CAIR Replacement Rule

Discussions between OTC and EPA

March 18, 2009

I. Introduction

On Wednesday, March 18, 2009, EPA held a call with the Ozone Transport Commission 

(OTC) to discuss the CAIR replacement rule. See Appendix A for a list of the participants in the 

call. The notes that follow are a detailed summary of the call.

II. EPA Opening Comments

Sam Napolitano, CAMD, opened the call by thanking the OTC directors and staff. He 

said that EPA sees this call as the beginning of a dialogue with the states, regional groups, and 

other key stakeholders. EPA had a very productive conversation with LADCO on Monday

(March 16) and heard a number of good suggestions about how to move forward. The Agency

sees this call as the start of a similar dialogue with OTC about the different elements that should 

be included in a replacement CAIR rule. As part of the dialogue effort, EPA has pulled together 

the staff who will actually write the rule, develop technical analyses, and perform modeling. The 

Agency hopes to complete the rule in the next couple of years. CAIR will remain in effect as a 

new rule is being developed.

EPA has a topic guide to work from that is aimed at helping to organize the discussion. 

The purpose of this call is to gather different ideas and thoughts to present to the new Assistant 

Administrator for Air (AA). This first series of teleconferences will include calls with states and 

other stakeholders, including LADCO, NACAA, the southern states, Texas, industry

representatives, and environmental groups. When this series has concluded, EPA will meet with 

states to report what EPA has heard from all of the groups. This will provide a way for the states 

to react, and to continue the general dialogue. The Agency hopes to get back to the states around 

April 20th.

EPA is still waiting for the new AA, but staff have heard positive things about the likely

AA and expect her to arrive soon. The staff will discuss the input from these conversations with 

the AA to give her a sense of the analytical and technical work that has been completed.

The upcoming meeting in June might be a good time for interaction between state and 

EPA personnel. Also, the staff might have a better sense at that time of how the AA wants to 

move on a replacement CAIR rule. During the process, EPA will be sure to include states on any

key issues that arise.

At the moment EPA has many options to present to the new AA for direction. The 

political management structure is not yet fully in place. Thus, the Agency has not decided on 

how to address many of the difficult issues. However, this does afford an opportunity for the 

Agency to listen to all stakeholder viewpoints and consider new approaches to meeting air 

quality standards. There are many current programs and requirements, such as MACT, BART, 
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and regional haze that will affect the replacement rule. However, it is unclear at this time 

whether changes in those programs will have an effect on the replacement CAIR program.

EPA is interested in including industrial boilers, and will be discussing ICI boilers with 

CIBO. Although their inclusion is not certain, these boilers are definitely on the table for 

consideration.

EPA has received OTC's letter and understands the detailed work OTC is doing. The 

Agency looks forward to the results of that work being presented through the State Collaborative 

in the near future. 

III. OTC Opening Comments

Anna Garcia, Executive Director of the OTC, said that OTC was very interested in many 

of the issues on EPA's topic list. It should not surprise EPA that baseline, significant 

contribution, timing, trading, and coverage are all issues the Commission and its member states 

have been discussing. By May or June, OTC hopes to be able to share with EPA some of the 

technical work the Commission has completed. 

OTC shared the letter it and LADCO sent to EPA outlining the emission limits that the 

Commission thought would be required. The letter has been made public and was also shared 

with industry. OTC expects to hear reactions soon, and it has cost information and a preliminary

technical support document, both of which will be shared with EPA once they are finalized. 

OTC is updating its information on electric utility controls and emissions. The 

Commission hopes to perform detailed analysis in an effort to see the full range of reductions 

that would be possible, and at what price. 

Trading remains an issue of concern to OTC members, who are interested in how EPA 

will approach the policy and the court decision. OTC has seen cost benefits in most of its

analyses, but there are concerns about whether allowing trading will really solve transport issues. 

IV. OTC Discussion

1. Timing

Tad Aburn, MDE, noted that states are particularly concerned with whether the CAIR

replacement rule process would line up with the process that states have to go through to meet 

attainment deadlines. It is important to get the reductions by the attainment dates, if not three 

years beforehand, because states have to work within those dates. The big challenge is to make 

sure a replacement program happens quickly. 

Sam Napolitano, asked what years the states were considering. Tad replied that states 

were looking to have controls in place for 2013, 2014, and 2015 because they are anticipating 

that they will have to meet attainment in 2016. 
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Bill O'Sullivan, NJ DEP, suggested that performance standards would need to be 

considered in order to adequately address the court's concerns with the current CAIR rule. 

Because it will probably take longer than that timeframe to fully implement the performance 

standards, trading should be used as a way to encourage earlier deeper reductions from units that 

can reduce cheaply and quickly. He suggested that the phases of a replacement plan should 

coincide with attainment dates. It is important to pick performance standards that are not too 

high or too low, and to then allow trading to encourage reductions beyond the standard. 

2. Performance Standards

Sam Napolitano asked Bill O'Sullivan to define what performance standards he foresaw 

by pollutant and program. Bill replied that EPA would have to look at the different state 

programs, but that there should be performance standards for all three pollutants, and even 

tighter trading schemes for SO2 and NOx.

Sam asked Bill what he would base the standards on. Bill replied that he would use

RACT, which, while taking cost into account, does not require that controls are at the cheapest

cost available. He suggested that the original CAIR had paid too much attention to cost, and that 

EPA should look at what the Agency had used for RACT and retrofit BACT.

Ali Mirzakhalili, DNREC, suggested that EPA should look at anything above 25 MW for 

these performance standards, with 24-hour average limits set at around 0.26 pounds per mmBtu

for SO2 and 0.125 pounds per mmBtu for NOx. He thought those limits could be met with 

retrofit and hybrid controls. He also noted that because small units were able to meet those

requirements, large units should have an even easier time. 

Ali also agreed that timing is critical. He noted that plenty of work has been done, much 

of the groundwork has been laid, and he suggested that EPA could move faster than the two-year 

time frame to develop and promulgate a rule. If the Agency cannot move faster, he urged it to 

stick to the timeline and put the rule development in high gear. 

Sam acknowledged that EPA understood the states' concerns, but that two years is a very

fast schedule for EPA. How to define "significant contribution" certainly is one factor that will

lengthen the rule development process because EPA is still trying to figure out exactly what 

significant contribution is and how it compares to a base year. EPA also is working hard to get 

the inventories set up so they can perform the modeling that is needed to fully understand and 

demonstrate the elimination of significant contribution as required by section 110(a)(2)(D). The 

Agency would welcome any state help with either inventories or modeling. 

Tad Aburn suggested that one option for a CAIR replacement would be to disconnect it

as a complete solution for section 110(a)(2)(D). EPA could classify the new rule as another 

national rule that helps solve transport, but disconnect it from the section 110(a)(2)(D)

demonstration. He has never believed that section 110(a)(2)(D) could be solved by looking at a 

single sector. 
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Tim Smith, OAQPS, replied that under the section 110 findings of failure, EPA was now 

under FIP obligations to address section 110(a)(2)(D) transport issues. Therefore, the Agency is 

concerned about whether it has the flexibility to solve the section 110 findings of failure through 

another program. At the same time, the Agency is very sensitive to timing because it is already 

late, which means that EPA potentially could be sued and put on a schedule for rule completion. 

Tad pointed out that if EPA could disconnect the replacement rule from the obligation o f 

fully satisfying section 110(a)(2)(D), the Agency might face fewer legal challenges, which would 

clearly make the whole process easier and possibly faster. Section 110(a)(2)(D) is not simply

satisfied by passing a CAIR-type rule, and he would like to continue exploring the idea of 

disconnecting the replacement rule from the 110 finding. EPA noted that it welcomes ideas for 

fresh thinking and would like to hear more from the states about this issue.

3. Baseline

Susan Wierman, MARAMA, said that she does not understand how EPA could use future

year emission projections, which may or may not happen, as the baseline for determining a 

significant contribution. Based on the meeting agenda distributed before the call, it appears that 

EPA is still considering this approach, but she indicated that she does not think it makes sense as 

a concept. If EPA projects forward, the Agency cannot know where the emissions will come

from in the future because new sources are created and old ones shut down. Also, the Agency

cannot predict where emissions will occur under a trading program as allowances can move 

between states. She concluded that she thought EPA would have to look at existing emissions 

that everyone knows have occurred. 

Sam Napolitano replied that using the 2010 baseline was one of the few concepts EPA 

won in the court case. The Agency chose to use a future year baseline because it wanted to be 

able to take into account future reductions from settlement agreements and mobile source 

controls, as well as from other programs such as RACT. EPA is considering approaching the 

CAIR replacement rule baseline in a similar manner because an accurate projection of future 

emissions would require taking into account rules that EPA knows will have a quantifiable 

impact on emissions. Furthermore, inventories are works in progress; thus, some level of 

uncertainty is unavoidable. He added, however, that EPA would still welcome other ideas on 

this subject.

In response, other participants noted that EPA also won on the issue of what year the rule 

would take effect, as well as on some aspects of significant contribution. Tim Smith explained 

that for EPA the big issue in the July 11, 2008 court decision was the determination that EPA

had not come up with a rule that guaranteed to eliminate the significant contribution from each 

state. The court held that EPA had neither adequately quantified each state's significant 

contribution nor provided a remedy to eliminate the significant contribution which had been 

identified. The court did accept EPA's thresholds for consideration of geographical areas and its 

choice of a baseline year.

Susan suggested that in order to understand significant contribution EPA would be 

required to use current year emissions data rather than projecting what the Agency thinks 
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emissions will be at some point in the future and using those data to create the baseline for the 

programs. In response to Sam asking for further explanation of her rationale, Susan replied that

states would have to comment on which specific years should be used, but as a general principle 

she thought using a year that is known would be better than a technique that not everyone 

understands. 

Rob Sliwinski, NYSDEC, agreed with Susan, noting that the emissions causing the

attainment problems are current emissions. Thus, it makes the most sense to use actual data for 

the baseline rather than something based on conjecture and future forecasts. EPA should focus 

on eliminating the emissions that people know are actually causing or contributing to nonattainment. Susan added that she thought it might make sense to take into account future 

controls for mobile sources. However, because EPA knows what the emissions from EGUs are, 

it should rely on current year quality-assured data.

Tim Smith said that EPA is considering what baseline to use, and he thanked everyone 

for their input. Potential legal challenges may impact any final decision, and it will be important 

to look also at the criticism that might be leveled at the Agency if data from a current year were 

used for the baseline. Tim noted two areas of concern. The first concern is that there are 

definitive settlements in place which EPA knows will have a quantifiable effect on emissions. 

The second concern involves the SO2 bank, which could play a large role depending on the 

overall direction of a replacement rule and where allowance prices end up. A no-CAIR-baseline 

would have to take into account the possibility of an increase in emissions due to banked 

allowances. These are two major issues for EPA when considering what year to use for the 

baseline. 

Sam then asked Susan whether the 2008 inventories were ready to be used for creating a 

baseline. Susan replied that 2008 was not yet completed. Sam responded that even with the 

current year's data forecasting would be required. Susan replied that there was a one-year lag; 

thus, 2007 data are available and quality-assured. However, she added, even with 2007 data 

there are issues with some of the modeling inventory data. Another participant noted that states 

just received a request from EPA to see what controls are in place on EGUs and that there are

some issues with the inventories that were submitted. States are currently trying to correct the 

data in the inventory that was circulated.

Susan suggested that EPA use the 2007 data to generate the baseline because those are 

the data states are using for the next round of modeling. States would be willing to work with 

EPA to fix any issues with the data so as to ensure the Agency and the states agree on the 

baseline. There will be concerns in any year about future settlements and other programs that are 

coming on line. Those programs and settlements could be considered in the remedy rather than 

the baseline. 

Susan then noted that industry had raised the bank issue in recent meetings with the 

states, noting that if CAIR were in place for only a short period of time most sources would use 

up some of the banked allowances rather than put on further controls. Sam agreed this was a

likely scenario and noted that EPA was left by the Court with the shortened version of CAIR 
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from the options EPA had analyzed last fall. The decision allowed CAIR to stay in place, but 

only while EPA develops a replacement rule. 

Chris Salmi, NJ DEP, urged EPA to use the available information and move forward 

quickly. It is critical not to wait longer for more data because states have people breathing bad 

air, suffering health effects, and even dying. He stressed the importance of moving swiftly and 

decisively. 

Bill O'Sullivan strongly agreed with Chris. He also agreed with Susan that banking was 

something to be addressed in the remedy not the baseline. The baseline should be built on data 

that have been monitored and quality-assured rather than on future year projections. The same 

applies to concerns about future year settlements, which should be addressed in the remedy. The 

baseline should account for the situation as it exists in the most current data. 

Tim replied that EPA will consider all the comments about the baseline and will move as 

quickly as possible. However, one of the biggest concerns remains legal risk. The Agency

wants to be sure that any replacement rule will fully satisfy the courts because no matter how the 

rule is constructed, litigation is expected. 

4. Scope of the Replacement Rule

Ali Mirzakhalili suggested that EPA not try to do too much with the replacement rule. 

He thought one of the weaknesses with the last CAIR rule was that it tried to address 

contribution through a cap and trade program married to the Acid Rain Program. EPA would not 

have to deal with the bank if the Agency did not allow trading. Also, if EPA were to leave out 

provisions claiming that the rule fixes contribution then it would not be required to demonstrate 

the elimination of significant contribution. 

Anne Gobin, CT DEP, thought that EPA should bifurcate the rule process and get the

deepest and quickest reductions possible because people have unhealthy air, and states have to 

meet these attainment levels. The rule does not have to be perfect and does not have to fix 

everything in one step. She agreed with Ali that taking on too much with a replacement rule 

would open it to a high level of litigation risk. 

Sam Napolitano acknowledged that EPA understood and heard the states' desire to move 

quickly. Two years is a very fast time frame for EPA, and the Agency intends to move with all 

deliberate speed. However, as others have pointed out, one of the primary concerns is making 

sure the rule is legally defensible. 

Tim Smith said one of the core issues EPA needs to resolve is determining the purpose of 

the CAIR replacement rule. What is the rule trying to accomplish? 

Tad Aburn said that he believes the key to a new rule would be separating out section 

110(a)(2)(D). Although EPA tried to make section 110(a)(2)(D) only about EGUs in the original 

CAIR, he believes it covers cars and other sources. Clearly, section 110(a)(2)(D) is something 

EPA needs to deal with, but disconnecting it from a CAIR replacement rule might be best. It 
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appears that EPA is mostly concerned with section 110(a)(2)(D), while states are mostly

concerned with getting controls in place as fast as possible. 

Sara Schneeberg, OGC, replied that it might be possible legally to replace CAIR with a 

rule that does not rely on section 110(a)(2)(D) and to deal with the section 110 requirements 

through a FIP, but that would require significant work. State participants generally agreed but 

said they believed that EPA might be able to move faster by disconnecting from section 

110(a)(2)(D). 

One state participant asked how EPA thought section 110(a)(2)(D) would be addressed 

by looking only at the power sector, suggesting that the Agency would have to look at other 

sectors. EPA replied that it does not have an answer as to whether section 110(a)(2)(D)

requirements can be met by controlling the power sector only, and that the Agency is open to 

looking at additional sectors. The state participant then suggested that it depends on how 

significant contribution is defined and what categories EPA defines as contributing. All source 

categories should be considered, and reasonable screening criteria are needed to determine which 

sources are actually playing a role in significant contribution. Section 110(a)(2)(D) is not solved 

by just going after EGUs. Furthermore, seasonal or annual programs do not necessarily solve the 

transport issue. 

Sam mentioned that detaching the replacement program from the section 110(a)(2)(D)

finding might bring up authority issues. The court clearly instructed EPA to be sure the Agency

based the replacement rule on clear legislative authority. EPA is uncertain where that authority

would come from, except from section 110(a)(2)(D). The Agency is interested in the idea of 

bifurcation, but it is concerned about the legal foundation. 

Andy Bodnarik, NH DES, said that one thing the court made clear is that EPA must 

quantify each state's contribution, as well as each state's contribution to other states. Quantifying 

those contributions is not something that can be addressed without taking all sectors into 

account, along with all the state-specific requirements for those sectors. He also suggested that 

intrastate trading might provide flexibility. 

A participant from NJ DEP raised concerns about getting out of the significant 

contribution classification once a state had been determined to contribute to another state. For 

instance, one way to determine if a significant contribution has been addressed would be to look 

at the contributing state's rules and determine if the receiving state had at least as stringent 

controls as the contributing state. If both states have equally stringent rules, then the 

contribution might be considered satisfied, for example. 

5. Trading

Sam Napolitano noted that trading had not appeared to be a legal issue for most states,

and that only North Carolina had brought up legal concerns with trading. Other states had 

concerns about stringency and how many allowances were given out, but most states did not 

oppose the concept of trading. However, one of the most significant choices EPA must make in 

a replacement rule is between direct control and trading. EPA is considering direct control, but 
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"significant contribution" issues remain even if EPA were to choose a direct control (e.g., 

performance standard) approach. Direct control still leaves the same problem of trying to 

identify what parts of contribution are significant and then demonstrating that the remedy

eliminates that quantified significant contribution.

Susan Wierman indicated that the idea that only North Carolina had an issue with trading 

might be too narrow. Other states, such as New Jersey, Maryland, and Delaware, adopted statespecific rules that limited trading by requiring EGUs to put on controls and by curtailing their 

ability to buy or sell allowances. Although states did not argue against trading on legal grounds 

in CAIR litigation, they clearly had policy concerns. Sam agreed that some states had added 

local controls which the CAIR program allowed. In those states direct control exists with the 

ability for facilities also to trade. Originally, when he said that only North Carolina had a 

problem with trading he was speaking in the legal context regarding states that made a legal 

challenge. 

Susan noted that some states were concerned that transport issues could not be solved by

trading. She suggested that if an area in a state were contributing to non-attainment in another 

state, that area should itself be considered in non-attainment. There are clearly political 

ramifications to such a determination. This concept has been discussed by OTC but has not 

necessarily been supported by other states. However, she did think there was legal authority to 

move forward with something other than CAIR. 

Tim Smith raised concerns about how a strictly performance-based system can have a 

lowest common denominator effect. With command and control, sources control only down to 

the required level, even if they might easily and cheaply control more emissions. Trading adds 

an economic incentive to reduce immediately and beyond the required level so sources can sell 

or bank allowances. One idea EPA is considering is to establish minimum standards and allow 

any source that reduces below those to participate in trading.

Ali Mirzakhalili agreed that trading should be used to encourage additional reductions 

beyond the standard. He supports using a performance standard and allowing trading to help 

eliminate the lowest common denominator problem. 

Another state participant pointed out that regardless of trading, the key point of the North 

Carolina case was that EPA needs to eliminate significant contribution. 

6. Sectors to Include

Barbara Kwetz, Massachusetts DEP, said that she believed a replacement program would

have to look at more than just utilities. Massachusetts gets the most response in modeling from 

the on-road sector. She was unsure if EPA had the authority to look at on-road through 

significant contribution, but that the on-road sector plays a large role in their modeling. 

Barbara also said that she believed EPA needed to build efficiency factors into the 

consideration of EGUs. States were concerned with how the allowances were distributed 

between the states last time. She thought the new AA would support considering efficiency. 
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Sam Napolitano replied that it seemed that Barbara was suggesting that EPA needed to 

look at more than EGUs. Was she considering cars? Or more broadly, what other sectors do the 

states think EPA should look at? Barbara replied that she was just reporting on what the 

modeling was demonstrating. She supports bifurcating and dealing with significant contribution 

in a separate rulemaking because far more than just utilities are involved in transport. 

Jeff Crawford, ME DEP, suggested that it is important timing-wise and depth-wise to 

consider other programs that will affect mobile emissions. He thinks it might be better not to tie 

mobile sources directly into a CAIR replacement rule, but he also said that mobile sources 

should not be taken out of consideration. He also thinks that the new rule would need to include 

more than EGUs, most likely large stationary sources. Large stationary sources were originally

considered under CAIR, but in the end were not included because there was not enough 

information. Jeff believes the data have progressed to a point where EPA could justify including 

the large stationary sources. When asked if he was referring to new information on ICI boilers, 

he replied yes, in part, and that there was other new information that also supported inclusion of 

large stationary sources. 

Andy Bodnarik reiterated the idea of bifurcation, suggesting that EPA create one program 

to deal with transportation and another that addresses CAIR-like programs that use a 

combination of performance standards and trading. Mobile sources should be included as one of 

many sectors in the rule addressing transportation. 

Chris Salmi also believes that EPA should separate out section 110(a)(2)(D) and develop 

a comprehensive plan to address transportation. Such a plan could involve multiple smaller rules 

that combine to control transportation across numerous sectors, allowing EPA to achieve the 

objective in a timely fashion that the states believe is important. Sam thanked Chris for the 

suggestion and said that EPA would consider it. 

7. 1997 versus 2006 NAAQS

Bill Harnett noted that the 2007 deadline had passed for the FIP required by the section 

110(a)(2)(D) finding made in 2005 for the 1997 standards. He also noted that the group had not 

even begun to talk about the 2006 standards for PM and ozone and wondered how the states 

foresaw these standards being addressed.

The 2006 standards must be met in September 2009, so this is an immediate issue for the 

states. Would the states rather have EPA wait and see if the states can meet the standards, or

should EPA proceed with creating the FIP? Basically, should EPA consider the newer 

standards?

States replied that it would depend on what type of FIP EPA intended to create. It was 

also noted that timing is difficult because the dates are upcoming but not yet arrived. It is hard to 

address a standard that states are not yet officially failing, especially when standards exist that 

are supposed to have been met, but were not in fact met. However, it is also true that the 

compliance date for the 2006 standards is fast approaching. 
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One participant noted that the EPA Administrator has acknowledged in publications that 

EPA had not fulfilled the section 110(a)(2)(D) requirements over the past eight years and would 

have to do better. Thus, it seems as though EPA should admit that the approach to section 

110(a)(2)(D) did not work, lay out a new plan for how to address transport, and provide an 

indication of the role a CAIR replacement rule will play in helping reduce future transport. 

V. EPA Discussion

Sam Napolitano noted that the group had addressed each of the three topic areas on the 

agenda in a largely unstructured fashion, and asked whether there were any more discussion on 

the baseline. 

1. Baseline

Andy Bodnarik raised the legal problem that EPA must confront in trying to create a new 

rule. The more assumptions EPA tacks onto the rule, the harder it is to get the rule promulgated. 

Last time there were assumptions regarding BART, MACT, and RACT which he felt might 

endanger the rule in the future. 

EPA asked if he meant that the new rule should satisfy the BART, MACT, and RACT 

requirements. Andy responded that he did not mean this, but that if the future rule attempted to 

satisfy all those requirements it would face potential legal challenges because those requirements 

are moving targets. 

EPA acknowledged this point and said that in terms of the baseline question the Agency

is trying to understand what consideration, if any, it should give to the reductions those programs 

will achieve when creating the new baseline. 

The states responded that in general they were in favor of using actual emissions data to 

generate the baseline rather than using projected reductions. The states believe 2007 is the best 

year meteorologically and the one for which states have good data. Furthermore, 2007 is the 

year the states are using to create their inventories for the next round of SIPs. States would like 

to work with EPA on these data to be sure everyone has a complete inventory that is based on 

real, monitored data. 

2. Significant Contribution

Sam Napolitano then moved the discussion to significant contribution. Clearly the states 

understand that significant contribution is a big issue that EPA must be sure to adequately

address. EPA heard the states' suggestion for disconnecting from section 110(a)(2)(D), which is 

a good idea and will be considered. Do the states have any further comments or suggestions 

about how to deal with significant contribution? 

One participant replied that she had read the rules and the methodologies and was still 

confused about how EPA arrived at the significant contribution levels used in the original CAIR. 
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She said that she understands the levels, but not the methodology used to determine them. She 

asked if EPA would be reviewing these methodologies, and wondered what universe of factors 

EPA generally considered when determining significant contribution or performing related 

modeling. 

Sam explained that there were two elements involved in a significant contribution 

determination. The first was a numeric metric used to define which geographical areas should be 

in CAIR. The court agreed with EPA's process in terms of identifying the areas that should be 

included. The second element was the remedy; here sources were required to put on highly costeffective controls. If cost-effective controls were put in place, the unit was determined to have 

met its CAIR obligations. By definition, complying with CAIR also meant the unit was in 

compliance with section 110(a)(2)(D) requirements. 

States noted that the second section was what the court struck down. Cost can be 

considered as part of the control strategy, but EPA said that if the cost were reasonable then the 

controls met the requirements. It was suggested that the court thought EPA had put the priorities 

in the wrong order. EPA agreed that clearly the court had found the old method unacceptable, 

but the Agency was less certain about what the court would find acceptable, which is part of 

what is driving the solicitation of new ideas.

Barbara Kwetz suggested that significant contribution was a scientific test which requires 

EPA to figure out and define the linkage between one state's emissions and exactly what part of 

those emissions are significantly contributing to non-attainment in a different state. Costeffectiveness arises when looking at a remedy. Sam agreed that this was one way to approach 

significant contribution. 

Barbara agreed that the court upheld the geographic metrics, but thought that in order to 

meet the standards the metrics might have to be lowered to include more areas. However, once 

that significant contribution is identified it must be removed; cost-effectiveness only comes into 

consideration when choosing between the different strategies that will eliminate significant 

contribution. Cost-effectiveness alone does not eliminate significant contribution. 

Tim Smith noted that EPA needed to develop some method of measuring the actual 

amount of significant contribution, not just whether an area did indeed significantly contribute. 

The court specifically held that under section 110(a)(2)(D) EPA needed to identify the 

significant contribution, and then eliminate what was identified. In the original CAIR, the court 

found that EPA had neither identified nor eliminated the significant contribution. 

Ali Mirzakhalili added that the geographic threshold of 0.2 that the court agreed EPA had 

done correctly was based on a standard which is up for review and will mostly like be revised. 

However, another participant noted that the court had sent only the annual standard back to EPA 

for review. It is impossible to prejudge what will happen during the review because the court 

asked EPA to justify only the level at which the annual standard was set. Therefore, it is not 

certain that the standard will change. Ali agreed with this but noted that the ozone NAAQS had 

already been lowered from 80 ppb to 75 ppb. He suggested that because the standard is more 

stringent, the thresholds for significant contribution should be tightened as well. 
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Some states noted that section 110(a)(2)(D) requires SIPs to contain adequate measures 

to deal with transport. They suggested that the difference between individual states' controls 

should be taken into account when determining significant contribution. This would level the 

playing field and ensure that those states which already have significant levels of control are 

given credit for those reductions. 

As a participant from NJ DEP had noted earlier, as part of the review it would be 

important to determine whether the receiving state has rules at least as stringent as those of the 

contributing state. 

The states have always been slightly confused about the way EPA makes significant

contribution determinations. It was suggested that if an upwind state does not have a SIP 

measure that provides a non-zero benefit to the downwind area, the downwind area already has

those types of controls in the SIP, and the downwind state's controls are cost-effective, then no 

matter how small the contribution is from the upwind state, it should be considered significant. 

The suggestion was that EPA might look at using the SIP measures as the driver for section 

110(a)(2)(D).

Sam explained that EPA has always been concerned about industry litigation risk. The 

Agency has always tried to select levels that industry would have difficulty arguing were not 

significant. Furthermore, requiring a 0.2 microgram reduction through a SIP requires significant

effort. The entire CAIR program on average removed 1 microgram. 

Tim asked the larger question of whether in determining what different states need to do 

to meet section 110(a)(2)(D) requirements EPA should look at significant contribution strictly

through a level playing field paradigm, or should it also weigh which states contribute more? 

One state participant replied that the assumption is that states that contribute more would 

have to control more. Susan Wierman raised the fact that states, specifically those in the 

Northeast, are smaller, and that non-attainment areas overlap state boundaries. For instance, the 

District of Columbia non-attainment area includes three to four states. It would seem that if 

there is an approvable SIP for that non-attainment area then the SIP itself is a demonstration that 

each of the states have done what is required to address transport to the states in that nonattainment area. Using the SIPs as a significant contribution metric would allow EPA to move 

away from a metric based on standards which change over time. 

Leah Weiss, NESCAUM, noted that all of the modeling numbers are based on an average 

summer day. However, many areas are affected by peak emissions, which need to be considered 

because those emissions often overwhelm an area and cause ozone non-attainment. Tim asked 

whether the states believe that the peak issue is linked to transport. Jeff Crawford responded that 

Maine has experienced high ozone levels between 2 a.m. and 3 a.m., which clearly points to a 

transport problem.

EPA noted that its modeling has historically been aimed at a peak. The Agency would

take an episode period, work through it, and think about significant contribution relative to the 
Page 13

peak. EPA then asked if the peak emission issue involved peaker plants coming on line during 

high demand days, as those plants are often smaller and dirtier than usual. One participant 

suggested that EPA had not looked at the issue in that light before. Leah noted generally that the 

manner in which modeling is performed may contribute to some difficulties in this area. 

Tad Aburn asked if the section 110(a)(2)(D) demonstration was the responsibility of the 

upwind area. EPA said that it is the states' responsibility to demonstrate compliance through the 

SIPs with section 110(a)(2)(D), and that the finding of failure to demonstrate section 110 

compliance is what triggered this whole process. 

Tad asked if EPA might be able to provide more guidance to the states on how to meet 

the section 110(a)(2)(D) requirements and what that demonstration would require. Bill Harnett

agreed that guidance might be useful. Especially as the section 110 transport requirements will 

continue to be an issue in the eastern U.S. In any demonstration there would have to be both a 

modeling and a control component. EPA expressed an interest in knowing which elements of the 

demonstration, such as state and regional modeling, have already been developed through the 

RPO process. 

OTC asked about EPA's review process for determining section 110(a)(2)(D)

compliance. OTC said it also would be interested in additional guidance from EPA on how to 

meet those requirements. EPA responded that most states do not submit anything on this issue. 

This means, of course, that the state automatically falls under the FIP. There was some 

discussion about the complexity of the demonstrations, and it was suggested that in many ways

the technical aspects of a demonstration might be beyond the resources of states and that the SIP 

process might not really be appropriate. However, EPA understands the concerns and will look 

into issuing more guidance. 

David Wackter, CT DEP, indicated that he thought that addressing significant

contribution would require sector-by-sector modeling. This would allow EPA to define what 

part of the significant contribution comes from EGUs and create a rule to deal with that specific 

part of the significant contribution. EPA would also be able to see what portion of significant 

contribution came from mobile sources, point sources, and area sources. He added that he 

believes the modeling would show that sources other than EGUs are playing a large role in 

contribution, which would mean that reductions might be required from those other sources. He 

reiterated support for bifurcating the process.

Sam acknowledged the suggestions and said that EPA would consider the bifurcation

ideas. He then asked if the states had any more thoughts on the remedy.

3. Remedy

Chris Salmi suggested that there are a number of area source categories where national 

rules make more sense. For instance, paint products, ICI boilers, and many others. Another 

participant noted that OTC was re-examining area source rules and going back to the VOC rules 

concerning consumer products. The Commission is very interested in working with EPA on new 
Page 14

national rules controlling emissions from sources other than EGUs, and would be happy to share 

with EPA the work done so far. 

Bill Harnett noted that there appeared to be two different remedies to address transport 

that states would like to see implemented. The first would be to look at area sources for 

contribution and set a level of control that sources would be required to achieve for area sources 

per state. EPA could recommend to the state how to achieve those control levels and what types 

of controls EPA believed would be cost-effective. However, it would be up to the state to meet 

the requirements. A second remedy would deal with national rules covering other sources, such 

as future consumer products. 

One participant suggested EPA use thresholds for other sources and allow the states to 

decide how to meet the thresholds. 

EPA indicated that it understands that the states are very interested in getting a program 

in place as quickly as possible. The Agency understands that states want EPA to do whatever is 

possible with EGUs and large stationary sources under the revised CAIR, and then to consider 

separate programs to control other types of sources.

Andy Bodnarik noted that some states already have area rules that cover manufacturing

and deal with more than just paints and coatings. Therefore, he believes states might support 

national standards that fit into pre-existing rules. For example, California dealt with some area 

sources, such as water heaters, by adopting a manufacturing standard. There are clearly products 

other than VOC emitters that are contributing to the overall emissions in large amounts. 

Sam Napolitano asked if Andy was referring to building codes. Andy replied that he was 

thinking more along the lines of how EPA controlled wood stoves. Sam asked if he thought this 

would be regulated under NSPS. Andy said it could operate in a similar manner, depending on 

the source. For example, under the wood stove program, EPA set up a test lab, and 

manufacturers either passed or failed. Andy suggested EPA could do with other sources the 

same as California did with water heaters. 

Bill Harnett agreed that using an approach similar to wood stoves for other area sources 

would be one option. However, Peter Tsirigotis, OAQPS, might raise concerns with resources as

his division can barely keep up with current programs and litigation on MACT and residual risk. 

Standards have to be reviewed, and the group is reviewing about 80 rules every two years. In 

addition, the sheer volume of court-ordered work at this time makes it difficult to look ahead. 

Although it strains EPA's resources, the Agency is required to comply with court orders. Bill 

said he would raise the issue with Peter, but wanted the states to bear the resource situation in 

mind. 

4. Coverage and Timing

Sam Napolitano moved the discussion to coverage and timing, stating that EPA 

understands that the states believe the program is late and that they are pushing for fast action. 
Page 15

From this conversation he understands that the states would like EPA to deal with the 2006 and 

2008 revised NAAQS for ozone and particulates, as well as the 1997 standards.

The states confirmed that a CAIR replacement rule on EGUs should consider all three 

standards. Using the 2006 and 2008 standards means that EPA will have to define transport 

within the framework of these newer, more stringent standards. However, put simply, the states 

are interested in the deepest and fastest emission reductions EPA can achieve. If combining 

source categories is necessary and will delay the rule, states understand why EPA may have to 

take that path, but the states encouraged the Agency to determine how to get some immediate 

reductions. 

Sam replied that EPA would be best able to look at utilities and possibly large industrial 

boilers because other source categories have not been focused on in recent years. EPA will have 

to build up data and research policy options concerning area and other sources. EPA believes 

utilities and large industrial boilers will be the easiest to get quick reductions from because so 

much work has already been done with these sources. 

VI. Conclusion

Sam Napolitano noted that the 2005–2008 data indicate that even with the shortened

CAIR and the court challenges, the current programs have brought SO2 down by 2.4 million tons

in the CAIR region. Emissions are still under the cap, and the bank did get bigger, but some 

progress was made. Additionally, the same data show that there was an annual NOx reduction of 

over 0.5 million tons in the CAIR region. The 2008 data are not finalized, but it appears as 

though emissions will be under the summer cap. 

Clearly, everyone would like to achieve greater reductions. However, EPA does believe 

these results will be helpful in trying to meet attainment requirements. While the SO2 bank is 

clearly an issue, EPA believes the NOx reductions are very real and binding. Sam noted that 

while most people were satisfied with the reductions under Phase I, OTC had wanted further 

reductions, and EPA looks forward to making sure reductions continue to occur. Finally, it is 

important to note that there are many control equipment projects under construction that will 

bring even more reductions. 

States and OTC said that they were pleased to hear about the reductions. However, they

are concerned because preliminary work (which has not yet been made public) based on the last 

round of modeling indicates that another 500,000 tons of NOx reductions will be required in the 

region. They cautioned that all the data had not been finalized, but noted that a large reduction 

would be required just from the Northeast region. That does not even take into account 

reductions that will be required from other regions such as the Midwest and South. In response 

to further questions from EPA, they explained that the predicted 500,000 ton reduction 

requirement applied not just to EGUs but to all sectors. In the power sector, it appears that a 

reduction of a few hundred thousand tons might be required. Sam then announced that Maryland

was the big reducer for NOx, and he congratulated Tad Aburn. 
Page 16

Ali Mirzakhalili thanked EPA for the renewed efforts at dialogue and mentioned that he 

hoped the dialogue would continue. In the past, starting with the Clear Skies initiative, the states'

message has been that the federal reductions are too little and too late. The federal response to 

the states' concerns was usually that EPA was doing the best it possibly could and that the 

reductions offered were the best the states were going to get. He hopes that the state comments 

were clear that this time EPA needs to do better and develop more stringent number and caps. 

States need reductions immediately to help meet attainment dates. 

Sam acknowledged that EPA had heard the states and suggested that the new AA would 

be a good listener. Bill Harnett agreed with Sam and thought the new AA would want to engage 

with states to make sure EPA understands the issues states are facing and the support they need 

from the Agency. Both Sam and Bill indicated that they understand that the states would like to 

have been more involved in the development of CAIR, and they reiterated EPA's interest and 

commitment to a strong dialogue with the states. 

Anna Garcia expressed OTC's approval of the renewed commitment to dialogue. OTC 

and the states then asked EPA how it thought regular communication between states and EPA

could be structured. They suggested that EPA staff discuss the issue once the political leadership 

was settled. 

Bill Harnett indicated that he thought that arranging a phone call similar to this one 

would be one way EPA could keep the lines of communication open. For now, EPA will stay in 

touch with OTC and let OTC decide at what point another discussion would be useful. As noted 

at the beginning of this call, at some point after April 20th, EPA will present a summary of this 

series of preliminary calls with states and other stakeholders. The semi-annual meeting was also 

mentioned as a good place for some direct contact, though the states noted that it is difficult at 

this time to get travel approval. 

Ali offered to develop a draft model rule to share with EPA. EPA agreed to consider it 

and suggested that he email it to Bill or Sam, either of whom would then circulate the draft to the 

whole team. 

Anna Garcia concluded by thanking EPA, noting that OTC would be speaking with 

LADCO the next day during the collaborative call, and she said that if there is anything OTC can 

do to help EPA, the Agency should not hesitate to call. The states and OTC do understand that 

there is lot of work facing the Agency. 

Sam thanked OTC and reiterated that EPA understands the states want a rule back in 

place as soon as possible. He concluded by noting that if the states had concerns about specific 

details they should not hesitate to call or email EPA.
Appendix A:

Participants

OTC and Other Groups:

Anna Garcia (OTC)

Doug Austin (OTC)

Seth Barna (OTC)

Amy Royden-Bloom (NACAA)

Leah Weiss (NESCAUM)

Susan Wierman (MARAMA)

States:

Anne Gobin (Connecticut)

David Wackter (Connecticut) 

Ali Mirzakhalili (Delaware)

Cecily Beall (District of Columbia)

Jeff Crawford (Maine)

Diane Nelson (Maryland)

Frank Courtright (Maryland)

George (Tad) Aburn (Maryland)

Barbara Kwetz (Massachusetts)

Andrew (Andy) Bodnarik (New Hampshire)

Jeff Underhill (New Hampshire)

David Shaw (New York)

Robert Sliwinski (New York)

Jared Snyder (New York)

William (Bill) O’Sullivan (New Jersey)

Chris N. Salmi (New Jersey)

Joyce Epps (Pennsylvania)

Barbara Morin (Rhode Island)

Mike Dowd (Virginia) 

Tamera Thompson (Virginia)

Tom Ballou (Virginia)
Appendix A: Participants

Page 2

EPA:

CAMD:

Sam Napolitano

Larry Kertcher 

Beth Murray

Gabrielle Stevens

Meg Victor

Tamara Saltman

OAPQS:

Bill Harnett

Rich Damberg

Todd Hawes

Gobeail McKinley

Tim Smith

OGC:

Sara Schneeberg

Representatives from EPA Regions 1 and 2