Document ID: EPA-HQ-OAR-2009-0491-0003
Agency: epa
Document Type: Supporting & Related Material
Title: 
Posted Date: 2010-08-02T04:00Z

CAIR Replacement Rule

Discussions between LADCO and EPA

March 16, 2009

I.  Introduction

	On Monday, March 16, 2009, EPA held a call with the Lake Michigan Air
Directors Consortium (LADCO) to discuss the CAIR replacement rule.  See
Appendix A for a list of the participants in the call.  The notes that
follow are a detailed summary of the call.

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 reviewing all options, setting up analyses, and preparing
technical models.  The goal is to finalize a replacement rule within two
years.  

	The primary objectives are to help states comply with the NAAQS 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
them meet 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 staff that will
actually develop and write the rules, as well as the OGC attorneys
assigned to the rule development.  Sam stressed that EPA is interested
in hearing the states' thoughts and concerns.  Everything is on the
table as EPA puts together ideas for the new Assistant Administrator for
Air and Radiation, who should arrive within the next couple of weeks.  

	In the spirit of listening to the states, Sam asked Mike Koerber to
lead the discussion through the topic agenda and to outline the states'
thoughts or ideas on the major issues:  baseline; significant
contribution; remedies; and coverage and timing issues.  

III.  LADCO Opening Comments 

	Mike Koerber, LADCO, began by noting that LADCO and the states had
anticipated listening more to EPA than speaking.  However, they are
excited and encouraged by EPA's desire for dialogue.  

	LADCO has been working with the northeast states and more recently the
southeast states through the state collaborative process, which has been
going on for over four years.  In their efforts to meet the 1997
standards, states banded together to address regional transport.  They
found that individual state programs overlapped and thought that it
might be possible to develop consistent programs.  While the states
recognize that a federal program would achieve the desired consistency,
there was not much federal action a few years back, and so the states
stepped in to fill the void.  

	In June 2008, fifteen states and the District of Columbia signed a
letter asking for dialogue about regional problems.  Although there was
no response to the letter, which Mike attributes to the issues EPA has
faced during the past year, it appears that EPA intends this meeting to
be the beginning of the effort to re-establish a federal-state dialogue.
 LADCO and the states are very interested in this and appreciate EPA's
efforts in this regard.

	A similar group of fifteen states and the District of Columbia created
a framework document calling for a strategy to deal with power plant
emissions in response to the court decision on CAIR.  The near term
focus is on the 1997 standards, which are still an issue for many
states.  Although progress has been made, nonattainment areas remain,
and states continue to finalize plans to meet the 1997 standards.  

	The framework document also recognizes the new, tighter standards for
PM2.5 and ozone.  The states believe that coordination with EPA will be
critical to meeting those standards.  A strong federal program for PM2.5
and ozone transport in the power sector and possibly in other sectors is
necessary to provide for attainment.  

	ICI boilers are an example of non-power sector units that might need to
be controlled.  There were discussions with EPA recently about these
boilers.  Also, the state collaborative process established a workgroup
that spent two years looking at options to meet the standards.  The
workgroup did not focus just on power plants because the states
recognize that other sectors will need to be controlled to meet
attainment.  The workgroup developed performance-based standards, did
solid cost analysis, and performed emissions modeling and analysis.  The
entire package is not yet complete, but the group should have a
recommendation soon.  

	While the states look forward to sharing the official recommendation,
the key element that Mike said he wanted to highlight was the
recognition by states that any program seeking to address the stricter
PM2,5 and ozone standards would have to include units other than large
EGUs.  

IV.  Importance of Regional Planning

	Mike said that before proceeding to address each item of the agenda, he
wished to speak briefly about regional air quality planning.  

	LADCO is the second oldest regional air quality planning group. 
Numerous benefits have been realized through 20 years of group
collaboration, including improved air quality, technical benefits from a
common emissions inventory, and policy benefits.  Although LADCO was
established through a series of lawsuits between the states and EPA, it
is important to recognize that progress has been made since that time,
and that there is now greater collaboration between LADCO and EPA.

	LADCO is grateful for the significant funding received from the states
and other groups.  While LADCO realizes that EPA has cut some funding,
it hopes that the Agency continues to emphasize regional solutions. 
States will continue to fund some of LADCO's operations, though not
likely at the 100 percent level.  Thus, federal funding for RPOs and
other regional initiatives is critical to the future of the regional
planning process.  

	Vinson Hellwig, MDEQ, reiterated that many of the air quality problems
facing states are regional and that solutions will have to be broader
than one state or locality can deal with.  Laurel Kroack, IEPA, voiced
strong agreement on this.

	Mike concluded his opening remarks by noting that the technical work
LADCO is undertaking in support of this framework includes the
Northeast, and that even some of the Southeast states are participating.
 While the Southeast states did not sign the framework document, they
were involved in some of the technical discussions and participated in
some of the modeling.  He wanted to recognize their technical
contributions even though those states might not be ready to sign policy
documents.

	Mike then turned the discussion back to EPA.  

V.  Core Issues Outlined by EPA

	Sam Napolitano said that EPA would lay out the issues, but that he
would be unable to indicate how EPA would eventually proceed, as the
Agency is uncertain at present as to how to respond to the issues raised
by the CAIR court decision.  The purpose of this meeting is to gather
different ideas and thoughts to present to the new Assistant
Administrator for Air, whose responsibility it will be to decide how to
address the ramifications of the court decision.  

	Sam invited Tim Smith, OAQPS, to talk about the key issues EPA is
considering in the CAIR replacement rule.  He asked that speakers
identify themselves as notes of the meeting were being prepared and
would be shared with LADCO.

	Tim outlined the following major issues:

1.  Baseline  

	What is the starting 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 the baseline.  The
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.  Quantifying significant contribution  

	This is one of the key issues from the court decision.  The court held
that CAIR failed to quantify adequately 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
contribution is quantified.  

	Sonja Rodman, OGC, noted that EPA is uncertain as to how to respond to
the decision of the D.C. Circuit Court.  In some ways, the decision is
quite clear, but in others it is rather murky.  For example, it is very
clear that the court found what EPA did unacceptable.  However, it is
less clear precisely what the court would find acceptable.  EPA
continues to struggle with what the decision means, as well as with how
the decision limits EPA and/or might impact future programs.

 

	One of the biggest areas of uncertainty is how to define significant
contribution.  The court held that EPA had failed to identify and
quantify each state's significant contribution.  Thus, the Agency is
seeking new ways to think about significant contribution.

3.  Remedy

	What remedy should be applied to the quantified significant
contribution?  What types of approaches should be considered?  Is the
trading option practical?

4.  Affected Area/Standards

	Which states or regions should be covered by the rule?  What should the
timing of the rule look like?  Should EPA start with existing standards?
Or, should it try to integrate the newer standards into a replacement
rule? Timing becomes a key element when considering which standards to
target.  

	Sam Napolitano noted that rule development might take considerably
longer if EPA tries to incorporate the newer standards.  But if EPA
relies on older standards, the rule may be seen as irrelevant.  The
resource issue is linked to the timing issue because developing a
program to meet new, stricter standards will require additional staff
time and effort.  In addition to dealing with these issues, EPA must
address the court's concern about the attainment deadlines.  EPA is
seeking state input on how to address all of these issues and concerns. 

	Lastly, Sam said that EPA career staff share LADCO's concern about
industrial boilers and other boilers.  Many questions remain about how
to regulate those types of sources.  Can they be treated in a manner
similar to how large EGUs are treated?  Are there other sources to
consider in this rule?  Or should other sources be left to a companion
rule?  Is there anything else EPA should be doing regarding the NAAQS?

	Now is the time to share views.  As noted earlier, a goal of these
discussions is to bring ideas to the new Assistant Administrator for
Air, whose task it will be to set the agenda and priorities, and to
implement and allocate resources.  Sam encouraged the states to think
broadly, suggesting that ideas can always be scaled back or set aside.

	He also said that EPA is operating under the assumption that there will
not be a legislative fix or a new court opinion.  The Agency must create
a rule that satisfies the current regulations and related court
opinions.  Because the legal landscape is complex, pragmatic decisions
will have to be made about the new rulemaking process.

	Sam concluded by saying that this is the first of a series of
teleconferences with states and other stakeholders, including OTC,
NACAA, the southern states, Texas, industry representatives, and
environmental groups.  When this series has concluded, EPA will meet
with states to report  what EPA has heard from all of the groups.  This
will allow the states to react and respond, and to continue the general
dialogue.  

VI.  LADCO Response to Core Issues

	Mike Koerber mentioned that LADCO and the states had recently developed
a one-page summary of the internal discussions concerning what LADCO
states hope will emerge from the state collaborative framework
discussions with the Northeast and Southeast states.  However, as the
one-page summary is still out for comment he inquired whether the states
would agree to sharing its contents on this call.  

	Dan Murray, IDEM, said he was comfortable with doing so.  He did not
think it would surprise EPA that states are talking about whether CAIR
satisfies the BART or RACT requirements as it was supposed to do under
the original rule.  Indiana has continued to voice support in the LADCO
discussions for meeting the BART and RACT requirements through the
replacement CAIR rule.  However, he has not been hearing as much about
that in the collaborative process discussions and was interested in
discussing it in this call.  Laurel Kroack and Bob Hodanbosi agreed that
the summary of discussions should be shared with EPA.

	There were no objections from the other states on this matter.  Mike
noted that the summary document responded to most of the issues raised
by EPA's agenda.  The group agreed that the summary would provide a good
framework for the discussion.  But before moving to this discussion,
several of the states asked for time to respond to some of the issues
EPA had raised earlier.  

VII.  State Responses to EPA's Presentation

1.  Baseline

	Vinson Hellwig stressed that Michigan believes any replacement program
will have to consider sources other than EGUs.  EPA must especially
consider industrial boilers and cement kilns.  Although these are of
particular concern, there may be other sectors that should be included
in the rule.  

	Tim Smith responded that EPA is starting to look at non-EGUs, and is
attempting to assemble data on inventories and the percentage of
contribution from each sector.  EPA welcomes any information the states
might have about industrial boilers and cement kilns.

	Laurel Kroack agreed that industrial boilers and cement kilns could be
controlled in a highly cost-effective manner.  She suggested that EPA
should at least cover the 1997 and 2006 standards in any new rule.  She
was less certain about the 2008 standards, which Illinois is still
grappling with.  She also noted that the dates suggested in the LADCO
summary were acceptable to Illinois.  

	Larry Bruss, WDNR, agreed that any future rule would have to consider
more than just EGU sources.  He stressed that it is critical to have a
broad view in developing a replacement rule.  Issues can be looked at
piece by piece, but in the end the whole rule must work together.  It is
important that the same logic extends throughout the rule to avoid
having one logic drive the definition of contribution areas and another
how a remedy is applied.  Lastly, in reviewing the rule during
development to ensure consistency it is absolutely essential to be
certain that the rule fully conforms to the court's decision.  

	Dan Murray agreed with Larry.  However, he cautioned that he would like
to see modeling showing what level of reductions would be required from
other source sectors to meet the requirements of section 110(a)(2)(D). 
He would like to be certain that there are data to justify putting
controls on additional sectors.  

	Sam Napolitano then asked states which other sectors might need to be
controlled and what data Dan would like to see to support further
control efforts.  

	Dan responded that his main concern was to be sure that the data
justified controlling additional sectors.  Furthermore, which units
within a sector are affected should be driven by the data.  For example,
he agreed that large ICI boilers probably should be affected, but was
less sure about smaller ones.  His key point was that before deciding
which classes of units and which sectors to look at, EPA should gather
data and make the decision based on what would be most effective to
control.  

	Mike Koerber followed up on Dan's point about ICI boilers, noting that
states have many different boilers and fuel types; thus, it is difficult
to fit one size to all the states.  The Midwest states want to focus on
coal boilers with over 100 mmBtu/hr, as that is where the emission mass
is concentrated in the Midwest inventories.  Given its various fuel
types, the Northeast has a different perspective.  Such fundamental
regional differences will be a challenge.

2.  Standards

	Bob Hodanbosi discussed the standards that the rule should address.  He
noted that it would be perplexing if EPA were to release a rule in 2011
that does not account for the 2008 standards.  Even though looking at
the new standards might require substantial effort, developing any type
of rule will require a great deal of effort.  It would be very confusing
if EPA were to spend time and money developing a rule to old standards,
especially as those old standards would be met and exceeded by the new
ones.  

	Laurel Kroack agreed that it was important to have a comprehensive
approach.  She reiterated, however, that Illinois continues to review
the 2008 standards to determine whether local VOC will be sufficient or
whether regional NOx, or something even more stringent, would be
required.  It is difficult to discuss specifics without the modeling in
hand.  

	Bob responded that although modeling was certainly needed, it was
already clear that transport would be a component of the SIPs.  He
reiterated that people would be confused by a rule released in 2011 that
does not consider 2008 standards.  

	Bob Lopez, WDNR, said that one starting point is to determine what
significant contribution is and to define it in a replacement rule.  As
state air directors have discussed significant contribution at length,
this might be a good place to start.  

VIII.  LADCO's Summary Document

	Mike Koerber agreed and noted that the discussion of significant
contribution was a good segue into the three-step approach in the
summary of LADCO's position in the state collaborative framework
discussions.  

	Mike noted that LADCO offers this approach as a way to deal with
significant contribution to nonattainment and interference with
maintenance.  LADCO believes this approach would both deal with the
transport problem and satisfy the requirements of section 110(a)(2)(D)
consistent with the D.C. Circuit Court's opinion.  

1.  Coverage/Timing

	Areas of interest for nonattainment and maintenance should be
identified through a monitoring plus modeling process, similar to the
process for identifying areas in CAIR.  Both the current monitoring and
the future year modeling would need to show nonattainment or maintenance
issues in order for the area to be defined as an area of interest.  

	The states suggest using the most current air quality data from
2006–2008.  These data are already quality-assured and should provide
a sound basis for analysis.  With regard to future year modeling, the
states did regional analysis for 2012 and 2018.  The states realize that
these dates may not fit EPA's schedule.  However, because they had the
modeling framework and the inventories prepared, using these dates
allowed the states to produce quick results.  In particular, the states
can provide EPA the data for nonattainment projections for 2012 and
maintenance projections for 2018.  

2.  Significant Contribution 

	The CAMx model was used to perform source apportionment for 2012 to
help quantify significant state contribution to nonattainment.  Modeling
for 2018 continues, and although most of the results are available, they
have yet to be finalized.  

3.  Remedy

	The states' preferred remedy would be reduction requirements for states
that contribute to nonattainment or maintenance issues.  The states
propose to use 1% and 4% as the levels of significant contribution that
would trigger controls.  States contributing 1% would be required to
meet CAIR Phase I type reductions, while states contributing 4% would be
required to make deeper emissions reductions.  

	For the 1% base level of control, the states realize that EGUs are
already subject to the CAIR reductions for 2009 and 2010.  They propose
that if EPA includes large non-EGUs in the program, it use 2012 as the
compliance date for those units.  

	For the higher level of control, triggered at 4%, the states would like
to see more stringent controls than CAIR.  The states believe that this
would most likely include large non-EGU sources.  Also, because more
time would be required for sources to prepare for the more stringent
controls, the states propose a future compliance date between 2015 and
2018, depending on the stringency of the program.  

	The 1% and 4% are relative to the total source contribution in the
areas of interest.  The states believe that using a relative metric is
easier to understand and provides consistency across pollutants and
standards.  EPA used a different metric in the past and may feel bound
by precedent to use something other than a relative metric.  However,
although it appears that the courts approved EPA's previous metric, the
states believe that the metric they are proposing is easier and more
straightforward.  

	Trading and banking should be part of the program.  While intrastate
trading should be allowed freely, interstate trading should have
geographic controls.  One option would be for states in the 4% bracket
to be allowed to trade only with other states in the 4% bracket. 
Banking should be allowed, but with strong flow control.  

IX.  Discussion of LADCO's Proposal 

1.  Thresholds

	Tim Smith asked LADCO to clarify what 1% referred to.  Mike Koerber
responded that it was 1% of the total contribution at a given downwind
nonattainment area or monitor.  

	Sam Napolitano clarified that LADCO was looking at total contribution
-- not simply EGU contribution, but the total upwind state contribution
for both the annual and the daily PM2.5, as well as ozone standards.  He
then asked why LADCO chose 1% and 4% as the thresholds for control.

	Mike indicated that the 1% was adopted from what EPA used in CAIR for
PM2.5, with the difference being that EPA used 1% of the standard, and
LADCO is using 1% of contribution.  When LADCO looked at source
apportionment it appeared that 1% would capture the largest mass of
state emissions.  Between 4% and 5% there is very little difference in
which states are contributing.  Four percent still captures a high
percentage of the contributing states.  

	Sam then asked the states what their goal was for reductions, and
whether they had determined how much reduction would be required from
upwind states.  Mike responded that states would need to achieve
whatever level of control their contribution percentage triggered.

	In summarizing his understanding of the states' proposal, Sam noted
that the states want the same cap levels as those outlined in the old
CAIR plan, with stronger controls required in 2015.  He also asked the
states to confirm that they had chosen 2012 and 2018 as their modeling
years because those data were available, and not because those years had
some special significance.  

	The states confirmed this understanding.  They indicated that although
they were uncertain as to what the stronger controls should be for 2015,
LADCO and the member states would like to work with EPA to develop the
specifics of those controls.  

	Sam then told LADCO that EPA wants to be sure the Agency is helping
states with attainment and maintenance.  

	In response, Mike noted that attainment planning goes beyond the LADCO
summary document, which is about the emissions transport provisions of
section 110(a)(2)(D).  A program that both addresses transport and
provides attainment in the downwind areas is desirable.  However, there
are numerous nonattainment situations in which local source contribution
is very important.  The states are dealing with such local issues, which
will need to be addressed in conjunction with regional controls.  They
understand that achieving attainment will require the right mix of local
and regional controls.  However, the LADCO summary document is not
actually intended to solve nonattainment, but rather the transport
issues associated with nonattainment.  

2.  Concerns about Significant Contribution

	Sonja Rodman expressed concern that the process LADCO proposes closely
mirrors the process that was used for CAIR, a process that was rejected
by the court.  The three steps seem very similar to the CAIR process: 
(1) identifying areas of interest; (2) establishing reduction
requirements; and (3) implementing a remedy.  

	Sonja said that this approach does not appear to include the important
step of quantifying each individual state’s significant contribution. 
Under the court's decision EPA is required to quantify each state's
contribution, identify and quantify the part of the contribution that
EPA deems to be significant, and eliminate all of the significant
contribution.  She expressed concern that if it fails to specifically
quantify and then eliminate each state’s significant contribution this
plan might encounter the same difficulties that CAIR did.  The court was
quite clear in deciding that EPA had failed to quantify each state's
individual contribution in CAIR.  

	Dan Murray replied that the states had been having a similar discussion
and felt that the court recognized that there is a significant
contribution threshold.  The issue is where that threshold lies.  The
emissions do not need to be zeroed out from upwind sources but instead
reduced below the significant contribution threshold.  

	Sonja agreed that emissions from upwind sources do not need to be
completely eliminated.  However, it is important to remember that the
threshold used in CAIR was part of the linkage analysis.  For example
for PM2.5, if the contribution analysis showed that a state’s total
contribution was over a certain threshold it was required to participate
in CAIR.  However, that threshold was not used to define the amount by
which a state had to reduce emissions.  The state specific emission
reduction requirements were defined through a complex process that took
into account cost and assumed interstate trading as a remedy. The court
concluded that this analysis was not adequate to quantify each state’s
significant contribution and that EPA had failed to eliminate each
state’s significant contribution.  

	Larry Bruss replied that he thought the summary document might be
unclear about LADCO's proposal, and that all that was required of states
is that they reduce to either a 1% or 4% level.  Second, he said that
eliminating all of the significant contribution from a source might be
impossible.  For example, southeast Wisconsin is immediately downwind
from Chicago and will likely always be affected on high ozone days. 
However, people still need to live and work in Chicago, making it nearly
impossible to zero out all of Chicago's emissions.  The same can be said
for a number of other areas.  It is impossible to remove enough
emissions from the atmosphere to eliminate significant contribution. 
That is why the states propose a plan in which all states must address
some level of contribution (1%), and that those states that have a
severe impact would really have to reduce emissions (4%).  

	Sonja suggested that there might be some confusion in this discussion,
and she explained that the statute requires the elimination of all
significant contribution.  In CAIR, however, significant contribution
was defined, not on the basis of air quality threshold contribution, but
on the basis of cost.  Significant contribution was defined as the
reductions that a state could achieve through implementation of highly
cost-effective controls, and the highly-cost-effective analysis assumed
trading.  Thresholds were used as justification for inclusion in the
CAIR region.  Thus, what should the role of the replacement plan be in
reducing contribution?  Should the new rule eliminate all significant
contribution, or only reduce it?  

3.  Modeling

	Turning to the specifics of the states' modeling, Sam Napolitano asked
about the CAMx modeling, and whether the states had enough information
to say which sectors had the largest role in significant contribution. 
For example, in a target area could the states say whether it was EGUs,
large industrial boilers, or mobile sources that contributed the most? 

	Mike responded that LADCO looked at contribution by chemical species
and did its modeling based on geographic zones defined by state
boundaries.  The data were then broken down by source sector, including
EGU, non-EGU, on-road, and off-road.  The results showed that the EGU
contribution was important, but that it was not necessarily the largest
at each location.  Mike indicated that he would have to review the
results to discuss this with more specificity.  He noted, however, that
mobile sources were an important category at many locations.  

	Sam confirmed with Mike that the geographical areas considered were
only states, not partial states, and that LADCO had tried to use the
same types of nonattainment areas that EPA uses so that everyone's data
would be comparable.  Sam concluded by saying that should the states
feel comfortable sharing these data, EPA would really benefit from their
technical work.  

4.  Timing

	Tim Smith next discussed the court's concerns about coordinating
compliance schedules with achievement of reductions.  In particular, the
court found that EPA was not proposing to accomplish enough by 2010;
however, he noted, by its ruling the court made it impossible to have a
rule in place by then.  He interpreted that as a general direction from
the court to be more mindful of attainment deadlines in relation to
compliance dates.  He indicated that he thought EPA would have to better
explain the relationship between the two in any new plan, and he asked
whether the states had considered this issue, specifically with regard
to the 1% and 4% thresholds they were proposing.

	Mike Koerber responded that the 1% base level is from the existing CAIR
program, and that those compliance dates have passed or will soon
arrive.  The states foresee a longer compliance timeline only if EPA
decides to tighten the CAIR replacement rule by adding other sectors
such as boilers.  An additional 2-3 years might then be required.  

	However, for the more stringent level of control, triggered at the 4%
threshold, more time might be needed depending on exactly where the
thresholds were set, and on what types of reductions were required. 
Either way, with a higher level of control the states thought it was
only logical that it would take longer to implement.  

	Tim asked what percentage of states in the CAIR region LADCO thought
would trigger the 4% threshold.  After some discussion, Mike summarized
by explaining that most CAIR states would end up in the 1% category. 
The 4% category would be a smaller subset of states, for the most part
eliminating fringe states such as Iowa, Florida, Mississippi, and
Louisiana.  He added that Minnesota contributed at 1% in this study.  

5.  Trading

	Sam Napolitano then turned to interstate trading and asked how the
restrictions would work.  

	Mike Koerber noted that the court had strong reservations about EPA's
trading program, and that the need to preserve "linkages" must be
considered.  The limits on interstate trading would be geographically
based and would allow states in the 4% category to trade only with each
other.  The nonattainment demonstrations might need to be revisited if
trades of large magnitudes were made.  The states realize that these
restrictions might be complicated, but they believe that trading is an
important cost control element of the plan.  

	Sam asked if the states had any special provision concerning intrastate
trading.  Mike replied that he would not speak in detail about
intrastate trading, as it is fairly simple and would not be restricted. 

	Laurel Kroack said she was not concerned about the Chicago area or the
down-state utilities, noting that if the intrastate numbers are set
correctly trading should not be a problem.  She added that Illinois
generally supports trading as the most cost-effective way to get the
deepest reductions.  

	Regarding interstate trading, Rich Damberg, OAQPS, asked for a
clarification as to whether states over the 4% threshold could trade
with any state.  For example, Illinois would be able to trade with
Missouri, but could it also trade with New York?

	Mike replied that Illinois could only trade with states with which it
was also significantly contributing to nonattainment.

	Dan Murray noted that the trading provision had been incorporated into
the document during the group's last discussion, and that the group
would have to discuss it further.  He added that he would like to pursue
a greater degree of interstate trading.  Further modeling and study
would obviously be required, and there might still be some geographic
limitations, but a broader trading program would help to provide more
cost-effective reductions.  

6.  Banking and Flow Control

	Sam Napolitano raised the subject of flow control, asking the states to
explain the environmental objective and the protocols they foresaw
implementing.  

	Mike Koerber replied that the states had not discussed flow control in
detail and thus could not offer a suggestion at present.

	Tim Smith then raised the subject of banking, noting that there was a
large SO2 bank, and that the manner in which any replacement plan dealt
with those banked allowances would greatly affect the nature and timing
of the controls that companies might choose to add.  Because of the high
level of uncertainty, there is concern that many companies may choose to
use the bank until the regulatory situation is more certain.  This means
that there is a potential for a short term increase in emissions while
companies use more banked emissions.  EPA has encountered difficulties
in modeling this situation, and Tim asked whether the states had
thoughts to share on this issue.  

	Bob Lopez replied that the importance of the bank had been implicit in
the LADCO discussions, but that the subject had not been addressed
internally by the states.  

7.  BART and RACT Requirements

	Tim Smith asked how the states were approaching BART, and whether they
would look at BART relative to overall reductions.

	Mike Koerber replied that LADCO had not addressed this issue in great
detail, but that it intended to do so in future discussions.

	Tim explained that when EPA created CAIR participation in CAIR was
defined as meeting BART requirements.  EPA modeling showed CAIR would
achieve greater reductions than BART guidelines. In the CAIR replacement
rule, EPA will again need to address how the rule could be integrated
with BART requirements.  EPA also needs to address the degree to which a
CAIR replacement rule could address RACT requirements.

	Bob Hodanbosi noted that some of the states had a longstanding
disagreement with CAIR, and so had moved forward with the NOx RACT,
putting on tighter controls irrespective of CAIR.  

	Larry Bruss noted that other states had problems with a CAIR rule
structure that did not provide for reductions in nonattainment areas. 
As a result, states pursued RACT as though CAIR did not exist.  States
did not see the same need for immediate action with visibility and took
a longer range approach.  

	As noted earlier in the discussion, all of these programs must fit
together, and Tim thought industry would be far more supportive if the
regulatory community could show how the programs work together and
provide co-benefits.  He indicated that EPA would like to hear any
thoughts the states have on synergizing the emissions control programs. 

	Sam Napolitano added that EPA would be interested in any suggestions
the states might have for further integrating anything from CAIR or the
regional haze programs, and that this was the opportunity for states to
raise these types of issues.  

	Larry Bruss mentioned visibility requirements, noting that while the
court did not address them, those requirements are still part of the
act.  

	Mike Koerber agreed that visibility needs to be addressed, but he
suggested that it might not be as much of a priority.  He thought the
CAIR SO2 and NOx requirements would satisfy any section 110(a)(2)(D)
visibility requirements.  

8.  Coverage

	Sam then asked whether there were any other topics that states wanted
to discuss.  

	Larry Bruss mentioned that EPA might want to look beyond the
traditional eastern U.S.  group of states.  Especially if EPA uses the
suggested 1% threshold, the Agency will find states in the west that may
be significant contributors to nonattainment areas.  For instance,
California probably contributes at significance levels to areas of
nonattainment in Arizona.   

	Sam responded by asking if Larry saw the replacement CAIR program as a
fully national program.  

	Larry replied that he thought it would have to be.  Section
110(a)(2)(D) is applied in a similar manner regardless of where a state
is located in the country.  He suggested having a national perspective
when evaluating replacement proposals.

	Sam said that EPA understood these concerns and will consider how much
larger of a geographic area the Agency should include in the replacement
CAIR rule.  He noted that one consideration is that 2/3 of western EGUs
have scrubbers.  Furthermore, the west in general, but California
specifically, has a lot of large gas-fired units.  

9.  Maintenance 

	Tim Smith then asked Mike Koerber to again explain the section of
LADCO's proposal that covers maintenance.

	Mike replied that the proposal expands the lists of areas of interest
by using a concentration threshold of 4% below the standard.  Even
though the list of areas would be expanded, he did not think the LADCO
plan would offer a lot of additional emissions reductions over the
earlier CAIR plan.  

X.  Conclusion

	Sam Napolitano concluded the call by thanking the states for taking the
time to discuss the CAIR replacement rule with EPA.  He noted that he
considers the ideas they laid out to be a “work in progress”, and
that he appreciates that states are willing to share ideas that might
not be official positions but that are starting points for a strong
dialogue between the states and EPA.  He reiterated that EPA would hold
a series of teleconferences with states, industry groups, and
environmental groups, and would then share the results of all these
meetings with LADCO and other states.  

	Mike Koerber thanked Sam for establishing this line of communication. 
He said LADCO would forward its recommendation, along with the technical
work and modeling done to support its proposal, once it is complete in
another month or so.  He indicated that LADCO would at that point like
to meet with EPA to discuss its key recommendations in detail.

Appendix A:

Participants

LADCO

	Mike Koerber (LADCO) 

	Vinson Hellwig (MDEQ)

	Bob Hodanbosi (Ohio EPA)

	Laurel Kroack (IEPA) 

	John Melby (WDNR)

	Dan Murray (IDEM)

	Larry Bruss (WDNR)

	Bob Lopez (WDNR)

EPA

CAMD

	Sam Napolitano

	Jenny Jachim

	Larry Kertcher 

	Beth Murray

	Gabrielle Stevens

	Meg Victor

OAPQS

	Bill Harnett 

	Rich Damberg

	Todd Hawes

	Gobeail McKinley

	Tim Smith

	Larry Sorells

	Chet Wayland	

OGC

	Sonja Rodman

Representatives from EPA Regions 1, 5, and 6

	

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