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### .I. (907) 780-2222 FAX (907) 463-3304 5601 Tonsgard Court, Juneau, AK 99801-7201 ALASKA ELECTRIC LIGHT AND POWER COMPANY

Lisa P. Jackson, Administrator U.S. Environmental Protection Agency Ariel Rios Building 1200 Pennsylvania Avenue, N.W. Washington, DC 20460

SUBJECT: Petition for Exemption

National Emission Standards for Hazardous Air Pollutants for Compression Ignition Reciprocating Internal Combustion Engines 40 CFR 63, Subpart ZZZZ; Docket OAR-2002-0059

Dear Administrator Jackson:
The purpose of this letter is to request an exemption from 40 CFR 63 Subpart ZZZZ for Alaska Electric Light & Power ("AEL&P").
Our specific petition is that EPA provide an exemption from 40 CFR 63 Subpart ZZZZ, for:

1. Each compression ignition ("CI") reciprocating internal combustion engine ("RICE") deployed as backup for hydropower and other renewable energy generation, AND

2. Each CI RICE which otherwise operates for less than 500 hours per year as determined on a multi-year basis.
We further request that any Cl RICE operating less than 500 hours per year be exempted from the performance testing requirements of 40 CFR 63 Subpart ZZZZ.The Petitioner

AEL&P serves approximately 16,000 residential, commercial, and government customers in the City and Borough of Juneau, Alaska. The community is isolated: there are no roads into or out of Juneau - only local traffic and transport via water or air. There is no interconnection to a regional electrical grid and no natural gas supply.
During most years, more than 98% of AEL&P's annual generation is provided by renewable hydro energy. However, due to the community's isolation and lack of an intertie to a regional electrical grid, AEL&P must provide 100% standby capacity which includes a mix of 15 diesel engines (Cl RICE) and 4 gas turbines. The diesel engines and gas turbines are permanently situated at three separate sources, facilities with distinct physical addresses.
As shown in Exhibit 1, the 15 standby Cl RICE operate infrequently over a 10-year period - as an average for each engine, less than 50 full-load equivalent hours per year. However, the air quality permits for these units cannot restrict them to emergency or limited use only as defined in Subpart ZZZZ. The standby Cl RICE are called upon to perform peak load or base load duty as necessary when renewable energy resources are interrupted. While the standby Cl RICE are permitted for significant operation, all AEL&P facilities are area (non-major) sources of hazardous air pollutants.
AEL&P is regulated by the Regulatory Commission of Alaska, is never guaranteed a return on investment, and has a strong incentive to minimize the use of standby Cl RICE. When standby generation is required, AEI..&P files a Cost of Power Adjustment with the Regulatory Commission of Alaska. With no markup or profit for diesel fuel permitted by the Regulatory Commission of Alaska, the Cost of Power Adjustment in winter 2009, for example, resulted in a tripling of the power price from 10.8 cents per kilowatt-hour to 30 cents per kilowatt-hour to cover the cost of diesel fuel for the standby generation. The price of diesel fuel during this period was $2.25 per gallon. In the prior year, customers paid 52 cents per kilowatt-hour for one month of standby operation, and the average price of diesel fuel was $3.89 per gallon.
Applicability and Requirements National Emission Standards for Hazardous Air Pollutants (NESHAP) Subpart ZZZZ was published in the Federal Register on March 3, 2010 and became effective on May 3, 2010. New Cl RICE are now subject to the rule requirements, and existing Cl RICE must meet the rule requirements by May 3, 2013. The focus of thispetition is primarily directed toward existing CI RICE in Juneau, with potential

application to future standby Cl RICE as well.
An existing CI RICE located at a major source or area source is subject to the rule. A major source of hazardous air pollutant (HAP) emissions is generally a stationary source that emits or has the potential to emit any single HAP at a rate of 10 tons or more per year or any combination of HAP at a rate of 25 tons or more per year. An area source of HAP emissions is a source that is not a major source, and there is no cle minimis level of emissions for an area source.
Relevant to many of Alaska's electric utilities and AEL&P in particular, Section 63.6590 of NESHAP Subpart ZZZZ identifies exemptions including emergency RICE, limited use RICE, and Alaska area sources not accessible by the Federal Aid Highway System (FAHS):

1. Regarding the emergency engine exemption, the rule specifically states that RICE used for peak shaving are not considered to be emergency engines, and RICE used to supply power to an electric grid are not considered to be emergency engines. 2. Regarding the limited use engine exemption, limited use RICE are those engines which operate less than 100 hours per year. 3. Area sources not accessible by the FAHS are an exemption for very remote area sources in Alaska. Many rural Alaskan coastal communities like Juneau are considered part of the FAHS because they are served by the Alaska Marine Highway with drive-on ferry service.
AEL&P's standby CI RICE do not qualify for exemption as emergency or limited use engines nor do they qualify for the FAHS exemption.

Analysis of Rule Impact on AEL&P Operations and Customers This discussion is based primarily on a representative diesel engine, a 3600 hp (2500 kWe) Electro-Motive Diesel ("EMD") CI RICE which represents the workhorse of AEL&P's standby engines.

AEL&P Engine Emissions Since 1972, EPA has published AP-42, Compilation of Air Pollutant Emission Factors, as the primary and latest compilation of EPA's emission factor information. The Petitioner referred to Section 3.4 Large Stationary Diesel and All Stationary Duel-fuel Engines for the emissions factors provided in Table 1. The[MD nameplate capacity is 3600 hp, and the [MD diesel fuel consumption is

equivalent to approximately 26.6 MMBtu/hr.

Emission Factor AP-42 Emissions Pollutant Lb/MMBtu

____ (lb/hr) Benzene 7.76e-04 0.0206 Toluene

_____ 2.81e-04 0.0075 Xylenes 1.93e-04

_____ 0.0051

__________ Propylene ______ 2.79e-03

_______ 0.0021

____ ______ Formaldehyde 7.89e-05

______ 0.0007

________ Acetaldehyde 2.52e-05 0.0002

____

____ Acrolein 7.88e-06 0.0056 Naphthalene 1.30e-04 0.0418
The uncontrolled emissions calculations presented in Table 1 are used in subsequent discussion.
Engine Usage For purposes of determining risk and regulatory cost (see Regulatory Impact Analysis), EPA has assumed that engines subject to the Subpart ZZZZ rule will operate at least 1,000 hours per year. However, as shown in Exhibit 1, AEL&P's standby Cl RICE are normally operated for only a few hours each month over many years and then dispatched for one or more months to provide energy during the infrequent interruption of renewable resources.
An ideal permit for Cl RICE at many Alaskan utilities would allow the engines to operate for a few hours each month for exercise and local grid issues but also allow them to operate for several months if needed to overcome a forced outage. Over a 5- or 10-year rolling average, operating hours would be relatively low. To our knowledge, there is no current permit mechanism under Title I or Title V which allows for a source to have such flexibility. Title I and Title V effectively require the owner/operator to permit the engines and the source for the maximum number of hours of operation possible under worst-case conditions. For this reason, neither an emergency category of 50 hours per year nor a limited use category of 100 hours per year would be acceptable for AEL&P's unique circumstances.
Regarding hours of operation for emergency units, EPA's John Seitz issued a memorandum to Regional Air Directors for calculating potential to emit foremergency generators (September 6, 1995). As taken from the OAR Policy and

Guidance Metarecord:
"Inherent physical limitations, and operational design features which restrict the potential emissions of individual emission units, can be taken into account in determining PIE. The EPA believes that generators devoted to emergency uses are clearly constrained in their operation, in the sense that, by definition and design, they are used only during periods where electric power from public utilities is unavailable. The combined period for such power outages during any one year will vary somewhat, but an upper bound can be estimated which would never be expected to be exceeded absent extraordinary circumstances. Also, the duration of these outages are entirely beyond the control of the source; when they do occur, they rarely last more than a day. EPA, therefore, recommends that the PIE of emergency generators be determined based upon an estimate of the maximum amount of hours the generator could operate, taking into account: (1) the number of hours power would be expected to be unavailable, and (2) the number of hours for maintenance activities. An appropriate default assumption is 500 hours per year."
At 500 hours per year, based on the emissions calculations in Table 1, we calculate that the EMD uncontrolled potential to emit would be less than 0.02 tons per year of HAP (total of 41.8 pounds per year). More importantly, given normal operation of the EMD for about 50 hours per year, actual uncontrolled emissions of HAP would be 4 pounds per year.
If EPA were to exempt from Subpart ZZZZ each electric utility CI RICE that actually operates less than 500 hours per year (especially over a multi-year period), AEL&P engines could be exempt from NESHAP ZZZZ under such conditions.
Add-On Control Technology As shown in Table 2, from the final rule RIA for Subpart ZZZZ, add-on control is the most expensive element of the rule.

Technology Diesel oxidation catalyst (DOC) Open crankcase ventilation (OCV) Capital Cost ($2008) L Annual Cost ($2008) $27.4 x hp -$939 4.99 x hp + $480 $0.26 xj?pif97J$0.065 x hp + $254For AEL&P's example EMD, the capital cost of add-on control is just over

$100,000 as estimated using the control cost data in Table 2. We have also discussed appropriate controls with vendors and arrive at an estimated capital cost of approximately $125,000 to $150,000. We note that construction in Juneau tends to be considerably more expensive than the Lower 48 due to the isolated nature of the community and concomitant logistics challenges as well as ambient conditions.
For purposes of this discussion, we use $125,000 for EMD add-on control technology to meet the requirements of NESHAP ZZZZ. Assuming a 10-year period at 7% discount rate, the capital cost of the equipment is approximately $17,797 per year. EPA's estimated annual cost per Table 2 for a 3600 hp engine equates to $18,480 which we assume also includes O&M costs for operating 1,000 hours per year.
We noted previously that Cl RICE located at a major source of HAP would have the same capital cost as CI RICE located at an area source of HAP and operating infrequently. Annual operating costs include the costs related to decreased engine efficiency (higher fuel consumption) due to add-on controls; performance testing; monitoring, recordkeeping and reporting; and more. Operating for only a few hours each month may extend the life of the add-on control technology, but the overall annual costs for the first 10 years are likely to be quite similar for an engine that operates frequently and one that operates infrequently.
For a typical scenario representing AEL&P operations, we assume the EMD is operated for 50 hours during a year with little to no interruption in the renewable energy resource. During such times, and using the lower $17,797 per year capital cost only estimate, the cost addition for the addon control technology is approximately 14 cents per kilowatt-hour.
As previously discussed, the Cost of Power for AEL&P's diesel-fired electricity is in the range of 30 cents to 52 cents per kilowatt-hour. Thus, the add-on technology required for NESHAP ZZZZ will effectively increase the cost of backup power provided by the standby generation to a range of 44 cents to 66 cents per kilowatt-hour.

We evaluated the cost/benefit of the rule in a manner consistent with best available control technology (cost of technology divided by quantity of pollutant reduced). Looking at a typical scenario of the EMD operating for exactly 50 hours during a year, we estimate uncontrolled HAP emissions at 0.002 tons per year (4pounds). We assume a 70% control effectiveness will result in a controlled HAP

emission of 0.0006 tons, for a quantity of HAP reduced equivalent to 0.0015 tons per year (2.9 pounds).
At an annualized cost of $17,797 to reduce 0.0015 tons of HAP per year, a cost of $12,164,858 per ton of HAP removed does not appear to be a reasonable cost for the citizens of Juneau to bear.
Performance Test Requirements Subpart ZZZZ requires an initial performance test of each Cl RICE and a test every 8,760 hours of operation or 3 years, whichever comes first. EPA's cost estimate for performance testing is based on $1,165 per day of testing for a portable analyzer. Three 1-hour runs, on two engines each day, is estimated to run $583 per engine.
Considering the unique circumstances of AEL&P's operation, it should be clear that such requirement not only creates an economic burden and operational inconvenience on AEL&P, but this will also have an unnecessary effect on the environment. Testing an AEL&P EMD every 8,760 hours of full-load operation would result in more than 20 years between testing events for the most used Cl RICE in the AEL&P fleet and more than 700 years for the least used Cl RICE in the fleet. Whereas testing an EMD every 3 years will provide little benefit given the low number of hours of actual operation and unexpected change in operational characteristics. Nevertheless, operation for the initial testing and periodic performance tests currently required by NESHAP ZZZZ will cause fossil fuel to be consumed in significant amounts along with the unnecessary emissions of criteria pollutants, HAP and carbon dioxide.

Conclusion We believe that the facts and analyses presented in this petition demonstrate that 40 CER 63 Subpart ZZZZ will have significant, detrimental economic consequences for the community of Juneau, consequences with no commensurate health cr environmental benefit. At an annualized cost of $17.79] to reduce 0.0015 tons of HAP per year, a cost of $12,164,858 per ton of HAP removed does not appear to be a reasonable cost for the citizens of Juneau to bear.
With respect to 40 CFR 63 Subpart ZZZZ, AEL&P requests that EPA provide an exemption from 40 CFR 63 Subpart ZZZZ, for:1. Each compression ignition ("Cl") reciprocating internal combustion engine ("RICE") deployed as backup for hydropower and other renewable energy generation, AND

2. Each Cl RICE which otherwise operates for less than 500 hours per year as determined on a multi-year basis.
We further request that any Cl RICE operating less than 500 hours per year be exempted from the performance testing requirements of 40 CFR 63 Subpart
zzzz.
We look forward to your response and appreciate your consideration of the unique circumstances operating an Alaska utility.

K. Scott Willis Vice President

Attachment: Exhibit 1 Annual and Average Annual Full-Load Equivalent Hours of Operation
Copies: EPA Region 10, Office of Air, Waste, and Toxics 1200 Sixth Avenue, M/S OAQ-107 Seattle, Washington 98101 Attn: Nancy Helm, Manager, helm.nancy@epa.gov
Alaska Department of Environmental Conservation Air Permit Program 410 Willoughby Aye, Ste 303 Juneau, Alaska 99811 Attn: James Plosay, Juneau Office Supervisor, jim.plosay@alaska.gov
Tapis Energy Group, Inc. P0 Box 270116 Fort Collins, CO 80527 Attn: Edward Settle, President, e.settle@tapisenergy.com0) C 

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## Lisa P. Jackson U.S. Environmental Prot€ Agency Ariel Rios Building 1200 Pennsylvania Aven Washington, DC 20460