p.1 

OAR Box 1778 

Prepped by Ollie Stewart 

Document Number: 

59) ll-C-1 

Docket Number: 

A-90-06 

Printed 10/28/2008 9:50:54 AM Sheet 59 of 276 
P.2 

M°s*r. ' 

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

Office of Air Quality Planning and Standards 

Research Triangle Park, North Carolina 27711 

FEB 6 I990 

II-C-1 

Mr. Thomas R. Anderson 

Technical Assistant 

Save the Dunes Council 

Post Office Box 114 

Beverly Shores, Indiana 

Dear Mr. Anderson: 

f.\ 

46301 

•ii MAY - T 

This letter is.in response to your December 7, 1989 letter to William K. 

Reilly, Administrator, U.S. Environmental Protection Agency (EPA), regarding 

the proposed Clean Coal Technology (CCT) project at the Northern Indiana 

Public Service Company's (NIPSCO's) Bailly plant, and EPA's action on an 

applicability decision for the Wisconsin Electric Power Company's (WEPCO's) 

Port Washington plant. Enclosed are the following items you requested: 

1. Determination on "life extension" project at the WEPCO Port 

Washington plant (and related attachments), dated February 15, 1989. 

2. Response to NIPSCO's initial request for a "no action" assurance 

letter for the Bailly demonstration project, dated July 14, 1989. 

3. Letter to NIPSCO providing guidance concerning the Bailly 

demonstration if the project were to be made permanent, dated January 5, 1990. 

4. Letter to the Indiana Department of Environmental Management (IDEM) 

commenting on their proposal to issue a construction permit for NIPSCO's 

Bailly plant, dated January 30, 1990. 

As you may note in the January 5, 1990 letter to NIPSCO, we generally 

agree with IDEM's finding that as a CCT project, new source review (NSR) and 

new source performance standards (NSPS) should not apply. The EPA believes 

that CCT demonstrations such as NIPSCO's Bailly project offer a valuable 

opportunity to demonstrate the viability of innovative air pollution control 

systems which are expected to provide environmental benefits. The CCT 

projects such as Bailly are not thoroughly addressed under the NSPS and NSR 

regulations. The EPA is currently preparing an interpretative ruling to be 

issued in late spring specifying conditions that must be met so that CCT and 

similar projects are not affected by NSR and NSPS. 

The attachment to your letter included excerpts from Mark T. Maassel's 

September 27, 1989 testimony before the Indiana Utility Regulatory Commission 

(Case No. 388849) which refers to the determination concerning WEPCO's Port 

Washington plant. It is EPA's position that there is a clear distinction 

between "life extension," "like-kind replacement" of equipment projects such 

as WEPCO's Port Washington project and "environmentally beneficial" control 
P.3 

on 

device changes such as NIPSCO's Bailly project. The major differences between 

the WEPCO project and NIPSCO's Bailly project are that: 1) NIPSCO is 

proposing new controls for their Bailly plant, while WEPCO did not initially 

propose controls for their Port Washington plant; 2) the WEPCO project was 

expected to lead to a substantial increase in operating rates, hours of 

operation, and emissions of the facility, while NIPSCO's Bailly demonstrati 

should not; 3) the WEPCO project appears to be intended to increase 

utilization of the plant from 10 percent to possibly 40-50 percent or more, 

while NIPSCO's Bailly plant is currently a fully functional power plant 

operating at 50-60 percent utilization; and 4) the WEPCO project was mainly 

designed to extend the life of an otherwise 1imited plant, while the NIPSCO's 

Bailly project is intended primarily to reduce emissions. 

On January 19, 1990, the Seventh Circuit Court of Appeals upheld nearly 

all of EPA's findings in the WEPCO case ["Wisconsin Electric Power Co. v. 

Reillv. Nos. 88-3264 and 89-1339 (7th Cir.)]. The court agreed that the 

changes at WEPCO's Port Washington plant are "physical changes" intended to 

extend the life of the facility and that NSR and NSPS should be applied 

according to regulations governing the calculation of emissions increases 

following a physical change. The court upheld EPA regarding emissions 

increases for NSPS purposes. Only the manner in which significant emissions 

increases for WEPCO's Port Washington plant are calculated for NSR purposes 

was returned for reconsideration. Even this aspect of the decision is limited 

to "like-kind replacement" projects. 

You also requested information on what measures are being taken to 

prevent further significant deterioration of air quality in the nonattainment 

areas in Northwestern Indiana, presumably with respect to the possible impacts 

of NIPSCO's Bailly project. The IDEM is the delegated permitting authority 

for NSR and NSPS in that State. The IDEM has determined that NSR and NSPS do 

not apply to the changes at NIPSCO's Bailly plant and solicited comments on 

that decision until January 30, 1990. As you may note in the January 30, 1990 

letter to IDEM, EPA has commented on the proposed permit. The comments 

include the conditions that we believe a source should meet to provide a net 

environmental benefit such that NSR and NSPS provisions should not apply. 

If you have any questions concerning our response, please call 

Gary McCutchen of my staff at (919) 541-5592. 

Sincerely, 

Gerald A. Bitfison 

<Ul Director 

Office of* Air Quality Planning 

and Standards 

4 Enclosures 
P.4 

.-• 

ORGANIZED IN 1952 

P.O. BOX 114 • BEVERLY SHORES, INDIANA 46301 • TELEPHONE 219/879-3937 OR 926-2224 

December 1, 1989 

Mr. William K. Reilly, Administrator 

Environmental Protection Agency 

401 M Street, SW 

Washington, D.C. 20460 

Re: WEPCO Decision 

Dear Mr. Reilly: 

The Save the Dunes Council, a conservation organization founded in 

1952 to protect the Indiana Dunes, is interested in a proposed 

Advanced Fluegas Desulfurization project under the Clean Coal 

Technology Program of the Department of Energy. This project, 

called Pure Air, is to be attempted at the Bailly Electrical 

Generating Station owned by Northern Indiana Public Service Company 

(NI), located along the shores of Lake Michigan and adjacent to our 

national park, Indiana Dunes National Lakeshore. 

Our purpose in writing is to seek information concerning the WEPCO 

decision by EPA (see attached information). Please send a copy of 

this decision and any other information about this subject. We 

also request a copy of the "no-action" letter issued by your office 

concerning this proposed project being exempt from New Source 

Performance Standards (NSPS) and Prevention of Significant 

Deterioration (PSD). We have been told by Ms. Judy Beck, EPA 

Region V Indiana coordinator, that a 3-year "no-action" letter has 

been issued by your office concerning this project. However, we 

understand NI is requesting a 20 year "no-action" letter to avoid 

review for NOx and PM10. 

Northwest Indiana is designated as "non-compliance" for S02, Ozone, 

and PM10. We request to know what protection we, as citizens, have 

without review for NSPS and PSD should this request be granted. We 

also request the procedure EPA intends to use to process this 

proposed request, including inter/intra agency review. 

We await your timely reply to our request. 

S inhere lyy / 

.;•__«•• > v V 

Thomas R. Anderson 

Technical Assistant 

cc: Judy Beck, EPA Region V 
Petitioner's Exhibit 4 

INDIANA UTILITY REGULATORY COMMISSION 

CAUSE NO. 38849 

491ES1117 

DIRECT TESTIMONY 

OF 

MARK T. MAASSEL 

SEPTEMBER 27, 1989 

I 
P.6 

I . 

- 19 -

1 A. I believe such a possibility is remote. The 600 MW absorber is a 

2 proven technology at this point and there is no reason to incorporate 

3 redundancy in this part of the Project. 

4 45. Q. You indicated that you would examine the U.S. Environmental 

5 Protection Agency decision in the Wisconsin Electric Power 

6 Company (WEPCO) matter. Please explain the WEPCO decision. 

7 A. In WEPCO, the Environmental Protection Agency (EPA) reviewed 

8 planned activities at the Port Washington Generating Station, an 

9 existing power plant. • Wisconsin Electric Power Company 

10 (Wisconsin Electric) had planned to make capital expenditures to the 

11 power plant to allow operation to return to design configuration for 

12 many years into the future. After reviewing Wisconsin Electric's 

13 proposal, the Environmental Protection Agency determined that this 

14 activity would subject the power plant to review under the (NSPS) 

15 and Prevention of Significant Deterioration (PSD) regulations. The 

16 EPA has since extended the logic behind the WEPCO decision to 

17 include changes in operation and capital expenditures which were 

18 formerly viewed as routine. Thus, WEPCO as the term is commonly 

19 used, now includes the original decision as well as the extention of 

20 that logic by the EPA. As a result of these changes, Northern 

21 Indiana was concerned with the possibility that the EPA might apply 

22 WEPCO to Bailly Units 7 and 8 because, of installation and operation 

23 of the Northern Indiana - Pure Air Project. 

24 46. Q. What would the impacts be if the EPA applied the WEPCO decision 

25 to Bailly Units 7 and 8 as the result of the installation and operation 

26 of the Northern Indiana - Pure Air Project? 

27 A. The PSD and NSPS reviews would assess the changes in emissions 

28 from Bailly Units 7 and 8 as the result of the capital expenditures for 

491ES1118 

ifflaSL 
P.7 

1 • control equipment on the plant and changed operation of the unit. If 

2 the changes are deemed "significant" a review of the ways to control 

3 the emissions would be initiated. The review would require that 

4 Northern Indiana install the Best Available Control Technologies 

5 (BACT) to limit emissions of SO2, NOx and particulate. Northern 

6 Indiana believes that the Pure Air Project is BACT for SO2 

7 emissions. BACT for NOx emissions could quite possibly require 

8 the installation and operation of a Selective Cathalytic Reduction 

9 (SCR) system at Bailly.. The SCR is an expensive technology which 

10 produces a hazardous waste. For exampie, Mr. Emmel estimated 

11 that the capital costs for a hot side SCR for Units 7 and 8 are 

12 approximately $100 million with annual operating costs of 

13 approximately $25 million per year assuming a one year catalyst life. 

14 BACT for particulate emissions might require the.' Company to 

15 upgrade or replace the existing electrostatic precipitators (ESP) to 

16 allow removal of greater amounts of particulate. The EPA currently 

17 indicates that baghouses achieve greater particulate control. Thus, 

18 for compliance with BACT, the EPA may mandate the removal of 

19 the existing ESPs and their replacement with baghouses at a cost of 

20 over $40 million. These potential costs and attendant operating 

21 problems are the basis for Northern Indiana's concern with the 

22 WEFCO decision. 

23 47. Q. Has Northern Indiana discussed this matter with the EPA? 

24 A. Yes. We sent the EPA a letter requesting a review of the Bailly 

25 project and a determination of the applicability of the WEPCO 

26 decision. The EPA responded with a letter indicating that they would 

27 not take any action at Bailly as long as the Pure Air project was a 

28 demonstration project. Northern Indiana has requested additional 

491ES1118 
P.8 

L 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

48. 

49. Q. 

A. 

clarification of this matter frpm^therEPA_.but to date, it has not 

received any such clarification. 

Turning to a final area, will the installation and operation of the Pure 

Air Project affect the life of Units 7 and 8? 

No. The installation and operation of a scrubber does not affect the 

useful life of a power plant. The scrubber is a pollution control 

device designed to remove SO2 from the flue gas. It will not extend 

or decrease the life of either Unit 7 or Unit 8. 

Does this complete your direct testimony. 

Yes. 

\ 

2 

> 

S 

491ES1118