CAIR Replacement Rule

Discussions between CIBO, AF&PA, ACC, Auto Alliance and EPA

April 14, 2009

I. Introduction

On Tuesday, April 14, 2009, EPA held a meeting/call with the Council of 

Industrial Boiler Owners (CIBO) and other manufacturers that operate industrial boilers 

to discuss the CAIR replacement rule. The summary that follows covers the key issues 

discussed during the call. More detailed notes, including a list of all participants in the 

call, are being prepared.

II. EPA Opening Comments

Bill Harnett, OAQPS, began with a short introduction, explaining that EPA was 

beginning the process of creating a replacement rule for CAIR. The Agency is reviewing 

all options, setting up analyses, and preparing technical models. The goal is to finalize a 

replacement rule within two years.

The primary objectives are to explore options for the replacement rule to help 

states comply with the NAAQS and to reduce interstate transport. Therefore, EPA has 

decided that it would be best to start working with states and stakeholders immediately. 

EPA has already held a number of meetings with state groups and would like to hear 

from stakeholders about what type of replacement rule would be most practical while 

also achieving the required emission reductions. Bill stressed that this is the beginning of 

a dialogue process, and that EPA intends to continue these types of discussions 

throughout the rule development process.

This is a chance for the stakeholders to talk to the key EPA staff that will actually

develop and write the rules, as well as the OGC attorneys assigned to the rule 

development. Bill stressed that EPA is interested in hearing the stakeholders' thoughts 

and concerns. Everything is on the table as EPA puts together ideas for the new Assistant 

Administrator for Air and Radiation, who should arrive within the next couple of weeks. 

EPA would like the rule to be as legally defensible as possible, and stakeholder input will 

help with the process. Bill said the current schedule is to have a proposal out by January 

2010, and a final rule by January 2011.

III. CIBO Opening Comments

Bob Bessette, CIBO, asked that EPA elaborate on what the Agency had heard 

about the CAIR replacement rule from the states and other stakeholders. He noted that 

CIBO worked closely with the states, often sharing data and information.
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IV. Summary of Past Discussions

Bill Harnett noted that states have done analyses on industrial boilers and want 

EPA to seriously consider including them in a replacement CAIR rule. NACAA is also 

interested in including industrial boilers and cement kilns, as well as any other large 

sources of SO2 or NOx that EPA could identify. Most of the modeling had been done by 

LADCO in a joint effort with the northeastern states. In general, the regional groups have 

not released official positions. However, all the states represented in the regional groups 

have expressed concern that there is a significant amount of transport that needs to be 

addressed.

States have also expressed interest in basing the replacement program on the 

newer PM and ozone NAAQS rather than on the 1997 standards. They indicated a strong 

preference that the implementation dates for the replacement CAIR rule correlate with the 

SIP dates so that the states can account in their SIPs for the reductions a new interstate 

rule would provide.

Ideas differ among states about contribution levels, thresholds to trigger inclusion, 

and levels of control. However, almost every state agreed that EPA's top priority should 

be to develop a rule that will survive legal challenge. Ideas for such a rule ranged from a 

strictly command-and-control regime to a rule including trading. States stressed that a 

program that gets reductions needs to be in place in time for them to meet attainment and 

maintenance deadlines.

Leslie Hulse, American Chemistry Council, asked EPA which environmental 

NGOs it had spoken with and what their overarching points were. Bill replied that EPA 

had heard from the National Parks Conservation Association, Environmental Defense 

Fund, Sierra Club, Natural Resources Defense Council, the Clean Air Task Force, 

American Lung Association, and others. He said the NGOs were focused more on 

electric utilities and stressed that older, inefficient units, that continue to operate only 

because they have not been forced to make investment decisions, should be forced to put 

on controls or shut down. EPA should consider all authorities available to it such as 

MACT, NSPS, section 110, and section 112, as well as the different rules that could 

affect electric utilities. It should then coordinate rulemakings so as to drive utilities to

invest in cleaner generation facilities.

NGOs suggested that EPA should also consider CO2 and hazardous air pollutants 

beyond mercury in developing a comprehensive plan to address future electric 

generation. NGOs agreed with states about the importance of considering sources beyond 

EGUs.

Sam Napolitano, CAMD, stressed that any decisions about future air policy would 

be made by the new Assistant Administrator for Air in consultation with other 

administration officials. The purpose of these meetings is to start gathering ideas and 

information so that staff can present the new Assistant Administrator with a full range of 

options. Sam also noted that EPA would be doing a range of analyses on multiple source 
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categories and that because an analysis was being done did not mean sources involved 

would be included in a future program.

Sonja Rodman, OGC, noted that under the D.C. Circuit Court decision the entire 

CAIR rule had been sent back for reconsideration and that the Agency is exploring all 

available options. The replacement rule will do more than just tinker with the existing 

CAIR rule. Bill added that EPA was not expecting a legislative fix of the CAIR rule and 

that he anticipated the rulemaking would continue. EPA would prefer a legislative 

solution to the issue, preferably something like the Carper 3-P approach, and the Agency

will work with Congress if legislation is proposed.

V. CIBO Presentation

Sam Napolitano noted that the purpose of the call was for EPA to hear what 

CIBO members and other industry representatives think and asked industry 

representatives to respond to topics in the agenda EPA had distributed, and to share 

thoughts or ideas that may not be on the agenda.

John deRuyter, DuPont, presented data outlining the current situation with respect 

to industrial sources. He began by noting that EPA's data show a downward trend for 

NOx and SO2. Projected emission trends from 2005 forward also show significant 

reductions in those two pollutants. He then discussed curves for marginal cost for NOx 

and SO2 controls provided in the CAIR Final Rule Federal Register notice. He noted the 

line indicating the $1,500 per ton cost effectiveness for NOx at the EPA limit selected for 

2015 as well as the cost effectiveness line on the SO2 curve at $1800 per ton indicating 

EPA’s selected SO2 limit of around 2.6 million tons in 2015.

He discussed industrial boiler NOx and SO2 control cost estimates and noted that 

these calibration points provided an idea of the cost, and that the data were from a recent 

OTC meeting and might not be final. However, the data show that there is a wide range 

in removal costs, and that those costs are significantly higher than the highly costeffective controls CAIR required EGUs to install. These cost estimates are based on an 

assumed 66 percent boiler capacity factor, which CIBO believes, in many cases, normal 

operation is at considerably lower capacity factor, skewing both tons removed and 

control costs; when the boilers are on stand-by, the cost per ton increases dramatically.

John noted that there is a wide range of costs because industrial facilities,

especially older ones, have very little available space, making retrofit costs site-specific, 

which in some cases can be very high. Requiring controls on all facilities would have a 

major impact on operations and jobs at some facilities. SNCR and SCR installation and 

operation would be very costly, as would FGD and dry FGD. Space would be a critical 

issue, particularly with FGD retrofits. Also, scrubbers and other control devices often 

make it impossible for companies to sell some of the combustion byproducts. EPA should 

consider all of these costs, not just the cost of control equipment.
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Bill Harnett indicated that there was some internal concern at EPA that the court 

decision limited the Agency's ability to consider cost as a factor when developing a 

replacement program. EPA is still grappling with the decision and the issue of costeffectiveness.

John noted that there were many combined-fuel boilers in existence and that most 

served an industrial function. Most industrial and commercial boilers use natural gas and 

many use byproducts as fuel, such as biomass generators at pulp and paper mills and 

various off-gasses from commercial and chemical processes. He concluded that the data 

he was presenting show that NOx and SO2 levels dropped and that further reductions 

(primarily from EGUs under CAIR) are expected. Even in its current state, CAIR has 

driven reductions, especially in SO2 levels. Control costs for industrial boilers are 

considerably higher per ton than those for EGUs, and the reductions gained by

controlling industrial sources are less certain. Finally, industrial sources have significant 

load-variability, which also detracts from the effectiveness of controls.

A copy of John’s presentation is submitted as a separate document with this 

summary.

VI. Discussion of CIBO Presentation

Sam Napolitano asked John de Ruyter how confident he was in the data 

presented. John noted that the data for the trends came from EPA. He was less certain of 

the accuracy of the inventory data. He suggested that the cost data were reasonable, but 

reiterated that because costs vary widely from unit to unit average cost is not necessarily 

representative of the actual costs a specific unit would incur. Tim Hunt, American Forest 

& Paper Association, noted that AF&PA previously had shared its best estimates of costs 

with EPA, which showed that on a per ton basis, reductions from industrial sources were 

far more expensive than those from EGUs. Furthermore, pulp and paper mills are already 

showing significant SO2 and NOx reductions.

Industrial sources across the board are facing challenging economic conditions, 

and with the MACT rules already in place further NOx and SO2 rules could be extremely

expensive. Tim noted that many industrial sources are installing co-generation and trying 

to use by-products such as biomass and off-gasses for fuel. It makes no sense to place 

additional costs on sources which are working to develop green energy.

Tim noted that EPA modeling shows that pulp and paper emissions are not 

significantly impacting regional air quality. Reductions at individual sources can be 

achieved through the SIP process and tailored to the individual situation at the affected 

source where needed. The CAIR replacement rule should not include industrial boilers at 

pulp and paper mills and should focus on regional transport of emissions from electric 

utilities, especially given the current economic situation.

EPA asked if most facilities were using as much alternative fuel as possible, and 

whether facilities were maintaining the ability to switch back to conventional fuels. Al 
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Clary from Eastman Chemical responded that chemical manufacturers try to make as 

little of the off-gasses as possible because it is a by-product. However, those facilities do 

use all of the generated gas. In response to environmental regulations and the rising 

prices of fossil fuels, pulp and paper mills have been increasing their already high 

utilization of biomass (currently about 2/3 of total energy usage) and continue to extract 

more from their biomass feedstock. Most facilities are able and would want to maintain 

the ability to switch back to conventional fuels in the permits due to concerns about 

fluctuating energy prices and feedstock availability.

Bill Harnett asked about how industrial sources were already affected by MACT 

and BART. Tim responded that many of the paper facilities went through BART analysis 

and were shown not to be contributing to Class 1 nonattainment. Just because a facility

was a BART eligible unit did not mean it ended up with additional controls, which again 

suggested that a case-by-case SIP-based approach would be best, not a one-size-fits-all 

approach that included all industrial boilers. Bill said that EPA did not plan to conduct an 

ICR to gather data, but may rethink this preliminary decision after consulting with EPA 

management; for now, EPA will start with state-level data.

VII. Discussion of Agenda

 1. Baseline

Given present economic conditions, CIBO members suggested EPA use the most 

current data, which would include reductions achieved through the NOx SIP Call. They

suggested that using a future year for creating a baseline would not work because of the 

uncertainty of possible CO2 regulations and an ever-changing economic environment.

Sam Napolitano noted that EPA was exploring the possibility of using a futureyear baseline because additional mobile source controls will come online in a few years, 

which should provide large NOx reductions. Also, there are scrubbers and other control 

systems that EPA knows will come online in the near future. Thus, the nature of the 

problem as it would appear based on the 2007 data may differ from the problem that will 

actually exist when the replacement CAIR program is implemented.

A CIBO member expressed a preference for using real measured data as a starting 

point. EPA could use the 2007 data in conjunction with other data to help forecast, but it 

should ground the baseline in data that had actually been measured. 2007 was the 

highpoint in terms of the levels of economic activity. Thus, EPA has a clear picture of the 

fuel mix at a time of high energy costs and of the impact of the NOx SIP Call. EPA 

should be able to integrate that measured data with other datasets and forecast under 

different economic conditions.

 2. Quantifying Significant Contribution

Sonja Rodman said that significant contribution was a big area to address, with 

many options for the replacement rule. For CAIR, EPA established significant 
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contribution through a two step process. EPA first conducted air quality modeling to 

determine which states should be included in the region and then looked at the costeffectiveness of controls to determine significant contribution. EPA established regional 

caps and developed the state budgets for each pollutant involved. The D.C. Circuit Court 

ruled that EPA had failed to quantify individual state significant contributions and thus 

also did not require the specific state to eliminate its significant contribution. As EPA 

develops the new rule it is considering alternate ways to define significant contribution. 

The Agency welcomes suggestions.

CIBO members noted that industrial sources generally have shorter stacks and so 

their contribution to transport is inherently less than sources with taller stacks. They

suggested that further modeling would need to account for this factor. Also, they felt 

strongly that cost-effectiveness had to be considered because many industrials cannot 

pass along control costs due to global competition and they have higher cost of capital. In 

addition, EPA needs to note that site specific factors for additional controls on industrial 

boilers are very important and tend to drive costs up significantly.

One Industrial member participant expressed concerns that in relying on modeling 

EPA would end up requiring similar controls on all the sources in an area when one 

source might be having 90 percent of the impact. It is critical that EPA assess the 

difference between local emissions and transport. Industrial sources clearly can have a 

high level of local impact, but EPA should not confuse this with transport as the two must 

be addressed differently. If EPA is using modeling to justify reductions, the Agency

should allow units to demonstrate that they are not actually having an impact. Such units 

should be exempt from reductions.

3. Remedy

Tim Smith, OAQPS, raised the issue of remedy: What remedy should be applied 

to the quantified significant contribution? What types of approaches should be 

considered? Is the trading option practical? Tim noted that EPA had heard suggestions 

ranging from a strict command-and-control program to a trading program and various 

combinations of the two. Some states expressed interest in combining looser standards 

with a trading program in an effort to leverage the increased reductions that can be gained 

by allowing trading.

In response to a question from Vince Albanese, Fuel Tech, EPA indicated 

uncertainty as to whether the court decision made it impossible to incorporate trading in 

the replacement program. EPA believes that some type of trading might be consistent 

with the decision, but there are concerns especially about an interstate trading program. 

Clearly trading as it existed in the original CAIR would not be included. EPA believes 

additional assurances that reductions would take place in nonattainment areas would need 

to be provided. EPA is generally supportive of trading because modeling has shown that 

it works and provides deeper reductions at a lower cost.
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John deRuyter suggested an opt-in program for industrial units. CIBO members in

general were supportive of at least some kind of trading. They expressed concern that an 

intrastate trading program would not have enough liquidity to function.

A number of industry participants also expressed concerns about the feasibility of

requiring industrial units to put on controls. They noted that industrial sources, more than 

EGUs, faced serious challenges in raising fresh capital. Given the nature of their product 

and global competition they cannot pass along price increases in the way EGUs can.

4. Affected Area/National Ambient Air Quality Standards (NAAQS)

Which states or regions should be covered by the rule? What should the timing of 

the rule look like? Should EPA start with existing NAAQS? Or, should it try to integrate 

the newer NAAQS into a replacement rule? Timing becomes a key element when 

considering which NAAQS to target.

Sam Napolitano raised the issue of the NAAQS, noting that the original CAIR 

was based on the 1997 standards. There is currently interest in looking at the 2006, and 

possibly the 2008 NAAQS. A key question for EPA is what standards the new rule 

should include to help states comply. States have expressed interest in having as much 

help as possible with the most recent NAAQS. Should EPA try to address the more recent 

standards, or wait and address those through a later rulemaking?

CIBO members agreed that one rulemaking process would be better than three. 

The members again expressed concern about local emissions versus transport emissions 

and cautioned the Agency to be very careful in determining whether a particular unit was

contributing to transport. Any new rule should not consider local impacts; that should be 

left to the states who can better understand site specific circumstances.

In response to questions about the ozone season and annual program, Sam 

explained that the ozone season was in response to northeastern states' concerns about 

summer emissions. He noted that it was unclear whether the replacement program would 

continue to have an ozone season. Sam then raised the issue of high demand days, noting 

that both Connecticut and New Jersey have done a lot of work on high demand days. He 

asked the group whether they thought special attention should be paid to these days. 

CIBO members expressed concern that regulating high demand days could set a 

precedent for quantity over distance and suggested that high demand days might be 

regulated better in a program smaller than the CAIR replacement rule.

An industrial company participant also suggested that EPA bear in mind

reductions that might be gained by meeting requirements of other regulations, especially 

in the context of a carbon-constrained world. Reductions will be made in other areas, and 

it is important to consider what capital investments will be required by the different rules 

and possible trade-offs between pollutants. It is critical to leave long lead times so 

companies can make decisions comprehensively.
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As a follow up to the meeting and in addition to that which was discussed, it is 

important to consider the interrelationship of all pollutants and energy efficiency (CO2

emissions) as it relates to the operation of industrial boilers, especially existing boilers. In 

light of this, CIBO submitted a graph showing the interrelationship of efficiency, NOx, 

and CO as they relate to changes in excess air from the optimum amount at maximum 

efficiency for a natural gas fired Package Boiler. While the actual curves will be different 

for every boiler, fuel, and load, the relationships will always be the same. For solid fuel, 

especially high moisture biofuel, as excess air is increased beyond the optimum level in 

order to obtain low CO emissions, significant decreases in efficiency can occur. Further 

increases in excess air will lead to increased CO and VOC emissions. Consideration of 

any industrial provisions under a CAIR rule should carefully evaluate the requirements to 

be proposed under the forthcoming Industrial Boiler and Process Heater MACT Rule.

VIII. Concluding Points

CIBO members concluded by asking EPA to ensure that the definitions for EGUs 

and non-EGUs be consistent across programs, using Acid Rain provisions as the guide. 

They asked that EPA pay careful attention to the exemptions about independent power 

producer long-term contracts and Combined Heat and Power operations. In addition, as 

CAIR gets revisited, EPA should make sure biomass units don’t inadvertently get 

classified as EGUs again. Finally, EPA needs to consider the uniqueness of small units 

creating steam for municipalities which had issues under CAIR. 

Sam Napolitano thanked CIBO members and said EPA would take all of their

suggestions under consideration. He mentioned that meeting notes would be sent out to 

all the participants and suggested that they include additional comments as addenda to the 

notes. This will help continue the dialogue process. Sam also offered to send CIBO 

members the SO2 and NOx emissions data that had been shared at earlier meetings.