PGE COMMENTS ON DEQ’S PR OPOSED REVISIONS TO

ITS REGIONAL HAZE RULES

7/30/2010

Portland General Electric Company (“PGE” or “Company”) appreciates this opportunity to comment on the Oregon Department of Environm ental Quality’s (“DEQ” or “Department”) preliminary revisions to its Regional Haze rules. As you know, the rules are the result of the federal requirement that Oregon develop an implementation plan for regional haze (the “Regional Haze Plan”) for submittal to EPA and approval into the State Implementation Plan (“SIP”). The Regional Haze Plan must include a determination of Best Available Retrofit Technology (“BART”) for each BART-eligible source in the state that emits any air pollutant which may reasonably be anticipated to cause or contribute to visibili ty impairment in any mandatory Class I area. 40 CFR § 51.308(e)(1)(ii). The federal Clean Air Act contains specific criteria for establishing BART and these criteria are carried ov er into the regulations. In developing these regulations, EPA also promulga ted guidelines to be used by the states in developing BART determinations. These guide lines, found in 40 CFR § 51 Appendix Y, contain the majority of the detail regarding how BART determin ations are to be conducted.

What follows is a summary of developments thus far in the BART determination rulemaking process for PGE’s Boardman Power Plant, PG E’s assessment of the draft control options described in DEQ’s June 28 announcement and i nvitation for public comment, and our proposed resolution to problems associated with those opti ons. We will also address concerns DEQ raised with respect to the alternative 2020 plan PG E proposed in the petition submitted to DEQ on April 2, 2010.

As we review the technical details of potential control solutions, however, it’s important that we not lose sight of why we are revisiting this issu e. After all, the EQC has already adopted rules

that would allow PGE to resolve all current emi ssions requirements for the plant and continue operation for at least the next 30 years, an outcome that extensiv e modeling confirms would be a responsible, cost effective course of action to serve our customers. We have chosen not to leave it at that, however, because PGE and numerous customer and key stakeholder groups have agreed that it would be possibl e to achieve an even better out come for both our customers and the environment if the DEQ rules are revised to allow us to instead meet Regional Haze objectives through a combination of inte rim controls and early plant closure. 1

1 Early closure, as referenced herein, is th e cessation of coal as a fuel source for the Boardman plant. PGE is evalua ting other technologies for use at the Boardman site, including

biomass.Mr. Brian Finneran July 30, 2010 Page 2

The reason for doing this, if we’re able to finalize an acceptable amendment to the rules, is to

achieve the best solution we can for our customer s. This also gives us an opportunity, however, to set a remarkable national precedent for Regional Haze regulation and, for that matter, for general air quality regulation of coal -fired generating plants nationwide.

Although a few coal-fired plants in the United Stat es have recently been slated for closure and replacement, none of the plants involved to date match Boardman’s age, size, level of efficiency or role in a utility generating fl eet (i.e. a baseload resource). In short, PGE and its stakeholders have stepped forward to match a pragmatic reso urce decision on behalf of customers with a forward-looking policy precedent that could have a significant impact on the nation’s efforts to reduce air pollution in general and carbon emissions in particular.

We believe DEQ should consider this combina tion of pragmatism and precedent as it seeks an appropriate solution in this matter. Specifically:

 Given the substantial discretion and flex ibility the states have under the BART requirements of CAA § 169A, 2 Oregon clearly has the author ity to develop a reasonable path to plant closure. An i nnovative approach along the li nes of what PGE has proposed would be consistent with Regional Haze regulations while also offering a valuable example for other util ities and states to follow. Th is could result in tremendous cumulative national air quality benefits that potentially dwarf the results of any action Oregon could take by itself.

 In order to achieve an attractive national precedent, however, DEQ must balance the considerable long term benefits of closing a coal-fired power plant of this size with the near-term need to mitigate costs to customers, maintain the reliability of the electric power grid, and reduce the economic impact of closure on communities surrounding the

2 "H.R. Conf. Rep. No. 95-564 (1977), reprinted in 3 Senate Comm. on Env't and Pub. Works, A legislative History of the Clean Air Act Amendments of 1977, at 535 (1978) [hereinafter "1977 Legislative History"]. The "agreement" to which the Conference Report refers was an agreement to reject the House bill's provisions giving EPA the power to determine whether a source contributes to visibility impairment and, if so, what BART c ontrols should be applied to that s ource. See id. At 533-35. Pursuant to the agreement, language was inserted to make it clear that the states - not EPA - would make these BART determinations. See id. at 533-35; see also H. R. Res. 4151, 95th Cong. (1977), reprinted in 1977 Legislative History at 1985, 2325-30. The Conferen ce Report thus confirms that Congress intended the states to decide which sources impair visibility and what BART controls should apply to those sources. American Corn Growers et al. v. EPA, 291 F. 3d 1 (D.C. cir. 2002)Mr. Brian Finneran July 30, 2010 Page 3

plant. Failure to do this would instead es tablish a precedent that greatly reduces the incentive for utilities, state regulators, a nd stakeholder groups to seek collaborative emissions control solutions based on early plant closure.

In our comments below, PGE offers suggestio ns on how to address key provisions of the Regional Haze rules and the BART guidelines to accomplish a reasonable 2020 closure of the Boardman Power Plant. Specifically, we propos e operation on reduced sulfur coal, low-NOx burners, modified overfire air and selective non- catalytic reduction (“SNCR”) through 2020 with a pilot study of Dry Sorbent In jection (“DSI”) technology. Conti ngent on the results of pilot testing, PGE would commit to meeting a 0.4 lb SO 2 /MMBtu limit through 2020 using DSI. If this option is considered BART, DEQ would need to provide a procedure for establishing an

alternative SO 2 limit if PGE’s pilot testing demonstrated that operation of DSI could not reach

0.4 lb SO 2 /MMBtu, when operating in conjunction with SNCR and the mercury controls, without resulting in an increase in th e hourly capacity to emit particul ate matter or triggering PSD for

PM 2.5 (assuming the same level of operation currently reflected in the Boardman Plant’s plant site emission limits).

We remain mindful that if an acceptable amendment to the 2009 Regional Haze rules cannot be achieved, our most responsible course of acti on remains full implementation of controls and continued operation of the plant to serve our cu stomers through at leas t 2040. While this would be an unfortunate and unnecessary outcome, we believe that it will still be the best plan available to us if the other options described by DEQ ar e carried through as draf ted to the final rule

amendments.

DEQ and the EQC have discretion under § 169A to achieve a balanced and reasonable outcome that will benefit both the environment and utility cu stomers. We urge the agency to approach this

issue with that flexibili ty in mind, remembering that ultimatel y the rules are intended to achieve results that will make both environmental and economic sense to the people we serve. We look forward to working with you to take advantage of this opportunity to se t an important national precedent.

1. BackgroundMr. Brian Finneran July 30, 2010 Page 4

On November 2, 2007, PGE submitted a BART analysis for its coal-fired pow er plant located in Boardman, Oregon (the “Boardman Plant”). 3 Sources in existence on August 7, 1977 and that both fall into one of the designate d source categories and have th e potential to emit more than 250 tons per year of a haze-causing pollutant are required to determine BART if they cause or contribute to visibility impairment in a ma ndatory Class I area. 40 CFR § 51.308(e). DEQ previously determined that the Boardman power plan t was in existence, as that term is defined in the federal Regional Haze program, on August 7, 1977. 4 The Boardman Plant emits more than 250 tons per year of NOx, SO 2 and PM, is in one of the design ated source categories and was determined by the Department to cause visibility impairment in at least one mandatory Class I area. Therefore, PGE engaged an extensive gr oup of experts that a ssisted the Company in preparing a BART determination for the Boardman Plant. This report was submitted to DEQ on November 2, 2007 and subsequently supplemented in response to dozens of questions posed by various state and federal agencies and interested third parties. The team of experts concluded that if the Boardman Plant were operated through 2040, BART consti tuted a set of NOx, SO 2 and

PM limits reflective of the installation of new low-NOx burners with a modified overfire air system for NOx control and the installation of a se mi-dry scrubbing system with fabric filters for

SO 2 and PM control. PGE concluded that due to the long lead time and complex engineering challenges the Company needed five years from the date that the Regional Haze SIP is approved in order to engineer, bid, proc ure, install and start up the SO 2 controls. Federa l law authorizes DEQ to allow up to five years from the date EPA approves the Regional Haze SIP. 40 CFR § 51.308(e)(1)(iv).

On December 1, 2008, the Department issued th e proposed Boardman Plant BART proposal for public comment. The proposal included new regulat ions that would requir e the installation of

3 The Foster-Wheeler boiler is identified by the U.S. Environmental Protection Agency (EPA) as acid rain program ORISPL code 6106.

4 40 CFR § 51.301 defines “in existence on Augus t 7, 1977” as “meaning that the owner or operator has obtained all necessa ry preconstruction approvals or permits required by Federal, State, or local air pollution emissions and air qua lity laws or regulations and either has (1) begun, or caused to begin, a continuous pr ogram of physical on-site constr uction of the facility or (2) entered into binding agreements or contractua l obligations, which cannot be cancelled or

modified without substantial loss to the owner or operator, to undertake a program of construction of the facility to be completed in a reasonable time.”Mr. Brian Finneran July 30, 2010 Page 5

the controls proposed by PGE, but on an exped ited schedule. In addition, the Department proposed to require that PGE install selective catalytic reduction (“SCR”) in 2017.

PGE submitted comments on DEQ’s proposal in troducing the concept of shutting down the Boardman Plant boiler before the end of its proj ected life and, based on the reduced plant life, eliminating some or all post-combustion controls depending on the shutdown date.

On June 19, 2009, the Oregon Environmental Quality Commission (“EQC”) adopted the Regional Haze Plan. The Regional Haze Plan includes new regulations (OAR 340-223-0030) imposing NOx, SO 2 and PM limitations reflective of BART and applicable to the Boardman Plant boiler. The NOx regulations re quire compliance by July 1, 2011 and the SO 2 and PM regulations require compliance by July 1, 2014. The Regional Haze Plan also includes new regulations (OAR 340-223-0040) im posing additional NOx limits reflective of the Reasonable Progress (“RP”) requirements of Clean Air Ac t Section 169A. The RP regulation requires compliance by July 1, 2017. These requirement s are summarized below in Table 1.

Table 1 Oregon Regional Haze Plan Requirements for Boardman Plant Boiler

Limit (Assumed Control*) Installation Deadline Authority 0.28 lb NOx/MMBtu—30 day rolling

average 0.23 lb NOx/MMBtu—annual average (Low-NOx Burners/Overfire Air) ** 7/1/2011 BART

0.12 lb SO 2 /MMBtu—30 day rolling

average 0.012 lb PM/MMBtu—average of

source test runs (Semi-Dry Scrubber) 7/1/2014 BART

0.070 lb NOx/MMBtu (SCR) 7/1/2017 Reasonable Progress * BART constitutes emission limits, not specific controls. The assumed control is provided for illustrative purposes only. ** If combustion controls do result in a showing of compliance by July 1, 2012 and DEQ grants an extension of the compliance deadline to July 1, 2014, the NOx limit changes to 0.23 lb/MMBtu as a 30 day rolling average.

In adopting these BART/RP requirements, the EQC and DEQ acknowledged PGE’s request for

consideration of a boiler shutdown, but stated that early closur e would need to be addressed inMr. Brian Finneran July 30, 2010 Page 6

future submittals. In Chapter 10 of the Regiona l Haze Plan, DEQ acknowledged that the cost of future greenhouse gas regulation in context with costs associated with the regional haze SO 2 and NOx controls for the Boardman Plant boiler “could be significant and may require PGE to

evaluate cost-benefit factors aff ecting the future of the Boardman Plant, as part of the Oregon Public Utility Commission Integr ated Resource Plan process.” 5 In Chapter 12, DEQ also stated that “should PGE determine that the impact and cost of carbon regulations will require the closure of the PGE Boardman Plant, PGE may s ubmit a written request to the Department for a rule change.” 6 Thus PGE could petition DEQ for recons ideration of the BART and RP rules if

external factors such as carbon regulation would result in early plant closure.

On April 2, 2010, PGE petitioned the EQC to amend OAR 340-223-0030 and -0040 in accordance with the invitation in the Regional Ha ze Plan. As the Department has acknowledged, DEQ has no authority under the BART requireme nts to require early closure of a plant. However, a source does have the ability to offe r to accept a federally enforceable condition to cease plant operations by a date certain either to avoid BART (by the closure date being no later than 5 years after EPA approval of the Regional Haze Plan into the SIP) or to be accounted for in the BART determination itself. For example, EPA stated in the preamble to the BART implementation rules:

“With regard to BART-eligible sour ces not being in operation for the duration of the program, a State, in making BART determinations, is explicitly directed by the CAA to account for the remaining useful life of a source.” 70 Fed. Reg. 39125 (July 6, 2005)

The remaining life of the plant is a separate and freestanding criterion as well as a component of the economic impacts analysis in the BART determ ination process. In its April 2, 2010 petition, PGE proposed to accept a 2020 plant closure da te. PGE accompanied the petition with a complete BART analysis that took into account the 2020 closure proposal and concluded that if the Boardman Plant closed in 2020, BART const itutes the use of reduced sulfur coal (for SO 2 control) and new low NOx burners with modified overfire air (for NOx control). BART for particulate was the continued use of the electrostatic precipitator (ESP).

On June 17, 2010, the EQC denied PGE’s petition and directed the Department to commence rulemaking to determine other alternatives to the current BART/RP requirements in the Regional

5 Regional Haze Plan at p. 155.

6 Regional Haze Plan at p. 202.Mr. Brian Finneran July 30, 2010 Page 7

Haze Plan. The Department has released a pr eliminary proposal for informal comment that would provide the following three options in addition to the existing rules:

DEQ BART Revision Proposal

Table 2

2011 NOx 2014 SO 2 2017 NOx Closure Date Existing Rules LNB/MOFA SD Scrubber SCR 2040+ DEQ Option 1 LNB/MOFA/SNCR SD Scrubber --- 2020 DEQ Option 2 LNB/MOFA/SNCR DSI --- 2018 DEQ Option 3 LNB/MOFA --- --- 5 years after SIP approval (2016?)

The new alternative options were supported by a dr aft BART analysis that PGE believes contains errors and incorrect assumptions that materially distort its conclusions. For that reason, PGE is submitting the following comments to identify and correct the errors so that the proposed rule that is placed out on formal notice more accurate ly reflects the statutor y BART process and EPA guidance.

2. Evaluation of Errors in DEQ’s BART Analysis

PGE has reviewed DEQ’s proposed BART analysis and three additional BART options. While PGE appreciates the Department’s willingness to th ink in terms of altern atives to the current regional haze requirements, PGE believes that th ere are numerous errors in the Department’s BART analysis that result in erroneous conclusion s. While our analysis is not yet complete, we are submitting the following comments identifying a number of errors in the Department’s analysis.

Plant Closure Assumption is Invalid

One of the most fundamental errors that we be lieve affects the Department’s BART analysis relates to the assumption in Option 2 that the plant will close in any year other than 2020 or 2040, i.e., the end of the Boar dman Plant’s useful life. 7 As the Department has previously

7 For ease of reference, 2040 is referred to throughout this document as the end of the Boardman Plant’s useful life. However, it is pos sible that the plant could ultimately operate for a longer period of time—particularly if the cont rols envisioned by the current BART rules are installed. By using 2040 as a reference point, PG E makes no commitment to cease operating the (...continued)Mr. Brian Finneran July 30, 2010 Page 8

acknowledged, Section 169A of the Clean Air Act does not provide DEQ or the EQC the authority to set a closure date for the Boardman Plant. PGE can volunteer to accept a premature closure and then DEQ is required to take that into account in determining BART. EPA stated:

“[A] State, in making BART determ inations, is explicitly directed by

the CAA to account for the remaini ng useful life of a source. Thus,States may factor into their reasonable progress estimates those shutdowns that are required and effected in permit or SIP provisions.” 70 Fed. Reg. 39103, 39125 (July 6, 2005).

In considering closure dates other than 2020 and 2040 in establishing BART, DEQ is acting outside of its jurisdictional authorit y. We note that this is not th e case in relation to Option 3 as that option simply states that if PGE does not install BART on Boardman within 5 years after SIP approval, the Boardman Plant must cease operat ion or face enforcement. This approach is

consistent with EPA’s clear statement in th e 2005 BART rule preamble where it stated:

“We believe that the CAA mandate s consideration of the remaining useful life as a separate factor, and th at it is appropriate to consider in the analysis the effects of remaini ng useful life on costs. We believe that, because the source would not be allowed to operate after the 5- year point without such controls, the option for providing flexibility would not create a loophole for s ources. Moreover, any source operating after this point without BA RT controls in place would be subject to enforcement actions for violating the BART limit. For any source that does not agree to shut down before the 5-year point, the State should identify a specific BA RT emission limit that would apply after this point in time.” 70 Fed. Reg. at 39127.

For that reason, we request that DEQ not propos e a BART option that an ticipates a 2018 closure

of the Boardman Plant. PGE has never offe red such a closure date and DEQ lacks legal authority to impose such a requirement.

(...continued) Boardman Plant in 2040. Any deci sion as to the useful life of the Boardman Plant would need to be reviewed by the Oregon Public Utilities Commission.Mr. Brian Finneran July 30, 2010 Page 9

The Department Failed to Identif y Technically Feasible Controls

In its April 2, 2010 BART analysis, PGE identified the use of reduced sulfur American coal as

an interim control for considera tion as BART. In its draft BART analysis, the Department added two additional interim technologies , DSI and the use of Indonesian coal. We do not contest that these two technologies should be listed in Step 1 of the BART analysis as “available retrofit control technologies.” However, both technologies should be elim inated in the second stage as not being technically feasible.

The importation of Indonesian coal is technically infeasible as an interim BART control. As DEQ acknowledges in its second bul let on page 20 of the Departme nt’s draft BART analysis, it would be infeasible for PGE to import Indonesian co al to the west coast of the U.S. There are no existing port facilities that c ould accommodate these shipment s. Setting aside the profound policy reasons why the Department should not be requiring Oregon consumers to pay for the importation of coal from a country with a ques tionable history of mine reclamation, worker safety and environmental protections (let alone a country that the U.S. government has labeled a haven for terrorism), 8 it is technically infeasible to actually transport the coal into any west coast port and, from there, to the Boardman Plant. 9 In addition, managing shipments around the Indonesian monsoon season is a real issue, which has resulted in price in creases and curtailment of coal supply under supply contract force majeure provisions. 10 Lastly, there is no

demonstration that the Indonesian coal is of acceptable quality to even be burned in the Boardman Plant boiler. Therefore, the use of Indonesian coal should be removed from the possible interim control options at Step 2, based on technical infeasibility.

Similarly, there is no basis for concluding that DS I, as proposed, is technically feasible. EPA stated in its 2005 BART rule preamble what was required in order for a technology to be considered technically feasible . Specifically, EPA stated:

8 See, http://travel.state.g ov/travel/cis_pa_tw/cis/cis_2052.html#safety

9 We note that the two plants identified by DEQ as having utilized imported Indonesian

coal are located on the east coast and have associ ated importation facilities that are not available

in the Western U.S.

10 See, e.g., http://www.thejakartaglobe.com/busine ss/indonesian-coal-prices-up-as-raincurbs-supply/372199 ; also see, http://www.reuters.com/article/idUSJAK42062020100427Mr. Brian Finneran July 30, 2010 Page 10

“Control technologies are technically feasible if either (1) they have been installed and operated successfu lly for the type of source under review under similar conditions, or (2) the technology could be applied to the source under review . Two key concepts are important in determining whether a technology could be applied: ‘‘availability’’ and ‘‘applicability.’’ As explained in more detail below, a technology

is considered ‘‘available’’ if th e source owner may obtain it through commercial channels, or it is othe rwise available within the common sense meaning of the term. An av ailable technology is ‘‘applicable’’ if it can reasonably be installed and operated on the source type under consideration. A technology that is available and applicable is technically feasible . 70 Fed. Reg. at 39165.

It is clear that DSI is not an applicable techno logy, as that term is defined by EPA. As the Department acknowledges in its BART analysis,

“DSI has been demonstrated in pr actice on smaller coal-fired boilers (<100 MW). It has not been demons trated on larger boilers...” DEQ Draft BART Analysis at page 6.

The Department seeks to distance itself from this acknowledgement by suggesting that DSI has never been installed on a boiler as large as that at the Boardman Plant because nobody has ever wanted to. However, that does not change th e fact that there is no demonstration project showing that DSI can be used on a long term ba sis for a boiler the size of the Boardman Plant boiler. Absent such a demonstration, DEQ cannot unilaterally impose DSI on the Boardman Plant as BART. By contrast, PGE could agree to serve as a demonstration project for DSI, but would only be able to do so if appropriate al ternative emission limits were included within the rule to protect PGE if DSI turned out not to be cost-effective, compatible with the mercury controls, permittable, or able to achieve significant levels of SO 2 control.

An additional reason not considered by DEQ in its BART analysis is whether under recent regulatory changes a DSI system is permittable. Even if DSI were assumed to be able to achieve

the SO 2 reductions suggested by the Department, the technology is not technically feasible if it would be impossible for PGE to obtain a permit to install and operate the technology. As the Department has acknowledged, EP A will be withdrawing its PM 10 surrogacy policy that has allowed sources to be permitted under PSD without having to evaluate PM 2.5 . Therefore, DEQ is requesting that the EQC adopt as an emergency ru le at its August meeti ng provisions that wouldMr. Brian Finneran July 30, 2010 Page 11

establish the baseline year for PM 2.5 as 2007 or 2006 (unless a prior year can be established as better representing normal c onditions), a 10 ton/year sign ificant emission rate, a PM 2.5 PSD

increment and a PM 2.5 significant impact level. Under thes e regulations, the in stallation of DSI would trigger PSD for PM 2.5 if it resulted in PGE requiring a plant site emission limit (“PSEL”)

in excess of its 2006/2007 actual PM 2.5 emission rate by 10 tons per year or more. PGE has estimated that DSI would require the addition of approximately 4 tons/hour of reagent powder into the boiler exhaust upstream of the ESP. Assuming 8,000 hours of operation per year, this would equate to 32,000 tons of particulate being introduced into the exhaust gas annually. The additional burden imposed on the particulate co ntrol device (ESP) coul d cause it to lose efficiency at collecting the sm aller particles, thus likely resulting in an increase in PM 2.5 emissions in excess of 10 tons per year. 11 PGE’s preliminary modeli ng indicates that at the anticipated level of increased PM 2.5 emissions associated with DSI, the Boardman Plant would

cause a PM 2.5 increment and/or NAAQS exceedance thus making the DSI technology unpermittable. Because it could not be lawfully operated, the DSI tec hnology is not technically feasible. We note that this aspect of DSI opera tion would not have been identified in relation to the small boilers that have empl oyed the technology for two reasons . First, the smaller boilers would have had a proportionately smaller level of PM 2.5 emissions. Second, any boiler that already has a permit would have obtained it while EPA’s PM 10 surrogate policy was still in effect. Therefore, these boilers would not have had to evaluate PM 2.5 impacts. As a result, the previous permitting of the smaller boilers is not a basis for concluding that the Boardman Plant boiler could pass permitting re view for DSI installation.

DSI by itself is similarly not technically feasible as it could not be installed and achieve compliance with the applicable New Source Performance Standard (“NSPS”). The applicable boiler NSPS, Subpart Da, imposes a particulate limit of 0.015 lb/ MMBtu heat input. 40 CFR § 60.42Da(c)(2). This limit is triggered by modifi cations that occur afte r February 28, 2005. A modification occurs if there is physical change that results in a statistically significant change in particulate emissions. 40 CFR § 60.14. If PGE installed DSI, the evidence overwhelmingly shows that a statistically signi ficant increase in the hourly cap acity to emit particulate would

11 By means of reference, Section 7.2 of th e BART analysis states that without DSI approximately 66 percent of the Boardman Plant’s particulate emissions are PM 2.5 . This equates to 275 tons per year of PM 2.5 emissions in the baseline period based on the emission rates

identified in Table 2-3. A 3.5 percent increase in PM 2.5 emissions as a result of adding over 32,000 tons per year of fine part iculate (i.e., adsorbent) into th e stack exhaust appears likely to result in a 10 ton per year increase in PM 2.5

.Mr. Brian Finneran July 30, 2010 Page 12

occur. Therefore, PGE would be required to comply with th e 0.015 lb/MMBtu limit, which the ESP would be incapable of doing w ith 4 tons per hour of reagent be ing added to the inlet gas. Therefore, DSI could not be installed and mainta in compliance with the Subpart Da NSPS limits. Therefore, this technology cannot be considered technically feasible.

For the reasons outlined above, both the importati on of Indonesian coal and the installation of DSI should be eliminated at Step 2 of the BART analysis.

DEQ Wrongly Evaluated the Cost Impacts of Imported Indonesian Coal and DSI

While PGE believes that imported Indonesian coal and DSI are both technically infeasible, we have prepared comments on the defects in the cost impact analysis as if the technologies were technically feasible. To be pe rfectly clear, DEQ and other readers of these comments should not conclude that because we are making these comme nts on cost impacts that we consider either technology technically feasible.

Imported Indonesian Coal is Not Cost-Effec tive Even if It Were Technically Feasible

Imported Indonesian coal is unequivocally not cost-effective. As noted above, there are no receiving facilities in the we stern U.S. that would be capab le of receiving, unloading and reloading the coal into unit trains. Therefor e, were imported Indonesian coal considered technically feasible, it would be necessary to construct an entire unloading and relo ading facility, including storage structures, capab le of handling the volume of coal needed to fuel the Boardman Plant. Land would either have to be acquired or le ased to facilitate this new infrastructure. All

this would cost hundreds of millions of dollars. PG E would further need to secure rights over the rail lines that connect the deepwater port capable of handling a coal lade n ship to Boardman.

This would involve additional costs. Construc ting these facilities a nd bringing them on line could likely not be completed by 2014 given th e land acquisition, permitting and siting processes

that would be involved. In addi tion, PGE estimates the initial capit al cost would be in exess of $100 million and the annual operational costs would be $275-$300 million. The biggest cost component in the annual operational costs is the delivery of the Indonesian coal, which is over 3.5 times higher than domestic options. It may also be necessary, given the potential for political instability in Indonesia, to stoc kpile considerable am ounts of coal in case of interruption in supply due to terrorism, labor unrest or politic al upheaval. This introduces both a direct operating cost as well as a significant risk wh ich imposes an additional cost of replacement power if the Indonesian mine cannot deliver as promised. None of these potential costs have been included in the operational cost amounts descri bed above. It is extr aordinarily speculativeMr. Brian Finneran July 30, 2010 Page 13

to think that the Oregon Public Utilities Commission would cons ider such an investment and fueling approach to be prudent and in the best interests of PGE’s customers. In short, DEQ’s BART analysis does not incor porate the extreme economic imp acts associated with importing Indonesian coal. Including these costs demonstrat es that even if the importation of Indonesian coal were technically feasible, that the direct and incremental cost-effectiveness of the emission

reductions would be too extreme to consider this option BART.

DSI is Not Cost-Effective Even if It Were Technically Feasible

Similarly there are fundamental flaws in DEQ’ s cost-effectiveness analysis of DSI. The Department’s BART analysis assumed that the installation of DSI woul d require “only” a $52.2 million investment and an annual operational cost of only $2.6 million. However, this cost fails

to take into account the fact that the in stallation of DSI could trigger PSD for PM 2.5 . As a result, the Department’s BART analysis fails to identify the costs associated with PSD compliance. As a result, even if DSI were considered technical ly feasible and were capable of being permitted, the costs associated with maintaining PM 2.5 emissions below the increment and NAAQS could render the technology no t cost-effective.

Semi-Dry Scrubbing Cost-Effectiveness Numbers in DEQ BART Analysis Understate

True Cost

Since the adoption of the Regional Haze Pla n, PGE engaged Sargent & Lundy (“S&L”), an internationally recognized engineering compa ny with extensive expertise in designing and contracting semi-dry scrubbing systems for coal -fired power plants. S&L has assembled a new detailed cost analysis for the construction and operation of a semi-dry scrubbing system for the

Boardman Plant. Based on S&L’s assessm ent, the true cost of controlling SO 2 emissions with a semi-dry scrubber are higher than what was identified in the prio r BART analysis by approximately 30 percent. If th e capital and operating costs are adjusted, then the Department’s

estimate of direct cost-effectiveness would in crease to over $6,500/ton and incremental costeffectiveness would increase to near $9,000/ton. Of course, as di scussed further below, these costs as expressed in dollars pe r ton, while being singularly releva nt in the BART context, do not

show the true cost effectivene ss with respect to PGE’s customer s. Installing a very expensive semi-dry scrubber for six and a half years and then shutting it down is not in the best interests of customers, and does not achieve the balance of e nvironmental benefit, maintaining the reliability of the electric power grid, and reducing the economic impact of cl osure to employees at the plant and the communities in which they live and work.Mr. Brian Finneran July 30, 2010 Page 14

The Department’s BART Analysis Fails to Account for Replacement Resource Cost

The Department’s BART analysis is also flawed in that it fails to account for the cost to PGE and

its customers of the loss of the Boardman Plan t. In a typical BART analysis, DEQ would account exclusively for the capital and operating cost of controls and divide that number by the

avoided emissions to calculate the cost of contro l. However, what PGE proposed in its April 2, 2010 BART analysis was anything bu t a typical BART approach. Instead, PGE proposed to shut the Boardman Plant down at least 20 years before the end of its operating life. The Boardman

Plant is one of the lowest cost thermal resource s in PGE’s portfolio. By agreeing to shut the plant down at least 20 years early, PGE is taking on a significant additional cost and foregoing a valuable opportunity. There is a cost associ ated with relinquishing Boardman’s low-cost baseload generation capacity that must be acco unted for as PGE must continue to supply the amount of electricity that its customers demand.

The Department’s cost-effectiveness evaluati on of its Option 2 must recognize the costs associated with premature retirement of the bo iler. These include the incremental replacement costs associated with closing the Boardman plant sooner than it would otherwise be closed. There are considerable costs that DEQ has not taken into account in evaluating the cost effectiveness of the premature closure options. In addition, in evaluating the cost of a BART option that includes a premature shutdown for a regulated utility, such as PGE, the agency cannot look at just the costs asso ciated with the source under scru tiny. PGE is required by law to

ensure that whenever one of its customers needs electricity, that power is available. 12 PGE does not have the option of telling customers that it is exiting the market and they must find other means of satisfying their electricity needs. PG E does not have excess generating capacity and is actually facing potential supply shortages even wit hout the Boardman Plant closing. As a result, the closure of any generation asset must include the cost of finding a replacement. To replace that power, PGE’s lowest cost a nd lowest risk option may be to spend millions of dollars on a natural gas fired power plant. 13 Dispatch costs on a megawatt-hour basis may also be significantly higher for a natura l gas replacement resource replacing Boardman. The DEQ BART analysis already rec ognizes additional replacement pow er costs of $50 per megawatthour, which could result in excess of $200 million of dollars of additional costs on an annual

12 ORS 757.020.

13 Preliminary estimates are approximate ly $700-800 million in 2010 dollars for a replacement natural gas pl ant constructed in 2021.Mr. Brian Finneran July 30, 2010 Page 15

basis. Nowhere does the Department reflect these direct costs of closure in its cost-effectiveness analysis.

The Department should take into account the dir ect costs associated with the premature closure of the Boardman Plant as well as the replacemen t resource needed to backfill the Boardman Plant’s generation after closure, and recognize that the use of redu ced sulfur coal through 2020 in conjunction with low NOx burners and modified overfire air const itutes BART. If it were not

for PGE’s commitment to close the Boardman Plant 20 years early, the additional costs of replacement generation to cover th e Boardman Plant’s output would not be incurred. Therefore,

there is a direct but-for causati on that requires that these replacem ent costs be factored into any

assessment of the cost-effectivene ss of control scenarios that i nvolve the premature closure of the Boardman Plant. PGE is proposing to incur th ese costs so long as the capital costs associated with the final years of operation are not ex cessive. However, if DEQ adds the $350 million capital cost and $9 million per year operating cost of semi-dry scrubbers to the costs associate with operating the Boardman Plant through 2020, then this option far exceeds any costeffectiveness threshold.

Integrated Resource Planning (IRP) analyses conducted under the Oregon Public Utility Commission (OPUC) show that it would be ridiculous for PGE to invest that much of its customers’ money in controls that would only run for 6.5 years. The reason that the Department’s analysis does not comport with th e analysis before the OPUC is that DEQ has

failed to account for all of the costs in eval uating its Option 1. When the additional costs associated with closing the Boardman Plant a nd accelerating a replacement source of electricity is included in the cost, as it must be, then the cost of Option 1 far exceeds $10,000/ton. This more complex evaluation of the control/closure costs associated with the Boardman Plant is being evaluated in PGE’s IRP. The reason that th e IRP analysis generates the conclusion that the most prudent approach is to operate the Boar dman Plant through 2020 usi ng reduced sulfur coal as proposed by PGE below is because it takes in to account the true cost of the alternative options.

Including the cost of both the controls and the replacement asset when evaluating the costeffectiveness of an option is a concept familiar to everyone. If you have an older but reliable car you will not just evaluate the cost of a repair when determining whether to proceed with an investment. If the engine fails on a car that you had planned to drive for 6 more years and you need to evaluate whether to pay for the $1,000 fix that will give the car 3 more years of life or the $2,000 fix that will allow the car to run the fu ll 6 years of its remaining life, you would not say that the two options are equal because they ea ch result in a cost of $333 per year of vehicleMr. Brian Finneran July 30, 2010 Page 16

life. You would necessarily have to account for the costs associated with accelerating the replacement of the vehicle. This includes the large capital investment in the new vehicle. Nobody would think for a moment that the only cons ideration was the cost of the repair itself. Likewise, in evaluating the cost-effectiveness of an option that includes shuttering the Boardman Plant before the end of its useful life, DEQ must take into account the additional costs associated with accelerating the replacement of a replacement resource. When those costs are added in the semi-dry scrubbing option with 2020 closure which DEQ already refers to as only “marginally cost effective” then it is clear that Option 1 is actually not cost-effectiv e. Similarly, when the replacement costs as well as the additional control and permitting costs associated with DSI are considered, as they must be, then that cost al so exceeds the cost-effectiveness threshold chosen by DEQ ($7300/ton), even if one cons iders DSI technically feasible.

The Department’s Cost-Effectiveness Threshold is Too High

The Department’s choice of a $7,300/ton cost-eff ectiveness threshold is excessively high and improperly distorts the BART analysis. The Department identified a $7,300/ton costeffectiveness threshold in the BART analysis but offers no legitimate basis for this figure. Other BART analyses across the country have em ployed significantly lower cost-effectiveness thresholds. In discussions with DEQ, they have identified the basis of the $7,300/ton costeffectiveness threshold as the BART determinatio n for a Minnesota facility. However, as the Department acknowledges at page 18 of its BART analysis, most other BART analyses apply a

cost-effectiveness thresh old of $3,000/ton and the Minnesota BART analysis that DEQ relied on was changed prior to finalization and applies a cost-effectiveness threshold of less than $4,000/ton. Thus the Department’s own BART analys is documents support th at it lacks a basis for the $7,300/ton cost-effectiveness threshold it is applying. The Depart ment also points to a preliminary assessment from New Mexico where the permitting authority said that for a power plant affecting 16 Class I areas that the appropr iate cost-effectiveness threshold was between $5,946 and $7,398. By the Department’s own logic th e New Mexico facility (San Juan) should have a higher cost-effectiveness threshold as compared to the Boardman Plant because the New Mexico plant affects more Class I areas than th e Boardman Plant. However, the Department mischaracterizes the San Juan BART analysis as if it were complete when it is currently a proposed determination and subject to further pu blic review and comment . Also, the costeffectiveness numbers that DEQ references for the San Juan BART analysis were for NOx and

not for SO 2 . The preliminary assessment of a different state in relation to a facility with a much bigger footprint that includes 6 na tional parks is not a basis fo r DEQ to adopt the New Mexico authority’s work in progress as binding in Oreg on. The Department fails to identify a singleMr. Brian Finneran July 30, 2010 Page 17

final BART determination that relied on a cost-e ffectiveness threshold as high as the one it is proposing.

DEQ Failed to Adequately Take Into Account Incremental Costs

DEQ’s BART analysis is also inconsistent with the agency’s legal authority in that it fails to adequately take into considerati on the incremental cost of the tec hnologies that it is proposing in Option 1. The BART rules that DEQ stated it wa s following in developing the Boardman Plant BART analysis specify that both the direct cost-effectiveness and the incremental costeffectiveness must be evaluated. Nonetheless, the Department ignores the incremental costeffectiveness in making its BART determination. Even if one assumed that the costs evaluated by the Department were accurate (and we demo nstrated above that they are not) and the Department’s cost-effectiveness threshold is appr opriate (and we demonstr ated above that it is too high), the incremental cost-effectiveness for Option 1 is excessive. The Department openly acknowledges this in its BART report for th e new options, but then appears to ignore it. 14 As adjusted by the updated price data from S&L s howing a 30% increase in price, the correct incremental cost is near $9,000/ton, which is significantly higher than the Department’s $7,300/ton threshold. Ignoring the ex cessiveness of this cost is clearly inconsistent with the process established by EPA and accepted by DEQ for establishing what constitutes BART. The Department should revise its BART analysis to reflect its own proce ss and thereby eliminate semi-dry scrubbing as BART under Option 1.

DEQ Failed to Account for the Energy and Environmental Impacts of DSI

The Department’s BART analysis is flawed in that it identifies that DSI could result in environmental impacts and yet fails to fully expl ain or in any way account for those in reaching its Option 2 BART determination. As the Department openly recognizes in multiple places within its BART analysis (e.g., Table 11), the use of DSI likely will result in an increase in particulate emissions. However, the Department ma kes no attempt to estimate the extent of this impact. As we explain above, the emissions increas e associated with DSI is significant and will most certainly result in the Boardm an Plant having to undergo PSD for PM 2.5 . Similarly, the Department’s BART analysis documents that the use of DSI will impair the efficiency of the Boardman Plant’s mercury controls. Again, there is no attempt to quantify this impact or to explain why it is acceptable to require a techno logy that could result in increased mercury

14 See Draft Boardman Power Plant BART Report at page 11.Mr. Brian Finneran July 30, 2010 Page 18

emissions. The Department must quantify and take into account in deciding to require DSI as a component of Option 2 the poten tial ramifications from the requirement to use DSI at the

Boardman Plant.

Visibility Assessment Fails to Account for the Benefits of Early Closure

The Department’s assessment of the visibility improvements associated with each option is

flawed in that it fails to take into account the years of visibil ity improvement associated with premature closure. The table provided at page iv of the Department’s BA RT analysis identifies that its Option 1 would result in an additional re duction of 7,700 tons of visibility impairing pollutants and that Option 2 would result in an a dditional reduction of 14,900 tons of visibility impairing pollutants. However, nowhere in its analysis does the Department make reference to the tens of thousands of tons of visibility impa iring pollutants that the en vironment will not see if

PGE is allowed to shut the Boardman Plant in 2 020. Even if the Boardman Plant installs semidry scrubbers, twenty years of SO 2 emissions amounts to over 58,000 tons of SO 2 . The Department completely fails to take into accoun t the enormous reduction in emissions associated with early closure. This is a fundamental flaw in the BART analysis. Wh en these reductions are properly taken into account a 2020 closure option with the imple mentation of reduced sulfur coal, SNCR, and low NOx burners and modified overfire air as discussed below is clearly the best BART option.

DEQ Failed to Conduct a Complete Mode ling Analysis for its Proposed Options

The Department has no basis to support its Option 1 and Option 2 BART proposals in the absence of having performed complete visibility modeling for those options. One of the bedrocks of the BART process is to assess th e visibility improvements associated with each option under consideration. In developing its BA RT alternatives, the Department failed to conduct a complete modeling analysis and the limited analysis that it did perform contains errors.

The Department’s BART Assessment Fails to Take into Account The Rate of Progress at

the Affected Class I Areas

In preparing its BART analysis, the Department failed to consider where the Class I areas are in

relation to their uniform rates of progress (the “glide paths”) a nd how the options will accelerate compliance with those options. Fourteen Class I ar eas are within 300 km of the Boardman Plant. Consistent with the statutory goal of reducing the worst haze conditions to natural levels by 2064, glide paths have been developed for each Cl ass I area. This allows comparison of theMr. Brian Finneran July 30, 2010 Page 19

projected progress towards the stat utory goal against the uniform rate of progress that defines the glide path. PGE acknowledges that to some extent BART exists independe nt of the glide paths in that BART is required rega rdless of the progress towards the statutory goal. However, if a Class I area has projected impacts for the next se veral decades that will be far in excess of its glide path, then it may be appropriate to im pose a higher cost-effec tiveness threshold or otherwise hold a source impacting that Class I to a higher standard. On the other hand, where the

Class I area is on course to achievi ng its uniform rate of progress goals over the next ten years, then a lower cost-effectiveness threshold is ap propriate. With any option that requires the premature closure of the Boardman Plant, ther e will be a substantial movement of the nearby

Class I areas towards the stat utory visibility goal.

A BART Determination Requiring Use of Reduced Sulfur Coal, Low NOx Burners, Modified Overfire Air and 2020 Closure is Approvable by EPA

The Department has inaccurately suggested on multip le occasions that reduced sulfur coal, low NOx burners, modified overfire air and 2020 closure is not a BART determination that could be approved by EPA. This statement is incorrect. Three reasons were given for why such a BART determination could not be approved by EPA: (1) Lack of enforceability of a closure requirement, (2) Absence of interim control m easures, and (3) Excessive cumulative impacts.

We address each of these three objections below.

Enforceability of Closure Requirement

As the Department acknowledges in its BART op tions analysis, there is no basis for the argument that a Boardman Plant closure date coul d not be made enforceable. DEQ’s Options 1, 2 and 3 plus PGE’s proposed 2020 solution discusse d below all contemplate the early closure of

the Boardman Plant and if PGE chooses to acce pt such an early closure, all contemplate effectuation by a regulatory requi rement. Such a requirement would, of course, be an enforceable permit condition, subject to penalties. So long as such a requirement is included in the State Implementation Plan there is absolutely no credibility to an argument that such a requirement is not both state and federally enforceable.

Absence of Interim Controls

PGE acknowledges that any BART determination that rests upon premature plant closure must also include an analysis of wh ether any interim controls can be imposed, consistent with BART, to limit emissions prior to the shutdown. For this reason, in its Apr il 2, 2010 BART analysisMr. Brian Finneran July 30, 2010 Page 20

PGE included an analysis of interim controls. SO 2 emissions are directly related to sulfur

content in the coal delivered to PGE. PG E is currently permitted to emit up to 1.2 lb

SO 2 /MMBtu heat input. Coal sulfur content varies year-to-year, with the SO 2 emissions frequently running significantly high er than the baseline period defi ned for the BART analysis. Therefore, PGE evaluated and ultimately propos ed the use of reduced sulfur coal thereby decreasing the allowable SO 2 emission rate by 50 percent.

The Department inappropriately dismi ssed PGE’s proposed reduction of the SO 2 emission rate from 1.2 lb/MMBtu to 0.6 lb MMBtu. In its propos ed BART analysis, the Department states that as compared to the baseline period the implementation of reduced sulfur coal would “only” achieve a 0.43 dV of visibility improvement. This is an inaccurate statement for two reasons. First, the maximum reduction in visibility impacts as a result of shifting to reduced sulfur coal as compared to the baseline period is 0.50 dV, occurring at Mt Hood (an 18.6 percent improvement). This is a significant improvement . However, this understates the benefits of

reduced sulfur coal in that there are benefits across all 14 Class I areas evaluated, as well as the Columbia Gorge. PGE objects to the use of cumu lative impacts as an inaccurate and misleading means of evaluating visibility impacts or benefits . However, if one were to sum the visibility improvements across the fourteen Class I areas, it would amount to 3.85 dV in visibility improvement. Second, evaluating SO 2 reductions in relation to the baseline modeling period

distorts the overall benefits of reduced sulfur coal. Currently PGE can and does emit SO 2 at levels significantly higher than the visibility assessment base line used by DEQ while operating in compliance with its air permit. Reducing the SO 2 permit limit to 0.6lbs/MMBTu is significantly lower than the industr y standard and it coul d restrict the coal available to PGE and increase the price at which the fu el can be obtained. Dismissing th e coal restriction as not being

an interim control because lower sulfur coal ha ppened to have been utilized during the BART baseline period is in error. PGE 's only contro l of the sulfur content in supply contracts is to specify a target and maximum level. During the BART baseline period, the coal deliveries varied based on what happened to be delivered by the mines, capped by a sulfur level of 1.2 lbs/MMBtu. The department should consider the fact that coal is not a re fined fuel that can be delivered at a specific sulfur level. Reducing a permit limit and requiring Boardman to limit the type of coal combusted in the boiler is a real reduction, and a method of SO 2 control that should be recognized as a robust interim control measure.

The Department, in its BART analysis, cons idered two additional interim controls, the importation of Indonesian coal and the use of DSI. As explained above and acknowledged by DEQ in its BART analysis, there is no rational ba sis for requiring the importation of coal from Indonesia. As is also explained in detail a bove, the Department failed to account for potentialMr. Brian Finneran July 30, 2010 Page 21

cost, permitting issues, and technical feasibility associated with th e use of DSI. When these are taken into account, then the use of DSI is swiftly eliminated from contention as an interim control as well. In the absence of any other viable interim controls, there is no basis for suggesting that PGE did not consider all viab le interim measures and that PGE’s proposed interim control is inadequate.

Excessive Cumulative Impacts

The final, and equally indefensible, suggesti on for why EPA would not find PGE’s April 2, 2010 BART analysis “approvable” was that it did not ta ke into account the cumulative impacts across all Class I areas. This approach was used by DE Q in its BART analysis. The clear wording of the Clean Air Act as well as longstanding EPA a nd DEQ precedent weigh against this type of an assessment. For decades, EPA and DEQ have been performing visibility assessments. Each of these assessments has been performed on a Class I by Class I area basis. DEQ has never applied a cumulative assessment that aggregated all impact s across all Class I areas within the radius of impact. Making such a profound change at this time from an established agency means of addressing visibility may require rulemaking on DEQ’s part.

The cumulative approach that DEQ is suggesting also ignores the reality of how human beings perceive visibility. No single in dividual would be able to percei ve visibility impacts across all

14 Class I areas within the 300 km radius of im pact. Yet the cumulative approach essentially

assumes that such simultaneous observation of vi sibility impacts in multiple Class I areas can and does occur. Furthermore, the cumulative approach distorts the temporal element of visibility impact assessment. On any given day the Boardm an Plant will impact only a subset of the Class I areas and such impacts change day to day and ev en over the course of th e day. Aggregating the impacts as DEQ suggests both distorts and exaggera tes the true impact of the Boardman Plant. Conversely, this approach overstate s the benefits associated with particular control technologies.

The truth of this statement is best shown by two examples. If a control achieved a tenth of a deciview of improvement at ten different Cl ass I areas, the cumulative evaluation approach would suggest that a significant improvement re sulted. However, a tenth of a deciview of improvement is far below the level that the hum an eye can detect. Second, under the cumulative approach the benefits would doubl e if a single Class I area were divided into two. Similarly, improvements achieved at Goat Rocks Wilderness area and Mt Rainier Na tional Park would be counted twice even though the reduction at one n ecessarily carries with it the reduction at the other due to their proximity in re lation to the Boardman Plant. Such an approach makes no sense and generates bad policy decisions. This appr oach is even worse when developed into a cumulative dollars per deciview evaluation approac h. Such an approach arbitrarily inflates theMr. Brian Finneran July 30, 2010 Page 22

projected visibility improvements and underre presents the costs associated with any improvement.

EPA has generally expressed concerns about rely ing too heavily on the “dollars per deciview” metric in making a BART determination. The 20 05 BART guidelines acknowledge that this is one means of evaluating BART options. However, as EPA has previously stated, “given the significant difficulties in developing a meani ngful method for calculating $/dv, EPA does not

recommend its use as the sole factor in making a BART dete rmination and would likely not approve a SIP based on that basis.” EPA Regi on 7 Letter to Nebraska DEQ; June 26, 2009. DEQ is acting inconsistently with this guidan ce by overly relying on the approach of evaluating BART options based on cumulative impacts and a dollars per deciview metric.

3. PGE’s Proposed Resolution

For the reasons stated above, the Department’s BART analysis is fundamentally flawed and that neither Option 1 nor Option 2 can be considered BART. When the Department’s BART analysis

is corrected and the true costs of the different options are evalua ted, it is clear that operation on reduced sulfur coal, low-NOx burners, modifi ed overfire air and SNCR through 2020 constitutes BART. However, while DSI cannot be required as BART without adequate consideration of its cost-effectiveness, and due to its likely inabili ty to be permitted at the level of operation anticipated by DEQ and the absence of long term experience with th e technology on boilers

similar to the Boardman Plan t boiler, PGE is willing to commit to a pilot study of the technology. Based on that pilot study, PGE would determine th e highest leve l of reagent injection that could occur in co njunction with the other controls without causing a significant

increase in PM 2.5 emissions and without impairing the ability to reduce mercury emissions by at least 90 percent. Contingent on the results of the pilot testing, PGE would commit to meeting a

0.4 lb SO 2 /MMBtu limit through 2020 using DSI. If this option is considered BART, DEQ would need to provide a procedure for establishing an alternative SO 2 limit if PGE’s pilot testing demonstrated that operation of DSI could not reach 0.4 lb SO 2 /MMBtu, when operating in conjunction with SNCR and the mercury controls, w ithout resulting in an increase in the hourly capacity to emit PM or triggering PSD for PM 2.5 (assuming the same level of operation currently reflected in the Boardman Plant’s plant site emi ssion limits). If this showing can be made, then

the 0.4 lb SO 2 /MMBtu would apply starting on July 1, 2014. If the showing cannot be made, then DEQ would provide a mechanism for establishing an alternative BART SO 2 limit based on the pilot test at the highest leve l of control that can reliably be achieved without increasing the hourly capacity to emit PM or triggering PSD (but no higher than 0.6 lb/MMB tu). The analysis of the pilot test results a nd any procedure for establis hing an alternative BART SO 2 limit wouldMr. Brian Finneran July 30, 2010 Page 23

be based on the Boardman Plant operating at the sa me levels currently reflected in the Boardman Plant’s plant site emission limits. Closure, in 2020, would be enforced through a state and federally enforceable permit condition, s ubject to penalties for noncompliance.

4. Conclusion

PGE appreciates the opportunity to comment on the Department’s BART determination in advance of the Fiscal Impacts Advisory Committ ee meeting. Any requirement that the Company

install hundreds of millions of do llars worth of control equipmen t and then recover those costs over a short remaining plant life and then pa y for replacement gene ration thereafter has a profound impact on our customers. At a time when our customers, and Oregon itself, struggle to manage through the Great Recession and any incr ease in rates is gree ted with concern, we believe that it defies common sense to require an investment that could reach $400 million and then require that the plant shut down at least 22 years early. Su ch an approach does not appear prudent and would be viewed by small and larg e business owners, commercial entities and residential customers as a significant and unr easonable impact. Emphasizing again what we stated above, if an acceptable amendment to the 2009 Regional Haze rules cannot be achieved, our most responsible course of action remains full implementation of controls and continued operation of the plant to serv e our customers through at le ast 2040. As unfortunate and unnecessary an outcome as this may be, we believe th at it will still be the best plan available to us if the other options described by DEQ are carri ed through to the final rule amendments as drafted. Therefore, we believe th e best approach is to proceed with a BART determination that

matches the elements described in Section 3 above.