CAIR Replacement Rule Discussions between CenSARA and EPA

April 1, 2009
I . Introduction On Wednesday , April 1, 2009, EPA held a call with Central States Air Resource Agencies (CenSARA) to discuss the CAIR replacement rule

. The brief summary that fol lows 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 Sam Napolitano , CAMD, began with a short introduction , explaining that EPA was beginning the process of creating a replacement rule for CAIR

. The Agency is reviewin g all options , setting up anal ys e s , and preparing technical models

. The goal is to finalize a replacement rule within two years . The primary objectives are to help s tates compl y with the NAAQ S and to reduce interstate transport

. Therefore, EPA has decided that it would be best to start working with states immediately

. EPA would like to hear from the states about what type of replacement rule would most help the m mee t air quality requirements

. Sam 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 states to talk to the key EPA staf f that will actuall y develop and write the rules , as well as the OGC attorney s as signed to the rule development

. Sam stressed that EPA is interested in hearing the states ' thoughts and concerns

. Every thing is on the table as EPA puts together ideas for the new Assistant Administrator f or Air and Radiation , who should arrive within the next couple of weeks

. II I . CenSARA Opening Comments Arturo Blanco, City

of Houston, Air Quality

Control , thanked EPA for the opportunity to share thoughts and ideas a bout how to approach a CAIR replacement rule. He noted that the session would be an informal opportunity for states and other members to ask questions, express concerns, or generall y share ideas. Although notes will be taken on the call, it is understood that the ideas or suggestions brought up on the call are not necessarily the official positions of the different government agencies represented on the call. I V . Core Issues Outlined by EPA Sam Napolitano said that EPA would lay out the issues , but that he w ould be unable to indicat e how EPA w ould eventuall y proceed, as the Agency is uncertain at present as to how to respond to the issues raised by the CAIR court decision

. The options for a replacement rule are very broad and EPA is looking at new w ay s to address the section 110( a)(2)(D) finding of failure. The purpose of this meeting is to gather different ideas and thoughts to present to thePage 2

new A ssistant A dministrator for A ir , whose responsibility it will be to decide how to address the ramifications of the court decision

. Sam Napolitano, Tim Smith , OAQPS , and Sonja Rodman, OGC, then outlined the key issues EPA is considering in the CAIR replacement rule

. Sam asked that speakers identify themselves as notes o f the meeting were being prepared and would be share d with all participants on the call

. EPA outlined the following major issues : 1 . Baseline What is the starti ng point? What is the baseline? When the original CAIR rule was developed there were many questions about how to set up a baseline and what to take into account when creating th e baseline

. T he situation has continued to change , and EPA would like to know how states believe the baseline should be created , and what factors should be considered in the baseline. 2 . Quantifyi ng significant contribution This is one of the key

issues from the court decision

. The court held that CAIR failed to adequatel y quantify and then eliminate each state ' s significant contribution

. There are many smaller issues that come up under this general rubric, but the key questions pivot on how significant contributi on is quantified and then what part of the quantified emissions must be eliminated. 3 . Remedy What remedy

should be applied to the quantified significant contribution ? What typ es of approache s should be considered ? I s the trading option p ractical? 4 . A ffected Area/National Ambient Air Quality Standards (NAAQS) Which states or regions should be covered b y 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
. V . CenSARA Response to Core Issues 1 . Baseline In response to a question about why BART would be an issue in a future CAIR baseline, Tim Smith explained that many states were rel yi ng on CAIR to meet the BART requirements. Because CAIR now can be in effect for onl y a limited period of time , and because it is unclear what will repla ce CAIR, many states are turning back to the BART requirements. EPA is tryingPage 3

to decide how much consideration, if any, to give the probable reductions from plants installing BART controls when considering a baseline for the replacement CAIR program. Calvin Ku, Missouri DNR, not ed that the states use the current ye ar data during the SIP process and that using future year projection s might not give a realistic view of the emissions. Using the current year data lines up with the states ' process and en sure s that the baseline is generated from full y quality

- assured data. He also suggested that if a future baseline year were to be used, it would be best to align it with the 2012 and 2018 non

- attainment deadlines. Sonja Rodman mentioned that use of a future year baseline was one of the parts of CAIR that the court upheld . Other participants supported using a future year baseline, but wanted to know which year of data the future ye ar baseline would be based on. Tim said he believed that future ye ar modeli ng would be based on 2005 emissions data. Kim Herndon, TCEQ , mentioned that it would be most helpful for states if the replacement CAIR impl eme ntation dates corresponded to the attainment dates for the 2008 NAAQS
. 2 . S ignificant contribution Tyler Harris , City

of Saint L ouis Air Pollution Control , said he thought EPA should raise the level of control considered cost effective. He noted that EPA ' s determination of what controls a unit needed to put on under CAIR was based on a determination of what controls were highl y cost - effective. The tightening of the standards might require a level of control that had not been considered highly cost - effective in the earlier anal ys is. Calvin Ku was concerned about how EPA might deal with maintenance areas . He suggested a higher cost - effectiveness trigger for maintenance areas than for non

- attainment areas because using the same standard for both might unfairl y punish some sources. Tim Smith explained his understanding of the LADCO proposal that had been o utlined in an earlier call. LA DCO is looking at the CAMx modeling to apportion contribution by states. States that contribute 4% of the standard or more would be required to put on the most stringent controls, states between the 4% and 1% level would be required to put on less stringent controls, and states below 1% of the threshold would be required to put on the least stringent controls. Tim noted that his explanation was based on a preliminary outline, and that LADCO w ould be issuing the official prop osal soon. 3. Remedy There were not many comments related to remedy

. Some participants asked EPA about the ty pes of plans the Agency

was considering. EPA responded that the Agency is considering the full range of possibilities. Some of the specifi c suggestions that have been offered include a strictly performance

- based standard that all sources would be required to meet. Other ideas have included a performance

- based standard with trading, perhaps limited to intrastate trading

.Page 4

One of the big q

uestions for the Agency

is whether section 110( a )(2)(D), which requires EPA to specificall y quantify each states ' contribution to another state, also requires the Agency to fully eliminate that quantified contribution, or whether EPA is allowed to provide a partial remedy. Calvin Ku suggested that EPA needs to look at large industrial boilers in addition to EGUs . He also said that he believed cement kilns should be considered as sources to control. Tyler Harris mentioned that according to modeling in the St. L ouis area, mobile sources play a large role in attainment problem s in St. L ouis

. Tyler also n o t e d that some steel mills hav e a large impact. The Iowa representative suggested that EPA look at source apportionment not simply on a state - by

- state basis , but also on the basis of the contributing sectors in the states. A breakdown of apportionment b y sector would provide a detailed anal ys is of what needs to be controlled and would allow EPA to target a program to th os e sources that have the largest impact on non

attainment. 4. Affected Area/Standards Jim Kavanaugh , Missouri DNR, and Eddie Terrill , Oklahoma DEQ, suggested that CAIR should be a national program , with Oklahoma representatives specificall y stating that Oklahoma should be included in any future CAIR region. In suggesting that the CAIR replacement program should be national , CenSARA members also indicated that EPA should create a rule addressing the most recent NAAQS . They n o ted that if EPA addressed the most recent standards, the program would by definition include a large geographic area, which could help justify a national program. CenSARA members advocated for a strong multi

- pollutant program based on the most recent standards. States are currentl y being asked to comply with the new, lower standards

. Because of the continued lowering of the standards , it is clear states will need strong regional and national multi

- pollutant programs , such as the CAIR replacement rule, to meet the recent, more stringent NAAQS

. Sam Nap olitano asked what other ty pes of pollutants the states would like to see a replacement CAIR rule address. Jim suggested EPA might consider the new annual and 24

- hour PM standard s and how the Agency might control direct PM ty pe pollutants and volatiles, w ith an emphasis on the direct PM pollutants. Many areas mentioned interest in getting federal help to deal with non

- attainment issues. EPA n o ted that the federal government could help with the transport part of non

- attainment. However, under section 110( a)(2)(D) EPA is only allowed to look at the parts of non

- attainment caused b y interstate transport . Thus , local controls will alway s play a vital role in meeting the attainment and maintenance standards. There was some confusion about why EPA created a summer and an annual program. Tyler Harris said he thought that sources should be required to use whatever controls werePage 5

installed year round. Sam noted that the summer program was created as extra insurance at the behest of the eastern states and would likely be included in a replacement program. VI . Conclusion David Thornton , MPCA, suggested that EPA consider the potential impact of other possible climate control programs, specificall y on states that were not originally in CAIR, but which mi ght be included under an expanded replacement program. These states, and sources in those states , will be making critical choices about what technologies to install and how to invest in emission controls ; thus , having some idea of the future regulatory landscape would be very useful. EPA noted that on an earlier call the environmental NGOs had also asked EPA to take a holistic approach. In response to questions about further comments, EPA suggested that participants use notes of this meeting , which wi ll be distributed to all the participants, as one avenue for further comments. Once the formal process is started a docket will be opened and official comments can be submitted. Otherwise, participants should feel free to email EPA contacts with suggesti ons or ideas. Sam Napolitano concluded the call by saying that this call was one of the first series of teleconferences with states and other stakeholders, including LADCO, OTC, NACAA, industry representatives, and environmental groups

. When this seri es has concluded, EPA will meet with states again to report what EPA has heard from all of the groups

. This will allow the m to react and respond, and to continue the general dialogue

.