United Slates
Environmental Protection Atr and Radiation EPA/400<'1-91/011
Agency (ANR-445) April 19S1
Summary of
Acid Rain Provisions
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SUMMARY OP ACID RAIN TITLE PROVISIONS
Purpose
To reduce the adverse effects of acid deposition through
reductions in annual sulfur dioxide (S02) emissions of
10 million tons from 1980 levels and, in combination with
other provisions of the act, of nitrogen oxides (NOx) by
2 million tons from 1980 levels in the lower 48 states and
the District of Columbia. (401(b))
To encourage energy conservation, use of renewable and
clean alternative technologies and pollution prevention
as a long range strategy for reducing air pollution and
other adverse impacts of energy production and use. (401(b))
so2 Allowances - Basic Program
The legislation obtains S02 emission reductions from electric
utility plants through the use of a market-based system of emission
allowances. Under this system, "affected units" (essentially all
utility boilers that serve generators larger than 25 megawatts
(MW)) are allocated allowances in an amount which is based on their
past fossil fuel consumption and the emissions rate required by the
legislation. An allowance is defined as an authorization,
allocated to an affected unit, to emit, during or after a specified
calendar year, one ton of S02. All new utility units which
commence operation after 12/31/95 are not allocated allowances and
must obtain allowances sufficient to cover their emissions by
1/1/2000 and thereafter. Industrial sources may become affected
sources by electing to opt-in to the allowance system.
Allowance Holding Requirement
Affected sources are required to hold sufficient allowances
to cover their level of emissions. Allowances may not be
used prior to the calendar year for which they are allocated.
(403(g)) Emissions limitations in the bill apply to sources
unless the owner or operator holds allowances to emit excess
tons of S02 . However, the fact that an affected source holds
excess allowances does not entitle it to exceed the National
Ambient Air Quality Standard limits.
Penalties for Noncompliance
Sources whose emissions exceed allowances held will be
required to pay $2000 per excess ton, and will be required
to offset excess tons the following year. (411)
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Allowance Usage
Once allocated, allowances can be used by affected sources
tc cover emissions, banked for future use, or sola to others.
Allowances transferred to others are not effective until a
written certification of transfer from the parties involved
is received and recorded by EPA, No permit alteration is
required.
Allowance Tracking
EPA will develop a system for issuing, recording and
tracking allowances.
Cap on S02 Emissions/Allowances Allocated
Beginning in 2000, the total number of allowances issued by*
EPA to utility units is, with limited exceptions, not to
exceed 8.9 million allowances. This effectively caps
emissions and ensures the maintenance of the 10 million ton
S02 reduction.
Conservation and Renewable Energy
EPA, in consultation with DOE, must identify qualified
conservation and renewable energy measures. Utilities
will receive an allowance for each ton of S02 emissions
avoided through the use of one of these qualified measures.
To be eligible to receive these allowances, a utility must,
among other things, be implementing a least cost energy
conservation and electric power plan. The allowances used
for this purpose are to come from a 300,000 allowance
Conservation and Renewable Energy Reserve which is
established by reducing Phase II allowanced by 30,000 per
year from 2000 to 2009, on a pro rata basis. {404(f)(g)).
802 Reduction Program
S02 reductions are obtained in two phases.
Phase I Reductions
Phase I reductions are required by 1/1/95 from 110 plants
listed in the legislation. These plants have large units
- 100 MWs or more - and have high emission rates - 2.5
lbs/mmBtu or more. There will be approximately 265 affected
units in these Phase I plants. Phase I plants are located
in 21 eastern and midwestern states.
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Phase I Allowance Allocations
Phase I affected units will be issued allowances as reflected
in "Table A of the legislation. This allocation was based
on a 2.5 lb/mmBtu emission rate, multiplied by their
"baseline", the average fossil fuel consumed in the years
1985, 1986, and 1987.
Substitution Plants
The owner or operator of a Phase I unit may propose
reassignment of some or all of that unit's S02 emission
reduction requirements to any other unit under the control
of the same owner or operator. If accepted by the
Administrator, both sources become affected sources and
both are subject to permitting requirements. (404(b)&(c))
Phase I Extension Units
A Phase I unit employing a "qualifying Phase I technology"
or transferring its phase I emission reduction requirements
to a unit employing such a technology may receive a two
year extension from the Phase I deadline. (404(d)). A
qualifying Phase I technology is defined as a technological
system of continuous emissions reduction which achieves a 90%
reduction in emissions of S02 from emissions that would
have resulted from the combustion of untreated fuels,(402(19)
Units employing such technologies will also be eligible for
additional incentive allowances from a reserve established,
for that purpose. The reserve will hold allowances
equivalent to the number of tons of S02 emissions
reductions projected for the year 1995, but not to exceed 3.5
million. (404(d))
Additional/Alternate Allowance Allocations
Affected Units in Illinois, Indiana and Ohio
Affected units in these states are allocated a pro rata
share of 2 00,000 additional allowances each year from 19 9 5
- 1999 (404(a))
Units in Certain Clean Systems
Phase I affected units with rates below 1.0 lbs/mmBtu which
have decreased their rates by 60% or more since 1980 and
are part of a utility system with a weighted average rate
for all fossil fueled units of below 1.0, may elect to be
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allocated allowances using am alternative baseline
calculation. (404(h))
Early Reductions from Certain Units
Phase I (and Phase 2) affected units that make early
reductions, and that are part of a utility system that
reduced its coal reliance by over 20% in the years 1980
- 1985, and for which coal-fired units produced less than
50% of the systems capacity in 1985-87 receive extra
allowances. (404 (e))
Phase II Reductions
In Phase II, which begins on 1/1/2000, the limits that were
imposed on Phase I plants are tightened, and emissions limits
are imposed on smaller, cleaner plants as well. In general,
all utility plants emitting at a rate above 1.2 lbs/mmBtu
will have to reduce their emissions to a level equal to 1.2
Ibs/aimBtu multiplied by their baseline. (405) However, there
are various other emission rate/allowance allocation
provisions for several other categories of sources including:
Units using primarily 1 ignite coal in 1985 - 1987 and located in
attainment states (405(b)).
Coal or Oil-fired units below 75 MWe and above 1.2 lbs/mmBtu
(405(c))
Coal-fired units below 1.2 lbs/mmBtu (405(d))
Oil and gas-fired units equal to or greater than .6 lbs/mmBtu and
• ~ n 1. 2 lbs/mmBtu (405(e) )
. . -.~.a Gas-fired units less than .6 lbs/mmBtu (405 (f))
Units that commence operation between 1986 and 12/31/95 (405(g))
Oil and gas-fired units with fuel consumption of less than 10%
{405(h))
Bonus Allowances
In addition to allocation through the above noted provisions, bonus
allowances are allocated to the following categories of sources:
Units in certain "high growth" states (405(x))
Certain municipally-owned power plants (405(j))
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States with emission rates at or below 0.8 lbs/nunBtu
un ts in 10 midwestern states (405(a)(3))
Units with actual 1985 rates below 2.5 Ibs/mniBtu and capacity
factors less than 60% (405(b)(2))
Units that converted to coal between 1380 and 1985 and that are
located in states with more than 30 million KW installed electrical
generating capacity.
Special Reserve for EPA Allowance Sales and Auctions
EPA is to create an allowance reserve by tapping each affected
sources allocation 2.8% during 1995 - 99, and 2.84 of the basic
Phase 2 allocation for each year beginning in 2000. These
allowances are to be set aside for EPA allowance sales and
auctions. (416(b))
Allowance Sales
A portion of the allowances in the reserve established above are
to be put in a direct sale subaccount and sold by EPA in accordance
with EPA regulations. The proceeds of allowance sales are to be
returned to the affected units on a pro rata basis. Purchasers are
required to pay 50% of the total purchase price within 6 months
after the approval of the request to purchase, the remainder due
before allowance transfer. Unsold allowances are to be transferred
to an auction subaccount (discussed below). The requirement to
hold direct sales shall be terminated by EPA if less then 201 of
the allowances available for sale are sold in any 2 consecutive
years, and any remaining allowances are transfered to the auction
subaccount described below.
CI-/- Direct Allowance Sale
EPA will offer for sale allowances as described in the
table below. They shall be offered at a price of $1500
per allowance (CPI adjusted). Sales are to be made on a
first come first served basis subject to the priority
for Independent Power Producers (IPPs) described below.
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Table I
Number of Allowances Available for Sale at $1500/ton
Spot Sale (same year)
Advance Sale
1993 - 1999
2000 and after
25,000
25 t000
25,000
Allowances sold in the spot sale in any year are allowances which
nay only be used in that year (unless banked for use in a later
year) , except as otherwise noted. Allowances sold in the advance
auction in any year are allowances which may only be used in the
7th year after the year in which they are first offered for sale
(unless banked for use in a later year.)
Independent Power Producers
An Independent Power Producer (IPP) is defined the owner of
a new facility required to hold allowances which sells 80%
of its electricity wholesale, is non recourse project-
financed, and does not generate energy sold to an affiliate
of the facility owner (unless it can not obtain allowances
from the affiliate). The opportunity to purchase allowances
from the above-noted reserve shall first be given to IPPs.
IPPs proposing to construct new independent power facilities
for which allowances are required before the date of the
first EPA allowance auction, and which have not received
responses to written offers to all affected units to purchase
allowances for $750, are also entitled to an EPA written
guarantee of allowance availability at §1500 per allowance.
(416(c)(3)
EPA is to establish a subaccount in the allowance reserve for
auctions. (416(d)) Auction rules will be developed by EPA, in
consultation with the Department of Treasury, within 12 months of
enactment. Auctions will be open to any person, and will be
carried out by sealed bid, with sales based on bid price. No
nunimuHs bid will be established. Auction proceeds will be
transferred to affected units contributing to the reserve on a pro
rata basis, ana allowances held for auction which were not sold at
the auction will be returned to contributing affected units on a
pro rata basis. EPA may delegate or contract out for auction
services. EPA may terminate the auctions after 2002 if less than
201 of the allowances available for purchase have been purchased
in any 3 consecutive years, (416(f))
1 ¦ owance Auctions
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Allowances vi'l be auctioned j.n accordance with the following
t a 1 e ¦
Table II
Year of sale Number of allowances available for auction
Spot Auction (same year) Advance Auction
1993
50,000*
100,000
1994
50 j 000 *
100 ,.000
1995
50,000*
100,000
1996
150,000
100,000
1997
150,000
100,000
1998
150,000
100,000
1999
150,000
100,000
2000
100,000
100,000
Allowances sold in the spot sale in any year are allowances
which may only be used in that year (unless banked for use in a
later year), except as otherwise noted, Allowances sold in the
advance auction in any year are allowances which may only be used
in the 7th year after the year in which they are first offered for
sale (unless banked for use in a later year.)
~Available for use only in 1995 (unless banked for use in a later
year.
Recording of Allowance Auction Results
EPA shall make public the nature, prices and results of
each auction, and shall record the transfer of allowances.
Additional Auction Participants
Any person holding allowances may submit them to the
EPA for inclusion in the auction, and may specify a
minimum price for their sale. These allowances will
be allocated and sold on bid price after the EPA
auction is complete. Proceeds shall be transferred
by the purchaser at the time of sale to the seller.
(416(d)(4))
NOx control Program
Together with NOx provisions in other parts of the legislation, NOx
provisions in the acid rain title will help to achieve an
approximate reduct ion in annual NOx emissions of 2 million tons
from 1980 levels by 2000, The NOx reduction program is not an
allowance based program, although, the excess emissions fee
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discussed in the context of S02 applies to excess NOX emissions as
well. {411(a)&(b))
Utility NOx emissions - Existing units
Within 18 months of enactment, EPA is required to
establish NOx emissions limitations for tangentially-fired
and dry bottom, wall-fired boilers. The standards set for
these boiler types may not be less stringent than those
specifically provided for in the legislation, unless the
legislatively mandated standards can not be met using low
NOx burner technology. The standards established go into
effect after January 1, 1995, and are applicable to all
Phase I sources. (407(b))
By January 1, 1997, EPA must promulgate emissions limitations
for all other types of utility boilers. All affected sources
must meet these standards by the Phase 2 deadline.
Alternate Emission Limitations
Less stringent emissions limitations then those established
above may be authorized if the operator can demonstrate that
the applicable emissions limitation can not be met using the
requisite technology. A compliance extension is also
possible if the required technology is not immediately
available. (407(d))
New Source Performance Standards
By 1/1/9 3, EPA must propose, and by 1/1/94 promulgate,
revised New Source Performance Standards for NOx from all
fossil fuel-fired steam generating units (407(c))
Emissions Averaging
An owner of 2 or more units subject to the NOx provisions
may comply based on the average emissions rate of all such
units. (407(e))
Acid Rain Permits
The acid rain title is implemented through permits. Permits are
issued for 5 years pursuant to the provisions of Title V as
modified by this title.
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Phase I Permits
Phase I penr.it applications are issued by EPA pursuant to
regulations promulgated within 18 months of enactment.
(408(c)). Phase I permits are due 27 months after enactment.
EPA must act on permit applications within 6 months of
receipt,
Phase XI Permits
Phase II permits are to be issued by states with approved
permit programs. Phase II sources must submit permit
applications by 1/1/96, and states with approved permit
programs must issue the permits by 12/31/97. In states
without approved permitting programs, sources must submit
applications to EPA by 7/1/96, and EPA must issue their,
by 1/1/98. (408(d))
New Unit Permits
Sources with new units must submit permit applications
2 years before the latter of 1/1/2000, or the date on
which the unit commences operation. (408(e))
Compliance Plans
Compliance plans are a required component of each permit
application. The compliance plan describes how the unit
will comply with the emission limitations of this title.
If the source expects to comply with the schedules by-
holding the requisite number of allowances, a statement
to that effect will be sufficient. A unit electing to
make use of an alternative method of compliance (e.g.,
bonuses or extensions) must file a more comprehensive
compliance plan. Compliance plans may be revised by
applicants at any time. (408(g))
Election of Additional Sources
Any unit not affected by Phase I or II requirements may elect to
become an affected unit under this title. It must submit a permit
application and proposed compliance plan. Election sources will
be subject to the requirements of this title, except for the
limitation that, with few exceptions, they may not transfer or bank
allowances produced from reduced utilization or shutdown. S02
emissions limits and allowance allocations for election sources
will be based on 1985 emissions and a baseline to be established
by EPA regulation. Process sources may also elect to become
affected sources in accordance with regulations to be developed by
EPA. (410) .
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Monitoring Reporting and Recordkeeping
In general, all affected sources will be required to install and
operate Continuous Emissions Monitors (or an alternative system
which provides information with the same precision, reliability,
accessibility and timeliness) on each affected unit at the source,
and to quality assure the data for S02, NOx, opacity and volumetric
flow. Multiple units using a single stack do not require unit
specific CEMs, but do require the collection of sufficient reliable
information to demonstrate compliance for each unit. (412)
Phase 1 Requirements
Within 36 months of enactment. Phase 1 sources must have
operational CEMs. They shall also quality assure data and
keep records and reports in accordance with regulations to
be developed by EPA.(412(b))
Phase II Requirements
By 1/1/95, all affected units roust meet the requirements
noted above. New units must meet the requirements upon
the commencement of commercial operation (412(c))
Unavailability of Data
EPA will promulgate regulations prescribing the means for
calculating emissions to be used to fill data gaps occurring
during periods of required compliance with the above
noted requirements. (412(d))
Clean Coal Technology Regulatory Incentives
A clean coal technology is defined as any technology which will
achieve significant reductions of S02 or NOx associated with coal
use in the generation of electricity, process steam, or industrial
products which is not in widespread use at the time of enactment.
(415)» The legislation also provides some incentives for clean
coal technology demonstration projects funded through the
Department of Energy Program or EPA. (415)
Temporary Demonstration Projects
Demonstration projects of 5 years or less which comply with
state implementation plans and National Ambient Air Quality
Standards during and after project termination will not be
subject to New Source Performance Standards, or parts C or
D of Title I. (415(2))
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Permanent Demonstration Projects
Permanent demonstration projects that constitute repowering
under 402(1) shall not be subject to New Source Performance
Standards, or to review or permitting requirements of Part.
C for any pollutant whose potential emissions do not in-
crease as a result of the project. (415(b)(3))
EPA Regulations
Within 12 months of enactment, EPA shall promulgate
regulations or interpretive rulings to make existing
regulations consistent with the above noted requirements.
State changes may be submitted to EPA to accomplish the
same objectives. (415(4))
Miscellaneous
Required Reports
EPA must report to Congress on the following matters:
The feasibility and effectiveness of an acid rain standard
A list of all lakes known to be acidified due to acidic
depos ition
, An inventory of national annual S02 emissions from industrial
sources. If the inventory shows that industrial S02
emissions are likely to exceed 5.6 million tons, the
EPA shall take regulatory actions to see that emissions
are capped at the 5.6 million ton level.
Annual S02 and NOx emission levels and reductions, ana
reduction methods utilized in each province of Canada
participating in Canada's acid rain control program.
Reports required by other Agencies
Clean Coal Technologies Export Program
Study of buffering and neutralizing agents
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