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OAR Box 1781 

Prepped by Ollie Stewart 

Document Number: 

12DIV-C-35 

Docket Number: 

A-90-37 

Printed 10/29/2008 10:46:23 AM Sheet 121 of 142 
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

RESEARCH TRIANGLE PARK. NC 27711 

SEP IO IS99 

A- ?o -37 

"E-c-35 

OFFICE OF 

AR OUALITY PLANNING 

Mr ANO STANDARDS . Henry V. Nickel 

Hunton & Williams 

1900K Street, N.W. 

Suite 1200 

Washington, D.C. 20004-1109 

Dear Mr. Nickel: 

This is in regard to the memorandum dated April 29,1999, which was entitled 

"Achieving New Source Emission Reductions from Existing Electric Generating Unit — 

Proposed Program of the Utility Air Regulatory Group." The Environmental Protection Agency 

(EPA) appreciates the time and effort that you and your colleagues spent in thinking through the 

issues and*in developing an altemative proposal for EPA to consider. 

We look forward to meeting with you and the other representatives of the coal-fired 

utility sector on September 14 in Durham to continue our discussions. At this meeting, we 

intend to focus our discussions on your views as to the environmental benefit of your proposal so 

that we can better evaluate it. To ensure that we use the time productively, the enclosure lists 

some clarifying questions to help frame our discussion next week. The responses will be 

evaluated and considered as we finalize the requirements of the NSR program. 

If you have any questions concerning the enclosed requests, please contact Karen 

Blanchard at (919) 541-5503 or Dennis Crumpler at (919) 541-0871. 

Sincerely, 

/W(A 

JohfrS. 

DymexSeitz 

V Director 

Officefof Air Quality Planning 

and Standards 

Enclosure 

cc: JohnPaul 

Bill Becker 

Bill O'Sullivan 

Internet Address (URL) • http://www.tpa.gov 

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V 

Questions Concerning the April 28 UARG Proposal 

Introduction 

1. Please provide more information related to the statement in your introduction that

 M[t]he 

CAA modification rule has had little impact on these units.** 

2. Please identify the EPA analysis referenced in your introduction. Was the context of that 

analysis relative to the acid rain provisions under Title IV? Was any reference made to 

how EPA believed NSR might apply to existing utility boilers during their 65-year 

projected life? Is it UARG's belief that NSR is never triggered (e.g., no modifications are 

undertaken) during a unit's projected operational life? 

3. " As you are aware, the Office of Enforcement and Compliance Assurance has been 

investigating several electric utilities for compliance with NSR requirements. If that 

investigation shows that electric utilities have been triggering NSR through the 

modification provision in the past, how would that change the underlying presumption for 

your proposal? Would a separate electric utility approach still be necessary? 

4. Please explain why your NSR proposal would not begin until after other, unrelated 

programs are implemented? How do SIP calls impact NSR for other industrial sectors 

under the current system? 

Proposal Item 1. Continuation of Existing NSR Program 

5. In question 1 .b., please explain how the current system has "discouraged efficiency and 

reliability improvement projects." Some examples would be helpful. 

a. How would the proposed potential-to-potential, hourly test not discourage the 

same projects? What are the projects that such a test would be applied to? 

b. Under your proposed test, changes undertaken to increase the total hourly 

availability of a unit and, thus, increase the actual emissions from that unit would 

not be subject to NSR. What is the purpose of these types of projects? Why 

shouldn't facilities that move up on the dispatch order and thereby increase actual 

emissions be subject to NSR? 

c. If EPA were to adopt a potential-to-potential test, in those situations where the 

affected sources increase actual emissions, how should the increase be factored 

into air quality management? Should EPA also require States to use potential 

emissions in SIP planning? 

2. 
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d. If, as you state in your introduction, the modification provision of NSR "has had 

little impact" on utility units, what confusion has complicated and delayed 

permitting proceedings? 

e. In item 1 .c, please provide the statutory basis for treating modifications that 

increase CO emissions differently under NSR. 

Proposal Item 2. No Netting for New Units 

6. Under item 2. netting would be disallowed. 

a. How many sources have actually netted out of review in the last 10 years? Is there 

any record of net outs prior to the 1992 WEPCO rule? 

b. How much netting has occurred at existing electric utilities for the addition of new 

units? 

c. In any of the netting actions mentioned above, how were netting credits 

* generated? 

d. In the absence of the restriction, how many would be expected to use netting in 

the future? 

Proposal Item 3. Subject Existing Units to NSR levels of control over time, but coordinate with 

other regulatory existing source control program,; 

7. In Item 3.a., you propose that NSR go into effect in 2010, which would serve as a 

backstop in case the anticipated NOx SIP Call, the Acid Rain Program and Regional 

Haze rules do not go forward. 

a. We note that all of these programs have different statutory foundations and goals 

from the NSR program. Why should the NSR program be put on hold until those 

programs have been implemented? 

b. What happens in the interim while the disposition of these programs is being 

decided? Would this mean that emissions could actually increase industry wide? 

8. You state in item 3.b., that under the age-based system a unit entering the program (upon 

reaching an age of 55) beginning in 2010, would be required to achieve new source 

control levels at that unit or other units through trading or averaging systems. 

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a. Does this mean that all control would be as a result of shutting down units as 

opposed to putting controls on existing units? Will controls be placed on some of 

these units in the near term as a result of other regulatory programs and if so to 

what extent? 

b. What would be the basis of the trading or averaging currency? 

c. One could speculate that as a result of this system, emissions could actually 

increase at one source, while two other sources might have shut down. How 

would your proposal address the statutory requirement of considering local 

impacts such as increment consumption, NAAQS violations or Class I area 

impacts? 

d. In the absence of NSR applicability prior to 2010, what is the estimated increase 

or decrease in generating capacity or capacity utilization of coal-fired utilities 

between now and 2010? What does this increase or decrease correspond to in 

emissions estimates. 

e.» Why were emissions from 1996, rather than 1997 or 1998, used to demonstrate 

that the emissions reductions using the age-based approach would be linear? 

Would the reductions still be linear using more recent data? 

f. The proposal talks about units "entering" the age-based program. For instance, 

the last units would "enter" the program in 2030. Would that mean controls 

would have to be installed prior to 2030 or only that the facility would have to 

start the process for adding the controls in 2030 and not start operating the 

controls for several more years? 

9. You state in Item 3.c, that the glide path option is necessary for companies that would 

otherwise have many same-aged units brought into the system at one time. What would 

prevent these companies from controlling some units earlier than their 55-year age to 

avoid this problem under the age-based option? 

10. With respect to Item 3.d., what "reasonable exemptions" would you want given to small 

units and low capacity factor units? 

a. How would you define those types of units? 

b. Are there facilities that utilize a sufficient number of these units that when 

aggregated together, they would constitute emissions greater than a major source? 

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ts? 

11. With respect to Item 3.e., why wouldn't you include PM, CO, ozone or lead in your agebased or glide path proposal? 

12. With respect to Item 31., as you know BACT and LAER cannot be less stringent than an 

applicable NSPS. Moreover, new technologies are evolving for NOx control. Why 

would UARG use 1998's NSPS, the minimum level of control required under the Act, as 

BACT and LAER for the next 30 years? 

a. Would you consider another mechanism for setting BACT/LAER that still gives a 

utility some certainty? 

b. Could UARG support a presumptive BACT/LAER process that is updated every 

few years? 

11. With respect to Item 3.g., what kind of emissions trading scheme would work under your 

proposal? A cap and trade assuming compliance with the age-based or glide path? How 

would new units or facilities participate? 

a/' Does the UARG analysis include peaking units as well as based-loaded units, i.e., 

bow much active coal-fired generating capacity will be retired and replaced by 

gas-fired turbines before 2010? Is the industry thinking of using these shut-down 

and replacement projects as the source of currency for the trading, banking and 

averaging alluded to in item 3.g? 

b. Would the type of control strategy for units that experience a major modification 

(however it is defined) be the same as that proposed for units that age out starting 

in 2010? 

b 
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April 29,1999 

Mr. John S. Seitz 

Director, Office of Air Quality Planning and Standards 

U.S. Environmental Protection Agency 

MD-10 Research Triangle Park, NC 27711 

Dear John: 

Enclosed is a memorandum outlining the UARG proposed altemative to tbe current NSR 

program as it applies to existing electric generating units. This proposal, in our view, would 

simplify the NSR program while at the same time Addressing concerns that, under the current 

program, utility units may perpetually extend their useful life without ever being subject to NSRrelated emission reductions. We believe this proposal is responsive to the principles announced 

by tbe Agency prior to the "stakeholders" meeting that was held on February 2 and 3 and 

provides a basis for serious discussions with the Agency and stakeholders. 

In putting this proposed alternative together, we have tried to be responsive to issues and 

concerns raised by others. ID this regard, we have had three meetings with state regulators on 

NSR alternatives and are encouraged by their response. We will have further discussions with 

state regulators ova* the next two weeks and expect further input at the STAPPA meeting on the 

15* and 16* of May in Phoenix. I also plan to talk to David Hawldns during this period about 

UARG's proposal. We would like to meet with you and your staff in May after getting 

STAPPA's comments. 

The current NSR program is incredibly complex and is characterized by 

misunderstandings by all as to its applicability. The EPA proposals to change the NSR program, 

in our view, will aggravate, not alleviate, mis situation, If adopted, the revised rules will lead to 

litigation and to a chilling efTect on programs by all of industry to improve the efficiency and 

reliability of existing facilities. Wc need to take this opportunity to develop an alternative to a 

program that all believe is "broken." I hope you will agree that UARG's proposal provides a 

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AH.'-3. i35 9 6:17PM HUNTON WILLIAM K0-

1171 ?" 3/ 7 

basis for beginning discussions and for delaying action on finalizing the Agency's NSR 

proposals. These discussions should include all industry and should cover the proposed program 

for the utility industry as well as changes tailored to the needs of the manufacturing sector. 

We look forward to discussing this proposal with you and other stakeholders. 

Sincerely yours. 

Enclosure 

cc: (w/encJosurt) Mr. Robert Perciasepe 

Mr. Tom Curran 

Lydia Wcgman, Esq. 

Mr. Bill Harnett 

Mr. David Solomon 

Bruce C. Buckhcit, Esq. 

Gregory B. Foote, Esq. 

^ 

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m . 29.1999 6:17PM BUNION WILLIAM

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 11?1 P"'4/7

 • * 

April 28,1999 

MEMORANDUM 

Achieving New Score* Emission Reductions 

from Existing Electric Generating Haiti -

Propwri PragnTn tfflt VJfflty Air RrtHlitorr Group 

This paper outlines a program for electric generating units mat addresses two objectives. 

First, simplification and clarification of me Clean Air Act pCAA") new source review fWSR") 

program for me electric generating industry is needed by both pennitting authorities aad 

regulated industry. Tbe current program is unduly complex and confusing and, as recently 

interpreted by EPA, is discouraging desired improvements in unit efficiency and reliability. 

Second, in spite of recent CAA programs directed at existing sources (eg,, the Title IV 

acid rain program, the revised ozone and particulate matter NAAQS, the regional haze program, 

and the regional SIP call), there is continued interest io ensuring mat new source levels of control 

are achieved at existing electric generating units. NSR levels of emission reductions can be 

achieved more efficiently and cost-effectively if addressed directly through a program designed 

for the electric generating industry, as opposed to attempting to force this result on an ad hoc 

basis through revisions to tbe NSR "modification*' rale. 

Existing electric generating stations consist of numerous, complex and integrated 

systems. These sources are designed to have a long life. For example, in analyses underlying the 

1990 CAA Amendments, EPA assumed that utility boilers would last for up to 65 years. 

Because the industry has traditionally had a statutory obligation to provide a safe, reliable and 

efficient supply of electricity, existing generating units ire routinely kept in good working order 

through repair, replacement and maintenance activity. As a result, existing electric generating 

stations have been regulated primarily under the CAA state implementation plan ("SIP") 

program ana\ more recently, under the CAA Title IV acid rain program. The CAA modification 

rule has had little impact on these units. 

The program outlined below, therefore, represents a significant departure from how 

existing electric generating units have been regulated under u^e CAA, as well as a significantly 

more stringent existing source program than the program described by industry at the February 2-

3,1999 EPA stakeholder meeting. Under this program, NSR requirements would continue to 

apply to new and modified sources, and existing electric generating units would also be required 

to achieve, individually or through emissions trading or averaging, NSR levels of emission 

reductions over time, on a schedule mat would begin in 2010 after the other existing source CAA 

control programs noted above have been defined. This would assure that implementation of this 

new pTO£T?m fcr existing electric generating units could be coordinated with these other 

programs. The parameters of this program are outlined below. 

$ 
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A ? * 19.199 9 6:17PM HUNTON WILLIAM K0J17 1 l 5/ 7 

2. Continue the existing NSR program, with a simplifled 

ipplicibllity tett for piodififid mitt. 

•. Copfinof ippHeibnttyBftigwifmre* rtopfrtmgpti - New source review 

requirements, including BACT or LAER, would continue to apply to sew md 

modified electric generating units. NSPS would continue to apply to all new, 

reconstructed and modified electric generating units. 

b. narffv "w^f r,r piwutffif «tien» tett „ The WEPCo rule would be revised. Tne 

term 'teajor modification" would be clarified to provide mat physical or 

operational changes must increase (he maximum achievable emission rate 

(measured in kg/hr) before and after a change in order to trigger NSR. This 

clarification would remove uncertainty that has discouraged efficiency and 

reliability improvement projects, and would siditss confusion that has 

complicated and delayed permit proceedings. 

c. ftpeHal CO review procedures - With the exception of CO, all criteria 

pollutants (including particulate matter) would be subject to this simplified 

modification test. CO would be evaluated as part of the "environmentally 

beneficial" test applied to NO, control projects (i.e., tiie types of projects that 

typically raise CO issues), Because CO releases from elevated point sources do 

not have a significant ambient air quality impact, CO emission increases would 

not otherwise be subject to the modification program. 

2. No petting out of control requirements for eTectrit generating units - To ensure more 

widespread use of new source controls, new electric generating units could not "net our 

of control technology requirements. As under current law, a unit could continue to net 

out of air quality analysis requirements, including ambient air quality modeling. 

3. Subject existing electric generating units to new source levels of eminion control 

over time, in a manner coordinated with the ImplemeDtatJon of other existing source 

control prof mm-. 

a. Prpgrara itart date - The electric generating industry is currently planning to 

implement a number of new control programs for existing sources over the next 

decade, including the revised NAAQS for ozone and PMjj, the regional haze 

program, the regional NO, SIP call, and Phase II of the Title IV »cid rain program. 

In order to allow for coordination with these other programs, the existing source 

control program would begin in 2010. To the extent any of these other CAA 

existing source programs do not go forward, the program outlined here would 

serve as a "backstop," ensuring levels of emission reduction that go as far or 

further than what might be required under these other prograxna. 

b. J2xdL5$$lkah}liXy mecbanTsnu - There would be two options for complying 

witb this backstop program - the "age based" option and the "glide path" option. 

Companies would be required to opt into one or the other by the year 2010. 

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V 

A PI 29. 1999 6:1BPM BUNTON WILLIAM N a ll7 1 l 6/ ? 

Under the age baaed option, program applicability would be triggered on a 

nmt-by-unit basis starting in the year 2010, when a unit has been operated for 55 

years. Units entering the program would be required to achieve new aource 

control levels at mat unit or at other units through trading or averaging systems. 

In prior CAA analyses, EPA has consistently assumed boiler life up to 65 years, 

and industry Iteejbre originally suggested 65 years as a trigger age in EPA's 

February 2d- 3d stakeholder meeting. A 55 year life ts the jhcrtcH boiler life 

used by EPA m analyses undertaken in connection with me 1990 Amendments 

and with subsequent rulemakings under those amendments. 

Of those units mat reach age 55 during the course of fhe "age based" 

program, the last unit will ester the program in 2030 (i.e., those units that began 

operation in 1975). Tbe number of units that would ester the program is each 

year is close to hnear, as arc the toss of emissions (based on 1996 emission 

levels) that come into the program is each year. In 2030, all remaining units 

under 55 years of age (i.e., units beginning operation in 1976 and after) would 

enter tbe program at me same time. Most of these younger, larger units are the 

units that will be overcontrolled to offset emissions from older units under this 

program, to meet Title TV requirements, or to comply with other ambient drives 

trading programs. As a result, most of these units will have, long before 2030, 

been controlled to sew source levels either through the NSR program itself or 

through Title I and IV emission reduction programs. 

Under the glide pad) option, a utility company would elect to have all of 

its fossil fuel-find units subjected to this program is 2010, and tiie system-wide 

average emission rate for those units would then be reduced proportionately over 

the Life of the program (e.g., 5 percent reduction per year) in order to reach overall 

new source control levels by the program end date of 2030. Among other reasons, 

this option is needed to provide flexibility for companies that might otherwise 

have multiple retrofits lumped together m a short time frame under tbe age-based 

option. 

c. program tqrf daft - AH units would be brought into the age based program by 

2030 (as compared to the 2040 date originally suggested by industry). Similarly, 

all reductions under the "glide path*'option would have to be completed by 2030 

and those reductions would be equivalent to the "age based** program reductions. 

d. Sooree applicability - This program would apply to fossil fuel-fired steam 

electric generating units. Consideration should be given to reasonable 

exemptions, for example, for small units and low capacity factor units. 

e. Pollutant applicability - The backstop program would apply to SOa and NO,. 

Particulate matter ("PM") would continue to be subject to the NSR program and 

other existing source programs as discussed above. Furthermore, the backstop 

program would address emissions of fine PM through its control requirements for 

SOjandNOg. ..*•»•-

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kfl 29.199 9 6:1 BPM HUNTON WILLIAM K0-

1171 l W 

f. Presumptive egw umret control lpveb - JJQ order for this program to work, it is 

critical that the applicable new source control levels be ttt is advance. New 

aourcc control levels for this backstop program sheuM be a^ at current NSPS 

levels (e.g., 0.15 Ib/MMBru for NO, end 0.6 Ib/MMBtu for SO,). These control 

levels would apply throughout (he year (as opposed to, for example, only during 

tbe ozone season), 

g. flerfbnrrv wifcenaiiliflfi - Achieving new source levels of control at existing 

units can involve numerous technological challenges sot presented in the case of 

new units. It is therefore important that this program include emission Siding, 

banking and averaging provisions to ensure that NSR levels of emission reduction 

can be achieved on an industry-wide basis, and m a manner that is cost-effective. 

. u