Ms. Lanelle Bembenek Wiggins

RFA/SBREFA Team Leader U.S. Environmental Protection Agency Office of Policy 1200 Pennsylvania Avenue, NW (1806A) Washington, DC 20460
wiggins.lanelle@epa.gov

Re: Small Busi ness Review Panel for the EPA rulemaking “ Greenhouse Gas (GHG)

New Source Performance Standards (NSPS) for Electric Utility Steam Generating Units (EGU) ”

Members of the Small Business Advocacy Review Panel:

San Miguel Electric Cooperative, Inc. (San Mi guel) thanks the Small Business Advocacy Review Panel (Panel) for selecting San Miguel to participate as a Small Entity Representative in this process. San Miguel submits the following comments to the Panel on the EPA rulemaking for the Utility GHG NSPS. San Miguel’s comments will be

covered under the following general headings:

Concerns on the Small Business Advocacy Review for this particular rule General Comments on Utility GHG NSPS rulemaking Input on Questions from the Presentation Packet



### Intro duction
The principal business of San Miguel is the production of electric energy in South Central Texas. San Miguel’s electric production comes solely from one mine mouth coal

- fired power plant in South Central Texas. This one coal

- fired unit comprises 100% of San Miguel’s generating capacity; average yearly output is 2.9 million megawatt hours. The

coal

- mine, which is located adjacent to the generating facility, extracts a Yegua, Lower

Jackson lignite (a Group B Lignite). The lignite mine supplies fue l only for the San Miguel Generating Station, with a yearly production of approximately 3.3 million tons of lignite. The generating unit fires only lignite provided by this mine. The San Miguel electric generating station was designed and built specific ally for this locally available lignite fuel. This unit has been reliably providing power to its customers since 1982 with a yearly availability factor averaging approximately 84%.

San Miguel is a Generation and Transmission Cooperative (G&T) and power generated from the plant is sold to two other G&T Cooperatives who ultimately distribute the power to 26 member cooperatives that serve approximately 570,000 end

- user member

- owners in114 Texas counties. As a not

- for

- profit cooperative, San Miguel does no t have

shareholders and these member

- owners bear all of the costs of owning and operating the San Miguel facilities

– including the costs associated with regulations such as the Utility GHG NSPS rulemaking

.

San Miguel is a member of the National Rural E lectric Cooperative Association (NRECA) and supports their comments to the Panel on the Utility GHG NSPS rulemaking.



### Concerns on the Small Business Advocacy Review
San Miguel is very concerned with this review process for the following reason s :

1) The E PA did not provide usable information or data in a sufficient form that would assist the SERs in assessing the potential impact of this rulemaking. The SERs were not provided enough information on how EPA will structure this regulation or establish the re levant standards. Without the necessary information or options I do not believe the SERs c an identify reasonable regulatory alternatives.

2) Developing NSPS for GHGs involves complexities heretofore not encountered in the NSPS context, because unlike othe r emissions regulated under the CAA, there are no viable emissions control technologies applicable to reducing CO2, the main GHG component in EGU emissions. In particular carbon capture and storage (CCS) is not developed technology as our comments below a ddress in detail. Therefore, we expect EPA will have to rely on energy efficiency and possibly work practice standards as a means of Section 111 regulation. Unfortunately , the

SERs ha ve yet to see a single proposal by EPA on options it may be considerin g. This is very troubling, and contrary to the requirement that EPA present regulatory options for review by the panel.



### General Comments on the Utility GHG NSPS Rulemaking
1) Promulgating an NSPS based on an output standard would be difficult if not impo ssible to implement.

Consistent with presentations made to the panel on July 13 th

, an output derived

standard such as a CO2/Mwh metric cannot realistically be applied to EGUs without accounting for significant and unavoidable variabilities. This is the case because an EGU heat rate and thus the CO2/Mwh rate var ies significantly over the EGU operating range and the duty

- cycle to which the unit is committed. The following graph shows how CO2/mmBtu and CO2/Mwh varies with load at the San Miguel generating unit.Graph based on turbine design heat rate and design boiler efficiency

Moreover, an EGU heat rate characteristic and thus the corresponding CO2/Mwh rates are largely unit specific, and th ey can be severely impacted by equipment conditions which cannot be quickly or easily remedied. The graph below shows how increased heat rate in 2008, due to a turbine problem, caused higher CO2/Mwh at the San Miguel unit.So even if such i ndividual unit variability could be accounted for in an output standard, such a standard would be source specific.

2) NSPS must represent “best demonstrated technology” (BDT) at the source and require nothing more

. The intent of Section 111 is to disse minate BDT throughout the source category. NSPS provisions cannot be utilized in a top down methodology where BDT requirements are based on or follow an overall source category reduction goal, national GHG emissions reduction goal, or GHG intensity avera ged over multiple sources. Stated differently, NSPS must represent BDT for any single source including costs of achieving the standard. For new or modified EGUs, BDT should not effectively dictate any particular fuel use such as natural gas over coal or one type of coal over another. In other words BDT must be fuel dependent.

San Miguel opposes the justification of an NSPS subcategory or the like, as was stated in our response at the second panel meeting, which is based upon the presumption that offsets , mitigation, or off

- source activities must be presumed in establishing the standard. Any standard or subcategory must be established on the

basis of the emission source.Once the standards are established however, it seems reasonable that some

sources co uld benefit from these strategies, and so sources should have the option to meet source NSPS requirements that might be satisfied by undertaking other actions apart from those at the source (emissions unit). Some of these

considerations were discussed in t he second SER panel meeting, and these are not generally objectionable so long as the BDT for those sources not willing or able to participate in “off source” actions are not affected

San Miguel wants to make clear that while some utilities, small and l arge, may benefit from an off

- source mitigation or offset, many small entities lack economic opportunities based upon geographic or location factors to addresses GHGs by incorporating off

- site actions. For those unwilling or unable to undertake off

sourc e actions, factoring those options into a source BDT would heavily prejudice those small business entities not utilizing off source options, thus hurting small business entities and not helping them

3) NSPS provisions and guidelines to states should be tech nology

- based and should not establish national or EGU source category wide GHG mitigation requirements, reduction goals, or caps. Section 111 standards and requirements are meant to be technology

- based and not driven by an overall emissions reduction o r mitigation goal. NSPS by statutory definition is technology that first and foremost has been “adequately demonstrated,” typically referred to as “best demonstrated technology” (BDT). In
this context, EPA has no broad mandate or even discretionary autho rity under Section 111 to expand its discretion to promulgate provisions incorporating national or source category GHG reduction or mitigation goals

.

Further, EPA cannot require any new or modified source to install and operate any particular technologica l system of continuous reduction to comply with any new source standard of performance. Since such emission reduction technology does not exist commercially, it follows that EPA cannot simply impose a fuel

choice that has the same effect as the mandate of a particular control technology.

San Miguel would also point out that the U.S. Congress explicitly considered a

cap

- and

- trade regime last year to address climate concerns and rejected such an approach. We believe it ill

- advised for EPA to propose an NS PS regulatory program that would have the effect of imposing an outcome already rejected by Congress . EPA’s strategy to utilize the NSPS program is a never

- attempted effort

to shoe

- horn an emission reduction or mitigation policy onto sources under an

exist ing program never intended to address an emission reduction policy.

4) Section 111 requires that EPA undertake an “endangerment finding”

directed at whether EGU greenhouse gas emissions endanger public health

or welfare. Section 111(b)(1)(A) clearly requir es that EPA issue a proposedregulation addressing the endangerment question as a requisite to actually regulating EGU GHG emissions. EPA has yet to do so.

5) EPA must reconcile the proposed NSPS including any standards or guidelines with its interpretation of New Source Review (NSR) major modification potential violations.

As previously mentioned

, c arbon dioxide is the primary GHG associated with EGUs and yet there is no available technology to directly reduce carbon dioxide

emissions from these facilities . While EPA did not expressly say so, presumably they will be looking at energy efficiency and work practice standards as no other demonstrated technologies exist. Many of the current EPA regulatory initiatives

are counter

- productive to improved efficie ncy as is referenced below ; real efficiency improvements such as turbine upgrades are the sort of changes that EPA has considered to be NSR major modifications and Clean Air Act violations.

To state the obvious, it would be poor policy for EPA to requir e EGUs to undertake activities to comply with NSPS where such activities trigger NSR violations under EPA current policies. EPA must reconcile this conundrum if it requires efficiency improvements as part of its NSPS proposal.

6) NSPS should not function to economically prejudice smaller systems or systems utilizing higher carbon content fuels, and must account for the installation of additional pollution control devices.

a) NSPS must recognize fuel diversity and be cognizant of the fact that different

fuels u tilized by EGUs have different carbon contents, and with current demonstrated technologies, utilization of different fuels will yield different GHG emissions. NSPS must not effectively dictate fuel switching. b) Unit size, design, and use will dictate unit e fficiency. For example, fossil fuel units that cycle or follow baseload or renewable generation cannot achieve the same overall efficiency as other similarly designed units that do not cycle in this manner. As identified at the second panel meeting , the efficiency of existing facilities were long

- ago determined and the tools available to improve efficiency are limited by the design operating temperatures and pressures which cannot be altered short of reconstruction. In many cases the design is limited by the size of the unit and the capital then available for the project. Also, the economics associated with installing efficiency improvements on smaller units will be quite different when compared to installing similar technologies on larger ones. The statu tory definition of NSPS requires that the standards must account for technology costs, thus NSPS requirements for smaller units may be different than for larger ones. c) As EPA is well aware, new regulations finalized or likely to be finalized over

the next s everal years include the Cross State Air Pollution Rule, the Electric Utility Hazardous Air Pollutants Rule, and the Clean Water Act 316(b) cooling water intake structure rule. All these regulation will require massive

new installations of add

- on controls such as flue gas desulfurization units(FGDs), selective catalytic reduction units (SCRs), baghouses, wet electro

static participators (ESPs), dry sorbent injection and cooling towers. All these devices require significant amounts of energy, and by defin ition, these EGUs will become less energy efficient. It is quite plausible many EGUs will become notably less energy efficient over the next several years than they are now. NSPS requirements must take the continuing addition of these types of

controls ca using EGU energy inefficiencies into account in this rulemaking

process. d) Lastly, the statute requires EPA issue guidance to the states for developing NSPS for existing units following a State Implementation Plan (SIP) like process. To carry out this mand ate, EPA must consider, in addition to the factors listed above, the remaining useful life of an EGU and other factors that would affect existing NSPS determinations that are identified during this rulemaking process.



### Questions for SERs

Since time ran out during the Panel meeting on July 13, 2011 San Miguel will attempt to provide input on selected questions contained in June presentation.

Applicability Should applicability include stationary combustion turbines (combined cycle and simple cycle)? I would say yes. Combustion turbines have similar problems to

steam units in that as load decreases CO2/ Mwh increases and CO2/ mmBtu remains constant across the load range.

Current Practices Do you employ measures to ensure that your EGU operates in an energy efficient

manner? Yes. I believe most power plants are run reasonably energy efficient. But one impediment for improving efficiency has been the NSR rules, which have prevented making major changes to improve efficiency.

What are the energy e

fficient measures you employ? Yearly planned outage to work on eq uipment that has deteriorated over time , an example is work performed on air heaters to reduce leakage due to routine wear

. T his restores the heat rate that was lost over the year

.

Are these measures a result of regulatory requirements, initiated voluntarily, or employed for other reasons? Voluntary

– reducing heat rate will reduce fuel and help keep customer costs at a minimum.What are the estimated emissions reductions associated w ith the energy efficient

measures? Energy efficiency will improve the heat rat e, which will reduce the fuel used thus reducing emissions. Energy efficient measure would need to be calculated based on the heat rate improvement. Whereas emission reduction s efforts at power plants usually cause units to be less energy efficient, thus in actuality increases emissions on a pound/Mwh basis.

Appropriate Control Levels for New Sources Should new source standards be based on fuel and technology specific effici ency standards based on the best performing coal units being permitted/ built (e.g.,

IGCC and/or ultra

- supercritical coal)? NSPS requirements must be based on
BDT at the time the unit is designed

.

Alternatively, should tighter standards that require n ew coal units to go beyond technologies such as IGCC and ultra

- supercritical coal and be designed/built to perform at lower CO2/MWh levels be considered? No , NSPS requirements must

be based on BDT at time of design/ build

.

Should the new source standar ds be fuel neutral (i.e., standards would not be fuel or technology specific but instead would be based on use of lower GHG fuels such as natural gas)? No, BDT must be fuel dependent.

Should EPA consider a phased approach where a fuel and technology spec ific standard based on existing technologies would apply initially and, after several years, a tighter standard would apply? No. The efficiency of existing facilities were long

- ago determined and the tools available to improve efficiency are limited by the design operating temperatures and pressures which cannot be

altered short of reconstruction.

Appropriate Control Levels for Modified Sources Will compliance with other regulations impacting the power sector cause EGUs to become modified sources subj ect to the GHG standards? It would be poor policy for EPA to require EGUs to undertake activities to comply with NSPS where such activities trigger NSR violations under EPA current policies.

Appropriate Control Levels for Existing Sources

Should exist ing source guidelines be based on efficiency improvements? No. NSPS requirements must be based on BDT at the time the unit was designed.

What is an appropriate heat rate reduction to require for existing EGUs? The efficiency of existing facilities wa s long

- ago determined and the tools available to improve efficiency are limited by the design operating temperatures and pressureswhich cannot be altered short of reconstruction. EPA has no broad mandate or even discretionary authority under Section 111 to expand its discretion to promulgate provisions incorporating national or source category GHG reduction or mitigation goals.

Should replacement of older generation be part of the guidelines? No, this is beyond the scope of NSPS

Should there be a linkag e between remaining useful life and tightened standards? No, this is beyond the scope of NSPS

. EPA has no broad mandate or even discretionary authority under Section 111 to expand its discretion to promulgate provisions incorporating national or source c ategory GHG reduction or mitigation goals.

Should EPA consider a phased approach where a fuel and technology specific efficiency standard based on existing technologies would apply initially and, after several years, a tighter standard would apply? No. NSPS requirements must be

based on BDT at the time the unit was designed.

Should other options such as fuel switching or co

- firing with lower carbon fuels

be considered? NSPS must recognize fuel diversity and be cognizant of the fact

that different fu els utilized by EGUs have different carbon contents, and with current demonstrated technologies, utilization of different fuels will yield different GHG emissions. NSPS must not effectively dictate fuel switching.

San Miguel would like to once again tha nk the Panel for selecting us as a Small Entity representative on this very important industry regulation. We encourage the Panel to give further consideration in scheduling an additional Panel meeting once the EPA has progressed in its rulemaking prepara tion.

If you have any questions concerning these comments please contact me.

Sincerely,

Joseph G. Eutizi Engineering Manager San Miguel Electric Cooperative, Inc.

830

- 784

- 3411 ext. 226 jeutizi@smeci.net