# Final Transport Rule OMB Briefing EPA May 17, 2011

# Outline
• Context for Final Transport Rule

– Clean Air Act’s statutory obligation to address interstate transport of air pollution

– Response to Court’s concerns

– Public comment on proposed rule leading to subsequent NODAs

– Supplemental proposal for 6 states under the Transport Rule 

## • Core Elements and Updates from Proposal to Final

– States in the final Transport Rule

– Level of SO 2 

### and NO X 

### control that removes each state’s significant contribution and interference with maintenance of the PM 2.5 

### and ozone NAAQS

– Four air quality-assured trading programs

– Allowance allocation

– Transition from CAIR to Transport Rule programs

– Compliance deadlines 

## • Air Quality Results of the final Transport Rule 05/17/201 1 2 Deliberative – Do Not Cite or Quote

# Transport under the Clean Air Act
• Clean Air Act includes statutory obligation for states and EPA to address interstate transport of air pollution

– States have the primary responsibility; EPA must act where states do not sufficiently prohibit emissions to eliminate signifi can t contribution to downwind nonattainment or interference with maintenance

– This “bounded obligation” does not direct EPA to use this authority to produce full attainment, but to promote it by addressi ng upwind element • EPA promulgated CAIR in May 2005 with regional NO x and SO 2 trading programs slated to begin in 2009 and 2010, respectively. • The DC Circuit Court vacated and remanded CAIR in July 2008 but modified its decision in December 2008 to remand the rules back to EPA without vacatur

– CAIR programs remain in effect while EPA acts to replace them

– In court documents filed in fall 2008, the Agency stated that it expected to provide replacement rule in about 2 years. Court n oted in its remand that it expected EPA to replace CAIR expeditiously. • The Court found that in CAIR, EPA had not:

– Adequately quantified and addressed each upwind state’s significant contribution

– Given independent meaning to “interfere with maintenance” prong of 110(a)(2)(D)

– Provided adequate assurance that necessary reductions would occur within each state

– Properly established state - level emission budgets for NO x and SO 2

– Properly addressed the timing of the second phase (set for 2015)

– Shown that it had authority to use Title IV SO 2 allowances in the program 05/17/201 1 Deliberative - Do Not Cite or Quote 3

# Response to Court’s Concerns
• Transport Rule addresses Court decision on CAIR

– Identifies states that contribute at least 1% of NAAQS to downwind areas with projected nonattainment and/or maintenance concerns

– Identifies emissions, if any, in each such state that could be eliminated at specific cost thresholds.

– Balances upwind responsibility for highly cost- effective emission reductions against downwind responsibility for local air quality control

– Uses 2 groupings of states for upwind SO 2 

## control based on air quality at linked downwind receptors, which reduces compliance costs for some states

– Gives independent meaning to “interference with maintenance” by projecting maximum design values at monitoring sites, to account for variability around average design values that may frustrate NAAQS attainment 05/17/201 1 Deliberative - Do Not Cite or Quote 4

# Proposal’s Public Comment and NODAs
• Public comment broadly supportive of “preferred remedy” that maintains marketbased trading flexibilities to achieve substantial emission reductions and health benefits at very low costs • Public comment identified three major areas of concern with the Transport Rule proposal that EPA followed up in detail by issuing NODAs

– Power sector modeling assumptions and unit- level representation of the fleet • NODA issued September 1, 2010



### – Emissions inventories used for air quality modeling • NODA issued October 27, 2010



### – Data and methodology used to determine unit- level allowance allocations • NODA issued January 7, 2011 

## • Updated power sector modeling yielded lower baseline emissions in most states than at proposal

– Affects the baseline downwind air quality problems projected in final rule’s analysis

– Affects the linkages with upwind contributor states due to changing emission patterns 05/17/201 1 Deliberative - Do Not Cite or Quote 5

# Determining Geographic Coverage (I)
• Identified downwind air quality problems

– Identified receptors modeled to have nonattainment and/or maintenance problems in 2012 

## • CAMx modeling results for 2005 and 2012 were coupled with 2003 - 2007 modeling results for 2005 and 2012 were coupled with 2003 PM 2.5 

## and ozone measurements to project “design values” in 2012.

– Monitoring sites with 2012 average design values exceeding the NAAQS are projected to be nonattainment in 2012. • Projection of the average of 2003 - 2005, 2004- 2006, and 2005 - 2007 ambient design values



### – Monitoring sites with 2012 maximum design values exceeding the NAAQS are projected to have maintenance problems in 2012. • Projection of the maximum of 2003 - 2005, 2004- 2006, and 2005 - 2007 ambient design values 05/17/201 1 Deliberative - Do Not Cite or Quote 6

# 2012 Base Case Annual PM 2.5 

# Nonattainment and

Maintenance Receptors Proposal Final

7 Deliberative - Do not cite of quote

# 2012 Base Case 24 - hour PM 2.5 

# Nonattainment

and Maintenance Receptors Proposal Final

8 Deliberative - Do not cite of quote

# 2012 Base Case Ozone Nonattainment

and Maintenance Receptors Proposal Final

9 Deliberative - Do not cite of quote

# Determining Geographic Coverage (II) • Identified upwind linkages to downwind air quality problems

– Quantify the air quality contributions from emissions in upwind states to downwind nonattainment and maintenance receptors 

### • CAMx Source Apportionment modeling was performed for the 2012 base case to quantify the contributions of SO 2 

### and NO X 

### emissions in each state to annual and daily quantify the contributions of 2 

### and NO X 

### emissions in each state to annual and daily PM 2.5 

### and ozone at each nonattainment and/or maintenance receptor site. 

## • Each upwind -to- downwind contribution (i.e., “linkage”) was evaluated against thresholds based on 1 percent of the NAAQS.

– Annual PM 2.5 : contributions >= 0.15 μg/m 3 [NAAQS = 15.0 ug/m 3 ]

– Daily PM 2.5 : contributions >= 0.35 μg/m 3 [NAAQS = 35 ug/m 3 ]

– 8- Hour Ozone: contributions >= 0.8 ppb [NAAQS = 0.08 ppm ] 

## • States that contribute amounts that meet or exceed the thresholds at a downwind receptor are considered “linked” to those downwind areas and are considered for inclusion in the Transport Rule programs. 05/17/201 1 Deliberative - Do Not Cite or Quote 10

# States Covered in the Final Rule Final Transport Rule* Proposed Transport Rule

Deliberative – Do Not Cite or Quote 11 Drop Out Come In Annual and/or 24- hr PM CT, DC, DE, FL,

LA, MA TX Ozone CT, DC, DE IA, MO, WI *Map includes six states whose coverage in the ozone-season NOX program is subject to an SNPR

# Determining State Budgets
• Quantify and eliminate emissions in each “linked” state which constitute that state’s “significant contribution and interference with maintenance” • Consider both control costs and air quality improvements (multifactor analysis) to identify appropriate cost thresholds

– Used Integrated Planning Model (IPM) to estimate emissions reductions at various cost thresholds

– Used Air Quality Assessment Tool (AQAT) calibrated with CAMx model to estimate downwind air quality impacts associated with the reductions at each cost threshold 

### • Calculated state -specific budgets by quantifying emissions remaining after all reductions available at the appropriate cost threshold are achieved.

– Upwind states linked for ozone • Ozone -season NOx budgets based on a $500/ton cost threshold

– Upwind states linked for PM 2.5 • Annual NOx budgets based on a $500/ton cost threshold • Annual SO2 budgets in Group 1 states based on a $2300/ton threshold • Annual SO2 budgets in Group 2 states based on a $500/ton threshold 05/17/201 1 Deliberative - Do Not Cite or Quote 12

# Air Quality-Assured Trading Programs Group 1 versus Group 2 SO 2 

## States Total Program Coverage*

Deliberative – Do Not Cite or Quote 13 SO 2 Control Group 1 IL, IN, IA, KY, MD, MI,

MO, NJ, NY, NC, OH, PA, TN, VA, WV, WI Group 2 AL, GA, KS, MN, NE,

SC, TX *Map includes six states whose coverage in the ozone-season NOX program is subject to an SNPR

# Supplemental Proposal for Notice and Comment
• Analysis conducted with updated inventories/modeling platforms results in new ozone receptors and states not included at proposal

– Two new ozone maintenance receptors (Allegan, MI and Harford, MD) • Five states are only linked to these new receptors: IA, KS, MI, OK, and WI



### – Three new upwind states in ozone program not included at proposal • IA, MO, and WI 

## • EPA is issuing a narrow supplemental proposal to provide opportunity for comment • Would accept comment only on whether these six states satisfy the test for inclusion in the TR ozone -season NO X 

### program • Would not re -open methodological issues finalized in the TR • EPA is seeking to finalize this supplemental by no later than October 31 14 Deliberative – Do Not Cite or Quote 05/17/201 1

# Allowance Allocation under FIPs
• EPA proposed an emissions- based approach and also solicited comments on historic heat input- based alternatives • Commenters noted the following advantages of the historic heat inputbased approaches:

– Superior data that is quality-assured Superior that is quality assured

– Less complex and more transparent than proposal’s approach

– Does not penalize units for choosing cleaner fuels or installing pollution controls 

## • The final rule allocates allowances to existing units based on share of state’s heat input constrained not to exceed a unit’s maximum historic emissions

– Uses highest three of the last five years for each unit to establish heat input baseline

– Constrains unit- level allocations not to exceed maximum emissions from 2003 - 2010 

## • States can establish allocations to existing units from 2013 onward 05/17/201 1 Deliberative - Do Not Cite or Quote 15

# Transition from CAIR
• Court held that EPA did not have authority to modify title IV SO 2 

# allowances in a 110(a)(2)(D) rule.

– Transport Rule will establish new SO 2 

## allowances separately for Group 1 and Group 2 compliance use. 

# • Transport Rule does not allow “carryover” of CAIR NO X 

# allowances

– State budgets under Transport Rule are determined to eliminate significant contribution; adding the CAIR NO X 

## bank would “undo” emission reductions deemed legally necessary to satisfy requirements of 110(a)(2)(D)( i )(I) 7/14/201 1 Deliberative - Do Not Cite or Quote 16

# Transport Rule Compliance Deadlines
• January 2012 for annual NO X

# /SO 2 

# and May 2012 for ozone -season NO X

# ; deeper reductions from January 2014 for SO 2 

# in Group 1 states

– The 2012/2014 compliance dates are responsive to Court’s direction to align emissions reductions with the NAAQS attainment deadlines. 

# • Basis for reductions in each compliance period

– 2012: operation of planned/existing controls; fuel -switching; cleaner dispatch; and installation or upgrade of combustion controls

– 2014: installation of less than 6 GW of scrubbers and 3 GW of dry sorbent injection (DSI) • Significant decrease in retrofit effort compared to proposal’s modeling projections of 14 GW of scrubber installations by 2014, due to updated gas supply assumptions and the inclusion of DSI technology in the final rule’s modeling 05/17/201 1 Deliberative - Do Not Cite or Quote 17

# Transport Rule Air Quality Results 1997 An nual PM 2006 24 - Hour PM 1997 Ozone

2012 Base Case Non -attainment 7 areas Atlanta Birmingham Cincinnati Cleveland -Akron Detroit Liberty- Clairton (Allegheny) St. Louis 11 areas Birmingham Chicago- Gary- Lake 1 Cleveland -Akron Detroit Indianapolis Lancaster Liberty- Clairton (Allegheny) Milwaukee 2 areas Baton Rouge Houston

05/17/201 1 Deliberative - Do Not Cite or Quote 18

1 The Chicago- Gary- Lake and Dayton areas are not officially classified for 24 - hour PM non -attainment. For the purposes of this exercise we assumed that these areas would be similar to their annual PM non -attainment areas. Therefore, the Lake, IN and Cook, IL receptors were included in the Chicago- Gary- Lake area. 2012 Base Case Milwaukee Pittsburgh St. Louis Steubenville Maintenance 1 area Indianapolis 3 areas Cincinnati Dayton Harrisburg 3 areas Allegan Baltimore New York 2014 1 Transport Rule Non -attainment No areas 1 area Liberty- Clairton (Allegheny) 1 area Houston Maintenance No areas 3 areas Chicago- Gary- Lake 1 Detroit Lancaster 1 area Baton Rouge

# Final TR Annual Reductions, Costs, and Benefits

(reductions in thousands of tons) 2012 2014 

## SO 2 

## Re ductions 4,010 3,866 

## Annual NOX 

## Re ductions 120 155

05/17/201 1 Deliberative - Do Not Cite or Quote 19



## Ozo ne-Season NOX 

## Re ductions 60 75 

## Incremental Costs (Billion 2007$) 1.4 0.8 

## Annual estimated benefits (Billion 2007$, 3% discount rate ) A 

### -- 120- 280 

## Annual estimated deaths avoided (Thousands) -- 13 - 34

A Sum of PM2.5 and ozone- related health benefits, value of visibility improvements in Class I areas and CO2 - related benefits

# APPENDIX

05/17/201 1 Deliberative - Do Not Cite or Quote 20

# Major Updates to Emission Inventories

• 2012 and 2014 EGU emissions were revised based on a new version of IPM with updated inputs • Updated plant closures for non - EGU point sources based on comments • Removed duplicate non - EGU point sources • Added known ethanol plants • Updated 2005 PM 2.5 to match IPM 4.1 emission factors • Updated projections for cement plants using Industrial Sector Integrated Solutions (ISIS) model Updated projections using Industrial Sector Integrated Solutions (ISIS) model • Included emissions reductions from reciprocating internal combustion engines (RICE) • Included additional consent decrees • Used MOVES 2010 NOX, SO 2 , and PM for all vehicles (including diesel) • Coastal states:

– only category 3 (C3) commercial marine vessel emissions close to coast are allocated to states (but emission levels do not change from this update)

– Emissions control area (ECA) International Maritime Organization (IMO) control strategy implemented for SO 2 • Delaware: State-supplied C3 marine, nonpoint, and non - EGU projections • Nebraska: Used CENRAP -derived non - point industrial fuel combustion • South Carolina: removed industrial/residual oil fuel combustion emissions • Texas and Oklahoma: updated oil and gas emissions 05/17/201 1 Deliberative - Do Not Cite or Quote 21

# Projected Transport Rule Budgets from EGUs

Compared to Proposal* (Thousand tons) Proposed 2012 TR Budget Final 2012

TR Budget Proposed

2014 TR Budget Final 2014 TR

Budget

05/17/201 1 Deliberative - Do Not Cite or Quote 22

• For comparability, only includes states in both proposal, final, and supplemental proposal (for ozone): • 23 for OS NOX : AL, AR, FL, GA, IL, IN, KS, KY, LA, MD, MI, MS, NJ, NY, NC, OH, OK, PA, SC, TN, TX, VA, WV •22 for annual NO X and SO 2 : AL, GA, IL, IN, IA, KS, KY, MD, MI, MN, MO, NE, NJ, NY, NC, OH, PA, SC, TN, VA, WV, WI Budget TR Budget Budget Budget SO 2 3,623 1,197 638 3,057

1,1 12 556 2,229

1,197 638 1,884

1,031 524 An nual NOX Ozone -Season NOX

# EGU Budgets under Transport Rule Compared to CAIR (Thousand tons) CAIR 2012 Final 2012

TR Budget CAIR Phase 2

(2015) Final 2014 TR

Budget

05/17/201 1 Deliberative - Do Not Cite or Quote 23 For comparability, only includes states in both rules’programs (including those in the supplemental proposal for ozone) •22 for OS NOX : AL, AR, FL, IL, IN, IA, KY, LA, MD, MI, MO, MS, NJ, NY, NC, OH, PA, SC, TN, VA, WV , WI •20 for annual NO X and SO 2 : AL, GA, IL, IN, IA, KY, MD, MI, MO,NJ, NY, NC, OH, PA, SC, TN, TX, VA, WV, WI * Note that Title IV SO 2 allowance bank of 12.7 million tons in 2010 available to CAIR SO 2 sources SO 2 3,254* 1,512 555 3,152*

1,159 483 2,278

1,1 11 459 1,980

1,083 460 An nual NOX Ozone -Season NOX

# Geographic Changes from CAIR Final Transport Rule* CAIR

Deliberative - Do Not Cite or Quote 24 Drop Out Come In Annual and/or 24- hr PM DC, DE, FL, LA,

MS, KS, MN, NE Ozone CT, DC, DE,

MA GA, KS, OK,

TX *Map includes six states whose coverage in the ozone-season NOX program is subject to an SNPR