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STATE OF CONNECTICUT Exhibit 3

DEPARTMENT OF ENVIRONMENTAL PROTECTION

In the matter of

The State of Connecticut

and

the Connecticut Resources

Recovery Authority

)

)

J

J

)

)

)

I

Trading Agreement

and Order No. 1494A

Whereas, the Commissioner of Environmental Protection ("Commissioner") and

the Connecticut Resources Recovery Authorit¥ ("CRRA"l agree that it is in

the public interest that they work cooperat~vely to 1mprove the air quality with1n the State of Connecticut and that the use of discrete emission

reduction credit (MDERC") trading to reduce nitrogen oxide ("NOx") emissions

will achieve this result in a t1mely and cost-effective manner:

A. At the request and with the agreement of CRR~, the Commissioner finds

the following:

1. CEL~ is a public instrumentality ~~d political subdivision of

the State of Connecticut establ1shed to provide solid waste

management services to Connecticut's municioalities. On

April 30, 2001 CRRA. will acquire from The~Connecticut Light and

Power C9mpany, and then own and operate the nine (9) oieces of

fuel-burn1ng equioment identified in Table 1 of this ~rading

Agreement and Order. Eight (8) pieces of the fuel burning equipment are combustion turbines (~peaking units·) and one (1) plece of the fuel burning equipment 1S an auxiliary boiler (~boiler·). The oeaking un1ts and the boiler are located at

Reserve-Maxim Roaas. Hartford, Connecticut (~facility~).

2. Pursuant to Subsection (b) of Section 22a-174-22 of the

Regulations of Connecticut State Agencies ("Regulations"), each

of the peaking units and the boiler identified in Table 1 of

this Trading Agreement and Order are subject to Subsections (d) through (k) of Section 22a-174-22 of the Regulations, pertaining

to the control of NOx emissions.

3. Results of the official u.S. Environmental Protection Agency (-EPA") Reference Method 7S stack testing oerformed for the

eight peaking units and one boiler are provided in Table 1 of

th1S Trading Agreement and Order:

Initials AlA.) (Prinlcll un IfJy'1:IcJ Paper)

7') El'n Street· Hartfllrll, CT 06106·SI~7

hltp:IIJep,slalc ,Cl,u~

till E"""I Oppnr"","r,I' t:t11I"III'C'r

f'JC'bran'nt CflllnC'rticul CfllJS11J1 Ruaurct MIJIIQgtmtlll: 1980 -lIJOO l A ../\....../'\... ~'-~~'-~'-

Date
Connec ic

ecovery

eso rces

uthority

radi g gree e

and Order o. 1 9

Table I

CRRA - NOx EMISSION RATES MeT LIMITS (lbs/MMBtu)

F".Jel FUEL FLER NOx p_~c_ Stack Stack Test Date of

B ming (lbs/MMBtu) Rate Test Rate Stack

Equipment I (lbs/ tu) Rate (IDs /MMBtu ) Test

Registr - (ppmvd)

tion No.

South 185.3 0.7 10/04/96

Meadow 1lA Other

R260 oil 0.81 0.289

South 187.2 0.71 10/04/96

Meadow 118 Other

R261 Oil 0.81 0.289

So h 75.7 0.67 0/02196

Meadow 12 OtJ:ler

R262 0 0.8_ 0.289

Sou h 59._ 0.61 0/02/96

eadow 128 Other

R263 Oil 0.81 0.289

South 201. 9 0.79 05/15/96

Meadow 13A Other

R264 Oil 0.81 0.289

So th 193.5 0.76 05/15/96

Meadow 38 a hrr R265 Oi 0.81 0.289

So h 180._ 0.69 0/1 /96

eadow 4.A at er

R266 Oil 0.81 0.289

South 179.5 0.69 10/11/96

Meadow 14B Other

R267 Oil 0.81 0.289

AW<ll~ary

Boiler A 0.285 12/7/99

o. 9 Res .Flua

R275 Oi o. a 0.25

The emiss'on rates for eac of the peak'ng . s and the boiler

identi 'ed in Table 1 0 t is Tradi g gree ent and Order are i

excess of Section 22a-17_-22, Tab e 22-1, of the Regu_at'ons, NOx Reasonably Available Control Technology ("~~CTn) emission

rate limits.

5. Pursuant to the"Department of Environmental Protection

( "Department") 's "Credi t Trading for Sources wi th Irregular NOx

Emissions" policy, revised on February 27, 2001, attached hereto

and incorporated by reference into t is rading Agree ent and

Order as Ex . it 1, eac peaking . as oeak daily Ox

emissio.s greater than three ti es the average daily emiss'o 5

d ri the ozo e season and 's t erefore considered a so rce

"t ~rre lar Ox emissio s.

Initials TZ..b~ -2- Date
Connecticut Resources

Recovery Authority

Trading Agreement

and Order No. 1494A

6.

8.

7.

B.

c.

Based on Department approved stack test data, it has been

determined that each of the peaking units' and the boiler's

emissions will not meet the applicable requirements of RACT

contained in Section 22a-l74-22 of the Regulations. C~~

proposes to use Full Load Emission Rates (·FLERs·) identified in

Table 1 of this Tradin~ Agreement and Order for the ourposes of

calculating DERCs requ1red. -

On and after the date that CRRA acquires each peaking unit and

the boiler identified in Table 1 of this Trading Agreement and

Order. pursuant to Subsection (j) of Section 22a-174-22 of the

Regulat10ns, CRRA will ~cquire sufficient approved ozone and

non-ozone season DERCs 1n order to meet appl1cable RACT

requirements and the requirements of this Trading Agreement and

Order for the following month's operation. CRRA intends to

continue acquiring approved DERCs as needed.

Approved DERCs are'defined for the purpose of this Trading Agreement and Order as those for wh~ch the Commissioner has

provided written authorization for use in compliance with

Section 22a-174-22 of the Regulations.

The Commissioner, in accordance with the orovisions of this Trading Agreement and Order, pursuant to Subdivision (3) of Subsection (d) of

Section 22a-l74-22 of the Regulations, hereby allows CRRA to comply with Section 22a-174-22 of.the Regulations through use of DERC

trading referenced in Section A, herein. to achieve the nitrogen oxide emission reduction required by Subdivision (ll of Subsection

(d) of Section 22a-174-22 or the Regulations.

With the agreement of C~~, the Commissioner, acting under

Connecticut General Statutes Sections 22a-6, 22a-171, 22a-174, 22a176. and 22a-177, orders CRRA as follows:

1. The terms and conditions established by this Trading Agreement and Order shall become effective on the date C~~ purchases each

of. the pe~king units and the boiler identifie~ in T~le 1 of

th1s Trad1ng Agreement and Order, and when th1s Trad1ng . Agreement and Order has been issued.

2.

J.

4.

5.

On and after the date which CRRA acquires each of the peaking

units and the boiler identified in Table 1 of this Trading

Agreement and Order, CRRA shall comply during operation of each

peaking unit and boiler with the FLERs shown in Table 1 of this

Trading Agreement and Order.

On and after the date which CRRA acauires each of the oeaking units and the boiler identified in Table 1 of this Traaing Agreement and Order, CRRA shall have in its possession .sufficient approved DERCs ~o meet.applicable RACT requir~~ents

and the requ1rements of th1S Trad1ng Agreement and Order.

On and after the date which CRRA acquires each of the peaking units and the boiler identified in Table 1 of this Trading Agreement and Order CRRA shall document and record the amounts

or all fuel used by each peaking unit and boiler each day and

the number of DERCs used for the ozone season (from May 1

through September 30 of each year) and non-ozone season (the remainder of the year) .

Approved DERCs shall be acquired on and after the date which

CRRA ac~ires each of the peaking units and the boiler. until

all of the peaking units and boiler emissions achieve permanent comoliance with the emission standards in Subsection (e) of

Section 22a-174-22 of the Regulations or until May 1, 2003,

-3- Date vbdo(
Connecticut Resources

Recovery Authority

Trading Agreement

and Order No. 1494A

whicheve~ occurs first. C~~ shall acquire approved DERCs, and

document and record the amo~'ts of NOx emissions and DERCs used

b¥ each peaking unit and the boiler each month in accordance w~th the appropriate emission rates and limits in Table 1 of

this Trading Agreement and Order, and shall maintain and submit

such records to the Commissioner in accordance with the

following and Secci?n 22a-174-4 of the Regulations:

a. DERCs required

(1) fo~ the peakinaunits Have in its possession suff~c~ent approve CERCs for the current day, based on

the following calculations (described also in Exhibit 1) i

At all times (mass calculation):

DERCs (in tons) = (((FLER in lbs/MMBtu) - (0.95 x NOx

RACT in Ibs/MMBtu» x (actual fuel use in Ibs/MMBtul 1 +

2000 pounds/ton

During the ozone season only (peak day calculation):

the maximum actual excess NOx emissions (in lbs) on any of

the days pro}ected by the Commissioner to be -moderate to

unhealchful. -unhealchful.· or "very unhealthful,· divided

by 3 and then divided by 13 (wiCh the result in cons):

CERCs -(in cons) = [(Maximum excess NOx in lbs) + 3] [13

lbs/day/tonJ i

As described in Exhibit 1 of this Trading Agreement and

Order, to the extent that DERCs used to offset on a peak day basis during the ozone season exceed the total mass

excess emissions, remaining DERCs may be used in the nonozone season in the same or subsequent years ~~til May I,

2003;

(2) For the boiler

(i) Before the first day of each month, calculate the

projected (estimated) worst case DERCs required for the

same calendar month as follows:

DERCs (tons) estimated = {((FLER in Ibs/MMBtu for the

boiler) - (0.95) x (NOx RACT limit in lbs/MMBtu)] x

(estimated fuel use in MMBtu)} + 2000 pounds.

CRRA shall acquire sufficient approved DERCs no later than

the first of each month to assure compliance for, at a

minimum. that calendar month. Excess DERCs from orevious

calendar months can be applied to subsequent months.

(ii) No later than the twentieth day of each month,

calculate the actual DERCs used in the preceding calendar

month, as follows:

DERCs (tons) actual = {rFLER in lbs/MMBtu for the boiler - ((0.95) x (NOx RACT lim~t in Ibs/MMBtu)] x (actual fuel

use in MMBtu)} + 2000 pounds.

b. Adjust upwards by 100% the DERCs required if DERCs are not

in CRRA's possession prior to use. However, nothing in

this Trad~ng Agreement and Order shall affect the

Commissioner'S authoritv to institute any oroceeding or

take any other action to require additional upward adjustment, based on the gravity of any alleged noncompliance or violation of law;

Initials -4- Date if (-zZ((i(
Connecticut Resources

Recovery Authority

Trading Agreement

and Order No. 1494A

c.

d.

e.

f.

g.

Make and keep records of daily fuel use, excess NOx

emissions and, for the Deaking units during the ozone

season, the ozone classlficat~on as forecasted by the

Commissioner on the previous day;

No later than March 1, 2002, 2003 and 2004( include with

its annual emissions report to the Commiss~oner, DERCs

used (calculated as described in paragraphs C.S.a. and

C.S.b. of this Trading Agreement and Order), by ozone and

non-ozore seasons, for the previous calendar year;

Keep records and supporting documentation as described in

this section for a m~nimum of five years, commencing on

the date such records are created;

Keep documentation to demonstrate that DERCs used during the ozone season were generated during the ozone season.

The ozone season is £rom May 1 through September 30 in any calendar year. Generator certificat~on of this fact shall

be suffic~ent; and

Submit the records specified above to the Commissioner

within thirty (30) days of receipt of a written request from the Commissioner.

6. Pursuant to Subdivision (3) of Subsection (d) of Section 22a174-22 of the Regulations I CRRA may use NOx allowances, pursuant

to Subsection (j) of Sect~on 22a-174-22 of the Regulations to

achieve all or a portion of the reductions for the peaking units

required by Section 22a-174~22 of the Regulations. Any allowance used for compliance with Subsection (e) of Section

22a-174-22 of the Regulations for the peaking units shall be

subject to all restr~ctions and/or requirements applicable to

DERCs contained in this Trading Agreement and Order.

7. No later than May 1, 2003, CRRA shall comply with the

requirements of Subdivision (1) of Subsect~on (d) of Section

22a-174-22 of the Regulations. However, after full program review of this and other Trading Agreements and Orders and, if

determined to be appropriate, the Commissioner may grant a

written extension of this Trading Agreement and Order.

8. The FLERs may be adjusted.upon satisfactory demonstration to the

Department and written approval by the Gommissioner.

9. Noncompliance with an established FLER shall subject CRRA to

make restitution by matching the quantity of emissions ("true up~) caused by the exceedance plus a 100% premium. The true up in tons of DERCs shall be equal to the FLER exceedance in

Lbs/MMBtu, multiplied by the total heat input during the period of noncompliance divided by 2000 lbs/ton. If the period of

noncompliance is not known, the time period from the completion of the last/previous Department witnessed stack test through the date.th~ FLER comDliance is achieved as a~proyed by the . Comm1ss~oner shall be used. However, noth~ng·~n th~s Trad~ng

Agreement and Order shall affect the Commissioner'S authority to

institute any proceeding or take any other action to require additional upward adjustment, based on the gravity of any alleged noncompliance or violation of law.

10. Pursuant to Subsection (k) of Section 22a-174-22 of the

Regulations, CRRA shall conduct NOx emission tests of the

peaking units and boiler at least once every five years commencing from the date identified in Table 1 of this Trading Agreement and Order.

Ini tials TlG"W -5- Date '1 Infer
Connecticut Resources

Recovery Authority

Trading Agreement

and Order No. l494A

11.

12.

13.

14.

15.

Each allowance used for comoliance with Section 22a-l74-22 of

the Regulations for the peaKing units shall be equivalent to one

DERC and shall be deducted from CRRA's NOx Budget Program comoliance account upon such use. Allowances shall be

considered used for comoliance with Section 22a-l74-22 of the

Regulations for the peaking units when they are transferred from

the facility's c9mpl~ance account or overdraft account to a

State of Connect~cut NOx allowance ret~rement account.

AporQya+s. CRRA shall use best efforts to submit to the Comm~ss~oner all documents required by this Trading Agreement and Order in a complete and approvable form. If the

Commissioner notif~es CRRA that any document or other action is

deficient I and does not approve it with conditions or modificat~ons, it is deemed disapproved, and CRRA shall correct

the deficienc~es and resubmit it within the time specified by the Commissioner or, if no time is specified by the

Commissioner, within 30 days of the Commissioner'S notice of

deficiencies. In approving any document or other action under

this Trading Agreement and Order, the Commissioner may approve the document or other action as submitted or performed or with

such conditions or modifications as the Commissioner deems

necessary to carry out the purposes or this Trading Agreement and Order. Nothing in this paragraph shall excuse noncompliance

or delay.

Defin~ti9ns. As used in this Trading Agreement and Order, -Comm1ss~oner· means the Commissioner or a representative of

the Commissioner;. ·Other oil- means a fuel that is liquid at

sta..."dard condi.tions and is not residual oil; ·Residual oil- means

any fuel oil of No.4, No.5, or No.6 grades, as defined by Commercial Standard C.S. 12-48; -Ozone season- means the period from May 1 through September 30 in a-~y given calendar year. The

date of -issuance- of this Trading Agreement and Order is the

date the Trading Agreemen~ and Order is deposited in the U.S.

mail or personally delivered, whichever is earlier.

~ates. The date of submission to the Commissioner of any ocument required by this Trading Agreement and Order shall be

the date such document is received by the Commissioner. The

date of any notice by the Commissioner under this Trading Agreement and Order, including but not limited to notice of

approval or disapproval of any document or other action, shall

be the date such notice is deoosited in the U.S. mail or is

personally delivered, whichever is earlier. Except as otherwise

specified in this Trading Agreement and Order, the word "day· as

used in this Trading Agreement and Order means calendar day. Any document or act~on which is required by this Trading Agreement and Order to be submitted or performed by a date which

falls on a Saturday, Sunday or a Connecticut or federal holiday shall be submitted or performed by the next day which is not a

Saturday, Sunday or Connecticut or federal ho12day.

~r~if~cation of d9cumen~~. Any document, including but not ~m~te to any not2ce t w ~ch is required to be submitted to the

Commissioner under th~s Trading Agreement and Order shall be

signed by CRRA or, if CRRA is not an individual. by CRRA's chief

executive officer or a duly authorized reoresentat~ve of such

officer, as those terms are defined in §2~a-430-3 (bl (2) of the Re~lat~ons of Connecticut State Agencies, and by the

individual(sl resoonsible for actuallx preparing such document, and CRRA or CRRA'S chief executive ofricer and each such

individual shall certify in writing as follows: -I have

personally exa~ined and am fa~iliar with the information

submitted in this document and all attacr~ents thereto, and I

certify, based on reasonable investigation, including my inquiry of those individuals responsible for obtaining the informat~on,

that the submitted information is true, accurate and complete to

the best of my knowledge and belief. I understand that any false statement made in the submitted information is punishable

as a criminal offense under §53a-l57b of the Connecticut General

Initials RC;-(j -6- Date ~(]r
Connecticut Resources

Recovery Authority

Trading Agreement

and Order No. 1494A

16.

17.

18.

19.

20.

21.

22.

23.

24.

25.

Statutes and any ocher applicable law."

N~nc~mp~ian~e. This Trading Agreement and Order is a final order

o t~omm~ssioner with resoect to the matters addressed

herein, and is nonappealable-and immediately enforceable.

Failure to comply w~th this Trading Agreement and Order may subject CRRA to an injunction and penalties.

FesSe stAtements. Any false statement in any information

s m~tted pursuant to this Trading Agreement a.."1d Order is

punishable as a criminal offense under §53a-157b of the

Connecticut General Statutes and any other applicable law.

Noti~~ ~f tr~nsser; li~ility of CRRA. Until CRRA has fully

comp ~e w~t t ~s Tra ~ng Agreement and Order, C~~ shall not~fy the Commissioner in writin~ no later than 15 days after

transferring all or any portion or the facility, the o~erations.

the site or the business which is the subject of this lrading Agreement and Order or after obtaining a new mailing or location

address. CRRA's obligations under this Trading Agreement and

Order shall not be. affected by the pa~sag~ of title to any property to any otner person or mun~clpal~ty_

80~issto~Ir'~ power~t Nothing in this Trading Agreement and r~r s a a fect t e Commissioner's authority to institute any proceeding or take any other action to prevent or abate

violations of law, prevent or abate pollution, recover costs and

natural resource damages. and to impose penalties for past. present I or future violations of law. If at any time the Commiss~oner determines that the actions taken by CRRA Dursuant

to this Trading Agreement and Order have not successfully corrected all violations, fully characterized the extent or

degree of any pollution, or successfully abated or prevented pollution. the Commissioner may institute any proceeding to

reQ¥ire CRRA to undertake further investigat10n or further

action to prevent or abate violations or pollution.

CR~'S Obligations ¥nder law, Nothing in this Trading Agreement

an Order sal rel~eve CRRA of other obligations under

applicable federal, state and local law.

No assurance b

6 aQmmis~ioner, No provision of this Trading Agreement ana: r er an no action or inaction by the

Commissioner shall be construed to constitute an assurance by the Commissioner that the actions taken by CRRA pursuant to this

Trading Agreement and Order will result in compl~ance or prevent

or abate pollution.

Acc~ss to farility- Any representative of the Department of

EnVlronmenta Protection may enter the facility w~thout prior notice for the purposes of monitoring and enforcing the actions

required or allowed by this Trading Agreement and Order.

No effact Qn,r*ghts Qf other Qet~Ons. This.Trading Agreement and Or er nelt er creates nor aLtects any r~ghts OL persons or

municipalities that are not parties to this Trading Agreement and Order.

go Creation Qf Prooertv Riahts. This Trading Agreement and

rder does not create any prQperty rights with respect to these

DERCs.

~~cg to CQrnmission,r of,chanqes, Wi~hin 15 9ays of ~he date

ecomes aware 0_ a cnange ln any ~nformatlon subm~tted to

the Commissioner under this Trading Agreement and Order. or that

any such information was inaccurate or misleading or that any relevant information was omitted, CRRA shall submit the correct

or omitted information to the Commissioner.

26. Notific~tioo Q! ~QncQmpliance, In the event ~hat CRRA

aware t at lt 1 not or may not comply, or dld not or

becomes

may not

Initials J1f:lo,) -7- Date Cf(-z 7(0'1
Connecticut Resources

Recovery Authority

Trading Agreement

and Order No. l494A

27.

comply on time, with any requirement of this Trading Agreement and Order or of any document required hereunder( CRRA shall

immediately notify by telephone the individual ~dentified in the

next paragraoh and shall take all reasonable steps to ensure

that any noncompliance or delay is avoided or, if unavoidable,

is minimized to the greatest extent possible. Within five (5) days of the initial notice, CRRA shall submit in writing the

date, time, and duration of the noncompliance and the reasons

for the noncompliance or delay and propose, for the review and

written aporoval of the Commissioner, dates by which compliance will be achieved, and CRRA shall comply with any dates which may be approved in writing by the Commissioner. Notification by CRRA shall not excuse noncompliance or delay, and the

Commissioner's approval of any compliance dates proDosed shall

not excuse noncompliance or delay unless specifically so stated

by the Commissioner in writing.

SUbm~ssion 9£ gocument~, Any document required to be submitted

to t e Comm~ss~oner un er tnls Trading Agreement and Order

shall, unless otherwise specified in this Trading Agreement and

Order or in writing by the Commissioner, be directed to:

Wendy Jacobs

Department of Environmental Protection

Bureau of Air Management Emissions and Cred~t Trading Section

79 Elm Street

Hartford, Connecticut 06106-5127

Initials ~~ -8- Date ~Ol
connecticut Resources

Recovery Authority

Trading Agreement

and Order No. 1494A

CRRA consents to the issuance of this Trading Agreement and Order without

further notice. The undersigned certifies that he/she is fully authorized

to enter into this Trading Agreement and Order and to legally bind CRRA to

the 'terms and conditions of the Trading Agreement and Order.

Connecticut Resources Recovery Authority

~/iA'Y Signature: _R-G (1\)( k rt-------------

Type Name: Robert E. Wright

Type Ti tIe: ---lP-=r..:::e:..=s~i~d..::.e~nt~ _

Date: Apri 1 27; 2001

Issued as a final order of the Commissioner of

Environmental Protection on \_~_~_~ __

MAILED CERTIFIED MAIL,

RETURN RECEIPT REQUESTED

Certified Document

-9-
EXHIBIT 1

TRADING AGREEMENT AND ORDER NO. 1494A
STATE OF CONNECTICUT

DEPARTMENT OF E VIRONME TAL PROTECTIO

Updated February 27 2001

Credit Trading for Sources with Irregular 0 Emissions

The following ouLlines th Department's concerns and methodology for dealing with peaking units

( peakers") that have maximum peak daily emissions that are substantially higher than their average daily

emissions and that C Qose to achieve Ox compliance via credit trading pursuant to §_2a-17 __(j) of the

Regulations of Connecticut State Agencies ('Regulations'). For purpos s of this protocol, peakers are

defined as sources with maximum peak daily Ox emissions grea er than three times their average daily

emissions I durinc the ozone season.

The basic cone pt of the trading program is that sources with excess Ox emissions (a rale that exceeds

the rate limits in the Regulations) rna obtain Ox discrete emissioD reduction credits ( 'DERCs ) from

sources that ha e' over-conrroUed 'their Ox emissions. Although rypical sources can obtain credits on a

mass basis (one ton ofDERCs to offset one ton of excess emissions) with an acceptable environmenml

outcome sources ith large variations in emissions from day to day pose an additional problem for ozone

attainment planning.

The most common peakers are electrici[}' generating units mat n during times of high electrici[}'

consumption. Electricity demand is often the highest during ho humid days of !.he summer when the

potential for ozone formation is also high. Peakers frequently b ve high emission rates. To the extent that

these units produce emissions at exac Iy the time when emissions need to be reduced to limit ozone

formation, allowing peakers to continue to comply with new rate limits through the use ofDERCs aD a

ton-far-ton basis will exacerbate this effect. On the other hand if it can be demonstrated that the DERCs

being used by peakers were generated on a comparable basis (i.e. during days of high ozone potencial).

then ton-for-ton use by peakers would be appropriate.

The full impact of the Ox emissions from these types of facilities during summer operation must consider

temporal variability as well as mass of excess emissions. Any DERC trade must consider equivalency to

the Ox reductions that control equipment would produce on an ozone day on both a temporal and a mass

basis. The protocol below places appropriate requirements on peaking units to reflect the greater impact

of NOx emitted under this type of usuge pattern. Attachment I provides a detailed xample of how this

policy would be applied to a peaker. Attachment 2 provides an explanation of the calculations underlying

this policy.

Ox Emissions Reduction CrediJ Use Computation For Peakers

• Peakers are only considered to be a temporal issue for the ozone season months.

• All xcess Ox emissions during the winter (non-ozone season) need only be offset by DERCs on

a mass basis.

• Prior to each ozone season there will be a prospectj e estimation to determine how many tons of

DERCs must be . on hand" during the ozone season. retrosp cti e calcul:Hion will detennine

how many DERCs were actually 'used" during the ozone season.

1 - For purposes 0 this ana.lysis,:1 er:l:e d.a.ily emissior.s n _ e ermine by ivi ing a our c's 01.31 ozone s~n

0:,< emissions (pounds) by 153 da s to aleula e an J ver3ge pound/day alue.

( Prinli.~t1 on ReI:. deu P per

9 Elm Streel • H n onl. CT 0 10 ·51_

hllp·l/dep. IJle I U

AJI Eq"al Oppurtuml. Emplu. a r~

n~brating Connl'ccicuJ Coastal RtsOllru ,"!anagt'!'lrllt: f~ 0 .10~O II.:J
For ERe use during the ozone season:

1. Prospective estimation (pre-ozone season) will determine the number of DERCs that must be

provided for the ozone season. (Beginning in 1996. the DERCs must be in place no later than

May 1.)

DERCs required for lhe ozone season shall be calculated on the following bases:

(a) Mass basis: DERCs required will be equal to the tOlal number of tons of estimated excess

NOx emissions over the entire ozone season, calculated in the same manner used for olher

sources usingDERCs (i.e.• including any discounts).

(b) Ma..'(-peak basis: DERCs required (in lons) will be calculated by dividing one·third of the

estimated maximum daily excess emissions (in pounds) for any day during !.he ozone

season by 13 poundsl(ton-day) '. (see Attachment 2 for an explanation of this

calculation):

DERCs required (tons) = «Estimated Maximum Excess NOx in lbslday) + 3]

+ [13Ibsl(loooday)]

Sources will be required to hold credilS equal to lhe greater of me amount calculated

on a mass or max-peak basis. The timing of actual credit possession will be governed by

the terms of the specific rrading order issued for that source.

2. Retrospecti"e calculalion (post-ozone season) will determine the actual credit use and the DERC

surplus, if any. At the end of the ozone season.lhe calculations required in step 1 above will be

repeated using:

for (a), the actual (ralher than estimated) total excess emissjons for the ozone season, and

for (b), the (rather than estimated) maximum daily excess NOx emissions on any of the days

projected by the Commissioner to be ·moderate to unhealthful-. ·unheallhful-. or ·very

unhealthful-.

The number ofDERCs required pursuant to this policy will be the greater of the number of

DERCs calculated on lhe mass basis or the max-peilk day basis.

Of the torol DERCs needed for the ozone season: a number ofDERCs equal to the unit's actual

total excess emissions (on a mass basis) will be used to cover such actual excess emissions. The

number of DERCs equal to the difference between the total number needed pursu:mt to this policy

and total actual excess emissions shall be converted from ozone se:1S0n DERCs to non-ozone

season PERCs. Any surplus DERCs (those purchased pursuant to the pre·ozone season

estimation and not used to cover actual emissions nor converted to non-ozone season emissions)

may be c:uned forward for use as ozone season DERCs through April 30,2003 excepl as may be

limited by the trading agreement and order, or by regulation.

2 - For the pre-ozone se:J50n estim:ttion. the maximum daily excess NOx emissions (in Ibslday) is the difference

between the ma..1.imum ex:pected NOx emission rate and 95% of the allowable NOx emission r.lle under Seclion 22:1-

174-11(e) of th~ R~gulalions (lb/MMBtu) multiplied by the unil's maximum r:lIed C:lp:lCilY (MMBlulhr) Jnd by the

estimJled m:lx;mum hours of opcr:lIion per day (Ilrs/day).

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Attachment 1

Example ofthis policy being applied to a peaking unit

Before the ozone season. a peaker has estimated its toral excess emissions to be 15 tons for the ozone

season. It is also estimated that the maximum excess emission on a day projected to be "moderate to

unhealthful" or worse will be 5000 pounds. Actual ozone season excess emissions are listed in the table

below. The analysis of how this policy would be applied to this peaker follows after the table.

Date NOx Excess NOx OERCs "Mod to Peak Day NOx

Emissions needed (mass Unhealthful" (or DERCs needed

(pounds) basis) (tons) worse) forecast? (tons)

5/1 1,000 0.50 no 25.64

5/15 2,000 1.00 yes . 51.28

6/1 3,000 1.50 no 76.92

6/15 4,000 2.00 ves .. 1'02.56

7/1 1,000 0.50 yes 25.64

7/15 5.000 2.50 no 128.21

8/1 1,000 0.50 yes 25.64

8/15 3,000 1.50 no 76.92

9/1 3,000 1.50 . yes 76.92

9/15 4,000 2.00 no 102.56

I 13.00 I

SUM (mass basis)

ANALYSIS:

PRE-OZONE SEASON ESTIMATION

128 21 Estimated Ozone Season Tons Needed (max-peak basis using

• 5000 pounds as estimated maximum daily excess emissions)

15.00 Estimated Ozone Season Excess Emissions (mass basis)

128.21 Number of ozone season DERCs thaI need to be held no later than May 1

POST-OZONE SEASON CALCULATION

10256 Ozone Season Tons Needed (max-peak basis using

• 4000 pounds as actual m8.?'imum daily excess emissions)

-13.00 Actual Ozone Season Excess Emissions (mass basis)

89.56 Number of Ozone Season DERCs convened to Non-Ozone Season DERCs

max-peak basis

SUMMARY

Of the 128.21 tons of ozone season OEACs th~t were reserved by May 1,

13.00 tons were used to cover actual ozone season emissions on a mass basis

89.56 tons were converted to non-ozone season OERCs

25.64 tons were carried forward as surplus ozone season DERCs

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Attachment 2

Explanation ofMax-Peak Basis Calculation

Unless it can be demonstrated otherwise, DERCs are assumed to be created by relatively small daily

reductions in NOx emissions over the course of an entire ozone season (153 days). The average daily NOx

emissions reduction represented by each ton of credit is 13 pounds/day calculated as follows:

2000 pounds/ton + 153 days =13 pounds/(ton-day)

Thus, one DERC (ton) would be equivalent to a reduction in NOx emissions of 13 pounds/day.

For example. if a peaker emits one ton of excess NOx per day when operating. but only operates for five

days during the ozone season. t.be owner/operator of that source would nominally need to obtain five tons

of DERCs on a mass basis. However. those DERCs used to offset this peaker's excess emissions are likely

to have been created by relatively small daily reductions in NOx emissions from another source over the

course of an entire ozone season (153 days). In this example. assuming a purchase of five tons of DERCs,

that calculates out to a NOx reduction of approximately 65 pounds.

(5 tons x 2000 pounds/ton) + 153 days =65 pounds/day

Clearly. on any day that the peaker operates. there will be many more tons of excess Ox emitted than

NOx credits created (on lhe same day) [0 offset those excess emissions (on the order of 1.935 pounds in

this example).

(I ton x 2000 pounds/ton) - (65 pounds credit) = 1.935 pounds excess NOx emissions

While the total amount of NOx emitted by a peaker would be offset on a seasonal averoge basis. on the

-peaking" day there would be a potentially significant increase in NOx emitted, and thus an increase in

potential ozone cre':l.Eion. [n order to achieve a commensurate reduction in ozone creation potential for

peakers, an adjusunent in the calculation of required DERCs is needed. One approach would be to require

DERCs in a quantity that would ensure that the daily average reduction represented by those DERCs

would equal the maximum daily excess NOx emissions from the peaking source on any day that it ron. On

this basis. a peaking source with a maximum 24-hour excess NOx emission of one ton would be required

to purchase 153 tons of DERCs.

1 ton/day x 153 dnys/season =153 tons/season

This 153 tons of DERCs would be adequ.:ne to offset excess emissions of one ton per day for as many days

as the source operated during a particular ozone season. This has been deemed to be unduly stringeD[.

given the diversity in operation of some of the peakers. In light of the foregoing. this requirement has been

adjusted downward by two-thirds.

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