**NOTE**

**DATE:** March 5, 2012 **TO:** Docket EPA

- HQ

- OAR

- 2011

- 0660 **FROM:** Mary

Johnson **SUBJECT:** Summary

of June 17, 2011 Meeting with Small Entities Standards of Performance for G HG Emissions for New Stationary Sources: E GUs: Proposed Rule The EPA’s outreach t o small entities regarded planned actions for new and existing sources, but only new sources would be affected b y th e currently proposed action. At that time, the EPA believed it likely that proposed regulations for greenhouse gas ( GHG ) emissions from ele ctric utility generating units ( EGUs ) (new sources as well as existing sources) would not result in a significant economic impact on a substantial number of small entities (SI SNOSE) . However , because the EPA believes that outreach to small entities is an important element in the development of the se regulations , the EPA requested that a Small Business Advocacy Review (SBAR) Panel be convened to allow that outreach to occur. It has since been determined that new source performance standards (NSPS) for emis sions of carbon dioxide (CO 2 ) for new affected fossil

- fuel

- fired EGUs will be proposed at this time. At a future date, the EPA intends to promulgate emission guidelines for states to develop plans reducing CO 2 emissions from existing fossil

- fuel

- fired EGU s. **Summary of June 17, 2011**  **Meeting with Small Entities** The EPA conducted outreach with representatives from 20 various small entities that potentially would be affected b y GHG regulations rule. The representatives included small entity municipalities, c ooperatives, and private investors. The EPA distributed outreach materials to the small entity representatives; these materials included background, an overview of affected sources and GHG emissions from the power sector, an overview of CAA section 111, an assessment of CO 2 emissions control technologies, potential impacts on small entities, a summary of the listening sessions held with various stakeholders , a

pplicable small entity

definitions, and s mall entities potentially subject to regulation

. The SBAR Panel (EPA, OMB, SBA) met with eight of the small entit y representatives, as well as three participants from organizations representing power producers (participating as viewers/technical backup) , on June 17, 2011
. The goal of the meeting w as to familiarize the small entity representatives with the background on the rulemaking itself , as well as the Panel process , and their role as a small entity representative ( SER) in the Panel process. When conducted, this meeting with small entity representatives was referred to as the first SBAR Panel Outreach Meeting

. A list of meeting participants is attached to this note. Copies of four documents used during the meeting are included as attachments to the docket entry Agenda and Materials for first Outreach Meeti ng _0 6

- 17

- 2011_email and include: 1. Agenda for the 6

- 17

- 11 Meeting) 2. Presentation by

th e Small Business Advocacy Chair 3. Presentation on the Rulemaking 4. Document outlining the regulatory options that EPA heard at the GHG NSPS listening sessionsThe meeting be gan with the EPA’s Small Business Advocacy Review Chair pr esenting an overview of the SBAR Panel process; this included a presentation that explained what a SBAR Panel is, how the Panel fits into the rulemaking process, how SERs participate in the Panel process, and what the Panel does with SER recommendations. T he EPA’s Office of Air Quality Planning and Standards (OAQPS) went through its presentation on the rulemaking and then directed the SERs’ focus to the list of questions the EPA prepared for SERs (a ctual questions shown below). The purpose of these questions was for the EPA to collect the SERs’ advice and recommendations regarding the rulemaking to be proposed and its potential impact on small entities. Main topics for which the EPA solicited input include d appropriate CO 2 control levels, mechanisms for achieving CO 2 emissions reductions, and State equivalency

with the emission guidelines. The SERs were encouraged to provide comment on the specific questions as well as on regulatory alternatives th at could minimize the impact on small entities while still meeting the statutory objectives of the CAA. In addition, OMB and SBA solicited the SERs’ views on the use of alternative applicability thresholds, alternative way s to address modified sources, how the EPA should choose between the various regulatory

alternatives, whether the EPA should establish a cost

- effectiveness benchmark for energy efficiency or other technological improvements at each unit, whether the EPA should establish a sy stem of CO 2 - equ ivalent credits and trading among EGUs or among a broader set of industries and/or sources, and whether the EPA should adopt BACT guidance as BDT for new and existing sources and rel y on case - by

- case evaluation of facilities for cost

- effective improvements (actual questions shown below). **EPA’s q**  **uestions for SERs :**  ► **Applicability** ► Is EPA’s description of applicability of these standards on slides 29

- 31 appropriate? ► Should applicability

include stationary

combustion turbines (combined cycle gas turbines and simple cycle gas turbines)? ► **Current Practices** ► Do you employ

measures to ensure that your EGU operates in an energy efficient manner? ► What are the energy

efficient measures you employ? ► Are these measures a result of regulatory requirements, initiated voluntarily , or emplo yed for other reasons? ► What are the estimated emissions reductions associated with the energy efficient measures? ► What are the costs of implementing the energy efficient measures? ► **Appropriate Control Levels for New Sources** ► Should new sourc e standards be based on fuel and technology specific efficiency standards based on the best performing coal units being permitted/ built (e.g., IGCC and/or ultra

- supercritical coal)? ► Alternativel y, should tighter standards that require new coal units to go beyond technologies such as IGCC and ultra

- supercritical coal and be designed/built to perform at lower CO 2 /MWh levels be considered? ► Given the existence of generation alternatives such as natural gas combined cycle and renewables, tighter standards could be based on the use of technologies such as co - firing of lower carbon fuels, integration of renewables or the use of some level of CCS. ► Should new source standards include emission rate averaging?► Should the new source standards be fuel neutral (i.e., st andards would not be fuel or technology

specific but instead would be based on use of lower GHG fuels such as natural gas)? ► Should EPA consider a phased approach where a fuel and technology specific standard based on existing technologies would apply init ially and, after several years, a tighter standard would appl y? ► Are there other options that should be considered? ► **Appropriate Control Levels for Modified Sources** ► Will compliance with other regulations impacting the power sector cause EGUs to become modi fied sources subject to the GHG standards? ► How should modified sources be addressed in the GHG standards? ► Should modified source standards be based on efficiency improvements? ► Alternativel y, given that the modifications are likely to involve more significa nt changes to the boiler and/or turbine, is it appropriate to consider other options such as fuel switching or co

- firing with lower carbon fuels? ► Are there other options that should be considered (e.g. different applicability thresholds)? ► **Appropriate Con trol Levels for Existing Sources**  ► Should existing source guidelines be based on efficiency improvements? ► What is an appropriate heat rate reduction to require for existing EGUs? ► Should replacement of older generation be part of the guidelines? ► Should there be a linkage between remaining useful life and tightened standards? ► Should guidelines be based on a s ys tem wide generation performance standard that would decrease as there was fleet turnover? ► Should EPA consider a phased approach where a fuel and techno logy specific efficiency standard based on existing technologies would apply initially and, after several years, a tighter standard would apply? ► Should other options such as fuel switching or co

- firing with lower carbon fuels be considered? ► Should States i ncorporate considerations of fleet turnover when considering potential GHG reductions? ► Are there other options that should be considered? ► **Mechanisms to Get Emissions Reductions** ► Do output based standards (e.g. lbs/MWh) make sense? ? ► Does a net output bas ed standard make sense for new facilities? ► Should emission averaging be allowed? ► Traditionally

new source standards have been set at the individual unit level. ► If EPA considers alternatives, should different approaches for new, modified and existing sourc es be considered? ► Should all generating sources (e.g., renewables, nuclear) be included? ► Over what universe of sources should emissions averaging be considered?

– Within a facility

– Within a State

– Within a company

within a State

– Within a company

across State lines

– Across state lines ► Should other alternatives be considered?► Should EPA develop a model rule that States can follow or just develop general guidelines? ► How should useful thermal output from CHP be credited? ► **State Equivalency With the Emission Guidel ines**  ► Should EPA set a more prescriptive set of requirements or a more general set of principals? ► Are there certain types of programs that should (or should not) be allowed? ► Programs that allow crediting of reductions from, or averaging with, non

- affected sources (e.g., generation performance standards or California’s AB

- 32 program) ► Programs that allow crediting of reductions from, or averaging with, sources in other States (e.g., the RGGI program) ► Are there other important factors for EPA to address as it sets forth criteria for demonstrating equivalency? ► **Compliance, Monitoring, Recordkeeping & Reporting** ► Should fewer requirements be placed on low mass emission units? ► If so, what should those requirements be? ► Are there compliance and monitoring alternativ es that would simplify the requirements? ► Are there recordkeeping and reporting alternatives that would simplify the requirements? ► How should useful thermal output from CHP facilities be monitored? ► **Issues that may Impact Control Options** ► What ty

pes of subcategories based on class, type, or size do you think EPA should consider and wh y? ► What ty

pe of size cut

- off, if any , do you think EPA should consider and why? ► Are there other regulatory options or small entity flexibilities that EPA should consider?
**Addit ional**  **t opics that**  **OMB and SBA were**  **interested in SERs’ views on:** ► **The use of alternative applicability thresholds (e.g. 50 MWs instead of 25 MWs)** ► **Alternative ways to address modified sources** ► **How should EPA choose between the regulatory alternatives offere d?**  ► What factors should EPA consider? ► What emissions benefits should be included in EPA’s consideration

- just GHGs or all pollutants that would be reduced b y either reducing fuel utilization or the decommissioning of facilities? ► Should EPA establish an eco nom y - wide emissions goal, an energy

- intensity goal, or a cost
- effectiveness goal for GHG emissions reductions? ► **Should EPA establish a cost -**  **effectiveness benchmark for energy efficiency or other technological improvements at each unit?**  ► For example, if the social cost of carbon is currently approximately

$20/ton (understanding that under current guidance this would grow over time), should EPA only require improvements at any particular unit that cost less than $20/ton CO 2 equivalent (CO 2 e)?► Should the cost o f improvements be based on case

- by

- case engineering evaluations or econom y - wide projections? ► Should EPA establish a cost

- effectiveness benchmark for energy efficiency

or other technological improvements for the econom y as a whole? ► If not $20/ton or the soc ial cost of carbon, what other monetary benchmark could be used? ► **Should EPA establish a system of CO 2**  **e credits and trading among EGUs? Among a broader set of industries and/or sources?**  ► What should credits represent

- allowances or emission reductions? ► If allowances, how should the supply of allowances be set? Be allocated? ► If emissions reductions, how should EPA establish emissions benchmarks? ► Are there an y reasons - legal, practical or competitive

- that a trading scheme should be restricted? ► **Should EPA adopt the Best Available Control Technology (BACT) guidance as Best**  **Demonstrated Technology (BDT) for new and existing sources and rely on case -**  **by -**  **case evaluation of facilities for cost**  **- effective improvements?**  In formation for the docket was provided durin g the meeting (4 documents) and is attached to this note

. The information included support for SERs’ concerns that geologic sequestration is not proven and that there are limitations caused by other regulations (statutory issues that are non

- air) and that fuel switching to natural gas is not available in all instances due to the inadequate infrastructure. Attachments