Janice K. Brewer 

Governor 

December 1 7, 2013 

ARIZONA DEPARTMENT 

OF 

ENVIRONMENTAL QUALITY 

1110 West Washington Street • Phoenix, Arizona 85007 

(602) 771-2300 • www.azdeq.gov 

Acting Administrator Janet McCabe 

Office of Air and Radiation 

U.S. Environmental Protection Agency 

1200 Pennsylvania Avenue, N.W. 

Washington, DC 20460 

Henry R. Darwin 

Director 

Re: State framing questions regarding considerations in the design of a program to reduce carbon 

pollution from existing power plants under CAA section 111 (d) 

Dear Ms. McCabe, 

As you know President Obama unveiled his Climate Action Plan on June 25, 2013 with a 

directive for the US Environmental Protection Agency (EPA) to issue carbon pollution 

guidelines for both new and existing fossil fuel fired Electric Generating Units (EGU). EPA 

issued a proposed "Carbon Pollution Standard for New Power Plants" on September 20, 2013. 

In accordance with the President's plan, EPA has announced that it will issue proposed 

guidelines for existing sources by June 1, 2014; issue final guidelines by June 1, 2015; and states 

will be expected to submit state implementation plans to reduce carbon pollution for covered 

sources by June 1, 2016. 

EPA is to be commended for the unprecedented outreach it has undertaken to gather input in the 

design of a program under Clean Air Act (CAA) section 111 (d). This tact is a constructive 

approach to fostering cooperation on complex issues and serves as a model for future outreach 

efforts. The aforementioned considered, Arizona remains unconvinced EPA has demonstrated 

the need or authority to adopt carbon pollution regulations under the CAA, and questions 

whether it is even prudent to proceed down this path. 

EPA's proposed path creates inherent conflicts in both the law, and the Agency's mission. From 

a legal perspective, the Clean Air Act has set a number of non-discretionary duties required of 

EPA. The purpose of these non-discretionary duties is to ensure the protection of public health 

from the immediate and long-term public health threat of conventional air pollutants. EPA is 

already behind in complying with many of its non-discretionary duties, resulting in time 

consuming lawsuits to compel action as well as the awarding of penalties in the form of lawyer's 

fees for the prevailing plaintiffs. These lawsuits take diminishing resources away from EPA's 

mission to protect human health and the environment. 

Addressing greenhouse gas emissions under 111 (d) is not one of those non-discretionary duties. 

Yet, to meet the deadlines imposed by the President's plan, EPA will undoubtedly remove 

1110 West Washington Street • Phoenix, AZ 85007 

(602) 771-2300 

Printed on recycled paper 
Page 2 of7 

resources from the non-discretionary programs and reassign them to the development of these 

duties. This will also force states to forego their responsibilities to their own non-discretionary 

duties and re-task their already thin resources to this completely discretionary program, or forfeit 

their ability to make their own decisions to EPA. 

From a mission perspective, EPA is pitting its primary mission against itself by forgoing nondiscretionary duties that protect public health for fully discretionary duties that only have the 

potential to improve the environment. Concentrations of greenhouse gases are the result of 

global emissions, and do not comprise an immediate health risk, as do criteria pollutants for 

which EPA has promulgated National Ambient Air Quality Standards (NAAQS). The resources 

necessary to develop and then implement a greenhouse gas program can only come from those 

programs that are better situated to protect public health in the near term. 

Since EPA appears prepared to follow this course of action despite the damage to its nonoptional programs, the following are Arizona's responses to the four framing questions issued in 

regards to "Considerations in the design of a program to reduce carbon pollution from existing 

power plants". 

What are the State of Arizona and stakeholder experiences with programs that reduce C02 

emissions in the electric power sector? 

Utilities regulated by the Arizona Corporation Commission (ACC) are required to comply with 

Renewable Energy Standard and Tariff (REST) which includes a requirement to generate 15 

percent of retail load using renewable energy by 2025 and thereafter1

• In addition to the REST, 

the ACC has implemented an Energy Efficiency Resource Standard (EERS) mandating that 

regulated utilities with annual revenues greater than $5 million achieve annual energy savings 

goals of 22% by the year 20202

• 

Other utilities that are not regulated by the ACC, such as the Salt River Project, have board 

mandated targets for generating retail energy through the implementation of Sustainable 

Resources which includes renewable energy and programs that promote energy efficiency. 

How should EPA Set Performance Standards for State Plans? 

Section 111 (d) of the act does not authorize EPA to set performance standards for state plans3

. 

Rather, EPA should recognize the role and responsibility states possess in setting C02 standards 

for existing EGU s under CAA section 111 (d) by establishing procedures· that allow states the 

flexibility to choose a source-category specific or system based carbon pollution standard that 

allows individual states the fastest and most economical means of compliance. This would have 

1 Title 14, Article 18 of the Arizona Administrative Code (AAC) governing the Arizona Corporation Commission (AAC 

R14-2-1801 et. seq.) describes in full the state REST, including details on compliance schedule, enforceability and 

penalties for non-compliance. The program is enforceable, surplus, quantifiable and permanent under the AAC. 2 AAC R14-2-2401 et. Seq. describes in full detail the Arizona EERS. 1 Section 111(d), 42 U.S.C. §7411(d), of the Clean Air Act requires EPA to "prescribe regulations which shall establish a 

procedure ... under which each State shall submit to the Administrator a plan which (A) establishes standards of 

performance for any existing source ... " 
Page 3 of7 

multiple benefits for both EPA and states. EPA, in establishing procedures for the case-by-case 

determination of "Best System of Emission Reduction" (BSER), should allow states the pliancy 

to choose a source-specific or system-based standard. EPA should: 

• Acknowledge the diversity in climate, portfolio mix, geology, geography and regulatory 

landscape unique to each state; 

• Ensure maximum power sector reliability and energy affordability in each state; 

• Prevent the infringement on states' rights to develop standards under CAA section 

lll(d); and 

• Allow for utilities and independent power producers operating affected sources to meet 

these standards using a variety of compliance methods. 

The BSER procedures should allow the determination to be based on demonstrated technologies 

suitable for the regional geology, geography and economy. The BSER analysis should examine, 

among other factors, fuel type; regional capacity planning; local geography; imminent non-C02 

environmental regulation; commercial demonstration of technologies; and potential 

environmental health and safety risks associated with electricity reliability and affordability. In 

setting the procedures, EPA should consider changes to the electric system that will occur as part 

of compliance with other EPA regulations, including New Source Review and Prevention of 

Significant Deterioration permitting requirements, both current and future. 

Residential buildings in Arizona consume significantly more electricity than the national average 

on cooling and appliances3

. Commercial building energy use is the second largest end-use sector 

in Arizona, yet has seen the highest growth in consumption of retail electricity from 2000-2010. 

Additionally, Arizona's fast-fowing urban population centers see significantly higher energy 

intensity as a ratio of k Whlft than the rest of the state, presenting a significant opportunity to 

reduce end-use energy intensity4

• When establishing procedures, EPA should provide the 

flexibility for states to account for potential generation displacement, and thus emissions savings, 

by accommodating programs from outside of the electric power sector that directly influence 

end-use energy intensity. 

Arizona's utilities already employ some programs to improve end-use efficiency by offering 

rebates and incentives for the installation and implementation of renewable and energy efficiency 

improvements in the residential, commercial and industrial sectors. Utilities already submit 

annual reports detailing many of these programs to demonstrate compliance with state energy 

mandates. When establishing procedures, EPA should offer states flexibility in determining the 

efficacy of these existing programs and documentation in reducing carbon emissions from the 

state electric power portfolio. 

3 EIA produces summary reports for Arizona Residential Energy use based on data collected through residential 

energy studies. The summary report and supporting data is available here: 

http: I I www .eia.gov I consumption/residential/reports/ 2009 /state briefs/pdf/ az.pdf 

4 EIA compiles state profiles and rankings of energy, environmental, and economic data. This data includes 

summaries, analysis and raw data and was used as a reference for other statistics on the Arizona economy and energy 

prices herein. The data is available here: http:/lwww.eia.gov/state/data.cfm?sid=AZ 
Page 4 of7 

Issues that influence Arizona C02 Emissions 

Arizona is currently the 16th most populous state with a compound population growth rate of 

2.9% from 1980-2010. However, Arizona ranks 42"d in the nation for per capita personal income 

and pays retail electric rates near the national average. Price stability and reliability are of the 

utmost importance in Arizona as the heat in the western, central and southern portions of the 

state can be deadly without affordable electricity for cooling. 

In Arizona, a misery day occurs when the average daily temperature exceeds 11 oo F, and the 

number of misery days in Arizona has reached record proportions in recent years. Phoenix had 

32 misery days in 2007, previously a record setting year for average daily temperatures. The city 

recorded its fourth hottest day in recorded history in 2013, with the year breaking the previous 

record for average daily temperatures set in 20075

. The National Weather Service recorded 25 

"misery" days at the Phoenix Sky Harbor weather station in the summer of 20136

• A lack of 

reliable firm power on these days could be catastrophic and result in the tragic loss of life, a 

much greater and immediate impact on public health than that posed by greenhouse gasses. 

Arizona urges EPA to consider the human health consequences of exceptionally high 

temperature events, and to provide flexible peak-demand day solutions or exemptions, while 

developing guidance to create long-term market signals for technologies and programs that drive 

efficiency, smooth demand curves or firm renewable resources. The abject consequences 

resultant of the lack of affordable, sustainable and available electricity during extreme heating 

events constitutes immediate and substantial endangerment to public health and is unacceptable. 

Regional Influences on the Arizona Electric Power Sector 

The regional trade balance in electricity also affects Arizona emissions. Arizona's diversified 

portfolio allows for cheaper base load electricity for states dependent on a higher emitting fossil 

fuel portfolio, while offering firm power resources for neighboring states that consume more 

electricity than they produce. Regional marketing and trading, by default, externalize some of 

the emissions or benefit from reduced emissions incorporated in generation of marketed 

electricity. As an example, Arizona utilities buy and sell wholesale electricity to and from the 

California Independent System Operator (CAISO) in both the day-ahead and hour-ahead 

wholesale energy market; in effect, displacing emissions from California when they sell energy 

to the CAISO and reducing emissions in Arizona when purchasing energy from the CAISO. 

Additionally, individual utilities often operate generation capacity in states other than those 

whose load they serve, and many generating facilities have multiple owners in multiple states. It 

is imperative that EPA consider the regional nature of the electric power sector, while allowing 

s Ruddell, D., Hoffman, D., Ahmad, 0., Brazel, A. (January, 2010). Historical Thresholds Temperatures for Phoenix 

(Urban) and Gila Bend (Desert), Central Arizona, USA. Climate Research. Vol. 55: 201-215, 2013 DOl: 

10.3354/ CrQ1130 

Dungan, R. (September 21, 2013). Phoenix Summer Hottest Ever. The Arizona Republic. Phoenix Arizona. Retrieved 

from: http://www.azcentral.com/weather/articles/20130920phoenix-summer-hottest-ever.html 6 NWS data was pulled from a data request to the NOAA National Climate Data Center available here: 

http://www.ncdc.noaa.gov/cdo-web/datasets/GHCND/locations/CITY:US0400u/detail 
Page 5 of7 

the appropriate time for regional cooperation to occur. As a result, EPA's procedures should 

allow for states to cooperate in setting and achieving regional reduction targets. 

Arizona also recommends that EPA's procedures allow for the consideration of all real world 

costs associated with implementing any air pollution controls, including the costs of any 

additional air pollution controls triggered for criteria pollutants under NSR and PSD during the 

installation of any controls under this program. 

Finally, Arizona recommends that EPA consider the co-benefit of reduction of criteria pollutants 

as a result of this program to be creditable for other State Implementation Planning purposes. 

For example, efficiency improvements that achieve both a C02 and 0 3 emission reduction should 

be creditable for planning purposes under Section lll(d) as well as Section 110. 

What requirements should state plans meet, and what flexibility should be provided to states in 

developing their plans? 

Arizona requests EPA allow states to propose and develop a "system of emissions reductions" 

that conform to procedures set by EPA. EPA should provide concise methodology for 

evaluating alternative systems for emissions reductions. 

Arizona also recommends that EPA's procedures allow energy efficiency, renewable energy 

resources, and programs outside of the electric power sector (building energy efficiency 

standards, building codes, etc.) as compliance credits as long as they are quantifiable, surplus, 

enforceable and permanent. Additionally, EPA should provide guidance and methodologies for 

quantifying these credits; processes to prevent double counting; and their comparability between 

mass based and rate based standards to harmonize and facilitate regional compliance trading to 

maintain affordability. Arizona also requests that EPA's procedures provide flexibility to bank 

credits for early emissions reductions. 

EPA should also allow credit for existing programs that have provided a quantifiable reduction in 

emissions (e.g. renewable energy and efficiency mandates, early retirement of C02 emitting 

EGUs, fuel switching, etc.) that occur after the baseline has been established. This crediting of 

early action will ensure ratepayers receive full value for emission reductions while incentivizing 

investment and participation in programs in the future. 

Finally, when establishing its procedures, EPA must recognize, as alluded to earlier, that states 

have the primary role in establishing and implementing performance standards under section 

Ill (d) as determined in the state plan, and should clearly define a consultation process to 

evaluate state plans and determine equivalency. EPA's guidelines should provide states with the 

maximum amount of flexibility to set an appropriate state-specific standard; and in doing so, 

should allow for the development and implementation of regional and national solutions should 

states decide that such an approach is most beneficial. It is in both EPA and the states interests 

to establish a clear, predictable, defensible and transparent program in order to avoid the years of 

frustration, delay and waste of resources that have been observed in programs such as inter-state 

transport of air pollution and regional haze. 
Page 6 of7 

What can EPA do to facilitate state plan development and implementation? 

One of the most important recommendations is for EPA to extend the timeline necessary for the 

development of the 111 (d) standards to facilitate multi state coordination and ensure states 

establish the standards and compliance mechanisms correctly the first time. In this respect, 

Arizona recommends at least 24 months for the development of the State Implementation Plan 

(SIP) and an additional 24 months to resolve any partial or full disapproval of a SIP prior to EPA 

prescribing and implementing a Federal Implementation Plan (FIP). This will ensure EPA 

provides the necessary commitment that the federal government will provide states with the 

appropriate opportunity to address plan shortcomings and perform the necessary consultation 

amongst state and regional stakeholders involved in the development of a plan. 

EPA should promote regulatory and market certainty by providing clear guidance prior to the 

SIP process beginning. This certainty should be legally durable and provide market signals that 

promote long-term investment in emission reductions. In defense of this justification, Arizona 

points out that EPA has still not sent the NSPS under CAA section Ill (b) to public comment 

despite being signed on September 20, 2013. It has been over two and a half years since EPA 

initiated the process to establish a carbon pollution standard for new sources

7

, yet states are only 

being afforded one year to develop existing source standards. It is unreasonable to expect states 

to develop a program that is inherently more complicated due to issues such as retrofit 

technology and existing source mix in less time that it has taken EPA to develop a program for 

sources that do not exist today and can be more easily designed to meet the standards. 

In Conclusion 

Should EPA decide to proceed down this path, EPA's authority under Ill (d) should be 

interpreted in the most defensible way possible, and nothing more. It is clear that Ill (d) limits 

EPA's role to that of setting procedures that states must follow when the states set the 

appropriate standards. If EPA chooses to develop standards as part of the 111 (d) procedures, 

that decision will result in lawsuits and thus also result in delay, uncertainty, an no immediate 

action or benefit. While the Statute provides EPA with the authority to approve or disapprove a 

State's plan, Arizona believes that this authority is constrained to determining conformance with 

the procedures, not EPA's opinion regarding the adequacy of the standard the State chooses to 

set. 

The aforementioned complexities and considerations underscore the delicacy required in setting 

guidelines for C02 standards that ensure climate change mitigation balanced with sustainable 

economic growth, sociocultural sensitivity, and environmental health and safety. EPA guidance 

should be a catalyst for the modernization of the electric power sector, guiding the states in 

developing sound and adaptable programs that align with our shared mission to protect human 

health and the environment. 

7 according to http://yosemite.epa.gov/opei/rulegate.nsf/byRIN/2o6o-AOg1 they initiated the process in March of 

2011 
Page 7 of7 

Arizona recognizes that these issues are complicated, and that they require significant thought 

and effort on the part of EPA. We encourage EPA to continue its unprecedented outreach as it 

considers these comments, and work directly with the states as they are best situated to resolve 

these complicated problems. 

Sincerely, 

Gina McCarthy, EPA Headquarters 

Jared Blumenfeld, EPA Region IX 

Deborah Jordan, EPA Region IX 

Amy Zimpher, EPA Region IX 

Colleen McKaughan, EPA Region IX 

Peter Tsirigotis, EPA OAQPS 

Joe Goffman, EPA Headquarters 

Sarah Dunham, EPA 

carbonpollutioninput@epa.gov 
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