Clean Air Act Advisory Committee Meeting:CAIR UpdateBrian McLean, DirectorOffice of Atmospheric ProgramsBill Harnett, DirectorAir Quality Policy DivisionU.S. Environmental Protection AgencySeptember 18, 20081Overview•CAIR and the Court Decision•Impacts and Consequences•Options for Action–Legal–Legislative–Regulatory2What Is the Clean Air Interstate Rule (CAIR)?

ug/m3•CAIR is EPA’s strategy toreduce interstate transport ofemissions contributing tononattainment of National Ambient Air Quality Standards (NAAQS) for fine particles (PM2.5)and ozone in the eastern U.S.•Uses an optional set of 3 interstate tradingprograms to achieve highly cost-effectiveemission reductions of sulfur dioxide (SO2) and nitrogen oxides (NOx)•Not intended to be an air qualityEastern urban/rural fine particlespanacea, but a valuable aid to state-30led efforts to attain the NAAQS, as25201510standard•EPA successfully addressed a5similar ozone problem in the 1990s0well as reduce acid rain and regional1997hazeStandardannual

St.Louis/3 Sites Birmingham/SIP Indy/LIVO Atlanta/2 Sites Cleveland/MKGO Charlotte/LIGO Richmond/JARI Baltimore/DOSO Bronx/BRIGby developing the NOxBudgetTrading Program under the NOx SIPCallUrban ContributionRegional Contribution12-month average PM2.5 mass from speciation samplersReference: 2002 EPA Trends Reporthttp://www.epa.gov/air/airtrends/chem_spec_of_pm2.5_b.pdf3July 11, 2008 – CAIR Court Decision•EPA was sued by a few parties on variousaspects of CAIR following promulgation in 2005•The Court issued its decision* on July 11, 2008–Opinion was mixed: ruled for CAIR in some instancesand against it in others–Overall the decision vacated the entire rule and theFIP*summary of Court decision in Appendix4What Are the Consequences of the Court’sDecision?•Disruption/delay of industry plans for installationand operation of pollution abatement equipment•Lost health and environmental benefits•Increased administrative costs to governmentand industry•Questions of future cap and trade programviability5SO2Emissions from the Power Sectorin the Short-term (2009-2011)*Potential Annual SO2Emissions under VariousQuick Fix Options in 2009-2011 for the CAIR Region*02,0004,0006,0008,00010,00012,000

1,000 tons200920102011CAIR Phase I CapNon-CAIR SO2SourcesCAIR SO2Sources2005 Emissions Full CAIR No Fix CAIR Ph I w/ 2CAIR Ph I w/ 4CAIR Ph IYR SunsetYR SunsetPermanent*This chart considers forecasted emissions from full CAIR and various quick fix alternatives. It does not factor in independentactions from States orindustry to provide added controls without other direct federalrequirements. For subsequent years, Clean Air Act requirementscould be expected toresult in new control measures needed to attain the current NAAQS and implement the more stringent 2006 NAAQS for PM2.5 and ozone.6Benefits Relative to CAIR in theShort-term (2009-2011)*Potential Annual Premature Deaths for Various Quick Fix Optionsin 2009-2011 for the CAIR Region*No FixCAIR Ph I w/ 2 YRCAIR Ph I w/ 4 YRCAIR Ph I PermanentSunsetSunset02,0004,0006,0008,00010,00012,00014,000

Annual Premature Deaths200920102011*This chart considers forecasted emissions from full CAIR and various quick fix alternatives. It does not factor in independent actions from States orindustry to provide added controls without other direct federalrequirements. For subsequent years, Clean Air Act requirementscould be expected toresult in new control measures needed to attain the current NAAQS and implement the more stringent 2006 NAAQS for PM2.5 and ozone.7Impacts on State Planning•Attaining and maintaining National Ambient Air QualityStandards (NAAQS) for ozone and fine particles–Attainment demonstrations that relied on CAIR–Reasonably Achievable ControlTechnology determinations whereCAIR controls were presumed to be RACT–Adequacy review for motor vehicle emission budgets–Maintenance plans relying on CAIR for redesignation to attainment–1997 Ozone and PM2.5SIPs•Regional Haze–Best Available Retrofit Technology (BART) determinations andreasonable progress plans relying on CAIR–Regional Haze SIPs•The Court decision did not consider or affect states’obligations to eliminate significant contribution to downwindstates’ ozone and fine particle pollution8Decisions Needed•How will we deal with SIP approvabilityissues?•Do we proceed with findings of failure tosubmit for Regional Haze and PM?•How do we deal with “clocks” for findings forozone and Section 110(a)(2)(d)(i)?9Regional Haze SIPs Submitted or on the Way•There are 26 CAIR-affected states covered under the regionalhaze program (Arkansas, Connecticut, and Massachusetts aresubject to CAIR for ozone-only,which is not regulated by thehaze rule)•20 CAIR-affected states for PM2.5planned to rely on CAIRreductions to satisfy BART•23 CAIR states for PM2.5planned to rely on CAIR in eithersetting Reasonable Progress Goals or, in those states withoutClass I areas, in assuming emission reductions due to CAIRwhen analyzing impacts on Class I states•Summary of CAIR states’ SIP submissions:–6 final SIPs submitted–12 SIPs in public review process–All but 4 CAIR states/DC planning to submit SIPs by end of ‘0810PM and Ozone SIPs Submitted or on the Way•There are 26 CAIR states or states impacted by CAIR thathave submitted or will be submitting 8-hr ozone and/orPM2.5SIPs for their nonattainment areas•There are 30 8-hr ozone SIPs due and 54 PM2.5area SIPsdue•Each of the 26 states planned to rely on CAIR forconsiderations such as determining the attainment date,determining what if any additional controls to adopt, andreliance on CAIR modeling in the attainment demonstration•16 of the 26 states planned to rely on the presumption thatCAIR=RACT for NOXand/or SO2for EGUs in the CAIRregion11••Upwind/downwindissues are nottransparentStatedemonstrations willneed to showindividual sourcecontributions•Linkage of Upwind toDownwind for PM2.5•Linkage of Upwindto Downwind forOzoneKey to ArrowsA Picture Speaks a Thousand Words12Do We Proceed with Findings of Failure toSubmit for Regional Haze and PM?•Preliminary decision has been made toissue findings of failure to submit for lateregional haze SIPs on October 3, 2008•Preliminary decision to issue findings forPM SIPs in same timeframe13How Do We Deal with “Clocks” for Findings forOzone and 110(a)(2)(d)(i)?•Findings for ozone were issued in March,2008, which started a 2-year FIP/sanctionclock•Findings for 110(a)(2)(d)(i) were issued withCAIR FIP in 2006; 2-year FIP clock hasexpired14Long-term Issue: Future of Emissions Tradingand SIPs•In resolving interstate transport issues under Section110 and 126, what is the role for emissions trading?Interstate? Intrastate?•Emissions trading has been an extremely effective toolat reducing regional emissions and ambientconcentrations of pollutants at lower costs (Title IV andNOXBudget Trading Program)•Emission caps address new and existing sources15Some Other Affected Rules and Activities•Clean Air Act Section 126 Petitions–EPA denied North Carolina’s 126 petition in June 2007–Denial relied on promulgation of the CAIR FIP which wouldcontrol interstate transport in all jurisdictions covered by CAIR,including the upwindstates linked to NC•Federal implementation plan toaddress interstate transport forozone and fine particle pollution in the CAIR region–The court decision vacated the CAIR FIP, however EPA’sstatutory duties with regard to findings of failure to submit arenot affected•International Agreements16Options for Action: Legal•Federal government is reviewing basis for rehearingand will make a decision by September 24 regardinga request for rehearing•Nature and timing of Court response are uncertain17Options for Action: Legislative•Senate hearing on July 29 and roundtable on Sept. 11•Both the Senate and the House are producing proposalsto reinstate CAIR, from a few years to “full CAIR”•Administration has been involved•Congress in session until Sept. 26 (target)–Level of interest is encouraging–Great uncertainty•Opposition of any single member, especially in the Senate,could be enough to block action–Hope remains18Options for Action: Regulatory•EPA is assessing options to retainCAIR reductions should Congressnot enact legislation and Court issues mandate•Regulatory response (by EPA and states) will require several years,probably entail litigation, and continue uncertainty•In the absence of legislation, multiple section 126 petitions likely to besubmitted by states–Time would be needed for modeling, federal and state regulatory actions,and compliance•EPA is taking steps to be ready forits role in administering the NBP in2009 if and when the Court issues mandate–Agency encouraged states to examine options to ensure NBP is in place by2009 (Meyers, 9-2-08)•Substance and timing of state actions to address NAAQS and RegionalHaze will be impacted by response to interstate transport19Conclusion•We face a serious situation with consequences acrossthe board: lost human health and environmentalbenefits, increased burdens on states, costs tobusiness and industry•Resolution will involve all three branches of government•Goal is reducing health and environmental impacts•Absent a legislative “fix”, restoration of benefits will takeyears and require significant new efforts by states,EPA, and industry•Outcome is uncertain20APPENDIX21What the Court Decided•The Court upheld several aspects ofthe CAIR rule relating to EPA’smethodology in determining whichstates should be affected and the2009 Phase I NOxdeadline.•The Court found six problems:–CAIR trading programs are flawed because the region wide focuson emission reductions did not factorin each state’s contributionto air pollution issues–EPA did not give independent significance to the “interfere withmaintenance language” in section110(a)(2)(D) and thus did notprovide enough protection to downwind areas–The 2015 compliance date for Phase 2 of CAIR is inconsistentwith downwind states’ 2010attainment deadlines for PM2.5andozone NAAQS22What the Court Decided,cont.–Both SO2and NOx budgets (i.e., the allowances states weregiven in their trading programs) were not based on theobjectives of section 110(a)(2)(D) and were thus invalid–EPA lacked authority to removeTitle IV (Acid Rain Program)allowances through CAIR, or change the amount of SO2emissions that an allowance permits–EPA did not properly address certain claims of measurementerrors raised by Minnesota regarding its contributions to NOxand SO2emissions23