IlL.INOIS POllUTION CONTROL BOARD April 30, 2012

MIDWEST GENERATION, !LC, WAUKEGAN GENERATING STATION,

Petitioner,



### v. ) ) ) ) ) ) ) IlL.INOIS ENVIRONMENTAL PROTECTON) AGENCY, )

Respondent. ) ) PCB 12-121 (Variance- Air)



### HEARING OFFICER ORDER 

### AECili!UVED ClERK'S OFFICE:



# APR 3

# o 2012

STATE OF 

### IlliNOIS 

### Pollution Control Boord

The parties are hereby notified that the above-captioned matter has been assigned to the hearing officer identified below. From this date forward, any document filed with the Clerk of the Board must also be served individually on the hearing officer.

The parties or their legal representatives are directed to participate in a telephonic status conference with the hearing officer on May 3, 2012, at 1:30 p.m. The telephonic status conference must be initiated by the petitioner, but each party is nonetheless responsible for its

own appearance. At the status conference, the parties must be prepared to discuss the status of the above-captioned matter and their readiness for hearing.

IT IS SO ORDERED.

### ~ Bradley P. Halloran Hearing Officer Dlinois Pollution Control Board James R. Thompson Center, Suite 11-500 100 W. Randolph Street Chicago, Illinois 60601 312.814.8917

### CERTIFICATE OF SERVICE

It 

### is hereby certified that true copies of the foregoing order were mailed, first class, on April 30, 2012, to each ofthe persons on the service list below.

It 

### is hereby certified that a true copy of the foregoing order was hand delivered to the following on April 30, 2012:

John T. Therriault Illinois Pollution Control Board James R. Thompson Center 100 W. Randolph St., Ste. 11-500 Chicago, Illinois 60601

## ~~-\~<>-- \ Bradley P. Halloran Hearing Officer Illinois Pollution Control Board James 

### R. Thompson Center 100 West Randolph Street, Suite 11-500 Chicago, Illinois 60601 312/814-8917

SERVICE LIST

PCB 2012-121 Stephen J. Bonebrake Schiff Hardin, llP 

### 6600 Willis Tower 233 S. Wacker Drive Chicago, ll., 

### 60606-6473

PCB 2012-121 Kathleen C. Bassie Schiff Hardin, LLP 6600 Willis Tower 233 S. Wacker Drive Chicago, 

## rr.. 60606-6473 PCB 2012-121 Julie A. Armitage IEPA 1021 North Grand Avenue East P.O. Box 19276 Springfield, ll., 

### 62794-9276ILLINOIS POLLUTION CONTROL BOARD May3, 2012

MIDWEST GENERATION, LLCWAUKEGAN GENERATING STATION,

Petitioner,

v.

ILLINOIS ENVIRONMENTAL PROTECTION AGENCY,

Respondent.

ORDER OF THE BOARD (by J.A. Burke): ) ) ) ) ) ) ) ) ) ) ) PCB 12-121 (Variance

- Air)

On April 10, 2012, Midwest Generation, LLC

- Waukegan Generating Station (Midwest Generation) filed a petition for a variance (Petition) for its electric generating station (Station), Agency I.D. No. 097190AAC, located at 401 East Greenwood Avenue, Waukegan, Lake County. The station is located on approximately 200 acres in a partially-developed industrial

area. Midwest Generation seeks a variance from the provisions of 35 Ill. Adm. Code 225.296(a)(l) and (c)(l) for the 12-month period beginning December 31, 2013 and ending December 31,2014.

Midwest Generation states that, in light of significantly changed circumstances since adoption ofthe rule, Midwest Generation's current operation plans will provide northeastern Illinois with a "substantial net benefit" in air emission reductions, while continuing to comply with the emission limits ofthe rule, most of which have already been achieved. Pet. at 1. Midwest Generation seeks a variance from two ofthe components ofthe Combined Pollutant Standard (CPS) codified at 35 Ill. Adm. Code 225.291

- 225.299 and 225.Appendix A "in order
to avoid arbitrary and unreasonable hardship by permitting the company to adapt to unanticipated conditions that have evolved since the adoption ofthe CPS." !d. at 2. Specifically, Midwest Generation seeks a variance from the compliance dates applicable to station unit 7 for the installation of flue gas desulfurization equipment (Section 225.296(a)(l)) and the conversion ofthe hot-side precipitator on that unit (Section 225.296(c)(l)). Midwest Generation requests the variance for a period of one year, from December 31, 2013, until December 31, 2014, with

no change in the existing emission rate limits ofthe CPS. !d. Midwest Generation notes that, in

an agreement dated February 28, 2012, the Environmental Law and Policy Center, the Sierra Club, the Natural Resources Defense Council, and the Respiratory Health Association of Metropolitan Chicago, have stated that, in "recognizing the net benefits to the CPS realized by the early retirements of [Midwest Generation's] Fisk and Crawford coal-fired units," they would
not oppose this request for a variance for station nnit 7. !d. at 3.

The Environmental Protection Act requires the Illinois Environmental Protection Agency (Agency) to provide public notice of a variance petition, including notice by publication in a2

newspaper of general circulation in the county where the facility is located within 14 days after the petition is filed. 415 ILCS 5/37(a) (2010); 35 ill. Adm. Code 104.214. The Agency is also required to file its recommendation on the variance with the Board within 45 days after the filing ofthe petition, or at least 30 days prior to a scheduled hearing, whichever is earlier. 35 Ill. Adm. Code 104.216. Midwest Generation's petition was filed on Apri!IO, 2012. Therefore, newspaper notice was required by Tuesday, April24, 2012, and the Agency recommendation is cmrently due Friday, May 25,2012. Within 14 days after service ofthe Agency's recommendation, Midwest Generation may file a response to the Agency recommendation or an amended petition. 35 Ill. Adm. Code I 04.220.

Midwest Generation does not request a hearing "because no federal law is affected" by the requested variance. Pet. at 28. However, Midwest Generation reserves its right to request a heming should the United States Environmental Protection Agency approve Illinois' Best Available Retrofit Technology and Regional Haze State Implementation Plan prior to issuance of the Board's order. Jd. Midwest notes that it would waive the decision deadline to a later date to accommodate such a hearing. 

### I d. The Board will hold a heming on the variance petition (1) if the petitioner requests a hearing, (2) ifthe Agency or any other person files a written objection to the variance within 21 days after the newspaper notice publication, together with a written request for hearing, or (3) ifthe Board, in its discretion, concludes that a hearing would be advisable. 415 ILCS 5/37(a) (2010); 35 Ill. Adm. Code 104.224, 104.234.

The assigned hearing officer is responsible for guiding the parties toward prompt resolution ofthis matter through whatever status calls and hearing officer orders he determines

are necessary and appropriate. Hearings, ifnecessary, will be scheduled and completed in a timely manner, consistent with the decision deadline 

### (see 415 ILCS 5/38(a)), which only Midwest Generation may extend by waiver 

### (see 35 Ill. Adm. Code 101.308). Ifthe Board fails to take final action by the decision deadline, Midwest Generation may deem the requested variance granted for a period not to exceed one year. 

### See 415 ILCS 5/38(a) (2010). Currently, the decision deadline is August 8, 2012 (the !20th day after the Apiii10, 2012 filing). 

### See 35 Ill. Adm. Code 104.232. The Board meeting inmiediately before the decision deadline is scheduled for July 26, 2012.

IT IS SO ORDERED.

Chairman Holbrook Abstained.

I, John Therriault, Assistant Clerk ofthe Illinois Pollution Control Board, certify that the Board adopted the above order on May 3, 2012, by a vote of4-0.

# r~.

John Therriault, Assistant Clerk Illinois Pollution Control Board

### Electronic Filing -Received, Clerk's Office, 05/04/2012

BEFORE THE ILLINOIS POLl.IJTION CONTROL BOARD

MTD\VEST GENERATION, LLCWAUKEGAl"' GENERATING STATION.

Petitioner,



# ,, .

ILLTNOIS ENVlRONMENTAL PROTECTION AGENCY,

Respondent. ) ) ) ) ) ) PCI.I 12-121 ) (Variance- Air) ) ) ) )



### NOTICE OF 

### FILING

To:

John T. Therriault. Assistam Clerk Illinois Pollution Control Board James R. Thompson Center Suire I 1-500 l 00 Wesr Randolph Chicago, nliuois 60601
Bradley 

### Halloran. Hearing Offic;:r Illinois 

### Pollution Control Board James 

### R. ·n10mpson 

### Center Suire 

### 11-500 1 00 West Randolph



### . Ch.icago, !llinois 60601 Charles 

### lv!aloesilUl l!linois E1wironmemal Protection Agency Division of

### Legal Cuunsel l 011 North Grm1d 

### Avenue. East P.O. Box 19276 

### Springfield. Ulinois 62794-9276



### PLEASE TAKE NOTICE that
,. 

### .,.e have today 

### tiled with the 

### Oflice of the 

### Clerk of the 

### Pollution Control 

### Board ADDITIONAL EXHIBIT TO PETITION FOR VARJANCEExhibit 

### I I. 

### copies ofwhich are herewith 

### served upon you.



### Dated: !I.-lay 4, 2012

### Electronic Filing- Received, Clerk's Office, 05/04/2012

SCHIFF HARDfN LLP Attorneys for Midwest Generation, LLC Kathleen 

### C. Bassi Stephen 

### J. Bonebrake 233 South Wacker Drive. Suite 6600 Chicago, Illinois 60606 Phone: 312-258-5567 Fax: 312-258-5600 kbassi@schillhardin.com

## Electronic Filing -Received, Clerk's Office, 05/04/2012

CERTI.FJCATE OF SERVICE

I, the undersigned, certify that on this 4th day ofMay, 2012, I have served electronically the attached 

### ADD1TJONAL EXHIBIT TO PETITION FOR VARIANCE- Exhibit ll. upon the**fol!O\\~ng** persons:

John 

### T. Therriault, 

### Assistant Clerk Illinois Pollution Control Board James R. Thompson Center Suite 

### 11-500 100 West Randolph Chicago, Tllinois 60601

Bradley Halloran, Hearing Officer Illinois Pollution Control Board James R. Thompson Center Suite 11-500 I 00 West Randolph Chicago, !Uinois 6060 I hallorab@ipcb.state.il.us

. Kathleen C. Bassi

SCHIFF HARDIN 

### LLP Attorneys lor Midwest Generation, 

### LLC Kathleen C. Bassi Stephen 

### J. Bonebrake 233 South Wacker Drive, Suite 6600 Chicago, Hlinois 60606 Phone: 312-258-5567 Fax: 312-258-5600 kbassimlscbif!hardin.com Charles Matoesian Illinois Environmen.tal Protection Agency Division of Legal Counsel 1021 North Grand Avenue, East P.O. Box 19276 Springfield, lllinois 62194-9276 charles.matoesian@illinois.gov

### Electronic Filing- Received, Clerk's Office, 05/04/2012

BEFORE THE lLLINOIS POLLUTION CONTROL BOARD

MIDWEST GENERUION, LLCWAUKEGAN GENERA,TING STATION,

Petitioner,

v.



### lLLINOlS ENVIRONl\'lENTAL PROTECTION AGENCY,

Respondent. ) ) ) ) ) ) ) ) ) ) ) 

### PCB 12-121 (Variance- Air)



### ADDITIONAL EXHIBIT TO PETITION FOR VARIA.i\ICE Exhibit 11

NOW COMES Petitioner, MIDWEST GENERATION, LLC- WAUKEGAN

GENERATING STAT10N, and submits the additional exhibit to its Petition tor Variance as

referenced 

### in the Petition. More specifically:



### I. On April I0, 20 12.!Vlidwest Generation, LLC- Waukegan Generating Station.

Petitioner in rltis matter (hereafter "Midwest Generation" or"Petitioner"), submined a Petition

for**Vari~nce** 

### to the Pollution Control Board.

2. 

### M.idwest Generation understands from the Hearing Officer assigned 10 

### this matter

that the Board accepted Midwest Generation's Petition at its May 3rd Board meeting.

3. On March 8, 2012, M.idwest Generation sent no rices ofits intent to 

### decommission

the coal-fired boilers at the Fisk and Crawford Generating Stations to PJlvl Imerconllection, LLC.

See 

### Ex h. 7 to 

### the Petition for Variance.

-I-

### Electronic Filing -Received, Clerk's Office, 05/04/2012

4. In footnote 17 on page 17 of the Petition, Midwest Generation stated that it would

provide copies ofresponses from 

### PJM to these notices if they arrived dwing the pendency of the

variance proceeding.

5. On May 3, 

### 2012, collnsel for Midwest Generation and for the Illinois

Environmental Protection Agency ("Agency") met in a status conference call with the Hearing**Offi~er.** During that status call, counsel for Midwest Generation indicated that Midwest

Generation has received such responses. Counsel for the Agency and the Hearing Officer agreed

that Midwest Generation could submit this additional exhibit at this time.

6. Therefore, consistent with footnote 17 of the Petition, Midwest Generation

herewith submits two letters from 

### PJM dated April 

### 5, 2012, and 

### a letter from Monitoring

A.nalytics dated April 10, 

### 2012, to the Board as Exhibit 11 to the Petition. PJM states in its

letters that "after a detailed study ofthe PJM 

### 2012 Transmission System," it "did not identify

any reliability violations'' that would result from the shutdowns ofthe Fisk and Crawford
generating un[ts.

by:

Dated: May 4, 20[2 Respectfully submitted,



### MIDWEST GENERATION, LLCWAUKEGAN GENERATING STATION

-2-

### Electronic Filing- Received, Clerk's Office, 05/04/2012

Kathleen C. Bassi Stephen 

### J. Bonebrake 

### SCHIFF HARDIN, LLP 233 South Wacker Drive, Suite 6600 Chicago, lllinois 60606 312-25&-5500 Fax: 312-258-5600 

### k

hassi@schi fthardi n. cern

-3-

### Electronic Filing- Received, Clerk's Office, 05/04/2012

April 

### 5, 2012

John 

### C. Kennedy Senior Vice President Genera.lion Midwest Generation, LLC 235 Remington Blvd. Suite A Bolingbrook, IL 

### 60440

Re: Generator Deactivation Request for FISk 19

Dear Mr. Kennedy, 955 Jefferson Avenue Valley Forge Corporate Center**Noms~l\,** ?A**\£Mf}~2497** Paul McGlynn Director- System Planning

This letter is submitted on behalf of PJM lnterc.onnection, L.L.C. ('PJM"), in response to the notice submilted on behalf of Midwest Generation, LLC, dated March 8, 2012, requesting lo deactivate the following generator located in the P JM region: Fisk Unit 19, effective no later than December 31, 2012.

In acccrdance with Section 113.2 of the PJM Open Access Transmission Tactff (PJM Tariff), PJM Interconnection Analysis (and the affected Transmission Owner) perfom1ed a detailed study of the PJM Transmission System and did not identify any reliability violations resulting ftom the proposed deactivation of the Fisk 19 generating 

### untt.

Since there are 

### no reliability violations associated with deactivation of 

### this generating 

### unit, consistent 

### with Section 113.2 of the PJM Tariff, the FISk 19 generating unit may 

### be deactivated 

### at any time. Please confirm the date on which you will deactivate !his generating uniL**~o.** 

### Monitoring Analytics, LLC, 

### lhe Independent Market Monitor for PJM, has indicated that they must also conclude a market power analysis prior to the generating unit deactivafion. Monitoring Analytics. LLC will be responding separately to you with their conclusions.

Please be advised that PJM's determination does not supersede any outstanding contractual obligations between the Fisk 19 generating unit and any other parties that must be resolved before deactivating the generator.

In accordance with the PJM Tactff, Part: VI, Subpart C, Section 230.3.3, the Capacity InterconnectiOn Rights associated with Generating Capacity Resource will terminafe one year ftom the Deactivation Date unless the holder of such rights submits a new Generation Interconnection Request within one year af'.er 

### the Deactivation Date. Also, if a generating unit is receiving Schedule 2 payments fur Reactive Supply and

### Electronic Filing- Received, Clerk's Office, 05/04/2012

Voltage Control, the generating unit owner must inform PJM when the unit is deactivated so that the payments may be adjusted.

Please contact Bill Patzin {610-666-4698) {patziw@pjm.com) in PJM's Interconnection Coordination Department to confirm the Deactivation Date or 

### if you have any questions regarding PJM's analysis or the generator deactivation process.

Very truly yours,

Paul McGlynn Director, System Planning

11594228



### Atlachrnent

cc: Michael J. Kormos. Senior ViD!l President PJM {korrnosmj@pjrn.com} Reem Fahey, Vice President, EMMT (rfahey@edisonmission.coml Joseph Bowring {Joseph.Bowring@mo0 itoringanalytics.corn}General 

### Electronic Filing- Received, Clerk's Office, 05/04/2012

Deactivation Study 

## Eisk 19 Generating Unit

PJM received a deactivation notice from Midwesl Generation LLC for the Fisk 19 generating unit which has
a capacity of 326 MW. Midwest Generation LLC has requested a deactivation date of no later than December31, 20t2.
Reliab!lity Analysis**Re~;ults** PJM Interconnection Analysis department performed the following studies for the 326 MW Fisk 19 generator and found no re:liability violations:

o N-1 Thermal and Voltage Study

• None

o Generator Oellverability Study

• None

o N-1·1 Thermal and Voltage Study
• None

o Load Dellverablllty

• None

System Reinforcements None ·······

### Electronic Filing- Received, Clerk's Office, 05/04/2012

April 5, 2012

John C. Kennedy Senior Vice President, Generation Midwest Generauon, LLC 2,3,5 Reminglon Blvd. Suite A Bolingbrook, IL 60440

Re; Generator Deactivation Request for Crawford 7 and 8

Dear Mr. Kennedy,**855Je~ifS<:m** Valley Forge CorpJrate Cemer Nomstown, P?, 19403-2497
Paul McGiynn rnre-ttm

- SVSIB"ll**:Oi~rni1D**

This letler is submitted on behalf of PJM Interconnection, L.L.C.**["P~M').** in response to the notice submitted 011 behalf of Midwest Generauon, LLC, dated March 8, 2.012, requesting to deacliva!e lhe following generators located in !he PJM region; Crawford Nos. 7 and 8, effective 30 days from the date PJM received !he request to deactivate Crawford units 7 and 8, out no later !han December 31, 2014.

In accordance 

### with Section 113.2 of the P JM Open Access Transmission 

### Tariff (PJM Tariff), PJM Interconnection Analysis (and the affected Transmission Owner) perfonned a detailed study of the PJM 2012 Transmission System and did not identify any reliability 11iolations resulting from the proposed deaclivation of the Crawford 

### 7 and 

### 8 generating units.

Since there are no reliability violations associated with deactivation of these generating units, consistent with Section 113.2 of the PJM Tariff, the Crav.iord 7 and 8 generating units may be deactivated at any 

### lima Please confinn the date on which you will deactivate this generating unit If the Crawford 7 and 8 generating units are not deactivated until after May 2013, PJM will need lo pe!fonn additional analysis. Also, Monitoring Analytics, LLC, the Independent Market**Mon~odor** PJM, has indiceted lhatthey must also conclude a market power aqa!ysis prior 

### to the generating units deactivation. Monftoring Analytics, LLC 

### will be responding separately to you with their condusioos.

Please be advised that P JM's determination does not supersede any outstanding contractual obligations between the Crawford 7 and Bgenerating units and any other parlit!s that must 

### be resolved before**de<~ctivating** the generator. ·

### Electronic Filing- Received, Clerk's Office, 05/04/2012

In accordance wtlh the PJM Tariff, Part VI, Subpart C, Section 230.3.3, the Capacity lnterconneclion Rights assoc"!ated 'hilh Generating Capacity Resource will terminate one year from the Deactivation Dale unless the holder of such rights submits a new Generation Interconnection Request within one year after the Deactivation Date. Also, if a generating unit is receiving Schedule 2 payments for Reactive Supply and Voltage Control, the generating unit owner must inform PJM when !he unit is deactivated so that the payments may be adjusted.

Please contact Bill Patzin (610-66€-4698) (patziw@pjm.com) in PJM's Interconnection Coordination Department 

### to confirm the Deactivation Date or if 

### you have any questions regardrng PJM's analysis or the genera1or deactivation process.



### Very truly yours,

Paul McGlynn Director, System PIann ing

Attachment

cc: Michael J. 

### Kormos, Sen)or Vice President, PJM {kormosmj@pjro.com} Reem Fahey: Vice President, EMMT {rfahey@edisonmission.com) Joseph Bownng {Joseph.Bowling@moniloringanalytics.com}

### Electronic Filing- Received, Clerk's Office, 05/04/2012

Deactivation Study Crawford Generating Units Nos. 7 and 8

General P

JM received 

### a deactivation notice from Midwest Generation LLC for the Crawford 7 and 8 generating units which have 

### a capacity of 213 MW (U7) and 319 MW (US). Midwest G!lneration LLC has requested 

### a deactivation date of as soon as possible but no later than December 31, 2014.
Reliability Analysis Results PJM Interconnection Analysis department performed the following stu(jies fpr tile 

### 213 MW Crawford 

### 7 and 319 MW Crawford 8 generating uni1s and fOund no reliability violations:

o N-1 Thermal and Voltage Study
• None

o Generator Deliverability Study

• None

o N-1-1 Thennal and Voltage Study

• None

o Load Dellverabillty

• None

SVs!em Reinforcements None

### Electronic Filing -Received, Clerk's Office, 05/04/2012



# Monitoring 

# Analytics

VIAEMAJL

AprillO. 2012



### Reen' Fahey Vice President, Market Policy & Market Operations Edison Mission Marketing & Trading Mon!tonng Analyu::s. LLC
1621 Van Buren**Avcn~.** Swtc 160
vaney Forge Corpmaie Center EaglevJIIe, fA 19403 Phone: 611}271-8050 fax;**610-27~*8057**

Re: Proposed Deactivation of Midwest Generation Units: Crawford 7 & 8, Fisk 19

Dear Ms. Fahey:

On March 8, 2012, Midwe.stGeneration, LLCsubmitted to P)M Interconnection, L.L.C. notice of proposed permanent retirement of !he Crawford units 7 & 8, no later !han December 31, 2014 (or as early as approved by PJM) and the Fisk 19**uni~** no later !han December 31,2012 (or as early as approved by P)M). Monitoring Analytics, acting in its capacity as the tndependent Market Monitor for P)M (IMM), must perform a market power analyru of the proposed
deactivation.

Section fV of Attaclunent M-Appendix to the P)M Open Access Transmission Tariff (OATf) provides:'

[T]he Market Monitoring Unit shall analyze !he effects of the proposed deactivation with regard to potential market power issues and shall notify the Office of the Interconnection and !he generator owner (of [sic], if applicable, its designated agent) wilhin 30 days of the deactivation request if a market power issue has been identified. Such notice shall include the specific market power impact resulting from the proposed deadivation of the generating unit, as well

as an initial assessment of any steps that could be taken to mitigate the market
power impacl

The IM},1 requested and received additio.nal information from .Midwest Generation. Based on

om review, the IMM concludes that the decision to retire the above listed units does not appear
to raise market po'Ner issues at this time.

Sec also PjM Monual14D (Generator Operational Requirements)§ 9 at 67-68.

### Electronic Filing- Received, Clerk's Office, 05/04/2012

The IMM analysis cUd not consider any market power issues that could arise in cormection with
any P]M determination that reliable system operations may require this unH to continue operating after the retirement dates specified above. 2

Please contact me if you have any questions about the information provided.
Sincerely,

\**~** 

## ..

. rrJ"""";:f,L-[

# '{)J~-") 'ioseph E. Bowring

cc: Andy Ott, P]M Interconnection, L.L.C. Michael Kormos, P]M Interconnection, L.L.C.

S..PJMOAIT§V.

### Electronic Filing- Received, Clerk's Office, 05/09/2012

BEFORE 

### THE ILLINOIS POLLUTION CONTROL BOARD

MIDWEST GENERATION ,LLC WAUKEGAN GENERATING STATION, Petitioner, ) ) ) ) ) ) 

### ) ) ) ) 

### v.

ILLINOIS ENVIRONMENTAL PROTECTION AGENCY, Respondent.

TO:

John T. Therriault, Assistant Clerk Illinois Pollution Control Board James 

### R. Thompson Center Suite 11-500 100 West Randolph Chicago, Illinois 60601

Kathleen C. Bassi SCHIFF HARDIN LLP Kathleen C. Bassi Stephen 

### J. Bonebrake 233 South Wacker Drive, Suite 6600 Chicago, Illinois 60606 kbassi@schiffhardin.com NOTICE PCB 12-121 (Variance- Air)

Bradley Halloran, .Hearing Officer Illinois Pollution Control Board James R Thompson Center Suite 11-500 100 West Randolph Chicago, Illinois 60601

Please find attached the CERTIFICATE OF PUBLICATION OF NOTICE OF PETITION FOR VARIANCE and APPEARANCE ofthe Illinois Enviromnental Protection Agency that was electronically filed with the Illinois Pollution Control Board today. Ifyou have any questions, please feel free to contact me.

ILLINOIS ENVIRONMENTAL PROTECTION AGENCY

### Electronic Filing- Received, Clerk's Office, 05/09/2012

DATED: May 9, 2012 P.O. Box 19276 Springfield, Illinois 62794-9276 217/782-5544

# By:~~ Charles E. Matoesian Assistant Connsel Division ofLegal Connsel

### Electronic Filing- Received, Clerk's Office, 05/09/2012

BEFORE THE JLLINOIS POLLUTION CONTROL BOARD

MIDWEST GENERATION ,LLC WAUKEGAN GENERATING STATION, Petitioner, ) ) ) ) ) ) ) ) ) ) 

### v.

ILLINOIS ENVIRONMENTAL PROTECTION AGENCY, Respondent. PCB 12-121 (Variance- Air)

CERTIFICATION OF PUBLICATION OF NOTICE OF THE PETITION FOR VARIANCE

NOW COMES .Respondent, ILLINOIS ENVIRONMENTAL PROTECTION AGENCY
("Illinois EPA"), by its attorney, Charles E. Matoesian, and pursuant to Section 104.214(£) ofthe

Illinois Pollution Control Board ("Board") rules, certifies to the Board that notice ofthe Petition

for Variance was placed in the Waukegan News Sun 

### on April24, 2012. A copy ofthis notice is

included as attachment "A."

DATED: May 

### 9, 2012

P.O. Box 19276 Springfield, Illinois 62794-9276 217/7782-5544 Respectfully submitted, ILLINOIS ENVIRONMENTAL PROTECTION AGENCY

# By:~~~ Charles E. Matoesian Assistant Counsel Division ofLegal 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.!.J&!!!ltyrwimtfarm\a..rllLLeefarm)hasfiledwiththeJllinoisPollutionControlGuard('"Board")<:petitionlorvarianceunderTitleIXoftheEnvironmentalProtectionAct{"Act"){'115tLCSSJScc.35·38J.nwBo3rdhastheauthoriiJpursu;mttoSectiun:15oftheActt415ILCS5!35jand35Ill.Adm.Code10·1tograntaremtl!st-;Stand:vd_c.llililiedat.li.JJIAdmCode§§225.2:91·225.299antj22UDJlt:rulixAasMp!ied!oW<tuk.!J.SWJLllr.!it7flocatPda!401East....!J!.k!L.Cill!..nl1l.J.ill11!.\l:instaflillionofflue..QL!!!gj1Q!.:..@.UlLc.QJiillltsJIonthatw1jtGrmerationweksrelieffromthe.PJ!l.'li.Sill.!!S..QL3.5J!Lllli.m.•..C.!l®..§.§..2.{ti..2.llii.W.illDccemllerU,December312011.AcopyoltllisvariancemayDeobtainedthroughtheClerk'sOllice,11theBoard.TheBoard'sofficeaddressisPol!ulionControlBoard,JamesR.ThompsonCe111er,100WestRandolphStreet,11-500,Chicago,Illinois60601(tele[Jhone:3121814-3620).TheIllinoisEnvironmentalProtectionAgency('"IllinoisEPA'"Jsolicitstileviewsolwhomaybeaffectedbythevarlanr.e.Adchessan'Jcommentsotinquiw;to:QbulesEfvbtoesianAssistantAttoroey.._AirBemtlator1rU.!lil.DivisionofLegalCounsel.IllinoisCnvironmentalProtectionAgct1cy,1021NorthGrar!dAverweEast.PostOt!iceBox19276,Springfield,Illinois62i'9-l-9276,telephone:217/182-5544,TheIllinoisEPAispreparingarecommendation,and,unlessorderedbythehearingofficer01Board,planstofiletherecommendationby.M!ly2_Q,_2J,J_.l2.:.Therecordwil!remamopentorVJrittencommentstor45daysaftertheHlinyoflherecommendationamishouldbesubmittedtotheSoatdataddressspecifiedabove.Tilereco(disavailabletheBoardofficeforinspection,exceptthoseportionsthatateprotected!romdisclosureunder35Ill.Adm.Code130.Proceduresa1eavailabledisclosuremaybesoughtbythepublic.Aheatingmaybeheldafterthefilingortherecommendation.Anyonemayrcqucs\ahearing.However,ifa'Niil\enobjecliuntothevarianceandarr.ques1forhearingarereceivedbytheBoardolfice,nolaterIhanlwe!lly-o11e(21)daysfromthepublicationofthisNotice.tile!Joardmustconductahearingonthepetltion.!.1\:2\HZ

### Electronic Filing- Received, Clerk's Office, 05/09/2012

BEFORE THE ILLINOIS POLLUTION CONTROL BOARD

MIDWEST GENERATION ,LLC WAUKEGAN GENERATING STATION, 

### Petitioner, ) ) ) ) ) ) ) ) ) ) 

### v.

ILLINOfS ENVIRONMENTAL PROTECTION AGENCY, 

### Respondent.

APPEARANCE PCB 12-121 

### (Variance- Air)

The undersigned, as one of its attorneys, hereby enters an Appearance on behalf ofthe Illinois Environmental Protection Agency.

DATED: May 9, 2012 P.O. Box 19276 Springfield, Illinois 62794-9276 217/782-5544 ILLINOIS ENVIRONMENTAL PRO' CTION AGENCY**By~: ~~~--~~~**  Charles E. Matoesian Assistant Counsel Division ofLegal Counsel

### Electronic Filing- Received, Clerk's Office, 05/09/2012

STATE OF ILLINOIS

COUNTY OF SANGAMON ) ) ) 

# ss

PROOF OF SERVICE

I, the undersigned, an attorney, state that I have served electronically the attached the CERTIFICATE OF PUBLICATION OF NOTICE OF PETITION FOR VARIANCE and APPEARANCE ofthe Illinois Enviromnental Protection Agency upon the following persons:

TO:

Jolm T. Therriault, Assistant Clerk Illinois Pollution Control Board James 

### R. Thompson Center Suite 11-500 100 West Randolph Chicago, Illinois 60601

Kathleen C. Bassi SCHIFF HARDIN LLP Kathleen C. Bassi Stephen J. Bonebrake 233 South Wacker Drive, Suite 6600 Chicago, Illinois 60606 kbassi@schiffhardin.com

Dated: May 9, 2012

l 021 North Grand Avenue East P.O. Box 19276 Springfield, Illinois 62794-9276 217.782.5544 217.782.9143 (TDD) Bradley Halloran, Hearing Officer Illinois Pollution Control Board James R Thompson Center Suite 11-500 100 West Randolph Chicago, Illinois 60601

ILLINOIS ENVIRONMENTAL PROTECTION

### AG~ 

# c-c;::/

Charles E. Matoesian Assistant Counsel Division ofLegal Counsel

### IAECIEIVED ClERK'S OFFICE

ILLINOIS POLLUTION CONTROL BOARD May23, 2012 

## MAY 2·3 2012

STATE OF ILLINOIS Pollution Control &lll!'d

MIDWEST GENERATION, LLC, WAUKEGAN GENERATING STATION,

Petitioner,

v. ) ) ) ) ) ) ) ILLINOIS ENVIRONMENTAL PROTECTON) AGENCY, )

Respondent. ) )



### HEARING OFFICER ORDER

On May 3, 10, 14 and 22, 2012, all parties participated in telephonic status conferences with the hearing officer. Discussions centered on whether or not a hearing was needed and, if needed, the hearing date.

The parties or their legal representatives are directed to participate in a telephonic status conference with the hearing officer on May 29, 2012, at 11 :00 a.m. The telephonic status conference must be initiated by the petitioner, but each party is nonetheless responsible for its

own appearance. At the status conference, the parties must be prepared to discuss the status of the above-captioned matter and their readiness for hearing.

IT IS SO ORDERED.



## \ Bradley P. Halloran Hearing Officer Illinois Pollution Control Board James R. Thompson Center,'Suite 11-500 100 W. Randolph Street Chicago, Illinois 60601 312.814.89172

CERTIFICATE OF SERVICE

It is hereby certified that true copies of the foregoing order were mailed, first class, on May 23, 2012, to each of the persons on the service list below.

It is hereby certified that a true copy of the foregoing order was hand delivered to the following on May 23, 2012:

John T. Therriault Illinois Pollution Control Board James R. Thompson Center 100 W. Randolph St., Ste. 11-500 Chicago, lllinois 60601

## ~~-1.~,~- \ Bradley P. Halloran Hearing Officer Illinois Pollution Control Board James R. Thompson Center 100 West Randolph Street, Suite 11-500 Chicago, lllinois 6060 I 312/814-8917

SERVICE LIST

PCB 2012-121 Stephen J. Bonebrake Schiff Hardin, LLP 6600 Willis Tower 233 S. Wacker Drive Chicago, IL 60606-6473

PCB 2012-121 Kathleen C. Bassi Schiff Hardin, LLP 6600 Willis Tower 233 S. Wacker Drive Chicago, IL 60606-6473 PCB 2012-121 Julie A. Armitage IEPA 1021 North Grand Avenue East P.O. Box 19276 Springfield, IL 62794-9276

PCB 2012-121 Charles E. Matoesian IEPA 1021 North Grand Avenue East P.O. Box 19276 Springfield, IL 62794-9276

### Electronic Filing- Received, Clerk's Office, 05/25/2012

BEFORE THE ILLINOIS POLLUTION CONTROL BOARD

MIDWEST GENERATION ,LLC WAUKEGAN GENERATING STATION, Petitioner, ) ) ) ) ) ) ) ) ) ) 

### v.

ILLINOIS ENVIRONMENTAL PROTECTION AGENCY, Respondent.

TO:

John T. Therriault, Assistant Clerk Illinois Pollution Control Board James R. Thompson Center Suite 11-500 100 West Randolph Chicago, TI!inois 60601

Kathleen C. Bassi SCHIFF HARDIt"! LLP Kathleen C. Bassi Stephen l Bonebrake 233 South Wacker Drive, Suite 6600 Chicago, illinois 60606 kbassi@scfliffhardin.com NOTICE PCB 12-121 (Variance- Air)

Bradley Halloran, Hearing Officer illinois Pollution Control Board James R Thompson Center Suite 11-500 100 West Randolph Chicago, lllinois 6060 I

Please find attached the ILLINOIS ENVIRONMENTAL PROTECTION AGENCY RECOMMENDATION that was electronically filed with the Illinois Pollution Control Board today. If you have any questions, please feel free to contact me.

ILLINOIS ENVIRONMENTAL PROTECTION AGENCY

### Electronic Filing- Received, Clerk's Office, 05/25/2012

DATED: May 25, 2012 P.O. Box 19276 Springfield, Illinois 62794-9276 217/782-5544

# B,~?dl Charles E. Matoewm Assistant Counsel Division ofLegal Counsel

## Electronic Filing- Received, Clerk's Office, 05/25/2012

BEFORE THE ILLINOIS POLLUTION CONTROL BOARD

MIDWEST GENERATION, LLCWAUKEGAN GENERATING STATION,

Petitioner,

vs.

ILLINOIS ENVIRONMENTAL PROTECTION AGENCY,

Respondent. ) ) ) ) ) ) ) ) ) ) ) 

### PCB 12-121 (Air- Variance)

ILLINOIS ENVIRONMENTAL PROTECTION AGENCY RECOMMENDATION

NOW COMES the Illinois Environmental Protection Agency ("Illinois EPA" or
"Agency'') by its attorney, Charles E. Matoesian, in response to the Petition for Variance of

Midwest Generation, LLC-Waukegan Generating Station ("Midwest Generation" or "Petitioner")

from the provisions of35 TIL Adm. Code 225.296(a)(I) and (c)(1) for the 12-month peliod

beginning December 31,2013, and ending December 31,2014. Pursuant to Section 37(a) ofthe

Illinois Environmental Protection Act ("Act") [415 ILCS 5/37(a)(2010)] and 35 Ill. Adm. Code

104.2 I 6, the illinois EPA neither supports nor objects to the Illinois Pollution Control Board

("Board") granting Midwest Generation's petition as specified in this recommendation. In

support ofthis recommendation, the Illinois EPA states as follows:

I. 

### INTRODUCTION

I. On Aplil I0, 2012, Petitioner, Midwest Generation, filed a petition seeking a variance

from the provisions of35 Ill. Adm. Code 225.296(a)(1) and (c)(l) ofthe Combined

## Electronic Filing- Received, Clerk's Office, 05/25/2012

Pollutant Standard ("CPS") for the 12 month period beginning December 31, 2013, and

ending December 31, 2014.

2. The variance would be for Unit 7 at the Waukegan Generating Station ("Waukegan" or

the ("Station"). The variance will give Midwest Generation an additional year to install

Flue Gas Desulfurization ("FGD") equipment and convert the hot-side precipitator on

that unit to a cold-side precipitator or shut down the unit.

3. 

### In return, Midwest Generation agrees to retire the coal-fired boilers at both the Fisk

Generating station and the Crawford Generating station earlier than might otherwise be

required under 35 Ill Admin. Code 225. Petition for Variance at 2-3.

4. On April24, 2012, the lllinois EPA published notice of Midwest Generation's petition in

the Waukegan News Sun pursuant to 415 ILCS 5/37(a)(2010) and 35 Ill. Adm. Code

104.214(a). Letter notice ofthe Petition was also sent on April19, 2012, to numerous

State Representatives and State Senators along with members of Congress, the Chairman

ofthe Lake County Board and the Lake County State's Attorney. Many other interested

parties were notified by letter, as well. Others were notified by e-mail. A few letters

were returned as undeliverable and a second attempt to contact those people occuned

where it was deemed necessary and prudent. All returned letters were added to the file.

To date, no public comments have been received regarding tllis matter.

5. Should any comments be received before the end ofthe conunent period, the Agency will

file an amendment to its Recommendation addressing any necessary issues.

6. Pursuant to 35 Ill. Adm. Code 104.234, the Board accepted the Midwest Generation's

variance petition for hearing on April30, 2012.

2

### Electronic Filing- Received, Clerk's Office, 05/25/2012

7. The Illinois EPA is required to make a recommendation to the Board on the disposition of

a petition for variance within forty-five (45) days offiling ofthe petition or any

amendment thereto or thirty (30) days before a scheduled hearing pursuant to 35 Ill. Adm.

Code 104.216.

II. BACKGROUND

8. The Waukegan Generating Station, Agency I.D. No. 097190AAC, is an electric

generating station owned and operated by Midwest Generation, LLC. The Waukegan

Generating Station is located at 40 I East Greenwood Avenue, Waukegan, Lake County,

Illinois 60087-5197. Petition for Variance at 3.

9. Waukegan is a major source subject to the Clean Air Act Pennitting Program

("CAAPP"). 415 ILCS 5/39.5 (2010). Petition at 6. The Illinois EPA issued a CAAPP

penni! to Midwest Generation for Waukegan on Febmary 7, 2006

.. !Q. As Petitioner

states, tbis petmit is under appeal at PCB 06-146. Id.

10. On July 19,2007, tbe Illinois EPA issued Midwest Generation aconstmction permit

authorizing the installation of activated carbon injection ("ACf') equipment at tbe

Waukegan Station, as required by tbe CPS. Id. Midwest Generation appealed this

permit at PB 08-020. 

### !fl. This permit has been partially stayed. Id. at 7.

11. On November 19, 2010, the Agency issued Midwest Generation a construction permit

authorizing tbe installation of a dry sorbent injection system and the conversion ofthe

hot-side ESP to a cold-side ESP for Waukegan Unit 7. Id. Midwest Generation has

obtained a one-year extension for this pemtit. Id.

12. The Fisk Generating station is tbe subject ofpennit appeals at PCB 08-018 and PCB 06-

3

### Electronic Filing- Received, Clerk's Office, 05/25/2012

057. The Crawford Generating station is the subject ofpennit appeals at PCB 08-019

and PCB 06-056.

13. The Agency accepts and incorporates by reference the description ofthe facility in Part I,

paragraphs one through six ofthe Petitioner's Petition labeled "Background". See

Petition p 3-6.

14. To the best of the Agency's knowledge, there are no state air pollution enforcement

actions currently pending before the Board.

15. The Petitioner appears to be involved in one case in the United States Court ofAppeals.

for the 7th Circuit, United States v.Midwest Generation, 12-1026 (2012).

III. RELffiF REQUESTED

16. The variance would be for Unit 7 at the Waukegan plant. ld. at 9.

17. The provisions from which :Midwest Generation seeks relief- are as follows:



### Section 225.296 Combined Pollutant Standard: Control Technology Requirements for NOx, S0 2 , 

### and PM Emissions

a) General Technology Requirements for NOx and 802.

I) On or before December 31, 2013, the owner or operator must either pennanenily shut down or install and have operational FGD equipment on Waukegan 7;


## ***

c) Control Technology Requirements for PM. The owner or operator ofthe two specified EGUs listed in this subsection that are equipped with a hot-side ESP must replace the hotside ESP with a cold-side ESP, install an appropriately designed fabric filter, or permanently shut down the EGU by the dates specified. Hot-side ESP means an ESP on a coal-fired boiler that is installed before the boiler's air-preheater [SIC] where the operating temperature is typically

4

### Electronic Filing- Received, Clerk's Office, 05/25/2012

at least 5500 F, as distinguished from a cold-side ESP that is installed after the air pre-heater where the operating temperature is typically no more than 3500 F.

1) Waukegan 7 on or before December 31, 2013

....

35 Ill. Adm. Code 225.296 (a)(l) and (c)(1).

18. The variance will give Midwest Generation an additional year to install FGD equipment

and convert the hot-side precipitator on that unit to a cold-side precipitator or shut down

the unit. Jd. at 9-10.

19. Petitioner stresses that it is not that it cannot comply with the CPS. !d. at 16. Rather, it

would be expensive and inefficient for it to do so. !d. Moreover, since its request results

in a net environmental benefit, it would be arbitrary and umeasonable to make it comply

with 35lll. Adm. Code 225.296(a)(l) and (c)(!) ofthe CPS.



### JV. FACTS PRESENTED IN THE PETITION

20. As required by 35 Ill. Adm. Code 104.216(a), the Illinois EPA has investigated the facts

alleged in Midwest Generations Variance Petition. To date, no public comments have been

received.

21. ln order to achieve compliance with the CPS, Midwest Generation requests a variance for

one year from 35 Ill. Adm. Code 225.296(a)(1) and (c)(1) in order to allow the Petitioner

to assess the economic situation for continued operation ofWaukegan 7 and either install



### a. dry sorbent injection system and convert the hot-side ESP to a cold-side ESP or, shut

down the unit.

22. Midwest Generation examined several options to comply with the requirements of



### 5

### Electronic Filing- Received, Clerk's Office, 05/25/2012

Section 225.296(a)(l) that FGD equipment be installed or the unit shuts down by 2013.

Id. at 10.

23. If allowed to delay the installation ofthe dry sorbent system by a year, Midwest

Generation states that it can install both the Unit 7 dry sorbent system and the Unit 8 dry

sorbent system at the same time. Id. This, Midwest Generation believes, will lead to
significant cost savings. Id.

24. Midwest Generation also points out that they will need to convert the ESP from hot-side

to cold-side and they obtained a permit for this when they obtained the constmction

permit for installing the dry sorbent injection system. Id.

25. The conversion ofthe ESP will also require the shutdown ofUnit 7 for an extended time

which must be coordinated with PJM, the regional transmission system operatm. Id. at

13. This will also affect the timing ofthe construction activities. Id.

26. In the meantime, the USEPA developed a new regulatory framework. Concerning

mercury, delaying the replacement ofthe hot-side ESP will further delay for control of

mercury and other hazardous air pollutants fmm coal-fired boilers, but they will still be

controlled and Waukegan will still reduce mercury emissions significantly prior to
implementation ofthe federal Mercury Air Toxics Standard ("MATS"). Id. at 13.

27. After the promulgation by the USEPA ofthe MATS, USEPA also promulgated the

Cross-State Air Pollution Rule ("CSAPR"). Petitioner points out that the Clean Air

Mercury Rule ("CAMR") and Clean Air Interstate Rule ("CAIR"), which formed the

basis ofthe CPS, were both replaced by CSAPR and MATS. The new CSAPR is

significantly more stringent than CAIR, but it has been appealed anrl it is uncertain if

6

### Electronic Filing- Received, Clerk's Office, 05/25/2012

the deadlines in the CSAPR will also be delayed, or if the conditions ofthe CSAPR will

change assuming it survives the appeal. Id. at 15-16. The one-year extension granted by

the variance will help to synchronize all ofthese varions timing requirements. Id. at 15.

28. The l1linois EPA has reviewed the information supplied by the Petitioner and found it to

be accurate. The calculations concerning emission reductions are also accurate.

29. Accordingly, the Petitioner's variance results in a net environmental benefit.

V. ENVIRONMENTAL IMPACT

30. Petitioner asse11s that there are hvo monitoring stations operated by the Agency located in

Lake County: "No. 24 at the Waukegan Notih Fire Station, AIRS Code 170971002, and

No. 25 at Zion Camp Logan, AIRS 170971007. 2010 AQ Rpt., p. 34. Ozone is monitored

at the Waukegan North Fire Station: ozone and PM2.s are monitored at the Zion Camp

Logan monitor." Id. at 5-6. The Waukegan station closed down in 2010. There is also a
monitoring station in Northbrook, 170314201.

31. There have been 19 exceedances ofthe National Ambient Air Quality Standard

("NAAQS") for ozone measured at these monitoring stations for either the 1 hour

standard or the 8 hour standard during the 2009,2010, and 2011 ozone season. Quality

assured data is not yet available for 2012.

32. The central argument ofMidwest Generation is that the accelerated decision to close (or

retrofit) the coal-fired boilers at Fisk and Crawford and the reductions that will occur as

the result ofthe decision will more than compensate for the increased pollution from

delaying the retrofit ofWaukegan 7. The emission reductions presented by the Petitioner

assume that the Fisk and Crawford units would remain operating and they would not

7

### Electronic Filing- Received, Clerk's Office, 05/25/2012

upgrade their pollution control equipment until required to do so by the CPS. This

analysis allows several years worth of avoided emissions to offset the single additional

year of emissions from Waukegan 7.

33. Based on the available information, Midwest Generation has shown that there will be an

environmental benefit to the granting ofthe variance. The CPS requires the Petitioner to

achieve a system-wide S02 emission rate of 0.44 lb/mmBtu in calendar year 2013. Id. at

17. The early retirement of the coal-fired 1mits at Crawford and Fisk, based upon when

the CPS would have required retrofitting them with pollution control equipment, gives

the Petitioner cumulative estimated reductions (considering the increase in emissions

from Waukegan 7 for one year) ofS0 2 of 32,231 tons for years 2013 through 2018,

particulate matter reductions of 5,602 tons for years 2013 through 2018 and NOx

emissions reductions of 9,556 tons for yem·s 2013 through 2018 should the variance be

granted (obviously more emission reductions ifFisk and Crawford close in September,

2012). See Table I, Petition p. 21. Mercury emissions will, however, increase by 20

pounds. ld.

34. Petitioner notes that the USEPA has stated that while mercury is a concern, there is a

greater com:ern for fine particulate matter emissions. Midwest Generation stresses that

the reduction in PM precursors, S0 2 and NOx, outweighs any deferral in the reduction of

mercury that would be required under the CPS. Id. at 23.

35. Fmthermore, the Petitioner states that because ofthe persistent and bioaccumulative

nature ofmercury, the reductions in mercury emissions from Fisk and Crawford because

ofthe early closure, mitigate the extra year of mercury emissions from Waukegan 7. Id.

8

### Electronic Filing- Received, Clerk's Office, 05/25/2012

at 20. The Illinois EPA agrees, especially considering the vast difference in emissions

avoided compared to emissions produced.

36. Petitioner stresses that it will operate and comply with all other provisions of the CPS

during the term of the Variance. Id. at 23

- 24.

VI. ARBITRARY AND UNREASONABLE HARDSHIP

37. In considering whether to grant or deny a variance pursuant to Section 35(a) ofthe Act,

the Board is required to determine whether the Petitioner has shown that it would suffer

an arbitrary or unreasonable hardship if required to comply with the regulation or pem1it

requirement at issue. The Act provides that "The Board may grant individual variances

beyond the limitations prescribed in this Act, whenever it is found, upon presentation of

adequate proof, that compliance with any rule or regulation, requirement or order ofthe

Board would impose an arbitrary or unreasonable hardship." 415 ILCS 5/35(a)(2010).

38. Petitioner states that the need for the variance results from two factors. First, the ongoing

deterioration in energy market prices combined with substantial new federal

environmental regulations have made continued investment in the Petitioner's fleet

questionable and subject to reconsideration at this time. Id. at 2. Second, the CPS

requires Waukegan Unit 8 to be retrofitted with FGD equipment by December 31, 2014,

and Petitioner has determined that it can gain cost and other efficiencies by concurrent
bidding ofthe two construction projects together for concurrent building. Id. Unit 7 will

comply with the State's unit-by-unit limitations by the CPS's January 1, 2015 deadline.

Id. at 19-20.

9

### Electronic Filing- Received, Clerk's Office, 05/25/2012

39. Petitioner demonstrates that there is a net benefit to the environment from the early

closure ofFisk and Crawford stations, in exchange for a delay of one year tocontrol or

close Waukegan Unit 7. Id. at 22. Thus, the hardship to the Petitioner should the

variance not be granted outweighs any impact on human health and the environment. Id.

Petitioner claims that none ofthese conditions were foreseen when the CPS was written,

and therefore, to enforce the CPS as written would impose undue economic hardship on

it. Id. at 2. Should the Board not grant the variance, Petitioner states that it will have to

incur the added costs from not taking advantage ofthe efficiencies in bidding out the

work on Units 7 and 8. Petitioner notes that ifit is required to retrofit Unit 7 by the

current time!ine in the CPS, the costs might be economically impractical and result in the

permanent closure ofUnit 

### 7 and the subsequent loss of jobs. Id. at 

### I0. Petitioner states

that it does not seek a CPS fleet-wide increase in emissions, and that the shutdown of

Fisk and Crawford will more than offset the one-year delay in achieving any emission

reductions from Waukegan Unit 7 by the installation ofFGD.

40. It is correct that the regulatory regime which formed the CPS has changed dramatically.

USEPA has issued new, and quite different, rules to replace CAIR and CAMR. The

Petitioner is also correct in stating that the closing ofthe coal-fired boilers at Fisk and

Crawford will compensate for running the Waukegan 7 an extra year without FGD.

VII. CONSISTENCY WITH FEDERAL LAW

41. Pursuant to Section 35 oftheAct [415 ILCS 5/35 (2010)] and 35 ill. Adm. Code

I 04.208(a), all petitions for variance must be demonstrated to be consistent with federal

law. Midwest Generation states in its Petition that "[t]he provisions from which Midwest

10

### Electronic Filing- Received, Clerk's Office, 05/25/2012

Generation seeks relief are not currently part of the lllinois SIP and are not federally

enforceable and are consistent with federal laws." Id. at 25.

42. The variance provisions ofthe Act and the Board's procedural regulations have been

approved as part ofthe Illinois State Implementation Plan ("SIP") to achieve the NAAQS

for ozone in the greater Chicago ozone attainment area. However, in order for U.S. EPA

to recognize the substance ofthis variance and to incorporate tl1e provisions into federal

law, any variance granted to Midwest Generation by the Board in this proceeding must be

submitted to USEPA as a SIP revision. In order to meet the requirements of Section

llO(a) ofthe Clean Air Act, a public hearing must be held on the proposed variance

before it may be submitted as a SIP revision.

43. Petitioner asserts that at the time of filing, it was consistent with Federal law. Id. at 25.

However, the Illinois EPA has submitted portions ofthe CPS as amendments to the

Illinois SIP for purposes of satisfying the Best Available Retrofit Technology ("BART")

program (regional haze). Id. Petitioner notes that because the USEPA has not yet
approved this SIP revision, it is not currently part ofthe Illinois SIP artd thus the variance

is consistent with Federal law. Id. Should the BART/Regional Haze SIP be approved by

the USEPA, the Petitioner states that the variance would still cause no negative impacts

on the Illinois EPA's calculations regarding emission levels. Id. at 26. ln addition, the

Petitioner is willing to request that the lllinois EPA submit the**vm~ance** order along with

updated emission calculations as another SIP amendment. ld.

44. Conceming mercury emissions, it was not a part of the Illinois BART/Regional. Haze SIP

submittals. Id. at 26. Thus the one year reduction in mercury control efficiency, has no

ll

### Electronic Filing- Received, Clerk's Office, 05/25/2012

import under the Clean Air Act. Id. at 27.

45. It is probable that USEPA will concur with such a SIP revision as there will be a
significant decrease in SOz and NOx emissions due to the early closure ofthe Fisk and

Crawford stations. The Illinois EPA will submit a Board order granting the variance

to USEPA as a SIP revision.

VIII. COMPLIANCE PLAN

46. As explained above, Midwest Generation has proposed an early closure ofthe coal-fired

boilers at its Fisk and Crawford stations, provided that it is granted an additional year to

install FGD equipment and convert the hot-side precipitator on Waukegan 7 to a coldside precipitator, or, alternatively, to shut down the unit.

47. Although the reliefrequested would extend the compliance date for Waukegan 7 for up to

a year, the compliance plan suggested by Midwest Generation under Part VI of the

Petition is reasonable.

IX. RECOMMENDATION AND CONCLUSION

48. Pursuant to Section 35 of the Act [415 ILCS 5/37(a) (2010)] and 35 

### Ill. Adm. Code

l 04.216(b), the Illinois EPA must prepare a recommendation for the Board.

49. As explained above, Midwest Generation's proposal is expected to result in a net

environmental benefit.

WHEREFORE, for the reasons stated herein, the Illinois EPA neither supports nor
objects to the Board granting Midwest Generation's Petition for Variance.

12

### Electronic Filing- Received, Clerk's Office, 05/25/2012

DATED: May25,2012 I 021 N. Grand Ave. East P.O. Box 19276 Sp1ingfield, Illinois 62794-9276 (217) 782-5544

13 Respectfully Submitted,

ILLINOIS ENVIRONMENTAL PROTECTION AGENCY

# BY:~:

Assistant Counsel Division ofLegal Counsel

### Electronic Filing- Received, Clerk's Office, 05/25/2012

STATE OF ILLINOIS

COUNTY OF SANGAMON ) ) ) 

## ss

PROOF OF SERVICE

I, the undersigned, an attorney, state that I have served electronically the attached the ILLINOIS ENVIRONMENTAL PROTECTION AGENCY RECOMMENDATION upon the following persons:

TO:

John T. Therriault, Assistant Clerk Illinois Pollution Control Board James 

### R. Thompson Center Suite 11-500 100 West Randolph Chicago, lllinois 60601

Kathleen C. Bassi SCHIFF HARDIN LLP Kathleen C. Bassi Stephen 

### .T. Bonebrake 233 South Wacker Drive, Suite 6600 Chicago, Illinois 60606 kbassi@schiffuardin.com

Dated: May25, 2012

1021 North Grand Avenue East P.O. Box 19276 Springfield, Illinois 62794-9276 217.782.5544 217.782.9143 (TDD) Bradley Halloran, Hearing Officer Illinois Pollution Control Hoard James R Thompson Center Suite 11-500 100 West Randolph Chicago, lllinois 60601

ILLINOIS ENVIRONMEN;;{AL PROTECTION AGENCY,

# c~U
Charles E. Matoesian Assistant Counsel Division ofLegal Counsel

### ilLINOIS POLLUTION CONTROL BOARD May30, 2012

MIDWEST GENERATION, LLC., WAUKEGAN GENERATING STATION,

Petitioner,

V.



### ilLINOIS ENVIRONMENTAL PROTECTION AGENCY,

Respondent, ) ) ) ) ) ) ) ) ) ) ) ) 

### PCB 12-121 (Variance- Air)

NOTICE OF HEARING 

## RECEIVED CLERK'S OFFICI\i



## MAY 3 0 2012

STATE OF IlLINOiS 

### Pollution Control Board

A hearing in the above-captioned matter is scheduled and will continue as necessary on the following date, time and place:

IT IS SO ORDERED. July 10, 2012 !O:OOa.m. 

### Waukegan City Hall City Council Chambers 100 N. Martin Luther King Jr. Ave.
znd 

### Floor Waukegan, illinois 60085

< 

# \ Bradley P. Halloran Hearing Officer illinois Pollution Control Board James R. Thompson Center, Suite 11-500 100 W. Randolph Street Chicago, lllinois 60601 312.814.8917

In compliance with the Americans with Disabilities Act and other applicable federal and State laws, rhe hearing will be accessible to individuals with disabilities. Person requiring auxiliary aids and services should contact John Therriault, Assistant Clerk of the Board, at 100 W. Randolph St., Suite I**1~500,** Chicago, Illinois 60601, at telephone number 3121814-6931, fax number 3121314·3669, or1DD number 3121814-6032, five days prior to the hearing.2



### CERTIFICATE OF SERVICE

It is hereby certified that true copies of the foregoing order were mailed, first class, on May 30, 2012, to each of the persons on the service list below.

It is hereby certified that a true copy of the foregoing order was hand delivered to the following on May 

### 30, 2012:

John T. Therriault Illinois Pollution Control Board James R. Thompson Center 100 W. Randolph St., Ste. 11-500 Chicago, lllinois 60601

## ~~.\.~<>~- \ Bradley P. Halloran Hearing Officer Illinois Pollution Control Board James R. Thompson Center 100 West Randolph Street, Suite 11-500 Chicago, lllinois 60601 312/814-8917

SERVICE LIST

PCB 2012-121 Stephen J. Bonebrake Schiff Hardin, LLP 6600 Willis Tower 233 S. Wacker Drive Chicago, IL 60606-6473

PCB 2012-121 Kathleen C. Bassi Schiff Hardin, LLP 6600 Willis Tower 233 S. Wacker Drive Chicago, IL 60606-6473 PCB 2012-121 Julie A. Armitage IEPA 1021 North Grand Avenue East P.O. Box 19276 Springfield, IL 62794-9276

PCB 2012-121 Charles E. Matoesian IEPA 1021 North Grand Avenue East P.O. Box 19276 Springfield, IL 62794-9276

### IIU!!rC IE fV

# .e i:ll

..**~lili<'S OFFIC~** 
ilLINOIS POllUTION CONTROL BOARD August 9, 2012

### AUG-~ 

## 2012

tt!!..TATE OF' !UJNO!l!l**r~o~~il.ltioll** 

## Control bm MIDWEST GENERATION, llC, WAUKEGAN GENERATING STATION,

Petitioner,



### v. ) ) ) ) ) ) ) ll..LINOIS ENVIRONMENTAL PROTECTON) AGENCY, )

Respondent. ) ) PCB 12-121 (Variance

- Air)



### HEARING OFFICER ORDER ' •,!

On August 9, 2012, all parties participated in a telephonic status conference with the hearing officer. There appears to be no remaining issues regarding the above-captioned matter and the parties await the Board order.

IT IS SO ORDERED.



### \ Bradley P. Halloran Hearing Officer Illinois Pollution Control Board James R. Thompson Center, Suite 11-500

. 100 W. Randolph Street Chicago, lllinois 60601 312.814.8917

### 2

CERTlFICATE OF SERVICE

It 

### is hereby certified that true copies of the foregoing order were mailed, first class, on August 9, 2012, to each of the persons on the service list below.

It is hereby certified that a true copy of the foregoing order was hand delivered to the following on August 9, 2012:

John T. Therriault Illinois Pollution Control Board James R. Thompson Center 100 W. Randolph St., Ste. 11-500 Chicago, Illinois 60601

## ~~-\~<>~- \ Bradley P. Halloran Hearing Officer Illinois Pollution Control Board James R. Thompson Center 100 West Randolph Street, Suite 11-500 Chicago, lllinois 60601 312/814-8917

SERVICE LIST

PCB 2012-121 Stephen J. Bonebrake Schiff Hardin, LLP 6600 Willis Tower 233 S. Wacker Drive Chicago, IL 60606-6473

PCB 2012-121 Kathleen C. Bassi Schiff Hardin, LLP 6600 Willis Tower 233 S. Wacker Drive Chicago, IL 60606-6473 PCB 2012-121 Julie A. Armitage IEPA 1021 North Grand Avenue East P.O. Box 19276 Springfield, IL 62794-9276

PCB 2012-121 Charles 

### E. Matoesian IEPA 1021 North Grand Avenue East P.O. Box 19276 Springfield, IL 62794-9276ILLINOIS POLLUTION CONTROL BOARD August 23, 2012

MIDWEST GENERATION, LLCWAUKEGAN GENERATING STATION,

Petitioner,

v.

ILLINOIS ENVIRONMENTAL PROTECTION AGENCY,
Respondent. ) ) ) ) ) ) ) ) ) ) ) PCB 12-121 (Variance- Air)

KATHLEEN C. BASSI AND STEPHEN 

### J. BONEBRAKE; SCHIFF HARDIN, LLP, APPEARED ON BEHALF OF PETITIONER; AND

CHARLES E. MATOESIAN; DIVISION OF LEGAL COUNSEL, ILLINOIS ENVIRONMENTAL PROTECTION AGENCY, APPEARED ON BEHALF OF RESPONDENT.

OPINION AND ORDER OF THE BOARD (by J.A. Burke):

Midwest Generation, LLC

- Waukegan Generating Station (Midwest Generation) seeks a variance for twelve months from December 31, 2013 to December 31, 2014 for an electric generating unit (EGU) located at its station at 401 East Greenwood Avenue, Waukegan, Lake County, Agency No. 097190AAC. The requested valiance would extend the compliance dates in 35 Ill. Adm. Code 225.296 entitled "Combined Pollutant Standard: Control Technology Requirements for NO., S02, and PM Emissions."

As applicable to Midwest Generation's Waukegan Unit 7, the Combined Pollutant Standard (CPS) would require the installation offlue gas desulfurization (FGD) equipment (35 Ill. Adm. Code 225.296(a)(l)) and the conversion ofthe hot-side electrostatic precipitator (ESP)

on that unit (35 Ill. Adm. Code 225.296(c)(1)) by December 31,2013. Midwest Generation seeks no change in its existing numerical emission rate limits.

In a filing responsive to the petition, the Illinois Environmental Protection Agency (Agency) found the facts and emission calculations in the petition to be accurate; determined that the requested variance "is expected to result in a net environmental benefit;" and stated that it "neither supports nor objects" to the petition. Agency Response (Agency Resp.) at 12. No hearing was requested or held concerning the petition.

The Environmental Protection Act (Act) gives the Board authority to grant a variance from a Board regulation when it finds that immediate compliance with the regulation would impose an arbitrary or unreasonable hardship on the petitioner. 415 ILCS 5/35(a) (201 0). For

### 2

the reasons set forth below, the Board fmds that requiring Midwest Generation to timely comply with the December 31, 2013 deadline in Sections 225.296(a)(l) and 225.296(c)(l) for Waukegan Unit 7 would impose an arbitrary and unreasonable hardship.

Additionally, the Board notes that the grant ofthis one-year variance will not result in an overall increase ofemissions from Midwest Generation's facility. Due to the early shutdowns of the coal-fiTed unit at the Fisk Generating station in Chicago (Fisk station) and the coal-fiTed units at the CTawfoTd Generating station in Chicago (Crawford station), even with the compliance delay at Waukegan Unit 7, there will be an overall reduction ofMidwest Generation's emissions. During the one-year term ofthe variance, the Board finds that the significant reductions in sulfur dioxide (S0 2) and particulate matter (PM) emissions, as well as nitrogen oxide (NOx) emissions, mitigate the estimated 20 pound increase in mercury emissions, noting that the mercury emissions Temain subject to controlTequirements.

The Board fmds that grant ofthis variance will cause no significant negative impact on the public or the environment. The Board also fmds that the requested variance is consistent with federal law. The Board, therefore, grants the requested variance from December 31,2013 to December 31, 2014, subject to certain conditions suggested by Midwest Generation and not objected to by the Agency.



### PROCEDURAL BACKGROUND

On AprillO, 2012, Midwest Generation petitioned the Board for a variance from 35 

### ill. Adm. Code 225.296(a)(l) and 225.296(c)(l) requiring the installation ofpollution control equipment or shutdown to control emissions ofNOx. S02 , and PM. Midwest Generation requests the variance for a period of one year, from December 31, 2013 to December 31, 2014, with no change in the existing emission rate limits.

The Act requires the Agency to provide public notice of a variance petition, including notice by publication in a newspaper of general circulation in thecounty where the facility is located within 14 days after the petition is filed. 415 ILCS 5/37(a); 35 

### ill. Adm. Code 104.214. Midwest Generation's petition was filed on AprillO, 2012. Therefore, newspaper notice was required by April24, 2012, and the Agency caused the notice to be published on that date. The Agency informed the Board that it also sent, on April 19, 2012, "letter notice" ofthe petition to "numerous State Representatives and State Senators along with members of Congress, the Chairman ofthe Lake County Board and the Lake County State's Attomey." Agency Resp. at 2.

The Act requires the Agency to investigate each variance petition and "make a recommendation to the Board as to the disposition ofthe petition." 415 ILCS 5/37(a); 35 Ill. Adm. Code 104.216. On May 25, 2012, the Agency filed a document titled "Illinois Environmental Protection Agency Recommendation" stating that the Agency "neither supp011s

nor objects to the [Board] granting Midwest Generation's petition." Agency Resp. at 1, 12. Within 14 days after service of an Agency recommendation, the petitioner may file a response to the Agency recommendation or an amended petition. 35 

### ill. Adm. Code 104.220. Midwest Generation made no such filing.3

The Board will hold a hearing on a variance petition ( 1) ifthe petitioner requests a hearing; (2) ifthe Agency or any other person files a written objection to the variance within 21 days after the newspaper notice, together with a written request for hearing; or (3) ifthe Board, in its discretion, concludes that a hearing is advisable. See 415 ILCS 5/37(a); 35 Ill. Adm. Code 104.224, 104.234. No person filed any objection to the variance petition or requested a hearing. Midwest Generationnoted that, in an agreement dated February 28, 2012, the Environmental Law and Policy Center, Sierra Club, Natural Resources Defense Council, and Respiratmy Health Association ofMetropolitan Chicago "stated that, recognizing the net benefits to the [Combined Pollutant Standard] realized by the early retirements of [Midwest Generation's] Fisk and Crawford coal-fired units, they would not oppose this request for a variance for Waukegan Unit 7." Petition (Pet.) at 3.

In the petition, Midwest Generation waived its right to request a hearing. Pet. at 28. Midwest Generation did not request a hearing "because no federal law is affected by the requested variance." !d. However, Midwest Generation reserved its right to request a hearing should the United States Environmental Protection Agency (USEPA) approve Illinois' Regional Haze State Implementation Plan (SIP) prior to issuance ofthe Board's order. !d.

As background, on June 24, 2011, the Agency submitted a revision to the Illinois SIP addressing regional haze. See 77 Fed. Reg. 3966 (Jan. 26, 2012); Pet. at 25. The Illinois regional haze plan addresses Section 169A ofthe Clean Air Act (42 U.S.C. 7491) to remedy impairment ofvisibility in Class I areas such as national parks and wilderness areas. 77 Fed. Reg. 3966. The illinois submittal included adding Sections 225.296(a)(l) and 225.296(c)(l), the subject ofthis variance petition, to the Illinois SIP. Pet. at 25, Pet. Exh. 8. On January 26, 2012, USEPA proposed approval ofIllinois' submittal. 77 Fed. Reg. 3966; Pet. at 25. As ofthe date of filing the petition, USEPA had not yet taken final action on this proposal.

On July 6, 2012, during this variance proceeding, USEPA approved the Illinois submittal. 77 Fed. Reg. 39943. USEPA granted fmal approval for Illinois' Regional Haze SIP as proposed by Illinois which means Sections 225.296(a)(1) and 225.296(c)(l) are part ofthe Illinois SIP effective August 6, 2012. !d. Any variance to Sections 225.296(a)(1) and 225.296(c)(1), therefore, needs to be submitted to USEPA to be incorporated into the Illinois SIP.

One ofthe requirements when amending the Illinois SIP is to allow the opportunity for a public hearing. See 42 U.S.C. 

### § 7410(a) and 40 C.F.R. 

### § 51.102. Historically, when a Board action may affect a provision ofthe Illinois SIP, Board hearings on proposed rules, adjusted standard petitions, and variance petitions have been used to meet this federal hearing requirement. Accordingly, although no person requested a hearing on this variance within 21 days ofthe initial newspaper notice, the Board set a hearing for July 10, 2012 in Waukegan. Consistent with the federal requirement that states provide an opportunity for public hearing, in the Board's publication ofthe hearing date, the Board noted that the hearing would be cancelled ifthe Board received no requests for the hearing by July 3. See 40 C.F.R. § 51.102. No person requested that the July 10 hearing be held and, on July 5, the hearing officer cancelled the hearing.4

BASIS FOR ISSUING VARIANCE

A "variance is a temporary exemption from any specified rule, regulation, requirement or order ofthe Board." See 35 Ill. Adm. Code 104.200(a)(1). Under Title IX ofthe Act (415 ILCS 5/35-38), the Board is responsible for granting variances when a petitioner demonstrates that immediate compliance with a Board regulation would impose an "arbitrary or unreasonable hardship" on petitioner. 415 ILCS 5/35(a). Specifically, the Act provides:

The Board may grant individual variances beyond the limitations prescribed in this Act, whenever it is found, upon presentation of adequate proof, that compliance with any rule or regulation, requirement or order ofthe Board would impose an arbitrary or unreasonable hardship. However, the Board is not required to find that an arbitrary or unreasonable hardship exists exclusively because the regulatory standard is under review and costs of compliance are substantial and certain. 415 ILCS 5/35(a); see also 35 Ill. Adm. Code 104.200, 104.208, 104.238.

The Board may grant a variance, however, only to the extent consistent with applicable federal law. 415 ILCS 5/35(a). Further, the Board may issue a variance with or without conditions, and for only up to five years. See 415 ILCS 5/36(a).

The burden ofproofis on the petitioner. 415 ILCS 5/37(a); 35 ill. Adm. Code 104.200(a)(l ), 104.238(a). The petitioner must prove that immediate compliance with Board regulations would cause an arbitra1y or unreasonable hardship that outweighs public interest in compliance with the regulations. See Willowbrook Motel v. PCB, 135 ill. App. 3d 343, 349-50, 481 N.E.2d 1032, 1036-37 (1st Dist. 1985).

BACKGROUND OF THE COMBINED POLLUTANT STANDARD

Analysis ofthis variance request requires an understanding ofthe underlying regulation and the history of its adoption. In 2005, USEPA promulgated regulations requiring reduction of NOx, S02, and mercury. See 70 Fed. Reg. 25162 (May 12, 2005); 70 Fed. Reg. 28606 (May 18, 2005). The Agency proposed rules to the Board to implement both federal rules. The first rulemaking was Proposed New 35 ill. Adm.Code 225 Control ofEmissions from Large Combustion Sources (Mercury), R06-25 (Dec. 21, 2006). This rule amended 35 ill. Adm. Code Part 225 Subpart A and added Subpart B. The second rulemaking was Proposed New Clean Air Interstate Rule CCAIR) SO,, NOx Annual and NOx Ozone Season Trading Programs, 35 Ill. Adm. Code 225, Subparts A, C, D, E, and F, R06-26 (Aug. 23, 2007).

As a result ofthese rulemakings, under Part 225, Control ofEmissions from Large Combustion Sources, affected utilities are provided two compliance options for reducing emissions: one option imposes stringent limits on mercury emissions alone and the other option requires implementing mercury control technology in conjunction with emission limits for S02 and NOx. Specifically, Sections 225.291 through 225.299, collectively referred to as the Combined Pollutant Standard (CPS), address the Midwest Generation facilities. 35 Ill. Adm. Code 225.291

- 225.299 and 225.Appendix A. On December 27, 2007, Midwest Generation opted in to the CPS and identified Waukegan Unit 7 as one ofthe EGUs to be included in the5

Midwest Generation CPS Group. Pet. at 8. The specific rule provisions from which Midwest Generation seeks relief are:

Section 225.296 Combined Pollutant Standard: Control Technology Requirements for NO., S02, and PM Emissions

a) Control Technology Requirements for NOx and S02

I) On or before December 31, 2013, the owner or operator must either permanently shut down or install and have operational FGD equipment on Waukegan 7

...

c) Control Technology Requirements for PM. The owner or operator ofthe two specified EGUs listed in this subsection that are equipped with a hot-side ESP must replace the hotside ESP with a cold-side ESP, install an appropriately designed fabric ftlter, or permanently shut down the EGU by the dates specified

... 1) Waukegan 7 on or before December 31, 20 13

...

35 111. Adm. Code 225.296.

MIDWEST GENERATION'S VARIANCE PETITION

Midwest Generation petitioned the Board for a variance from two provisions ofthe CPS "to avoid arbitrary and unreasonable hardship by permitting the company to adapt to unanticipated conditions that have evolved since the adoption ofthe CPS." Pet. at 

### 2. Midwest Generation points to two "unanticipated conditions." 

### Id. First, Midwest Generation claims that "energy market prices" have been "significantly deteriorating" and new federal environmental regulations "have made long-term investment in the smallest generating units

... questionable." 

### I

d.

Second, Midwest Generation determined through bidding future construction work that "it can gain cost and other efficiencies" by installing FGD equipment on Waukegan Unit 7 concurrently with Waukegan Unit 8 which is due to be retrofitted by December 31, 2014. Pet. at 2. Midwest Generation asserts that none ofthese conditions was foreseen when the CPS was adopted; and therefore these CPS provisions impose an undue economic hardship on Midwest Generation. 

### ld.

### 6

Station Background

The Waukegan Generating Station (Waukegan station) went online between 1952 and 1962 and can generate approximately 781 net megawatts of elechicity. Pet. at 4. The station employs· approximately 157 people. 

### !d.

The CPS applies to three EGUs at the Waukegan station: Waukegan Unit 6, Waukegan

_ Unit 7, and Waukegan Unit 8. Pet. at 4; 35lil. Adm.Code 225.Appendix A. Waukegan Unit 6

was shut down by December 31,2001, as required by 35 Ill. Adm. Code 225.297(a)(l). Pet. at 4, fu. 2. The remaining two units fire coal as their primary fuel and natural gas as auxiliary fuel during startup and for flame stabilization. Pet. at 4.

Particulate matter emissions from each unit are controlled by an ESP. Pet. at 4. The ESP for Waukegan Unit 7 is a hot-side ESP. 

### !d. Mercury emissions are controlled by injection of powdered activated carbon (ACI). 

### !d. at 5. S02 emissions are controlled by using very lowsulfur coal. 

### !d.

The Waukegan station is located in Lake County, which is part ofthe Chicago ozone and PM 2

. 5 nonattainment areas. Pet. at 5, fu. 6 (includes detailed discussion of attainment status in Illinois). The Waukegan station is a major source of air pollution under the Clean Air Act and is subject to the Clean Air Act Pe1mitting Program (CAAPP). 

### !d. at 6.

Requested Relief

Midwest Generation seeks relief from the requirement to perform the following activities by December 31, 2013 on Waukegan Unit 7: (i) permanently shut down or install and have operational FGD equipment (35lil. Adm. Code 225.296(a)(l)) and (ii) replace the hot-side ESP with a cold-side ESP, install an appropriately designed fabric filter, or permanently shut down the unit (35 lll. Adm. Code 225.296(c)(l)). Pet. at 9, 27. Midwest Generation requests a oneyear extension, to December 31,2014, to comply with these requirements. 

### !d. at 10, 27.

Midwest Generation notes that it does not seek any relief from the system-wide S02 annual emission rates set forth at Section 225.295(b) or the NOx emission rate and control requirements set forth at Sections 225.295 through 225.298. Pet. at 10. Nor does Midwest Generation seek relief from the mercury control requirements set forth in Section 225.294. 

### !d. Further, Midwest Generation does not seek relief from any CPS requirement applicable to other units in the Midwest Generation CPS Group. 

### !d.

Midwest Generation explains that 

### it seeks this variance well in advance ofthe December 31, 2013 compliance date because long lead time is needed to plan and perform the construction required to comply with Sections 225.296(a)(l) and 225.296(c)(l). Pet. at 10. Midwest Generation states "it is essential that Midwest Generation know now whether the Board will grant the relief so that it does not embark on unnecessary and costly activities in anticipation ofconshuction, as well as the actual conshuction." 

### !d.

### 7

Examined Alternatives

Midwest Generation examined altematives to comply with the CPS requirement in Section 225.296(a)(l) to install FGD equipment. Pet. at 10. First, it evaluated installing a dry scrubber. 

### !d. Next, Midwest Generation evaluated installing a dry sorbent injection system at a cost of $18 million. 

### !d. at II. Midwest Generation applied for and obtained a construction permit to install the 

### chy sorbent injection system on Waukegan Unit 7. 

### !d. Midwest Generation started constmction in 2011 but later obtained an extension ofthe permit. 

### !d.

Midwest Generation also examined altematives to comply with the CPS requirement in Section 225.296(c)(l) to replace the hot-side ESP with a cold-side ESP or install a fabric filter. Pet. at 12. First, it evaluated installing a fabric filter (baghouse). 

### !d. at 10, 12. Midwest Generation faced challenges with this altemative including lack of adequate space, lengthy planning, and cost. 

### !d. at 11, 12. Next, Midwest Generation evaluated converting the ESP from hot-side to cold-side at a cost of approximately $70 million. 

### !d. The permit Midwest Generation obtained for the illy sorbent injection system also covered converting the ESP on Waukegan Unit 7. 

### !d.

Compliance Efforts and Hardship

Construction Permit

Midwest Generation obtained a construction permit from the Agency dated November 19,2010 to install the FGD equipment (a illy sorbent injection system) on Waukegan Unit 7 and convert the hot-side ESP on that unit. Pet. at 7, 13, Pet. Exh. 5. Midwest Generation also obtained a one-year extension ofthis permit from the Agency. Pet. at 7.

Regulatory Uncertaintv

Midwest Generation summarizes the status oftwo recent federal air pollution rules: the Cross-State Air Pollution Rule (CSAPR) (76 Fed. Reg. 48208 (Aug. 8, 2011)) and the Mercury and Air Toxics Standards (MATS) (77 Fed. Reg. 9304 (Feb. 16, 2012)).

In August 20 II, USEPA adopted CSAPR to replace the Clean Air Interstate Rule (CAIR). Pet. at 13. Both rules were written to apply to fossil fuel-fired electric generators. 

### !d. A federal court remanded CAIR to USEPA for additional action, but allowed CAIR to remain effective until USEPA replaced it with a new mle. 

### !d. In response to this court order, USEPA promulgated CSAPR. 

### !d. Midwest Generation characterizes CSAPR as
significantly more stringent than the CAIR, namely the addition of assurance provisions or variability limits that establish hard mass emission caps on each subject state's emissions ofS0 2 and NOx. 

### Id. at 13-14.

Midwest Generation asserts two uncertainties with respect to implementing CSAPR. Pet. at 14. First, it is unclear how the Agency will implement CSAPR, including which allowance allocation method it will use. 

### !d. Second, CSAPR has been challenged in federal court and the8

court ordered that implementation ofthe mle be stayed. 

### !d. Midwest Generation anticipates that

even assuming the fastest case scenario where the court issues an opinion by the end of2012 upholding CSAPR, CSAPR would become effective in 2013 and reduction in S02 allowances would apply in 2015. 

### !d.

In Febmary 2012, USEPA adopted MATS which "codifies the Utility Maximum Achievable Control Technology (MACT) requirement applicable to coal- and oil-fired EGUs pursuant to Section 112 ofthe Clean Air Act." Pet. at 14. Midwest Generation asserts that MATS "was not even proposed at the time that Midwest Generation obtained its construction permit" and "Midwest Generation could not have had any idea ofthe scope ofthe mle." 

### !d.

Midwest Generation states that MATS requires emission reductions for mercury, nonmercury hazardous metals, and hydrogen chloride. Pet. at 15. Midwest Generation explains that MATS allows monitoring patticulate matter emissions as a surrogate for non-mercury hazardous metals and the technology to control non-mercury hazardous metals is the same as for particulate matter, namely ESPs or baghouses. 

### !d. For hydrogen chloride, MATS allows the option to comply with a S02 emission limit as a sun·ogate. 

### !d. Midwest Generation concludes that "the

measures that Midwest Generation must unde1take to comply with the CPS overlap with its compliance obligations under the MATS." 

### !d. MATS requires compliance by April16, 2015 with the possibility of a one-year extension. 

### !d.

Midwest Generation argues that CSAPR and MATS, both possibly requiring compliance in 2015, have "overlapping, significant S02 , mercury, and PM emission reduction obligations that conflict with the CPS's 2013 deadlines applicable to Waukegan Unit 7." Pet. at 15. The one-year extension sought by the variance would "help [Midwest Generation] synchronize these various regulatory timing requirements." 

### !d. Fmthe1more, Midwest Generation contends that "at least some ofthis unce1tainty" surrounding appeals of CSAPR and MATS "could be alleviated by deferring the deadlines at issue for Waukegan 7." 

### !d. at 16. Coordinating compliance with these various obligations "could help Midwest Generation avoid additional and unnecessary significant costs and dismption ofunit operation." 

### !d.

Midwest Generation, therefore, asserts compliance with the current December 31, 2013 CPS deadlines would impose an unreasonable hardship. Midwest Generation notes that it "does
not claim that it cannot comply with the CPS, but that doing so is arbitrary and unreasonable at this time and poses an undue hardship." Pet. at 16.

Environmental Impact

Sulfur Dioxide Emissions

The CPS requires Midwest Generation to achieve system-wide annual average S0 2 emission rates starting with 0.44 lb/mmBtu 1in 2013 and declining in subsequent years. Pet. at 17; 35 

### Ill. Adm. Code 225.295(b). Using 2007 actual data, Midwest Generation estimates that

1 "mmBtu" stands for million British thermal units or I ,000,000 Btu.9

system-wide S02 emissions for 2013 would be 66, I 09 tons using the CPS rate of0.44lb/nunBtu. Pet. at 17.

Ifthe Fisk station shuts down by the end of2012, Midwest Generation estimates that system-wide S02 emissions for 2013 would be 62,282 tons. 

### ld. This results in a reduction of 3,827 tons or 5.6 percent in 2013. 

### Id.

The CPS requires that the Fisk station be upgraded or shutdown by December 31, 2015. Pet. at 17. Midwest Generation calculates that the cumulative reduction of S02 emissions in 2013,2014, and 2015 from shutting down the Fisk station by the end of2012 would tota111,481 tons (3,827 tons per year over three years) or 7.5 percent. 

### ld. at 18.

The CPS requires that Crawford Urut 8 be upgraded or shutdown by December 31, 2017 and Crawford Urut 7 by December 31, 2018. Pet. at 18. Ifboth Crawford units are shutdown by the end of2014, Midwest Generation calculates that Crawford Urut 7 would not emit approximately 10,408 tons ofS02 in 2015, 2016, 2017, and 2018 and Crawford Urut 8 would not emit approximately 13,437 tons ofS02 in 2015,2016, and 2017. Pet. Exh. 9. The total reduction of S02 from shutting down the Crawford uruts by the end of 2014 would total23,592
tons. 

### !d., Pet. Exh. 9.

In 2011, the Waukegan station emitted 9,929 tons ofS0 2 ; 3,801 tons were attributed to Waukegan Urut 7. Pet. at 5, 21 (Table 1). Ifthe Waukegan station complied with the current regulatory deadlines, the estimated S02 emissions for Waukegan Urut 7 are 1,016 tons in 2014. 

### Id. at 21 (Table 1). Ifthe variance is granted and the retrofits required for Waukegan Urut 7 are delayed for one year, the estimated S02 emissions for Waukegan Urut 7 are 3,974 tons in 2014-

·an increase of 2,957 tons. 

### !d.
Accordingly, Midwest Generation argues that emission reductions from shutting down the Fisk and Crawford stations exceed the additional year of emissions from Waukegan Urut 7, resulting in a net benefit to the environment. Pet. at 21 (Table 1), 22, 24. In addition, Waukegan Unit 7 complies with an acid rain permit issued to it and will continue to do so during the term of the variance. Pet. at 23.

Particulate Matter Emissions

Midwest Generation calculates that the reduction ofPM emissions in 2013,2014, and 2015 from shutting down the Fisk station by the end of2012 would total2,084 tons. 

### Id. at 18. If both Crawford uriits are shutdown by the end of 2014, Midwest Generation calculates that Crawford Unit 7 would not emit approximately 1,380 tons ofPM in 2015,2016,2017, and 2018 and Crawford Urut 8 would not emit approximately 2,156 tons ofPM in 2015, 2016, 2017. Pet. Exh. 9. Midwest Generation calculates that the cumulative reduction of PM from shutting down both Crawford units would total3,536 tons. 

### !d., Pet. Exh. 9. The total tons ofPM reduced from early shutdown ofthe Fisk and Crawford stations would be 5,620 tons. 

### Id.

In 2011, the Waukegan station emitted 768 tons ofPM; 140 tons were attributed to Waukegan Urut 7. Pet. at 5, 21 (Table 1). Ifthe va1iance is granted and the retrofits required for10

Waukegan Unit 7 are delayed for one year, the estimated PM emissions for Waukegan Unit 7 are 157 tons in 2014. Id. IfWaukegan complied with the cunent regulatory deadlines, the estimated PM emissions for Waukegan Unit 7 are 140 tons in2014. 

### Id.
Accordingly, Midwest Generation argues that emission reductions from shutting down the Fisk and Crawford stations exceed the additional year of emissions from Waukegan Unit 7, resulting in a net benefit to the environment. Pet. at 22, 24. Midwest Generation notes that Waukegan Unit 7 is subject to PM limitations in 35 Ill. Adm. Code 212.203 and will continue to comply during the tenn ofthe vmiance. Pet. at 23.

Nitrogen Oxide Emissions

The CPS requires Midwest Generation to achieve a system-wide emission rate of O.lllb NOJmmBtu in 2012. Pet. at 19; 35 Ill. Adm. Code 225.295(a). Midwest Generation asserts that the variance will not affect NOx emissions at Waukegan Unit 7. Id.

However, Midwest Generation claims that the shutdown ofthe Fisk and Crawford stations will reduce system-wide NOx emissions. Midwest Generation calculates that the cumulative reduction ofNOx emissions in 2013, 2014, and 2015 from shutting down the Fisk station by the end of2012 would total3,456 tons. Pet. at 18. Midwest Generation calculates that Crawford Unit 7 would not emit approximately 2,663 tons in 2015,2016,2017, and 2018 and Crawford Unit 8 would not emit approximately 3,437 tons in 2015, 2016, 2017. Id. The total reduction ofNOx from shutting down the Crawford units would total6,100 tons. Id.

Mercury Emissions

Based on 2010 and 2011 actual emission data, Midwest Generation calculates that annual mercury emissions are 5 lbs/year at Crawford Unit 7, 3 lbs/year at Crawford Unit 8, and 8 lbs/year at the Fisk station. Pet. at 20. Midwest Generation calculates that the cumulative reduction ofmercury emissions in 2013, 2014, and 2015 from shutting down the Fisk station by the end of2012 would be approximately 23 pounds. Id. Crawford Unit 7 would not emit approximately 18 pounds ofmercury in 2015, 2016, 2017, and 2018 and Crawford Unit 8 would not emit approximately 12 pounds in 2015, 2016, 2017. Id. The total reduction ofmercury from shutting down the Fisk and Crawford units would total approximately 54 pounds. 

### Id.

In 2011, the Waukegan station emitted 79 pounds ofmercury; 74 pounds were attributed to Waukegan Unit 7. Pet. at 5, 21 (Table 1). IfWaukegan complied with the cunent regulatory deadlines, the estimated mercury emissions for Waukegan Unit 7 are 8 pounds in 2014. 

### I d. at 21 (Table 1). Ifthe variance is granted and the retrofits required for Waukegan Unit 7 are delayed for one year, the estimated mercury emissions for Waukegan Unit 7 are 83 pounds in 2014- an increase of 75 pounds. 

### Id.

Midwest Generation argues that mercury emission reductions from shutting down the Fisk and Crawford stations mitigate the one-year delay in achieving emission reductions from Waukegan Unit 7. Pet. at 20. Specifically, Midwest Generation statesII

[t]he impact of a year's delay in reducing mercury emissions at Waukegan will be minimal and will be significantly offset by the effectively contemporaneous closures ofthe coal-fired units at Fisk and Crawford. 

### !d. at 23.

Based on "USEPA publications," Midwest Generation argues that "reductions in fme particulate
matter precursors S02 and NOx resulting from early shutdowns ofthe coal-fired units at Fisk and Crawford would have a far greater benefit" than controlling mercury emissions. 

### !d. at 23.

Pursuant to the CPS, Midwest Generation installed mercmy control equipment on Waukegan Unit 7 and Unit 8 in July 2008. Pet. at 19. Since 2007, mercury emissions at the Waukegan station were reduced from approximately 231 pounds per year to less than 80 pounds per year. 

### !d. Waukegan Unit 7 is achieving in the range of 72 percent removal efficiency when operating at lower loads, and Waukegan Unit 8 is consistently achieving greater than 90 percent. 

### !d. at 5, 19. The CPS requirement to convert the hot-side ESP is intended to improve mercury removal efficiency. 

### !d. Midwest Generation contends that using "a somewhat less efficient ESP · for a single year should have minimal impact." 

### !d. at 23. Midwest Generation notes that Waukegan Unit 7 will comply with unit-by-unit limits in the CPS by the January I, 2015 deadline and will continue to operate the activated carbon injection system on Waukegan Unit 7. 

### !d. at 19-20; 

### See 35lll. Adm. Code 225.294(c). Midwest Generation also asserts that "Unit 7 will have begun significantly reducing mercury emissions prior to implementation ofMATS." 

### !d. at 19.
Consistency with Federal Law

Midwest Generation contends that the Board may grant the requested variance consistent with federal law. Pet. 25. On June 24, 2011, the Agency submitted a revision to the illinois SIP to satisfy Illinois' obligation under the Clean Air Act to develop a Regional Haze SIP. 77 Fed. Reg. 3966; Pet. at 25. This submittal included adding Sections 225.296(a)(l) and 225.296(c)(l), the subject ofthis variance petition, to the illinois SIP. Pet. at 25, Pet. Exh. 9. On January 26, 2012, USEPA proposed approval ofIllinois' submittal. 77 Fed. Reg. 3966; Pet. at 25. Accordingly, Midwest Generation concluded, at the time ofits petition, that the variance seeks relief that is consistent with federal law, because the CPS currently is not part ofthe Illinofs SIP and is not federally enforceable. Pet. at 25.
Additionally, Midwest Generation argues that the one-year delay in upgrading Waukegan Unit 7, as requested by the variance, would have "no negative impact on the Agency's calculations regarding emissions levels." Pet. at 25. In its Regional Haze SIP revision submittal, the Agency argued that the Midwest Generation system-wide average S02 emission rates in the CPS provide greater reductions than applying presumptive Best Available Retrofit Technology (BART) to BART-eligible units. 

### !d. at 25-26. Midwest Generation will continue to comply with the S0 2 emission rates in Section 225 .295(b) thus not impacting the Agency's calculations. 

### !d. at 26. Midwest Generation also notes that Waukegan Unit 7 is not one ofthe BART-eligible units identified in the Agency's Regional Haze SIP revision. 

### !d. at 25. Rather, Waukegan Unit 7 will continue to be subject to the CPS.12

However, Midwest Generation acknowledges that ifthe SIP revision becomes fmal before the end ofthe variance te1m, the December 31, 2014 compliance date in the variance will conflict with the December 31,2013 compliance date in the SIP. Pet. at 26. In that event, Midwest Generation states that it will request that the Agency submit the variance to USEPA as
a SIP revision. Id. Midwest Generation observes that "[i]t is possible, perhaps likely, in that

case that the variance period could expire before USEPA took action on revising the SIP to reflect the variance." 

### !d.

Variance Conditions and Compliance Plan

Midwest Generation proposes the following compliance plan:

DATE ACTIVITY
Continuously dming Comply with the system-wide S02 emissions rate set forth in pendency ofthe Section 225.295(b). Comply with the ACI rate set forth in var1ance Section 225.294(g). Comply with CAIR or CSAPR, as applicable. Comply with the Acid Rain Program. Comply with all other applicable requirements.

On or before Apply for a new or extended construction permit, as needed, September 15,2014 for the installation ofthe FGD equipment and conversion of the hot-side ESP or other control methodologies that Midwest Generation determines are more appropriate for Waukegan Unit 7.

On or before Shut down Unit 7; or install and have operational FGD December 31,2014 equipment, and convert the hot-side ESP to a cold-side ESP or install an appropriately designed fabric filter.

On or before Shut down the coal-frred unit at Fisk Generating Station. December 31, 2012

On or before Shut down the coal-fired units at Crawford Generating Station. December 31, 2014

Pet. at 27-28.

AGENCY RESPONSE TO VARIANCE PETITION

On May 25, 2012, the Agency filed a document titled "Illinois Environmental Protection Agency Recommendation" stating that the Agency "neither supports nor objects to the [Board] granting Midwest Generation's petition." Agency Resp. at 1.13

Background

The Agency recounts Midwest Generation's description ofthe Waukegan station and permit history and does not atticulate any disagreement with any ofthis portion ofMidwest Generation's petition. Agency Resp. at 3-4. The Agency notes that there is a case pending in the United States Court ofAppeals for the Seventh Circuit captioned United States v. Midwest Generatiog, Docket No. 12-1026, but does not give a reason for referencing the case. Agency Resp. at4.

Requested Relief

The Agency recognizes that Midwest Generation's petition requests a variance from 35 Ill. Adm. Code 225.296(a)(l) and 225.296(c)(l) for twelve months beginning December 31, 2013 and ending December 31, 2014. Agency Resp. at 1-2, 4-5. The requested variance would give Midwest Generation an additional year to install FGD equipment and convert the hot-side ESP or shut down Waukegan Unit 7. 

### !d. at 2, 5. Citing to Midwest Generation's petition, the Agency points out that "Petitioner stresses that it is not that it cannot comply with the CPS" but "[r]ather, it would be expensive and inefficient for it to do so." 

### !d. at 5, citing Pet. at 16. Further, because the variance request "results in a new environmental benefit, it would be arbitrary and unreasonable to make [Midwest Generation] comply." 

### !d.

Agency Investigation of Facts in the Petition

The Agency informs the Board that it "has investigated the facts alleged" in the variance petition. Agency Resp. at 5. The Agency recounts that Midwest Generation examined several options to comply with the requirement of Section 225.296(a)(l) to install FGD equipment or shut down the unit. 

### Id. at 6. The Agency notes Midwest Generation's assettion that installing the Waukegan Unit 7 equipment at the same time as the Waukegan Unit 8 equipment will lead to significant cost savings. 

### !d. Furthermore, the conversion ofthe hot-side ESP must be coordinated with the regional transmission system operator. 

### !d.

The Agency sunmtarizes the status ofvarious federal rules and the inipact on the Waukegan facility. As to mercury emissions, delaying the conversion ofthe hot-side ESP on Waukegan Unit 7 will delay control ofmercury and other hazardous pollutants. Agency Resp. at 6. However, the Agency concludes that mercury emissions will be controlled and the facility "will still reduce mercury emissions significantly prior to implementation ofthe federal [MATS]." 

### !d. MATS replaced the Clean Air Mercury Rule (CAMR). 

### !d. As to interstate air pollution, USEPA promulgated the CSAPR. 

### !d. CSAPR replaced CAlR. 

### !d. CSAPR is "significantly more stringent than CAlR." 

### !d. CSAPR has been challenged in federal court and "it is uncertain ifthe deadlines in the CSAPR will also be delayed, or ifthe conditions ofthe CSAPR will change assuming it survives the appeal." 

### !d. The Agency notes Midwest Generation's contention that a one-year extension granted by the variance will help to synchronize these timing requirements. 

### !d. at 7, citing Pet. at 15.

The Agency informs that it "has reviewed the information supplied by the Petitioner and found it to be accurate." Agency Resp. at 7. In addition, Midwest Generation's "calculations14

conceming emission reductions are also accurate." Id. The Agency concludes "[a]ccordingly, the Petitioner's variance results in a net environmental benefit." Id.

Environmental Impact

The Agency supplements the infmmation provided by Midwest Generation as to nearby air emission monitoring stations. Midwest Generation stated that there are two monitoring stations in Lake County: Waukegan and Zion. Agency Resp. at 7, citing Pet. at 5-6. The Agency notes that the Waukegan station closed in 2010. In addition, there is a monitoring station in Northbrook. Agency Resp. at 7. The Agency reports that "[t]here have been 19 exceedances ofthe National Ambient Air Quality Standard (NAAQS) for ozone measured at these monitming stations for either the 1 hour standard or the 8 hour standard during the 2009, 2010, and 2011 ozone season." Id.

The Agency concludes that "Midwest Generation has shown that there will be an environmental benefit to the granting ofthe variance." Agency Resp. at 8. The Agency describes Midwest Generation's "central argument" as being that the shutdown ofthe Fisk and Crawford stations will more than compensate for the increased pollution from delaying the retrofit ofWaukegan Unit 7. Id. at 7. This argument assumes that the Fisk and Crawford units would otherwise remain operating and not upgrade until required to do so under the CPS. Id. at 7-8. The early shutdown ofthe Fisk and Crawford stations "gives the Petitioner cumulative estimated reductions (considering the increase in emissions from Waukegan 7 for one year) of S02 of32,231 tons for years 2013 through 2018, particulate matter reductions of 5,602 tons for years 2013 through 2018 and NOx emissions reductions of 9,556 tons for years 2013 through 2018 should the variance be granted." Id. at 8.

The Agency notes that mercury emissions will increase by 20 pounds ifthe variance is granted. Agency Resp. at 8. The Agency acknowledges Midwest Generation's argument that "the reduction in PM precursors, S02 and NO., outweighs any deferral in the reduction of mercury that would be required under the CPS." Id. citing Pet. at 23. The Agency also notes Midwest Generation's argument that the reductions in mercury emissions from shutting down the Fisk and Crawford stations mitigate the extra year ofmercury emissions from Waukegan Unit 7. Id. The Agency agrees with Midwest Generation, "especially considering the vast difference in emissions avoided compared to emissions produced." Id. at 9.

Arbitrary and Unreasonable Hardship

The Agency repeats Midwest Generation's arguments that the hardship to Midwest Generation from not granting the variance outweighs any impact on human health and the environment because there is a net benefit to the environment from the early closure ofthe Fisk and Crawford stations. Agency Resp. at 10. The Agency states that Midwest Generation is "correct in stating that the closing ofthe coal-fired boilers at Fisk and Crawford will compensate for running the Waukegan 7 an extra year without FGD." Id. The Agency also agrees that "the regulatory regime which fmmed the CPS has changed dramatically" and "USEP A has issued
new, and quite different, rules to replace CAIR and CAMR." 

### I d.15

Consistency with Federal Law

The Agency presents the situation created by the timing ofthis petition in relation to pending federal rules. Agency Resp. at 10-12. The Agency previously submitted portions ofthe CPS as amendments to the lllinois SIP for purposes of satisfying the federal BART program addressing regional haze. 

### !d. at 11. USEPA had not yet approved this SIP revision at the time of the Agency's filing. 

### !d. The Agency notes that Midwest Generation argues that the variance request is consistent with federal law because the CPS provisions relevant to this variance are not currently part ofthe Illinois SIP. 

### !d. citing Pet. at 25. Ifthe Regional Haze SIP amendments are approved, Midwest Generation argues that the variance would cause no negative impacts on the Agency's calculations regarding emission levels. 

### !d. Midwest Generation "is willing to request that the lllinois EPA submit the variance order along with updated emission calculations as another SIP amendment." 

### !d. citing Pet. at 26.

The Agency asserts that any variance granted to Midwest Generation must be submitted to USEPA as a SIP revision. Agency Resp. at 11. Furthermore, to meet the requirements ofthe Clean Air Act, a public hearing must be held on the proposed variance before it may be submitted as a SIP revision. 

### !d. The Agency states that it "will submit a Board order granting the variance to USEPA as a SIP revision." 

### !d. at 12. The Agency anticipates "[i]t is probable that USEPA will concur with such a SIP revision as there will be a significant decrease in S02 and 

### NOx emissions due to the early closure ofthe Fisk and Crawford stations." 

### !d.

Compliance Plan

The Agency notes that Midwest Generation's variance request proposes early closure of the coal-fired boilers at its Fisk and Crawford stations. Agency Resp. at 12. The requested variance would extend the compliance date for Waukegan Unit 7 by one year. 

### !d. The Agency concludes that the compliance plan is reasonable. 

### !d.

Recommendation and Conclusion

The Agency acknowledges that it "must prepare a recommendation for the Board" pursuant to 415 ILCS 5/37(a) and 35 Ill. Adm. Code 104.216(b). Agency Resp. at 12. While the Agency neither supports nor objects to the Board granting Midwest Generation's petition, the Agency concludes "Midwest Generation's proposal is expected to result in a net environmental benefit" 

### !d.

DISCUSSION

The Act authorizes the Board to grant variances "beyond the limitations prescribed in this Act, whenever it is found, upon presentation of adequate proof, that compliance with any mle or regulation

... would impose an arbitrary or unreasonable hardship." 415 ILCS 5/35(a). Midwest Generation seeks relief from the requirement to perform the following activities by December 31,2013 on Waukegan Unit 7: (i) permanently shut down or install and have operational FGD equipment (35 Ill. Adm. Code 225.296(a)(l)) and (ii) replace the hot-side ESP with a cold-side ESP, install an appropriately designed fabric filter, or permanently shut down16

the unit (35lll. Adm. Code 225.296(c)(l)). Pet. at 9, 27. Midwest Generation requests a oneyear extension, to December 31, 2014, to comply with these requirements. 

### !d. at 10, 27.

To obtain a variance, Midwest Generation must establish that the hardship from denying the variance from Sections 225.296(a)(l) and 225.296(c)(l) "outweighs any injury to the public

or the environment" fi·om granting the variance. Marathon Oil Co. v. EPA, 242 Ill. App. 3d 200, 206,610 N.E.2d 789,793 (5th Dist. 1993). IfMidwest Generation only shows that compliance will be difficult, "that proof alone is an insufficient basis" for granting the variance. Id. Thus, "only ifthe hardship outweighs the injury does the evidence 1ise to the level ofan arbitrary or unreasonable hardship." 

### !d.

Accordingly, the Board analyzes the injury to the public or the environment from granting the requested variance, and the hardship to Midwest Generation from compliance with the rule. The Board then weighs the hardship against the injury to detennine whether Midwest Generation demonstrated that the hardship is arbitrary and unreasonable to support granting a var1ance.

Environmental Impact of Requested Variance

Midwest Generation states that the variance will provide northeastern Illinois with a "substantial net benefit" in air emission reductions, while continuing to comply with the emission limits ofthe rule. Pet. at I. The Agency reviewed Midwest Generation's emission calculations and informs the Board that the estimates are accurate. Agency Resp. at 7. Further, the Agency agrees that the variance petition results in a net environmental benefit. 

### !d. at 7, 8, I 0, 12. As discussed below, the Board fmds that Midwest Generation demonstrated that the requested variance will reduce emissions during the term ofthe variance and result in a net benefit to the environment.

The Board initially notes that Midwest Generation does not seek relief from any numerical emission limit, most notably the system-wide S0 2 emission rate set forth at Section 225.295(b). Pet. at 10. Furthe1more, Midwest Generation does not seek relief from the mercury control requirements applicable to Waukegan Unit 7 set forth in Section 225.294 or the NOx emission and control requirements set forth at Sections 225.295 through 225.298. 

### !d. Midwest Generation does not seek relief from any CPS requirement applicable to other units in the Midwest Generation CPS Group. 

### !d.

The Board finds that Midwest Generation demonstrated that the difference in S0 2 emissions of2,957 tons resulting from the one-year delay in retrofitting Waukegan Unit 7 are offset by the reduced 

### SOz emissions of 3,827 tons in 2014 from closing the Fisk station. In addition, the cumulative reduction of 

### SOz emissions from shutting down the Fisk station three years early are 11,342 tons and the Crawford Units 7 and 8 three and four years early are I 0,408 and 13,437 tons, respectively. Accounting for the difference in emissions at Waukegan Unit 7 if the variance is granted of2,957 tons, this results in a net benefit to air quality ofreducing emissions by 32,231 tons ofS0 2 overall. Pet. Exh. 9.17

The Board finds that Midwest Generation demonstrated that the difference in pm1iculate
matter emissions of 18 tons resulting from the one-year delay in retrofitting Waukegan Unit 7 are offset by the reduced particulate matter emissions of694 tons 2 in 2014 from closing the Fisk station. In addition, the cumulative reduction ofpm1iculate matter emissions from shutting down the Fisk station three years early and the Crawford units three and four years early are 2,084 tons and 3,536 tons, respectively. This results in a net benefit to air quality ofreducing emissions by 5,602 tons. Pet. at 21 (Table 1).

The delay in retrofitting Waukegan Unit 7 is estimated to result in mercury emissions of 7 5 pounds. Midwest Generation calculates that annual mercury emissions are 8 lbs/year at the Fisk station. Thus, the early closure ofthe Fisk station would only offset 8 pounds of mercury in 2014 during the term ofthe variance. The cumulative reduction of mercury emissions from shutting down the Fisk station three years early and the Crawford units three and four years early total approximately 55 pounds. Thus, a negative net benefit in reduced emissions of20 pounds of mercury over the course ofthe years 2013 to 2018 would result ifthe variance were granted. Pet. at 12, Exh. 9. As the Agency noted, although the variance would result in lower emissions ofPM, S02 , and 

### NOx than without the variance; mercury emissions would be 20 pounds greater with the variance. Agency Resp. at 8. However, the Board notes that Midwest Generation is not seeking relief from the mercury emission standards in Section 225.294 and has connnitted to operating Waukegan Unit 7 in compliance with the halogenated activated carbon injection rates

as set forth in Section 225.294(g).
Hardship to Midwest Generation from Compliance

Midwest Generation asse11s that the following conditions were not foreseen when Sections 225.296(a)(l) and 225.296(c)(l) were adopted and therefore impose an undue economic hardship on Midwest Generation: (i) "energy market prices" have been significantly deteriorating; (ii) new federal environmental regulations "have made long-term investment in the smallest generating units

... questionable"; and (iii) "it can gain cost and other efficiencies" by installing FGD equipment on Waukegan Unit 7 concurrently with Waukegan Unit 8 which is due
to be retrofitted by December 31, 2014. Pet. at 2.

Energy Market Prices

Midwest Generation makes the conclusory statement that "energy market prices" have been "significantly deteriorating." Pet. at 2. However, Midwest Generation makes no further mention ofthis basis for hardship in its petition. Midwest Generation submitted no exhibit or other evidence to suppm1 this contention. Midwest. Generation also did not explain how this condition inipacts its ability to tiniely comply with Sections 225.296(a)(l) and 225.296(c)(l).

2 694 tons ofparticulate matter is based on the information in Petition Exhibit 9, dividing by three the avoided Fisk emissions of2,084 tons ofPM over the three-year period of2013 to 2015.18

New Federal Regulations

Midwest Generation argues that uncertainty as to the scope and timing of implementing CSAPR and MATS causes hardship to Midwest Generation. Midwest Generation argues that CSAPR and MATS, both requiring compliance in approximately 2015, have "overlapping, significant S02 , mercury, and PM emission reduction obligations that conflict with the CPS's 2013 deadlines applicable to Waukegan Unit 7." Pet. at 15. The Agency agrees that CSAPR is "significantly more stringent than CAIR." Agency Resp. at 6. The Agency also agrees that "the regulatory regime which formed the CPS has changed dramatically" and "USEP A has issued
new, and quite different, rules to replace CAIR and CAMR." 

### !d. at 10.

The one-year extension sought by the variance would allow comt challenges to CSAPR and MATS to run their course and Midwest Generation will be in a better position to determine how to proceed with required retrofits. Coordinating compliance with these regulations helps Midwest Generation avoid additional and unnecessary significant costs and disruption in operations.

Coordinating Unit 7 Retrofit with Unit 8

For Waukegan Unit 7 to comply with Sections 225.296(a)(l) and 225.296(c)(l), Midwest Generation must install FGD equipment and convert the hot-side ESP or shut down the unit. Midwest Generation examined alternatives to comply with these requirements and decided that the most cost effective option was to install a dry sorbent injection system to comply with Section 225.296(a)(l) and convert the hot-side ESP to a cold-side ESP to comply with Section 225.296(c)(l). Pet. at 10-12. Midwest Generation estimates that this option will cost $88 million as compared to installing a dry scrubber and baghouse costing $240 million. 

### !d. at II. Midwest Generation already obtained a construction permit for this work but would need to incur the remaining costs that installation requires. 

### !d. at 7.

Midwest Generation is also required to perform upgrades on Waukegan Umt 8 but the deadline for this work is December 31,2014. Pet. at 2. Midwest Generation did not quantify the cost savings from performing the Waukegan Unit 7 and Unit 8 work concurrently but contends that they would "gain cost and other efficiencies" from performing the work concurrently on both units. 

### !d. at 2.

Weighing Environmental Impact against Hardship to Midwest Generation

The Board finds that the environmental impact ofthe requested variance for the Waukegan station is a net benefit to air quality, considering the early shutdown ofthe Fisk and Crawford stations. Midwest Generation has shown that the variance will result in significant reductions in S02 , NOx and PM emissions. Midwest Generation will achieve this net reduction in emissions by taking credit for the early shutdown ofthe Fisk and Crawford stations to offset

one year ofemissions due to delaying upgrades on Waukegan Unit 7. The Agency agrees with Midwest Generation's calculations and concludes that the shutdowns yield "cumulative estimated reductions (considering the increase in emissions from Waukegan 7 for one year) of S02 of32,231 tons for years 2013 through 2018, PM reductions of5,602 tons for years 201319

through 2018 and NOx emissions reductions of9,556 tons for years 2013 through 2018 should the variance be granted." Agency Resp. at 8.

The Board recognizes that the shutdown ofthe Fisk and Crawford stations will not completely offset mercury emissions fi·om Waukegan Unit 7 during 2014. According to Midwest Generation's estimates, there will be approximately 75 pounds ofmercury emissions in 2014 attributable to the variance. Ifthe cumulative emissions from the Fisk and Crawford station shutdowns are applied to offset mercury emissions from Waukegan Unit 7 in 2014, the variance would result in approximately 20 more pounds ofmercury emissions than without the variance. The Agency notes that mercury emissions will be controlled during the variance and the facility "will still reduce mercury emissions significantly prior to implementation ofthe federal Mercury Air Toxics Standard." Agency Resp. at 6. The Agency also agrees with Midwest Generation's argument that "the reduction in PM precursors, S02 and NOx, outweighs any deferral in the reduction ofmercury that would be required under the CPS." 

### !d. at 8-9. The Board fmds that the significant reductions in S02 and PM emissions, as well as NOx emissions, mitigate the estimated mercury emissions, which remain subject to control requirements, during the variance pe1iod. See Agency Resp. at 9.
Accordingly, the Board is persuaded that the overall reduction in pollutant emissions resulting from this variance strongly favors granting the variance. Against this net benefit to the environment from the requested variance, the Board weighed the 20 pounds ofmercury emissions attributable to the variance and the alleged hardship to Midwest Generation from not granting the variance. Specifically, the Board considered the estimated $18 million in compliance costs from retrofitting Waukegan Unit 7. Currently, this retrofit is required to be completed by December 31, 2013 but Midwest Generation claims that it would be more cost effective and less disruptive to operations ifthe work could be coordinated with similar work on Waukegan Unit 8 due to be completed by December 31,2014. The Board previously granted variances, in part, to allow sources to coordinate required retrofits with other construction projects at a facility. See ExxonMobil Oil Com. v. illinois Environmental Protection Agency, PCB 11-86, 12-46 (consol.) (December 1, 2011); Dvnegy Midwest Generation, Inc. v. Illinois Environmental Protection Agency, PCB 09-48 (May 7, 2009).

The CPS mandates certain deadlines for equipment upgrades or shutdowns. Through this variance, Midwest Generation is requesting a reordering ofthe compliance deadlines among units in the Midwest Generation CPS Group without any change in commitment toward complying withapplicable numerical emission standards. Midwest Generation committed to the early shutdown ofthe Fisk and Crawford stations and in return seeks to push forward the retrofit deadlines for Waukegan Unit 7. The purpose of a variance is to allow additional time for compliance by a source in appropriate cases, and granting this variance serves this pmpose.

The Agency contends that "it would be arbitrary and Ullfeasonable to make [Midwest Generation] comply" with the current deadline, in part, because the variance request "results in a
new environmental benefit." Agency Resp. at 16. Considering the overall reduction in pollutant emissions during the term ofthe requested variance, the Board fmds that requiring Midwest Generation to comply with the December 31,2013 deadline in Sections 225.296(a)(l) and20

225.296(c)(l) is an arbitrary and unreasonable hardship. Accordingly, the Board grants the va1iance as requested by Midwest Generation, subject to the conditions set forth in the order.

Consistency with Federal Law

The Board has authmity under Section 110 ofthe Clean Air Act to adopt regulations that

are part ofthe State's plan for implementation, maintenance, and enforcement of air quality standards. The variance procedure to grant relief from a Board regulation is consistent with the authority granted to the states under Section II 0 ofthe Clean Air Act. The Agency states that it "will submit a Board order granting the variance to USEPA as a SIP revision." Agency Resp. at 12. The Agency anticipates "[i]t is probable that USEPA will concur with such a SIP revision as there will be a significant decrease 

### in S0 2 and 

### NOx emissions due to the early closure ofthe Fisk and Crawford stations." 

### !d. The Board, therefore, finds that granting Midwest Generation a variance from the rule is consistent with federal law.

Compliance Plan and Variance Conditions

Midwest Generation's petition includes a compliance plan. Pet. at 27-28. The Agency did not suggest any other variance conditions beyond those proposed in the petition. The Board will include the proposed compliance plan as conditions to the variance.

CONCLUSION

The Board fmds that Midwest Generation established that requiring immediate compliance with the CPS upgrade deadlines for Waukegan Unit 7 by December 31, 2013 imposes an arbitrary or umeasonable hardship. Midwest Generation seeks no change in its numerical emission rates but seeks to reschedule compliance with equipment upgrade deadlines. Also, Midwest Generation committed to reducing emissions earlier than required at two other facilities by permanently shutting down the facilities.

The Board grants Midwest Generation a variance for Waukegan Unit 7 for a period beginning December 31,2013 until December 31, 2014 from the requirements of35 Ill. Adm. Code 225.296(a)(1) and 225.296(c)(1). This variance is granted subject to the conditions outlined in the order below.

ORDER

The Board grants Midwest Generation, LLC- Waukegan Generation Station (Midwest Generation) a variance for Waukegan Unit ?located at 401 East Greenwood Avenue, Waukegan in Lake County for a period beginning December 31, 2013 until December 31, 2014 from the requirements of Section 225.296(a)(1) and (c)(1) subject to the following conditions:

1. During the period ofthe variance, Midwest Generation must:

(a) comply with the system-wide S02 emissions rate set forth in Section 225.295(b),21



### (b) comply with the rates ofinjection ofhalogenated activated carbon as set forth in Section 225.294(g),

(c) comply with the Clean Air Interstate Rule (CAIR) or Cross-State Air Pollution Rule (CSAPR), as applicable,

(d) comply with the federal Acid Rain Program at 40 C.F.R. § 

### 72, and

(e) comply with all other applicable requirements.

2. On or before September 15,2014, Midwest Generation must apply for a new or extended construction pennit, as needed, for the installation ofthe flue gas desulfurization (FGD) equipment and conversion ofthe hot-side electrostatic precipitator (ESP) or other control methodologies that Midwest Generation determines are more appropriate for Waukegan Unit 7.

3. On or before December 31, 2014, Midwest Generation must either permanently shut down Unit 7; or install and have operational FGD equipment, and convert the hot-side ESP to a cold-side ESP or install an appropriately designed fabric filter.

4. On or before December 31,2012, Midwest Generation must shut down the coalfired unit at Fisk Generating Station.

5. On or before December 31, 2014, Midwest Generation must shut down the coalfired units at Crawford Generating Station.

IT IS SO ORDERED.

Chairman T. A. Holbrook abstains

IfMidwest Generation chooses to accept this variance, it must, within 45 days after the date ofthis opinion and order, file with the Board and serve on IEPA a certificate of acceptance and agreement to be bound by all the terms and conditions ofthe granted variance. "A variance and its conditions are not binding upon the petitioner until the executed certificate is filed with the Board and served on the Agency. Failure to timely file the executed certificate with the Board and serve the Agency renders the variance void." 35 Ill. Adm. Code 104.240. The form of the certificate follows:

CERTIFICATE OF ACCEPTANCE



### I (We),
, having read the opinion and order ofthe Illinois Pollution Control Board in docket PCB 12-121, dated August 23, 2012, understand and accept the opinion and order, realizing that this acceptance renders all terms and conditions ofthe variance set forth in that order binding and enforceable.22

Petitioner: MIDWEST GENERATION, LLC- WAUKEGAN GENERATING STATION

By: Authorized Agent

Title:

Date:

Section 4l(a) ofthe Environmental Protection Act provides that final Board orders may be appealed directly to the Illinois Appellate Court within 35 days after the Board serves the order. 415 ILCS 5/41(a) (2010); see also 35 ill. Adm. Code 101.300(d)(2), 101.906, 102.706. Illinois Supreme Court Rule 335 establishes filing requirements that apply when the Illinois Appellate Court, by statute, directly reviews administrative orders. 172 ill. 2d R. 335. The Board's procedural rules provide that motions for the Board to reconsider or modify its fmal orders may be flied with the Board within 35 days after the order is received. 35 Ill. Adm. Code 101.520; see also 35 Ill. Adm. Code 101.902, 102.700, 102.702.

I, John Therriault, Assistant Clerk ofthe Illinois Pollution Control Board, certify that the Board adopted the above order on August 23,2012, by a vote of4-0.

John Therriault, Assistant Clerk Illinois Pollution Control Board

### Electronic Filing- Received, Clerk's Office, 08/27/2012

BEFORE THE ILLINOIS POLLUTION CONTROL BOARD

MIDWEST GENERATION, LLCWAUKEGAN GENERATING STATION,

Petitioner,



### v.

ILLINOIS ENVIRONMENTAL PROTECTION AGENCY,

Respondent. ) ) ) ) ) ) PCB 

### 12-121 ) (Varianee- Air) ) ) ) )

NOTICE OF Fl.LING

To:

John 

### T. Therriault, Assistant Clerk Illinois Pollution Control Board James 

### R. Thompson Center Suite 

### 11-500 100 West Randolph Chicago, Illinois 6060 I

Bradley Halloran, Hearing Officer Illinois Pollution Control Board James 

### R. Thompson Center Strite 11-500 100 West Randolph Chicago, I!linois 60601 Charles Matoesian Illinois Environmental Protection Agency Division ofLegal Counsel 1021 North Grand Avenue, East P.O. Box 19276 Springfield, Illinois 62794-9276

PLEASE TAKE NOTICE that we have today filed with the Office ofthe Clerk ofthe Pollution Control Board CERTIFICATE OF ACCEPTANCE, 

### copies of which are 

### herewith served upon you.

Kathleen C. Bass1

Dated: August 27, 2012

### Electronic Filing- Received, Clerk's Office, 08/27/2012

SCHIFF HARDIN LLP Attorneys for Midwest Generation, LLC Kathleen C. Bassi Stephen 

### J. Bonebrake 233 South Wacker Drive, Suite 6600 Chicago, Illinois 60606 Phone: 312-258-5567 Fax: 312-258-5600 kbassi!Wschiffhardin.com

### Electronic Filing- Received, Clerk's Office, 08/27/2012

BEFORE THE ILLINOIS POLLUTION COl\'TROL BOARD

MIDWEST GENERATION, 

### LLCWAUKEGAN GENERATING STATION,


### Petitioner,

v.

ILLINOIS ENVIRONMENTAL PROTECTION AGENCY,


### Respondent. ) ) ) ) ) 

### ) PCB 12-121 

### ) (Variance- Air) ) ) } )

CERTIFICATE OF ACCEPTANCE

I, 

### DOUGLAS R. 

### McFARLAN, on behalfofMlDWEST GENERATION, LLC, having



### read the opinion and order ofthe 

### Illinois Pollution Control Board in docket 

### PCB 12-121, dated
August 23,2012, understand and 

### accept the opinion and order, realizing 

### that this acceptance



### renders all terms and ccnditions 

### ofthe variance set forth in that order 

### binding and 

### enforceable.

Dated:**August~2012**

Cii2\l17363J9.l 

### Petitioner: MID\VEST GEl\TERATION, LLCWAUKEGAN GENERATING STATION

by:

AnlUriZed 

### Agent Douglas R. McFarlan President Midwest 

### Generation, LLC

### Electronic Filing- Received, Clerk's Office, 08/27/2012

CERTIFICATE OF SERVICE



### I, the undersigned, certify that on 

### this 27th day of August, 2012,1 have served electronically the attached ADDITIONAL EXHIBIT TO PETITION FOR VARIANCEExhibit 11, 

### upon the 

### following persons:

John T. Therriault, Assistant Clerk Illinois Pollution Control Board 

### James 

### R. Thompson Center Suite 11-500 100 West 

### Randolph Chicago, Illinois 6060 

### I

Bradley Halloran, Hearing Officer Illinois Pollution Control Board 

### James R. 

### TI1ompson Center Suite 11-500 100 

### West Randolph Chicago, Illinois 6060 I balloraMvipcb.state.il.us

SCHIFF HARDIN LLP Attorneys for Midwest Generation, LLC 

### Kathleen C. 

### Bassi Stephen J. 

### Bonebrake 233 

### South Wacker Drive, Suite 6600 Chicago, Illinois 60606 Phone: 312-258-5567 

### Fax: 312-258-5600 khassi@schiffhardin.eom Charles 

### Matoesian Illinois Envirorunenta:I Protection Agency 

### Division of Legal Counsel 1021 North 

### Grand Avenue, East P.O. Box 19276 Springfield, Illinois 62794-9276 charles.matoesianiWillinois.!!ov