012, it 

would have helped by at least leveling the playing field between Illinois merchant generators 

14 The Affidavit of Gary M. Rygh is attached as Exhibit 5 and will be cited to hereinafter as "Rygh Aff., Par. , 

15 The Affidavit of Ryan J. Martin is attached as Exhibit 6 and will be cited to hereinafter as "Martin Aff., 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 of the stay. Martin Aff., 

Par. 13. 

B. The Costs of Compliance with 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 explained that the costs necessary to achieve the MPS would 

be greater than those required by the original proposal because of the added S02 and NOx 

controls, but should carry a "more man~geable rate of increase 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 of the 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 of the MPS, including the annual mercury 

emission rate effective in 2015 which was the driver behind the MPS, and Illinois will enjoy 

the benefits of mercury 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 

Environment and to Comply With the MPS. 

The S02 provisions of the MPS do not mandate the installation of specific control 

technology. Specific technology choices are left to the discretion of the owner of regulated 

17 
EGU s 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 or capacity restrictions. 

Since 2006, AER has 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 and mercury controls are in place across the fleet. 16 

AER; along with Ameren Corporation, has also been a leader in the 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 

environment benefits 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 FutureGen Alliance and the Agency on a variety of permitting and regulatory approval issues in 

support of the project's clean coal technology objectives. 

17 In reference to mercury control, "mOre effective" means higher mercury control in a cost effective manner. 

lR 
also contemplated the construction of a 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 

choice but to initiate a deceleration of its construction efforts. As a result, the Company will 

not have the Newton FGD Project complete in time to meet either the 2015 or 2017 MPS 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 

the various engineering and construction activities it can fund so as be positioned to complete 

the FGD Project in time to comply with the 2015 MPS S02 annual emission rate by January 

1, 2020 and the 2017 rate by January 1, 2021. By the end of2012, AER will have spent over 

50% of the project cost. 

3. Due to Low Power Prices, AER Can No Longer Fund the Newton FGD 

Project in Time to Comply with the Current 2015 and 2017 MPS S02 Rates. 

Power prices in the Midwest impact both the cash flow of AER and the borrowing 

capability of its subsidiary AEG. Sales of power from AER generating units and the 

associated power prices are the source of cash 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 of the recession, the exceptionally mild weather this 

winter, and an increased supply of natural gas from shale gas that has contributed to lower 

18 S.ee Exhibit 3. 

19 
natural 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 of AER, 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 pressure for most unregulated power producers. 19 Id. at Par. 5-7. Further, as 

discussed previously, unlike their regulated peers, unregulated power companies do not enjoy 

the benefits of rate recovery assurance for capital investments. Instead, unregulated power 

companies can only turn to the markets to generate positive cash flow to help pay for capital 

investments. Id. at Par. 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 next three years are not expected 

to improve to thelevel to support the installation of the 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 not require market prices to be at a 

level necessary to fund the investments. Lenders look to this revenue stream in evaluating 

the credit worthiness of companies and establishing lending terms. In contrast, a merchant 

19 On April 17, 2012, USEPA issued final regulations delaying requirements for capturing air emissions from oil 

and gas wells until 2015 (http://www.epa.gov/airguality/oilandgas/actions.htm!). The goal of the 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. 

20 Public notice of Winning Bidders and Average Prices, (Feb. 16, 2012), attached as Exhibit 9. 

?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 of future power prices in assessing the creditworthiness of a 

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 

insufficient to 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 of pollution 

control facilities, including scrubbers, SCRs, landfills, cooling basins and towers, and 

precipitators,. at Duck Creek, E.D. Edwards, Coffeen, and Newton, not including the Newton 

FGD Project. Martin Aff., Par. 7. To fund its business operations, including the $1 billion in 

environmental compliance capital projects, AEG issued an $825 million secured debt held by 

bondholders. As conditions of various 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 of the 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 recent rating downgrade by Standard & Poor's places it within the upper tier of junk grade status, 

which increased financing costs and applicable. interest rates. 

'}1 
until power price market conditions improve, AEG will not be able to borrow additional 

funds to finance any project of the magnitude of the FGD Project. Martin Aff., Par. 9. 

AEG' s bond maturities also require AEG to preserve cash until market prices recover. 

Approximately $300 million of AEG's $825 million in long-term public bonds matures in 

2018, and approximately $250 million of this debt matures in 2020. Generally, AEG would 

plan to refinance these bonds in the public market and extend the maturity of the 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. An inability to repay the 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. Given these pending maturities, a weak 

financial forecast, and covenant provisions that are expected to restrict AEG'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 of the business and result substantial losses for all 

AER stakeholders, including both investors and those in the communities in which AER 

operates. Martin Aff., 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 of all 

of its 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, credit rating agencies have been very clear that 

if Ameren Corporation were to lend additional monies to AER such a capital injection would 

have adverse financial consequences on the ratings of the parent corporation. Rygh Aff., Par. 

22 

i 
11. As such, the financial distress of AER 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 of additional borrowings, there 

is no viable funding mechanism for completion ofthe Newton FGD Project by 2015 or 2017. 

Without relief from the Board, and in the absence of the 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/or Newton, would be necessary in order to maintain compliance in absence of completing 

the Newton FGD Project. Martin Aff., Par. 9. One of the main drivers for AER's petition for 

relief now is that if mothballing of facilities must occur, AER must have the necessary time 

to make and effectuate these critical decisions in the best possible way. 

1. Retiring Plants Would Substantially Impact AER Employees and Local 

Communities. 

The economic hardship experienced as a result of AER's failure to obtain regulatory 

relief will not be limited to AER alone. AERcurrently employs approximately 750 people at 

energy centers across the State. Both options negatively impact the company, local economy, 

and State. Should AER be forced to mothball power plants as a direct result of economic 

hardship brought on by compliance with the MPS, AER employees, contractors and the State 

will bear a significant portion of the 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 of this on the State and 

citizens of Illinois cannot be understated given the current economic conditions. 
At the request of AER, consultant Development Strategies performed an independent 

analysis of the 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 include the 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 of their earnings on 

housing and at local businesses (i.e. restaurants, mechanics, and grocery stores) are examples 

of the indirect economic impacts category. According to Development Strategies, AER puts 

$44.4 million into the local economy surrounding the 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 on the State's economy annually. Together 

the energy centers provided 274 good paying and much needed jobs for Illinois residents. 

Development Strategies estimates that because the AER facilities contribute to additional job 

support in the community and the State of Illinois, the two plants supported an additional 

1,209 total jobs held by Illinois residents. Thus ceasing operations at facilities such as the 

E.D. Edwards and Joppa Energy 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 indirect jobs for Illinois residents, reduce household earnings in regional 

22 Economic impacts of E.D. Edwards and Joppa Energy Centers of Illinois and surrounding market areas, 

Memorandum to Mike· Kearney, Manager, Economic Development, Ameren Services from Development 

Strategies (Apr. 19, 2012), attached as Exhibit 10. 

24 
labor markets, and result in the Joss of significant economic output that helps drive the 

Ill. . 23 mo1s economy. 

2. Ceasing Operations at Plants Will Indirectly Impact Illinois Electricity 

Consumers through the Power Market 

Illinois consumers of electricity could also feel the effects ofreduced competition and 

the retirement of efficient plants if AER must mothball units. AER's units are some of the 

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 of the 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 of Jack of 

access to financing options could be displaced by less efficient units from generation 

companies that do not have 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 demonstrate that 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 ). AER has crafted its mitigation and Compliance Plan with such demonstration in 

23 Exh. I 0, Tables 2 through 4. 

"The Affidavit of Shawn E. Schukar is attached as Exhibit II and will be cited to hereinafter as "Schukar Aff .• 

Par. -

25 
mind. Despite delaying the effective date of the 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 if the variance were not granted, the projected emissions under the variance 

S02 annual emission rates and Compliance Plan, and the cumulative S02 reduction under the 

requested relief through 2021. 25 The cumulative S02 reduction reflects the cessation of 

operations at the Hutsonville and Meredosia Energy Centers through 2021. 

Ameren Energy Resources Alternative S02 Limit Comparison to the Current MPS 

MPS Baseline Cumulative S02 Variance 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 See Affidavit of Steven Whitworth, attached as Exhibit 7. 

26 
AER specifically offers to meet an annual emission rate of 0.38 lb/mmBtu S02 on a 

yearly system average from 2012 through 2019 (with a 0.55lb.mmBtu or less S02 coal on the 

non-scrubbed units) that is more stringent than the existing 2012 and 2013 S02 emission rate 

of 0.50 lb/mmBtu and the 2014 S02 emission rate of 0.43 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 

Quality Report shows that air quality in Illinois is steadily improving_26 Statewide trends for 

the S02 24-hour average and !-hour average 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 of 2020. 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, Jllinois Air Quality Report, pg. ix. 

27 !d. at Fig. 6, pg. 11. 

27 
B. AER Will Continue to Comply with NOx and Mercury Control MPS 

Annual Emission Standards. 

AER has worked diligently to comply with all other components of the 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, or by 2017 if necessary to mitigate risks to electric reliability. 77 Fed. Reg. 9304 

(Feb. 16, 2012). 

AER has installed activated carbon injection ("ACI") systems on 12 units at 4 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 systems and 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 per year. 

AER continues to test and evaluate the performance of fuel additives to enhance 

mercury removal. 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. 

28 
C. AER Continues to Take Action 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 of Energy, Ameren Corporation researches the 

feasibility of carbon sequestration, the capture and underground storage of C02 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 half of the coal combustion wastes into beneficial uses; and 

participates in a reforestation organization which funds projects as a means of removing 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 of the 

variance should have no significant impact on water quality. In fact, there will be a net 

benefit with respect to air emissions associated with granting the variance. 

VII. COMPLIANCE WITH FEDERAL LAW 

The Board may grant the variance consistent with federal law and, specifically, with 

the Clean Air Act, 42 U.S.C. 7401 et seq. The requested variance is consistent with current 

federal law. However, on June 24, 2011, the Agency submitted portions of the 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 if final adoption will occur. Also, as noted above the CSAPR 

has been stayed pending the outcome of current litigation regarding the rule. The following 

paragraphs explain why the Board can grant the requested relief consistent with the Clean Air 

Act and pending regulations. 

29 
A. The Terms of the Requested Variance Are Consistent with Federal BART 

Regional Haze Requirements. 

The state of Illinois 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 what the 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 of BART controls on just subject-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 impairment if it imparts a change of visibility of at least 0.5 

deciviews. Illinois adopted this threshold as adequate and, using this threshold, concluded 

that PM emissions from its subset of BART sources have a negligible visibility impact. 

Second, USEPA stated in the proposed BART/regional haze SIP revisions that "[t]he 

MPS and CPS provide emission reduction well.in excess of simply implementing BART on 

28 Selected pages of the Agency's Technical Support Document for Best Available Retrofit Technology Under 

the Regional Ha::e Rule ("TSD"), Illinois Environmental Protection Agency, AQPSTR 09-06, pg. 23 (Apr. 29, 

2011) are attached as Exhibit 12. 

29 Exh. 12, TSD, pg. 25. 

30 
the 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 BART requirements.31 

AER's system-wide emissions under the proposed variance will provide even greater 

reductions compared to presumptive BART by 2015. Given the 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, the variance will 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 not impact the state's BART determinations. 

B. Once Effective, the Ameren MPS Group Will Comply with CSAPR. 

As with the Illinois BART/Regional Haze SIP, CSAPR is not yet effective. However, 

AER must comply with CSAPR when it becomes effective. USEPA released the final 

CSAPR regulation on July 7, 2011. There are important differences between the CSAPR and 

the MPS. As currently promulgated, the CSAPR is not as onerous as the 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 of buying allowances to 

comply with the proposed the CSAPR is not anticipated to be as financially challenging for 

30 USEPA's proposed Approval and Promulgation of Air Quality Implementation Plans; Illinois; Regional 

Ha::e, 77 Fed. Reg. 3973 (Jan. 26, 2012) is attached as Exhibit 13. 

31 !d. In its TSD, the Agency recognized that BART-eligible units must comply with BART controls within five 

years of USEPA's approval of the State's SIP. Exh. 12, TSD, pg. 25. If approved 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. USEPA accepted Illinois' plan for S02 emissions reductions by 2015 as satisfying BART. !d. 

31 
AER as installing the pollution control technology in the current time frame required to meet 

current MPS emission rates. 

C. AER Must Also Comply with the MATS. 

In response to the vacatur of the 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 of a combination of 

existing FGD systems and sorbent injection technologies. 

VIII. REQUEST TO WAIVE HEARING 

AER does not request that the Board hold a hearing in this matter. A hearing is not 

necessary at this 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 NOT APPLICABLE TO THIS REQUEST 

This request does not involve any existing permit or 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 

32 The rule became effective 60 days after the date of publication in the Federal Register on February 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 of Illinois' achievements that it too has been a part of 

Section 35(a) of the Act states that "the Board is not required to find that an arbitrary 

or unreasonable hardship exists exclusively because the [state] regulatory standard is under 

review and the costs of compliance 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 of compliance 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 of regulatory 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 

back on 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 

AER before the Board as its last and only resort for 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 of 0.25 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 of 0.23 lb!JnmBtu for the period 

from January 1, 2017 through December 31; 2020. 

33 
Dated: 

Amy Antoniolli 

Renee Cipriano 

SCHIFF HARDIN, LLP 

233 South Wacker Drive, Suite 6600 

Chicago, Illinois 60606 

312-258-5550 

Fax: 312-258-5600 

aantoniolli@schiffhardin.com 

by: 

Respectfully submitted, 

AMEREN ENERGY RESOURCES 

a~-

~ne oflts Attorneys 

14 
EXHIBIT LIST 

Exhibit I. . Selected Portions of the 40'h Annual Illinois Air Quality Report, 2010 

Exhibit 2. Table I: Ameren MPS Group Information 

Exhibit 3. Newton Energy Center FGD Project Construction Permit 

·Exhibit 4. Ameren's MPS Opt-in letter 

Exhibit 5. Affidavit of Gary M. Rygh 

Exhibit 6. Affidavit of Ryan J. Martin 

Exhibit 7. Affidavit of Steven C. Whitworth 

Exhibit 8. EPA gives oil companies more time to capture emissions from wells, 

Washington Post, Apr. 18, 2012. 

Exhibit 9. Public Notice of Winning Bidders and Average Prices, (Feb. 16, 2012). 

Exhibit 10. Development Strategies Memorandum 

Exhibit 11. Affidavit of Shawn E. Shukar 

Exhibit 12. Selected Pages of the Technical Support Document for Best Available 

Retrofit TecJmology Under the Regional Haze Rule 

Exhibit 13. Proposed Revisions to Illinois SIP for Regional Haze 

35