1 Summary of Meeting with Clean Energy Group Regarding the Proposed Statio nary Existing RICE NESHAP April 15, 2009

Attendees

Jaime Pagán, EPA Participants from: Melanie King, EPA Con Edison Michael Horowitz, EPA Florida Power & Light Graham Fitzsimons, EC/R NiSource Tanya Parise, AGTI Exelon Carrie Jenks, M.J. Bradley & Associates (moderator for Clean Energy Group) National Grid

PSEG

Purpose of Meeting

The purpose of this meeting was to di scuss the proposed national emission standards for hazardous air po llutants (NESHAP) for existing stationary reciprocating internal combustion engines (RICE). The proposed NESHAP for existing stationary RICE was published in the Federal Re gister on March 5, 2009 (74 FR 9698).

Summary of Meeting

General

The Clean Energy Group (CEG) requested th is meeting with EPA to discuss the recently proposed NESHAP for stationary engines. Clean Energy Group is a coalition group focused on the expanded use of clean energy technologies. Clean Energy Group has previously worked with EPA on other ru lemakings. Participating at this meeting were several representatives of CEG member companies (see Attendees). Clean Energy Group provided a list of specific questions for EP A, which is included as Attachment 1 to these meeting minutes. The list of questions is a collaboration of issues brought up by individual member companies. In additi on, CEG indicated that each member company will be submitting separate comments on the proposed rule. A summary of this meeting

will be available in the docket for this rulemaking (Docket ID No. EPA-HQ-OAR-2008- 0708).

Jaime Pagán was asked to provide an overview of the proposed regulation. Jaime explained that the proposal is a result of consent decrees on diesel exhaust emissions and

maximum achievable control t echnology (MACT) rulemaking in general and is based on

settlements reached between EPA and envir onmental groups. The rule was proposed on February 25, 2009, and must be promulgate d by February 10, 2010, under the consent decree. Jaime noted that the public comme nt period for the proposed rule that was originally set at 60 days ha s been extended by 30 days.

Jaime indicated that EPA promulgated st andards in 2004 for stationary engines greater than 500 horsepower (HP) located at major sources. Last year, EPA issued regulations for new stationary engines e qual to and below 500 HP located at major2 sources and new stationary engi nes located at area source. This proposed rule addresses stationary engines not previ ously covered. Plus, the proposed rule addresses existing stationary diesel engines great er than 300 HP as a result of the consent decree to target

diesel exhaust emissions.

Jaime pointed out that EPA will not be making decisions during this conference call, but will try to answer industry’s ques tions. Jaime noted that EPA will have to review all comments received on the proposed rule and then provide recommendations to management for final decisions.

CEG Questions to EPA

As mentioned, CEG had a list of questions for EPA. The complete questions are available in Attachment 1 of these meeting minutes and are not repeated in full below.

1. 40 ppmvd CO Limit

The CEG asked what EPA’s intent underlying the 40 parts per million (ppm) proposed carbon monoxide (CO) limit is. Ja ime responded that the 40 ppm CO limit is based on EPA’s MACT floor analysis. The limit is not expected to require add-on controls for engines subject to the limit and the level should be achievable without the

installation of aftertre atment. In response to CEG’s question if a non-numerical standard could be considered, EPA replied that a non- numerical standard is not an option for stationary engines located at major sources. A non-numerical standard may be an option for stationary engines located at area s ources, EPA said. EPA noted that it would appreciate specific comments related to the proposed management practices.

2. Engines at Nuclear Plants

The CEG asked if EPA had specifically l ooked at stationary emergency diesel engines at nuclear plans, which operate less than 200 hours per year, and if a nonnumerical standard could be considered for th ese units. EPA said that it did not have information on engines located at nuclear power plants during the time of rule development, but asked CEG members to submit information on engines at nuclear power plants. EPA noted that the definition of emergency engines already attempts to capture the type of operation th at CEG is concerned about. In addition, there is language in the emergency engine definition that allo ws sources to petition for additional hours for maintenance and testing purposes. The CEG expressed that it would like to see only management practices required for these units and asked why requirements are different for the same engine at one location versus an other (i.e., major source versus area source).

The CEG also wanted to know how sources ar e required to determin e compliance with an emission limit when no perfor mance testing is required.

3. and 4.. Engines with Low Operation/Low Fuel Usage

The CEG made the point that certain engines with low fuel usage have less stringent requirements in some states and have only recordkeeping and reporting requirements. The CEG asked if EPA had c onsidered subcategorization based on fuel3 consumption. EPA responded that it did not co nsider fuel usage for this proposal, but felt that hours of operation was more appropriate.

5. Engines in Demand Response Programs

Regarding demand response programs, EPA i ndicated that it has made it clear that peak shaving operation is not considered em ergency operation. Engines used for peak shaving are not considered emergency engines and must meet the standards applicable to non-emergency engines. Most likely the definition of emergency engines will not change, EPA said. Members of CEG noted that they would submit comments on this

issue.

6. Engines used for Starting up Combustion Turbines

In CEG’s list of questions, black start capability is mentioned in which a diesel engine is used for starting up combustion turb ines. EPA stated that it was not aware of diesel engines being used for this purpose, but that it appears from CEG’s description of these units that they would likely be considered emergenc y units. The CEG made the point that the engines are technically not em ergency because they are capable of going on the grid. However, CEG said, the units onl y run for about 10 minutes at a time and if they go beyond 15 minutes they will overheat. In total, these units may run between 10 and 15 hours per year, according to CEG. Fi nally, CEG added that there is no other way to start the combustion turbines. EPA suggest ed that CEG provide detailed information about these units in their comments, includ ing historical opera ting information and reasons why post-combustion co ntrols are not reasonable.

7. Performance Testing

The CEG acknowledged that it may have misunderstood the rule to say that emergency engines are subject to performan ce testing. EPA clarified that emergency engines are not subject to performance te sting requirements under the proposed rule.

8. Number of Affected Engines

The CEG asked how EPA identified the numbe r of engines that would be affected by the rule. EPA referred CEG to a memo in the docket, which describes how EPA estimated the number of engine s that would be affected by the rule. The estimates are based on information from Power Systems Res earch (PSR), which represents the best data available. The PSR database is proprie tary, but tables with the number of affected engines is available in the docket memo.

9. Urban versus Rural Areas

The CEG asked if EPA had analyzed urban versus rural impacts of the rule for area sources and if different requirements ha d been considered. EPA said that it has evaluated the impacts of engines located at ur ban areas versus those of engines located at rural areas for previous rulemakings affecting stationary engines. EPA determined that engines are located everywhere and cannot sa y that there is a difference between an4 engine at one location versus another. Th erefore, it was determined to regulate all engines regardless of location.

10. Cost per Ton

Regarding EPA’s above-the-floor analysis , CEG asked what threshold EPA uses

to determine whether controls are cost-effective or not. EPA said that there is not a clear dividing line or specific cost per ton thre shold. EPA conducts the above-the-floor analysis by looking at it on a source-by-source basis. EPA also considers which pollutants are involved. The cost per ton ma tters in the final decision. EPA told CEG that the cost per ton estimates for the proposed rule are in the docket.

11. and 12. High Load/SSM Limits

Regarding EPA’s proposed limits, EPA said th at they are supposed to be met at all conditions. The proposed limits during startup and malfunction are based on a recent court decision, which did away with the ge neral language in the General Provisions, which exempted sources from requirements during startup, shutdow n and malfunction.5 Attachment 1 List of CEG Questions

The following are questions we would like to discuss with you during our call on Wednesday, April 15 at 3:00 re garding EPA’s RICE proposal:

1. Please explain EPA's intent underlying th e 40 ppmvd CO standard for existing emergency compression igniti on (CI) engines > 500 HP located at area sources?

Does EPA consider the standard to be one that can be met by existing CI engines

without controls? Could a non-numeric standard be considered for these emergency CI engines similar to some of the other standards included in the proposal (e.g., based on manufactur er recommended services?)

2. Emergency diesel generators at nuclear plants typically operate less than 200 hours per year, and the NRC prohibits these units from supplying electric power to the grid. Thus, operati ons at these generators ar e limited to NRC-mandated testing and emergency situations only. Di d EPA consider a subcategory for these units, and could EPA exempt these units based on the annual operational hours? If not, could a non-numeric standard apply to these units similar to some of other

standards included in th e proposal (e.g., based on manufacturer recommended services)?

3. Some distribution company service bu ildings have emergency combustion engines > 500 HP located at area sour ces. These typically operate under 50-100 hours per year. Similar to the above ques tion, did EPA consider a subcategory for these units, and could a non-numeric standard apply to these units similar to some

of other standards included in th e proposal (e.g., based on manufacturer recommended services)?

4. Some small engines are unregulated in so me states because they remain below a certain fuel usage amount per year, but thes e facilities do comply with record keeping requirements. Similar to the above question, did EPA consider a subcategory for these units, and could a non- numeric standard apply to these units

similar to some of other standards included in the proposal (e.g., based on

manufacturer recommen ded services)?

5. Has EPA considered the impact of the pr oposed standards on participation in PJM demand response programs? Given that the number of emergency events are limited number, can the following provisi on in Section 63.6640 be modified to allow the continued participation of em ergency IC engines in demand response programs for a limited number of hours per year?:

"... There is no time limit on the use of emergency stationary ICE in emergency situations. The owner or operator may petition the Administrator for approval of additional hours to be used for

maintenance checks and readiness tes ting, but a petition is not required if the owner or operator maintains records indicating that Federal, State, or local standards require ma intenance and testing of emergency6 RICE beyond 100 hours per year. Emer gency stationary RICE may operate up to 50 hours per year in no n-emergency situations, but those

50 hours are counted towards the 10 0 hours per year provided for maintenance and testing. The 50 hours per year for non-emergency situations cannot be used for peak sh aving or to generate income for a facility to supply power to an elec tric grid or otherwise supply power as part of a financial arrangement with another entity. For owners and operators of emergency engines, any operation other than emergency operation, maintenance and testing, and operation in non-emergency situations for 50 hours per year, as permitted in this section, is prohibited."

6. Since the early 1960s every major power pl ant in the US has been required to have black start capability. This is typically involves a small combustion turbine (CT) equipped with a diesel engine us ed for startup of the CT, generally the engine operates less than 10 minutes per CT start. The majority of these black start units only operate a few times per year. Requiring post combustion controls on units will reduce dependability and si gnificantly increase cost, with little change of an actual reduction in emissi ons as these engines rarely run long enough for a CO catalyst or SNCR sy stem to reach minimum operating temperatures. Could emission controls fo r engines of this type be limited to mechanical maintenance requirements coupled with restrictions on per event operating times and annual hours of operation?

7. RICE units covered by the proposal are required to be tested every 8760 hours of operation, or every three years, which ev ery comes first. For many emergency generators, or emergency fire pumps , operation during stack testing could represent a major percentage of the units operating time. To require significant, and expensive, post combustion controls that require testing on un its of this nature

could results in an actual increase in total emissions since there is a significant warm-up period for catalysts and/or SN CRs during which emissions with be

elevated. Did EPA evaluate this consequence?

8. The rule will affect nearly every existing stationary engine in the U.S. - including small generators at facilities that have not required permitting or been associated with air regulations (e.g., heath care facilities, homeowners, fire houses, small remote facilities with a single small engi ne for power). How did EPA identify the

total number of affected s ources and is there outreach underway to inform the

affected stakeholders?

9. Since Section 112(k) focuses on urban impacts from area sources, did EPA analyze urban versus rural impacts from area source engines and consider different requirements for urban versus rural engines?

10. EPA's analysis for "beyond the floor" cont rol concludes that catalytic control is cost effective for several subcategories. What is the $ per ton cost effectiveness

threshold that differentiates cost effective controls from controls that are not cost7 effective? If not a brightline, is ther e an approximate cost range for the cost

effectiveness threshold?

11. The rule retains the "high load" test requirement when performance tests are required. However, the Proposed Rule indi cates that emission limits apply at all loads and during shutdown, with differe nt limits for startup and malfunction periods in most cases. Please explain EP A's underlying reasoning. For example:

Does EPA have data indica ting that low load operation can meet the uncontrolled baseline or that catalyst performance of 90% is achiev able at reduced load? How can an operator certify Title V compliance if off-load performance is uncertain and has not been demonstrated by EPA?

12. Please explain EPA's conclusion that emissions during startup, shutdown and

malfunction are commensurate with the "MACT floor" emission limit (average of the best performing 12% of similar units without catalytic co ntrol)? Could EPA

consider alternatives under Secti on 112(h) for setting SSM limits?