**Summary of Public Comments and Responses for:** 

Notice of Opportunity to Comment on a Methodology for Allocating Greenhouse Gas Emissions to a Combined Heat and Power Configuration under the Renewable Fuels Program, and the Application of this Methodology to a Proposed Plant by

Dakota Spirit AgEnergy

in Spiritwood, ND **Commenter Name**  **Commenter Affiliation Docket ID Number**  Floyd Gilzow Missouri Joint Municipal Electric

Utility Commission EPA - HQ - OAR - 2012 - 0636 - 0004 Richard Hardegger Barr Engineering Company EPA - HQ - OAR - 2012 - 0636 - 0005 Joseph M. Schmitt Citizen EPA - HQ - OAR - 2012 - 0636 - 0006 Howard J. Feldman American Petroleum Institute EPA - HQ - OAR - 2012 - 0636 - 0007 Dick Munson and Larry Plitch Recycled Energy Development and Veolia Energy EPA - HQ - OAR - 2012 - 0636 - 0008 Rolf Nordstrom Great Plains Institute EPA - HQ - OAR - 2012 - 0636 - 0009 Owen A. Kean American Chemistry Council EPA - HQ - OAR - 2012 - 0636 - 0010 Brad Upton National Council for Air and

Stream Improvement, Inc. EPA - HQ - OAR - 2012 - 0636 - 0011 Jan Weinzettel Citizen EPA - HQ - OAR - 2012 - 0636 - 0012**Applicability of Allocation Method to Other EPA Programs** 

**Commenter Name:** Floyd Gilzow **Commenter Affiliation:** Missouri Joint Municipal Electric Utility Commission **Docket ID Number:** EPA - HQ - OAR - 2012 - 0636 - 000 4 **Comment** : As the owner/operator of two Combined Heat and Power (CHP) Units, both of which have been presented awards by Region VII of the EPA, we are concerned about future application of this approach and its impact on our ability to utilize conventional configurations of on - site CHP in the future for ethanol plants as well as complying with the Tailoring Rule for GHG emissions. As you may be aware, Missouri has one of the lower rates of CHP use in the country , and that’s a ranking we are interested in changing. We encourage the insertion of language to more clearl y indicate that the identified approach was selected solely because of the unique set of conditions clearl y associated with this installation, and that had other conditions been present, another approach might have been selected. **Commenter Name:** Floyd Gilzow **Commenter Affiliation:** Missouri Joint Municipal Electric Utility Commission **Docket ID Number:** EPA - HQ - OAR - 2012 - 0636 - 0004 **Comment** : We also encourage the EPA to consider the implications of this rule’s interaction with the GHG Tailoring rule and the likelihood that there might be future pressure to use the apportionment approach to keep a power plant under the 100,000 ton CO2e limit or where the approach might push an industrial facility over th e 100,000 ton CO2e limit. **Commenter Name:** Brad Upton **Commenter Affiliation:** National Council for Air and Stream Improvement, Inc. **Docket ID Number:** EPA - HQ - OAR - 2012 - 0636 - 0004 **Comment** : Adoption of a single allocation method for application to all s ystems may result in unintended consequences relative to policy objectives. EPA should not, therefore, select the work potential method for universal application when allocating emissions from CHP configurations under the RFS sy stem. **Commenter Name:** Howard J. Feldman **Comme nter Affiliation:**  American Petroleum Institute **Docket ID Number:** EPA - HQ - OAR - 2012 - 0636 - 0007 **Comment** : Our principle concern is that if EPA applies the Work Allocation Methodology in this case it could serve as a precedent to be implemented in all other cases , in the RFS program and elsewhere. In this regard, we agree with EPA’s comment in the notice: “Since CHP sy stem design and operating characteristics vary so widely , leading organizations in this field have not developed a consensus on one preferred allocation method.” EPA, in our view, should remain flexible and allow the use of alternative methodologies that could be equivalent or more appropriate for other cogeneration arrangements. There are pros and cons for each approach and no one “right” methodology is obvious to us. **Commenter Name:** Howard J. Feldman **Commenter Affiliation:** American Petroleum Institute **Docket ID Number:** EPA - HQ - OAR - 2012 - 0636 - 0007**Comment** : Other methodologies may be more appropriate for other applications, so applying a flexible, multi - methodology approach makes the most sense to us. Again, we request that EPA explicitly indicate that the allocation approach ultimately chosen in this situation does not set precedent for other future applications. **Response:** As EPA stated in its decision on Dakota’s petition , EPA must determine emissions associated with imported steam to the Dakota plant in the context of lifecycle emissions accounting. EPA has chosen the work potential methodology due to the specific characte ristics of the CHP sy stem configuration outlined in Dakota’s petition. EPA is deciding how to allocate emissions from this specific offsite CHP sy stem for purposes of the RFS program. EPA is not making an y decision at this time as to how offsite CHP emis sions should be allocated for purposes of an y other regulatory program.**Methodology for Calculating Lifecycle Emissions**

**Commenter Name:** Howard J. Feldman **Commenter Affiliation:** American Petroleum Institute **Docket ID Number :**  EPA - HQ - OAR - 2012 - 0636 - 0007 **Comment:** H ow does EPA plan to “draw the box” when examining GHG emissions impact? In the case of the Dakota Spirit AgEnergy petition, the Work Allocation methodology applied b y EPA leaves a 10 MW shortfall in power generation. The marginal power generator to make up that short fall may

create more, or less, GHG emissions than the amount debited to shipping some of the steam offsite. Where does any difference get applied? **Response** : T he work potential approach effectively “draws the box” of emissions around the Spiritwood power plant . U sing the work potential allocation method, EPA allocated a portion of Spiritwood ’s total emissions to the imported steam used at the Dakota plant. The portion of emissions allocated to Dakota were calculated b y taking the GHG emission factor for the Spiritwood power plant without any steam extracted and multiplying that by the amount of electricity that is not generated due to the extraction of steam for the Dakota plant (approximately

10 MW). Effectivel y, this methodology cal culated the emissions associated with an additional 10 MW of power production from the Spiritwood power plant and assigned it to the Dakota plant. T he work potential approach therefore accounts for the emissions associated with a 10 MW reduction in power production . This is a reasonable approach to defining boundaries for determining the lifecycle emissions associated with the production of fuel at the Dakota facility . In an y case, the Spiritwood power plant has a GHG emission factor considerabl y higher than the national average grid electricity emission factor that we calculated for the March 2010 RFS rule, so our approach provided a conservative estimate of lifecycle GHG emissions associated with the Dakota plant. Using an alternative approach could result in underestimating the lifecycle GHG impacts of the Dakota plant. Using these boundaries , no further consideration of marginal power production by

an unidentified, other electric power generator is needed or appropriate . **Commenter Name:** Joseph M. Schmitt **Commenter Affiliation:** Citizen **Docket ID Number:** EPA - HQ - OAR - 2012 - 0636 - 0006 Comment: One must consider the impact of the coal fired plant’s emissions in evaluating this proposed Dakota Spirit plant since the coal fired plant would be inoperative but for the proposed plant and other proposed plants being shoved down people’s throats in an effort to find enough plants to justify

starting the coal fired plant since electricity generation does not justify starting the plant or it would be operating.. To not consider the fact that the coal fired power plant is idle and would otherwise remain idle when considering the impacts of emissions from the proposed Dakota Spirit Ag grossly

understates emissions that would result should the ethanol plant be built. The emissions from the power plant should be considered because it will otherwise remain idled, with no emissions. **Response:** Under the RFS program, EPA is required to determine whether the Dakota ethanol plant is able to achieve a 20% reducti on in lifecycle GHG emissions compared to the gasolinefuel baseline. As the steam used in the process will be imported from the adjacent Spiritwood

power plant , EPA has to determine the emissions associated with it as part of the lifecycle anal ys is for fu el produced at the Dakota plant . The work potential approach considers the emissions associated with the Spiritwood station and properl y allocates a portion of those to the Dakota plant steam use. The determination we have to make is whether the Dakota plant using steam from the Spiritwood station would meet the 20% lifecycle GHG reduction threshold, not what emissions would be if the Dakota plant was not built and operating . Therefore , the scope of our analy sis properl y consider ed the emissions associated with the steam exported to the Dakota plant. The scope of our anal ys is starts with the circumstances of fuel production before us, and does not address the situation where the Dakota plant is not buil t and does not produce fuel, and the Spiritw ood station does not operate . EPA reasonabl y considered that as outside the scope of our anal ys is , just as we do not include the emissions associated with the construction of fuel production facilities that have been built or may be built in the future. Our anal ys is starts with the assumption of an existing fuel production facility that is operational , and assesses the lifecycle emissions of fuel produced by such a facility . In these circumstances, EPA reasonabl y did not include, in the lifecycle analy sis of the fuel produced by the operational Dakota facility , a circumstance that would exist if the Dakota plant was never built and did not produce fuel.**Choice of Work Potent ial Allocation Method** 

**Commenter Name:** Brad Upton **Commenter Affiliation:** National Council for Air and Stream Improvement, Inc. **Docket ID Number:** EPA - HQ - OAR - 2012 - 0636 - 0004 **Comment** : However, in the petition under evaluation the thermal output of the CHP sy stem (steam exported to the corn ethanol plant) will be used for process heating, not for mechanical power. The WRI/WBCSD guidance states that "in cases where steam is used for process heating, the work potential method underestimates the amount of useful energy in the steam and should not be used." Therefore, EPA has misinterpreted the WRI/WBCSD guidance and inappropriatel y employed the work potential method. **Response:** EPA reviewed each emissions allocation approach to see which one most closely capture d the Dakota operations. While the Spiritwood power plant operat es in a CHP configuration when supplying steam to Dakota, EPA focused on the original purpose of the Spiritwood facility , which is to generate power. EPA carried through this rationale in its choice of the work potential approach. Using the work potential approach, all the benefits of CHP are applied to the steam because the ethanol plant is recovering energy from the steam that the power plant would not have used otherwise (as this energy is t ypicall y dissipated in the power plant condenser). EPA, b y taking this approach, has appropriatel y emplo yed the work potential method as outlined in the WRI/WBCSD guidance. Using any of the other approaches results in additional emissions allocated to the extracted steam and fewer emissions allocated to the remaining power , essentially resulting in a lower emissions factor for the power coming from the power plant for the remaining electricity generation at the Spiritwood power plant in CHP mode than the original emissions factor for electricity generated from the plant in power - onl y mode, making the power appear to be cleaner than it actually is. **Commenter Nam e:**  Brad Upton **Commenter Affiliation:** National Council for Air and Stream Improvement, Inc. **Docket ID Number:** EPA - HQ - OAR - 2012 - 0636 - 0004 **Comment** : EPA rejects both the efficiency and the energy

content methods for allocating GHG emissions from CHP plants because they are “based on assumptions.” The WRI/WBCSD guidance cited b y EPA lists the efficiency method as the preferred approach because it allocates GHG emissions from CHP systems according to the amount of fuel energy used to produce each final energy stream. Although the efficiency method ty

picall y relies upon assumed values for characterizing the efficiency of generating steam and electricity , the recommended default values are based on the performance of actual energy conversion sy stems and reflect that these s ys tems can produce much more thermal energy , from a given quantity of fuel, than electrical energy . The use of assumed efficiencies does not represent a deficiency in the WRI/WBCSD efficiency method. Furthermore, the assumed efficiency values can be replaced with facility- specific values if available.**Response:** The WRI/WBSCD guidance outlines the applicability of all three primary

approaches (efficiency , work potential and energy content). For the purposes of the WRI/WBSCD guidance , EPA recognizes that the guidance recommends the efficiency method “to insure a consistent approach to CHP allocation”. However, the guidance considers each of the approaches to have technical merit as it clearly states that , “ While this guidance document and a utomated calculation worksheets focus on the efficiency method, following the energy content, work potential, or one of the other CHP emission allocation methods may be acceptable as long as the methods used are clearl y stated, along with any and all assumptions inherent to the approach adopted”. In reviewing the efficiency method for its use in this particular analy sis, EPA recognized that the allocation of emissions would vary based on which heat and power production efficiencies are considered for the CHP system. In addition, as there are several efficiency allocation methods available (b y WRI, CARB and others), the selection of one efficiency method amongst them wou ld be difficult to determine as each method is defined b y its own set of electrical and thermal efficiencies. Furthermore, the use of default efficiency values would not be the most representative for the CHP system considered in this petition. In review ing the applicability of the energy

content method, EPA did not raise concerns over the use of default values. However, by focusing on the s ys tem’s energy content alone, the method does not take into consideration the relative value of the outputs or the relative efficiencies of generation that also play a role in the CHP sy stem emissions. For the reasons discussed here and in the decision document, EPA considers the work potential approach to be most appropriate method for allocat ing emissions from this s pecific offsite CHP sy stem for purposes of the RFS program. **Commenter Name:** Brad Upton **Commenter Affiliation:** National Council for Air and Stream Improvement, Inc. **Docket ID Number:** EPA - HQ - OAR - 2012 - 0636 - 0004 **Comment** : The energy

content method allocates GHG emissions according to the useful energy contained in each energy

stream output from the CHP sy stem. According to WRI/WBCSD it is “best suited where heat can be characterized as useful energy , e.g., for process or district heating.” Because the steam e xported from the power plant CHP sy stem currentl y under evaluation b y EPA will be used for process heating, use of the energy content method would be more appropriate than use of the work potential method according to the WRI/WBCSD guidance cited by EPA. It is not clear what assumptions EPA attributes to the energy content method when rejecting it in the agency ’s current evaluation. **Response :**  EPA undertook a deliberative process in which numerous methodologies for allocating emissions were reviewed. EPA ch ose the emissions allocation approach that was most applicable to the CHP sy stem configuration described in the Dakota petition. As the original purpose of the steam was for power generation, EPA estimated the emissions from the steam based on the original intent for the steam and allocated those emissions to the extracted steam . The energy

content method allocates emissions based on the energy content of the power and thermal outputs and makes no allowance for the relative value of the outputs or the relativeefficiencies of generation. Instead it allocates emissions based on the relative energy content of each output. It was therefore not considered appropriate for this particular application . **Commenter Name:** Brad Upton **Commenter Affiliation:** National Co uncil for Air and Stream Improvement, Inc. **Docket ID Number:** EPA - HQ - OAR - 2012 - 0636 - 0004 **Comment** : EPA proposes to simply appl y the emission factor corresponding to electricity generation when the coal fired power plant is not operated in CHP mode, multiplied by the quantity of electricity not generated due to steam extraction when the power plant is operating in CHP mode, and assign these emissions to the exported steam. EPA characterizes this approach as the work potential method, but it is inconsistent with the work potential method as described in the WRI/WBCSD guidance cited b y EPA. The work potential method allocates emissions based on the useful energy

represented by

electric power and heat, and defines useful energy on the ability of heat to perform wor

k. This useful energy

in heat (steam) is calculated from the specific enthalpy and specific entropy

of the steam according to thermody namic principles, and the useful energy in electrical power is equal to the total electricity generated. Total GHG emissio ns are then allocated to each energy stream in direct proportion to the energy stream's useful energy . Therefore, EPA has incorrectl y applied the work potential method. **Response:** EPA disagrees with this comment. The power not generated b y the steam once it is extracted is, by

definition in this case, the amount of useful work that the extracted steam represents in this sy stem and is based on the enthalpy drop and entrop y change of the steam as it passes through the low - pressure turbine. EPA has based the work potential on the power the steam would have produced and has made the most practical estimation of work potential based on the petitioner’s operating conditions. In this way , EPA’s approach is consistent with the concept behind the work potential method defined in the WRI/WBCSD guidance. **Commenter Name:** Dick Munson and Larry Plitch **Commenter Affiliation:** Recycled Energy Development and Veolia Energy **Docket ID Number:** EPA - HQ - O AR - 2012 - 0636 - 0008 **Comment** : That said, it appears EPA, in trying to advance the Work Allocation Method, has misinterpreted the CARB paper, which say s “[t]he work potential method may be most appropriate for s ys tems that use heat [thermal energy] to produce mechanical work.”1 In this way , the CARB paper suggests determining emissions based on how the thermal energy is used. Here, thermal energy

that is exported to the ethanol plant is likely used for process energy , not mechanical energy

or electricity . Thus, following the CARB recommendation, it seems the Work Allocation Method is not appropriate at the Spiritwood facility . **Response:** The CARB paper describes the work allocation approach as a method that “allocates emissions based on the useful energy represented by

electric power and heat. The work potential method may

be most appropriate for sy stems that use heat to produce mechanical work.” The ori ginal purpose of the steam extracted from the Spiritwood facility is to generate electricity. EPA undertook a deliberative process in which numerous methodologies for allocating emissions were reviewed. EPA concluded that the work potential approach most c losely captures the CHP sy stem configuration described in the Dakota petition.**Commenter Name:** Dick Munson and Larry Plitch **Commenter Affiliation:** Recycled Energy Development and Veolia Energy **Docket ID Number:** EPA - HQ - OAR - 2012 - 0636 - 0008 **Comment** : The Efficiency Allocation Method, as EPA notes, allocates GHG emissions based on the amount of fuel used to pro duce each final energy stream. Because it is based on the actual efficiency of thermal energy

and electricity

production, this methodology most accurately calculates the pollution - reduction benefits of CHP. Moreover, because this approach has been endorsed b y the Massachusetts Energy Portfolio legislation and the Climate Registry , it offers the consistency

and predictability

needed b y a growing CHP ind ustry . We encourage EPA to maintain that consistency and adopt the Efficiency Allocation Method under the Renewable Fuels Program. **Response:** The Massachusetts energy efficiency

approach used in the Massachusetts renewable fuels program is not meant to estimate the allocation of the emissions of a CHP system among its various outputs, but instead is a methodology to estimate the energy

savings that CHP represents compared to separate heat and power. The commenters lay out an approach to calculating the e nergy savings, and by

extension GHG savings, that a CHP project would provide compared to separate heat and power that is consistent with the CHP Partnership’s recommended methodology . This is a different objective, however, than allocating the specific emissions of the CHP system itself among the outputs of the CHP project . **Commenter Name:** Jan Weinzettel **Commenter Affiliation:** Citizen **Docket ID Number:** EPA - HQ - OAR - 2012 - 0636 - 0012 **Comment** : The allocation method suggested b y EPA favors the steam, since it is claimed that the total emissions from this sy stem are lower than the emissions of two separate s ys tems with these products and the emissions intensity of electricity

is not changed by

this allocation method from the case in which only electricity is produ ced. Therefore, onl y the emissions of heat generation are lower than in the separate sy stem. This is not “fair” as the power generation should also benefit from the lower total emissions in terms of lower emission intensity . **Response:** The work potential approach used in the Dakota case does indeed appl y all the benefits of CHP to the extracted steam ; however, as the commenter notes below, this could be considered appropriate for this particular configuration because the steam ‘would be used for electricity generation if not delivered as b y- product”. In addition, the plant is recovering energy from the steam that the power plant was never able to use (the energy lost in the power plant condenser). T he commenter appears to agree with the use of the work pot ential approach for this particular configuration. **Commenter Name:** Jan Weinzettel **Commenter Affiliation:** Citizen **Docket ID Number:** EPA - HQ - OAR - 2012 - 0636 - 0012 **Comment** : Therefore, even if the allocation method based on useful energy sounds appropriate, its application has two errors: first, it is applied at a wrong place in the production chain and second, the value of the useful energy of the steam is underestimated. In order to appl y this method correctly , emissions from combustion should be allocated to power generated by the firstHPST turbine and the total steam. The useful energy of the steam should be calculated based on theoretical value, not based on the second turbine. Such a modified allocation approach would provide appropriate results. **Response:** EPA’s application of the work potential method allocated emissions both to steam used to generate power through the high pressure turbine, and to the steam sent to the ethanol process based on the amount of power that would have been provided b y the extracted steam in the low - pressure steam turbine . T he commenter appears to suggest that a superior approach would be to calculate the displaced power that the extracted steam represented not by estimating the actual power not generated in the low - pressure turbine, but by using a theoretical generation efficiency . EPA believe s using the specific displaced power of the powe r plant itself is a more accurate and appropriate method for estimating emissions than attempting to derive a theoretical generation efficiency .