»oi United States ' ' Environmental Protection Air and Radiation EPA/400/1-91/006.D £- ' Agency (ANR-445) April 1991 en CD a C3 & EPA Acid Rain Advisory Committee Meeting: January 28-29,1991 M - Permits and Technology Issue Papers HEADQUARTERS LIBRARY ENVIRONMENTAL PROTECTION AGENCY WASHINGTON, D.C. 20460 ------- .If it-. ' ------- INDEX ARAC PERMITS DOCUMENTS PI Background Paper on Permits and Compliance Plans P2 Revised 12/20/90 - Key Issues for the Acid Rain Permits Program P3 Permit Term Issue Paper P4 Minutes of First ARAC Meeting, December 13 -14, 1990 P5 Minutes of First ARAC Permits Subcommittee Conference Call P6 Phase I Extensions Issue Paper P7 Reduced Utilization Issue Paper P8 . Repowering Issue Paper P9 Substitution Plan Issue Paper P10 Election Sources (Opt-In) Issue Paper Pll New Units Issue Paper P12 NOx Averaging Issue Paper P13 NOx Alternative Emissions Limitation Issue Paper P14 Permit Procedures Issue Paper P15 Minutes of Second ARAC Permits Subcommittee Conference Call P16 Revised Subcommittee Assignments ------- ------- V . BACKGROUND PAPER ON PERMITS AND COMPLIANCE PLANS The Acid Rain requirements will be implemented through an operating permits program under Section 408 of the Acid Rain Title and the general permits provisions, Title V, of the Act. Regulations implementing the permitting requirements will include provisions regarding schedules for submission and approval or disapproval of permit applications and compliance plans, contents of permits and compliance plans, and permit issuance and amendment procedures. Permits and compliance plans should complement the allowance system and foster trading by providing sufficient flexibility, to allow sources to make real time allowance trading decisions. Our challenge in this critical program element is to develop permit and compliance plan requirements which maximize flexibility for the market, certainty and predictability for sources, and accountability. whv are Operating Permits Necessary or Desirable? An affected source under the Clean Air Act, as amended, is typically subject to numerous requirements. These include Acid Rain program requirements such as sulfur .dioxide and nitrogen oxides limits; compliance deadlines; emissions monitoring, recordkeeping and reporting requirements; and regulations concerning allowance tracking and trading. In addition, each source is potentially subject to State implementation plan (SIP) emissions limits, New Source Performance Standards (NSPS), air toxics requirements, and new source review/prevention of significant deterioration (NSR/PSD) requirements. These requirements apply to a greater or lesser degree to a particular source depending on the type of facility involved. An affected source might, for example, be subject to the year 2000 compliance deadline or it might be granted a repowering extension to 2003. Similarly the applicable NOx limit will vary depending on the type of boiler involved. The intent of Section 408 of the Acid Rain title and by the general permits title. Title V of the Clean Air Act Amendments of 1990, is, thus, to establish a mechanism for clearly articulating the specific requirements applicable to an individual source in one document. Operating permits will provide greater certainty, thereby facilitating compliance by individual sources and oversight by air pollution control agencies. Why is Flexibility Desirable? Flexibility is desirable in order to — (1) Promote efficiency: Rigid and inflexible requirements for compliance would hamper the ability of sources to make decisions based on economic considerations. Flexibility in allowing sources to determine (and modify) methods of ------- compliance will promote economic efficiency and reduce compliance costs. (2) Foster active allowance trading: Flexibility in selecting methods of complying with the requirements of the Acid Rain program will foster an active allowance trading market. Since the Acid Rain program is the first substantial market-based environmental program, it is important that the trading system not stifled through inflexible command-and- control requirements. (3) Allow compliance program modifications: Flexibility is essential to allow sources to modify their methods of compliance as necessary to minimize the cost of compliance. Provided each affected unit complies with its obligations by applicable deadlines, sources should not be burdened by excessive impediments to obtain permit and compliance plan modifications. How Can Flexibility Be Promoted While Ensuring Accountability? While the benefits of building flexibility into the Acid Rain permit program are clear, the Agency must ensure that units are held accountable for compliance with the emissions reduction and other program requirements. The Agency must balance these objectives through the implementing regulations. The Agency contemplates promoting flexibility by creating an administratively adjustable compliance planning process. As currently contemplated, plans could be adjusted periodically without the need of a formal permit revision or lengthy approval process. The incorporation of explicit emissions monitoring and reporting requirements will complete the measures needed to enable the Agency to take this passive role in compliance planning. Up to date, accurate emissions data will couple with the Act's stringent excess emissions offset and fee requirements to enable the Agency to close the loop and ensure that the goals of the program are achieved. To accomplish this, EPA is exploring procedural mechanisms for building flexibility into the program. For example, different types of information requirements, and amendment procedures can be established for permits and compliance plans. In addition, reliance on forms and electronic systems may contribute to the program flexibility. (1) Permit Application, Compliance Plan, and Permit Contents; A critical program element to facilitate real-time allowance trading decisions, is that permit applications, compliance plans, and permits will not have to be amended each time a source engages in allowance trading. Rather the success of the Acid Rain. control program will depend heavily on a ------- reliable allowance tracking and trading system to support end- of-year compliance determinations. The permit documents must, however, articulate the essential requirements of the Acid Rain program. Since the permit application, compliance plan, and permit, are binding on the' source, maximum flexibility will depend on limiting the information required in these documents to what is necessary for ensuring compliance at the affected units. Although many of the Acid Rain program requirements that must be included in the permit documents are explicitly enumerated in Title IV, additional information may be needed to ensure program accountability. The Agency -needs to consider what data elements are implicitly needed to ensure compliance with the CAA. For example, the legislation authorizes a wide range of compliance methods. The compliance plan, which becomes a part of the permit and is required to be developed by sources and submitted with their permit applications, is the vehicle for the source to articulate its choice of one or more of the authorized compliance methods. Certain compliance options may be chosen for affected units at the source which must be supported by information and commitments to achieve mandated deadlines fe.o. demonstrations of compliance by substitution sources, deadlines for achieving repowering demonstrations) . By contrast, the permit is expected to contain the more rigid requirements, such as the emissions monitoring; recordkeeping and reporting requirements, prohibitions concerning the use of allowances, operational information such as the unit's baseline, the number of allowances initially allocated to each unit covered by the permit, and the applicable compliance deadlines. Permit application contents will depend on the information needed for permit issuance. (2) Mentifflgrtfg Procedures : The Agency is considering adding flexibility to the program by authorizing amendments by notice for modifications to compliance plans. Amendments to the terns of the permit would, by contrast, require more extensive Agency review and opportunities for public comment. Provisions necessary to ensure accountability, such as emissions monitoring requirements for each unit, would be included in the permit. Thus, a source which decides to change its method of compliance could do so with only minimal restrictions. The process would have to include certain safeguards, however, to ensure the source is accountable for its emissions and compliance with other applicable requirements. (3) Standardized Permitting; To facilitate information transfer, the Agency is considering allowing the electronic ------- submission of permit applications, and computer generated permits. In addition, the Agency may develop a series of forms to reflect the differing data requirements for the various compliance options authorized by the legislation. For example, all affected sources would be required to submit a general form, accompanied by specific forms for each of the alternative compliance methods chosen (e.g., substitution plans, recovering). Thus, a source considering either a substitution or a Phase I extension would submit the general form, the form for substitution plans and the fora for Phase I extensions. In this instance the compliance plan would also have to indicate a date certain by when the source would decide which option it will pursue. The forms could be available in electronic format for sources wishing to use electronic submissions of applications. How will Permits Be Issued? . ^ As with all other facilities regulated by the CAA, every affected source is required to develop and submit a permit application and a compliance plan for each affected unit at the source. Acid Rain operating perm.ts are required to have a term of five years. (See Section 408(a).) EPA is required to issue permits for affected sources in Phase I, which begins in 1995. For Phase II, which begins in 2000, Title IV provides that permits will be issued by States and localities with approved permitting programs under Title V, or by EPA in the event of state default. Eventually, all CAA requirements (Acid Rain, SIPs, NSPS, etc.) will be incorporated into one permit. EPA must develop regulations to implement the requirements of the Acid Rain Program, consistent with the Title V general operating permits program. A critical issue EPA will have to resolve early on in developing the program concerns the timing of permit issuance. Phase I permit applications, binding on the source until the permit is issued, must be submitted by each affected source for Phase I by February 15, 1993. EPA must review the compliance plans submitted with each such application within six months. (There is no deadline by which EPA must issue Phase I permits.) Phase II permit applications are due January 1, 1996 (or 1998 for NOx requirements and some new sources). Phase II permits are required to be issued by States or .acalities with approved programs by December 11, 1997, or by EPA in the event of a State/local default, by January 1, 1998. Given the legislative mandate that Acid Rain perai*- have a term of five years! (1) if a Phase I permit is issuec before 1995, it will expire before Phase I ends. EPA would have to issue another permit to cover the last two years of Phase I, or Phase II permits issued by the States would have to include the requirements for the last two years of Phase I. (2) If the Phase I permit is not issued until December 31, 1994 (so it lasts throughout Phase I), the source will have two Acid Rain permits from 1998 through 2000. ------- tv The Agency i's considering using computerized expert systems to generate all or part of the Acid Rain permits. Use of expert systems would facilitate expeditious permitting and would ensure consistency in permit requirements, particularly during Phase II permitting by States and localities. At a minimum, expert systems would help ensure that essential Acid Rain program permit conditions are not inadvertently left out of. permits. Although such a system promises efficiency and national consistency, its . success will depend on an effective outreach and training program. How Will Acid Rain Permits Be Coordinated With The General Operating Permits Program? The CAA requires that the Acid Rain permit program operate in accordance with the general permits title (Title V) , except as modified by the Acid Rain title (Title IV) . Where the two permitting programs differ, the Acid Rain requirements take precedence for purposes of the Acid Rain portion of the permit. (See Section 506(b)). (1) Relationship Between Acid Rain. SIP. NSPS. and Other Clean Air Act Permit Requirements. It is important to keep in mind in any discussion of integration issues that the general permit program under Title V does not establish any substantive program requirements, only the permitting program. Each permit issued under Title V will, thus, have essentially -separate chapters specifying Acid Rain . requirements, SIP requirements, NSPS requirements, NESHAP requirements, as appropriate depending on the source involved. A paramount concept to understand in considering how these separate programs might affect operations at a source is that nothing in one substantive program can supersede the requirement to comply with other programs. Thus, a source subject to a strict SIP or NSPS limit of SO2 may not emit in excess of that limit just because it holds allowances under the Acid Rain program. A source in that situation will be better off selling the allowances it cannot use. Similarly, a relaxed SIP limit will not override the absolute Acid Rain prohibition that a unit cannot emit S02 in excess of the allowances it holds for use in that year. As a practical matter, therefore, the most stringent CAA requirement will govern the operations at a source. (2) Timing Conflicts Between Titles IV and V. A critical issue, related to the permit-term issue discussed above, is.the conflict between permit duration and permit issuance deadlines in Title IV and Title V. As previously noted, Section 408(a) mandates that Acid Rain permits have a term of five years. Title v authorizes permit terms of ujj £fi five years, but allows states the discretion to issue permits of shorter duration. In addition, Title V mandates revisions to operating permits before the end of five years to incorporate new requirements. ------- EPA needs to address these permit-term conflicts to ensure effective use of resources by the per itting authority and to avoid burdening facilities which are both SIP and Acid Rain affected sources with multiple permitting. The permit issuance process is resource-intensive for both the permitting authority and the sc *rce involved. It is, therefore, important to ensure that all air permitting requirements (e.g. Acid Rain, SIPs, NSPS, etc.) are included in a source's permit as quickly as possible — preferably by the beginning of Phase II. Unless the autt .-ity for shorter permit terms in Title V is deemed to be superseded by Title iv, affected sources under the Acid Rain program will tend to be burdened inordinately by repeated permitting. • (3) Compliance Plan Contents Under Titles IV and V. Another area needing integration is the extent to which Title V compliance planning requirements might be superseded by Title IV. Section 408(b) limits the contents of compliance plans for sources not seeking approval of one or more special compliance options which are specifically enumerated. This provision presumably applies to the planning requirements for achieving initial compliance. Plans may, however, include such Title V components as a description of the source's operation and maintenance, and compliance monitoring program. ------- P2 (Revised) KEY ISSUES FOR THE ACID RAIN PERMITS PROGRAM Issues Concerning National Consistency of the Acid Rain Program: How can the Acid Rain permit program best be structured to facilitate the transition from Phase I Federal permitting to Phase II State permitting? How can the integrity of the acid rain program be ensured, particularly in the context of state-issued' permits during Phase II? What mechanisms would ensure that permit applications and proposed compliance plans faithfully articulate and are consistent with the Acid Rain Program? For example: (a) Should regulations bar state permits if state law is changed to significantly alter the approved permit program? (b) Should EPA mandate the State use of permit forms or permit language for Title IV permits? Should EPA develop "expert systems" for generating permits? (c) Should State authority to impose limitations in the contents of a Title IV permit be limited? . (d) Should the Acid Rain requirements be in a separate, stand-alone chapter of the permit, or should the permit in essence modify the Acid Rain emissions requirements by setting forth only the most stringent Clean Air Act limit as an operating requirement (where the facility has SIP, NSPS, or NSR/PSD limits on NOx or SO2)? Can a state require a source to transfer allowances based on more stringent non-Acid Rain limits? Or should non-Acid Rain limits be addressed completely separately from the Acid Rain portion of the permit? (e) Should states be mandated to put sources which are acid rain affected sources on a five-year permit cycle for purposes of all permitting requirements (g^ SIP)? (f) Should permit-challenge procedures be mandated during Phase II, as criteria for approving state permit programs? (e.g. time-bar challenges) Should permits be made publicly available through, e.g. a national bulletin board, to facilitate trading? Permit Contents: What must be in the permit application, in the compliance plan, and in the PRELIMINARY DRAFT FOR ARAC PERMITS SUBCOMMITTEE THIS DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY ------- 2 P2 (Revised) permit? Preliminary outlines of statutory requirements and issues papers for the various compliance methods contemplated by Title IV are under preparation. These will include: (a) reduced utilization, (b) substitution plans, (c) Phase I extensions, (d) Repowering extensions. (e) opt-in plans, (0 new unit plans, (g) NOx emissions averaging, (h) NOx alternative emissions limit petitions, (i) excess emissions offset planning. The permit application and compliance plan are binding until the permit is issued. What should be required to be included in the application based on this fact? Should an application form be mandated containing or referencing applicable prohibitions? How specific should emissions limit compliance planning requirements be so as to ensure accountability yet afford maximum flexibility in support of the allowance trading provisions of the program? e.g. should compliance plans relying on the intent of the owner or operator to obtain allowances by end of year, be required to include a fall back add-on schedule with increments of progress if allowances are not available by a date certain? Should advance back-up planning be required for sources seeking Phase I or repowering extensions, in the event an increment of progress is missed or the technology does not give intended results? Permitting Procedure^: Phase I Extensions: When should EPA start accepting Phase I Extension applications? Note The statute seems to contemplate that applications be submitted in a source's compliance plan. Allowances for units granted extensions are, however, awarded on a first-come-first-serve basis. Many sources which may not ultimately actually seek such extensions would like to begin submitting applications immediately in order to preserve their place in line. Presumably EPA will not be in a position to consider such submissions until permit application requirements are promulgated in final form in 18 months. Also, see the technology issues, discussed below. PRELIMINARY DRAFT FOR ARAC PERMITS SUBCOMMITTEE THIS DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY ------- 3 P2 (Revised) Program Flexibility: Title V contemplates separate procedures for permit modification versus amendment.procedures, the later being a more streamlined procedure of notice. How can this distinction be used to increase flexibility in the Acid Rain permit program yet ensure accountability? Assuming two types of amendment processes are used, what should the effective date of any amendment be: Upon receipt of notice by EPA? Upon EPA notification to source of date of effectiveness of amendment? What criteria in addition .to submittal of required information should be used to determine whether compliance plans should be. approved or modified by the permitting authority? For example, should EPA approve Phase I substitution plans submitted under Sections 404(b) and (c), that are facially sufficient, and rely on the strength of the excess emissions section and other enforcement provisions as the incentive for sources not to overextend?.or should EPA try to assess whether allowances will be available under the trading system or through allowance allocations? Should compliance plan approval be conditional on a . source meeting non-acid rain requirements, or require alternatives? (e.g. NSR permitting) . Under what circumstances should integrated permit applications or compliance plans ~ governing more than one source - be required? (Section 408(b)) Duration of Operating Permits: Under Section 408(a), acid rain operating permits must have a term of five years. (1) Phase I begins on January 1,1995. Phase I permit applications, binding on the source until a permit is issued, are due 27 months after the date of enactment (L& February 15, 1993). EPA must review the submission within 6 months, i.e. August 15, 1993. The permit term will end in 1998 under a literal reading of the statute. (2) Phase n begins January 1, 2000. Phase n permit applications are due on January 1, 1996, (except in the case of NOx requirements and for some new sources they are not due until 1998). Phase II permits are required to be issued by the States December 31, 1997, or by EPA in the event of a State default, January 1, 1998. Phase II permits timely issued will expire in 2003. PRELIMINARY DRAFT FOR ARAC PERMITS SUBCOMMITTEE IMS DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY ------- 4 P2 (Revised) Title V authorizes permit terms of less than five years. In addition, under certain circumstances Title V mandates revisions to operating permits for major sources before the end of five years to incorporate new CAA standards or regulations. Section 506(b) seems to supersede Title V permit schedules. How should EPA address these permit term conflicts? Is there any way of avoiding the permit reissuance process for Phase I and the first five years of Phase II? e.g. Can the legislation be read to allow a Phase I permit to be issued December 31, 1994, allowing for the permit to last the entire period of Phase I? or should the Phase II permit issued in 1998, include requirements to govern operations during the last two years of Phase I? (Note delaying issuance of permits might impinge on opportunities for permit challenges.) Similarly, must a Phase II permit issued December 31, 1997, be reissued in by January 1, 2003? Should the Title IV ; permitting schedule drive the schedule for State permitting of Acid Rain affected sources for purposes of other portions of the permit, e.g. SIP requirements? If not, when the Acid Rain portion of the permit comes up for reissuance, will the entire permit be reissued and reopened? New Units: There is an apparent conflict in that §405(g)(4) provides for allowances for certain new units, but they are not listed as one of the exceptions for allowance allocations under §403(e): (1) Is this a technical error in Section 403(e)? (2) Should we presume that new units authorized to have allowances allocated under the exceptions in Section 405(g) must submit permit applications by 1/1/96 and meet all other Phase n deadlines? Or are they on the more lenient new unit permit application deadline? What criteria should be considered or what procedures used to establish "designated representative" status? e.g. certifications of designation written/public notice to potentially interested persons? Should there be an alternate requirement to avoid problems in the event of death, etc.? How should a designation be changed? Should there be opportunities for challenging a designation? If so what kind? What limits? Is there anyway to immunize EPA/States from disputes concerning representation? Technology Issues (Refer to issue papers for further discussion.) Reduced Utilization or Shutdown: What consitutes reduced utilization? Section 408(c)(l)(B) imposes the reduced generation planning requirements on affected sources under section 404 (Phase I - SO2) and section 407 (NOx). PRELIMINARY DRAFT FOR ARAC PERMITS SUBCOMMITTEE THIS DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY ------- 5 P2 (Revised) Should such plans be obtained from Section 405 units (Phase II) which intend to comply in this manner? . •" , Substitution Plans: Should or can the language "unit(s) under the.control of such owner or operator" be read to include units which, by agreement of two or more owners or operators, are placed under the control of one designated representative? ... Qualifying Phase I Technology Extensions: What is Qualifying Phase I Technology? Is a unit which does not in fact need the additional time to install the technology eligible to apply for the extension under Section 404(d) so as to benefit from the additional allowances available under the special reserve? What is the primary concern behind this provision? Environmental? Other? (Note these issues warrant full deliberation by the ARAC Refer to issue paper.) Repowering: How should EPA define "qualifying clean coal technology" for purposes of a Section 409 compliance deadline.extension? ("Repowering" is defined at Section 402(12) as replacement of an existing coal-fired unit, or any oil or gas unit which was awarded clean coal demonstration funding as of January 1, 1991, with an enumerated clean coal technology or with any other new technology to control simultaneous multiple emissions and improved efficiency and waste reduction.) Should the technological/economic infeasibility of a chosen reppwering technology demonstration requirement go into the permit? If a demonstration is made, should the permit be modified? Should the demonstration requirement be separate from the permit? Should the compliance plan be required to specify a backup technology? . Does a Phase I Extension or a Repowering extension apply to NOx requirements? There is no express statutory authority to do so. Is there authority to include NOx. limits in extensions if it will result in a decrease in NOx emissions? Would this be desirable? . . . : Excess Emissions Offset Plans: What should be required in offset'plans? "What is the permitting authority's obligation in reviewing offset plans? PRELIMINARY DRAFT FOR ARAC PERMITS SUBCOMMITTEE THIS DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY ------- 6 P2 (Revised) ISSUES NOT RECOMMENDED FOR THE ARAC PERMITS SUBCOMMITTEE CONSIDERATION AT THIS TIME: How should permit challenges be handled? Should challenges to permits be time- barred? What permit challenge procedures should be provided for? Should enforcement be barred while a permit challenge is pending? Should there be some type of interim relief? Would treatment in case of initial permit challenges differ from challenges to permit revisions? Who can challe nge a permit? (Legal issues which will be addressed in Title V permits rulemaking.) Does the legislation contemplate that the shield provisions of Title V be interpreted differently in the context of the Acid Rain program? (Legal issue to be addressed in proposal.) What dangers exist of sources trying to use ambient program permit requirements to insulate themselves from Acid Rain program requirements? Should the Acid Rain regulations include provisions to reduce opportunities of sources using ambient air requirements as a defense to compliance with acid rain requirements? (The legislation clearly provides that nothing in one Clean Air Act program area can be used to alter the requirements under another program area. This can be restated in the regulations.) Should procedures be developed to protect trade and business secrets? (F.ocedures already exist pursuant to Section 114 of the Act, fof sources to obtain protections. These procedures would be available for affected sources in the Acid Rain program.) \pplications for various extensions and for optional alternative baselines are due March 31, 1991, before the regulations defining designated representative are due. How should we deal with this timing issue? (Referred to the Allowance Subcommittee.) Should Title IV permit applications be plant-wide and address compliance at every unit? Should there be one permit per plant, with sub-components for units? (Issue too ministerial to warrant ARAC consideration.) There is a conflict in the repowering extension, referred to as a 1-year extension at section 403(a)(l), on p. 15, and as a three-year extension in section 409. Is the reference on p. 15 a typo? (The answer is clearly yes. The repowering extension PRELIMINARY DRAFT FOR ARAC PERMITS SUBCOMMITTEE THIS DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY ------- 7 P2 (Revised) authority is from 2000 to December 31, 2003.) Since the statute provides that nothing in Acid Rain program immunizes source from the obligation to comply fully with other CAA requirements (e.g. SIP or NSPS limits), are there any circumstances when it would be appropriate to rely on discretionary authority in Section 408(b)(l) of requiring demonstration of attainment of the NAAQS or of compliance with a SIP, NSPS or other limitation, be appropriate? Are there statutory or policy reasons or benefits for conditioning Acid Rain permit approval on demonstrations of compliance with other requirements under the Act? E.g. if the SIP is known to be inadequate? when reviewing substitution plans? other? or should demonstrations of attainment be required only if there is no SIP in place? What are the dangers of intermingling the ambient and total loadings programs in this way? (The use of this authority raises policy issues that are broader than the scope of the Acid Rain program. EPA will review the issues in order to frame an appropriate presentation of the discussion.) Energy Conservation and Renewable Energy Issues: (Referred to the appropriate Subcommittee.) A Phase II unit could presumably earn allowances under this subsection from 1992 through 2000. When would the Phase II source have to submit a permit application? Phase II permit applications are normally due by January 1, 1996. If a source wants to receive conservation/renewable allowances beginning in 1995, it seems that the source should submit some type of permit application by the Phase I permit application deadline. Units may begin earning credits under Section 404(f) towards allowances 4 months before EPA issues conservation/renewable regulations and permit regulations. What guidance should EPA provide regarding certification of emissions avoided during this time period? The criteria for acceptable plans are difficult to address. EPA must determine what constitutes "qualified" conservation and renewable energy under subsection 404(f) (in consulta-tion with the Secretary of Energy), and the determination must rely heavily on the potential to demonstrate the legislated requirements for issuance. If the reductions cannot be quantified, can the measure qualify? How frequently should compliance certifications (progress reports) be submitted? PRELIMINARY DRAFT FOR ARAC PERMITS SUBCOMMITTEE THIS DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY ------- 8 P2 (Revised) Quarterly? Within a specified time period of the occurrence of a scheduled deadline or a change of circumstances, e.g. 10 days? (Referred to the Emissions Subcommittee.) Can permit application, compliance plan, final permit, and compliance certification forms be developed to facilitate use of a expert systems for generating permits, and of computerized information retrieval systems accessible to participants in the allowance trading program? If so, what EPA data system should be used to record and provide regulated community ready access to such information? What confidentiality protections should be established? (The discussion of whether this is desirable is raised by the transition issues above. The specifics of implementation are better left to EPA and State deliberation.) What criteria/procedures should be used when EPA or the State modifies what is in a proposed compliance plan? (This issue involves legal analysis and a level of detail better addressed in the context of a proposed regulation.) How should EPA perform offset fee CPI adjustments, and what mechanisms must be established for the receipt and deposit of excess emissions fees? (Too ministerial to warrant ARAC deliberation.) Allowance Pools: End-of-year unit-by-unit accounting is mandatory. If, however, EPA establishes a procedure for recognizing/approving allowance pools in order to facilitate streamlined end-of-year transfers of allowances within the pool, what limitations should be imposed? (The issue of whether to recommend recognition of pools needs to be addressed first by the Allowance subcommittee.) Can EPA approve permits in part? Are parts of permits severable? (These issues will be addressed in the Title V permits rulemaking.) PRELIMINARY DRAFT FOR ARAC PERMITS SUBCOMMITTEE THIS DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY ------- November 29, 1990 IS8U2 Hov can the conflict between Title IV and Title V, resulting froir. the provision in Title IV mandating permit terns of 5 years duration, be resolved? DISCUSSION There are several permit duration and scheduling conflicts between the General Permits title (Title V), and the Acid Rain Permits requirements (Title IV). Section 506 (b) states that the Acid Rain Act (Title IV) overrides Title v in regards to permits. " Permits Implementing Acid Rain Provisions.— The provisions of this title, including provisions regarding schedules for submission,and approval or disapproval of permit applications, shall apply to permits implementing the requirements of Title IV except as modified by that title." Under Section 408(a), Acid Rain operating permits shall have a term of five years. Title V authorizes permit terms of shorter duration. In addition, Title V mandates revisions to operating permits before the end of five years to incorporate new requirements. These permit term provisions conflict with the initial Phase I and Phase II Acid Rain permitting requirements. (1) Phase I begins on January 1, 1995. Phase I permit applications, binding on the source until a permit is issued, are due 27 months after the date of enactment (i.e. February 15, 1993). EPA must review the compliance plans submitted within 6 months, i.e. August 15, 1993, although there is no mandated date for issuing the permit. (2) Phase II begins January 1, 2000. Phase II permit applications are due on January 1, 1996, or in 1998 in the case of Section 407 NOx requirements and for some new sources. Phase II permits are required to be issued by the States or localities with approved programs December 31, 1997, or by EPA in the event of a State or local default, January 1, 1998. See attached Timelines. How should EPA address these permit term conflicts? Hill the Acid Rain portion of the permit be reissued, revoked, and revised in accordance with the Title V state ------- or local program permitting schedule, or must all facilities which are Acid Rain affected sources be placed on a five-year cycle for purposes of SIP permitting notwithstanding a different state/local program permitting cycle for other types of sources? Section 506(b) seems to indicate this is not the case. If not, when the Acid Rain portion of the permit comes up for re- issuance, will the entire permit be reissued and reopened? Is there any way of avoiding a permit re-issuance process for Phase I and the first five years of Phase II? e.g. Can the legislation be read to allow a Phase I permit to expire December 31, 1999? Should the Phase II permit issued in 1998, include requirements to govern operations the last two years of Phase I? Similarly, must a Phase II permit issued December 31, 1997, be reissued in 2002? ------- TIXELIVB8 I. ACID RAIN PERMITTING TIMELINE: The Acid Rain Permits Progras (Section 408 of Title IV) specifies the following timeline — May 15, 1992: Promulgate final regulations February 1993: Phase I permit applications and proposed compliance plans due August, 1993: Deadline for EPA to act on Phase I compliance plans. (Note, there is no express statutory deadline for EPA to issue Phase I permits. If issued on this date, Phase I permits would have to be reissued before August 1998, for remainder of Phase I due to 5-year permit term restriction. Re-issuance could be virtually automatic. Alternatively, the legislation might be construed to authorize the EPA to issue. permits with an effective date beginning 1995, particularly since the source will be bound by the.permit application and proposed plan until the permit is issued. January 1, 1995: Phase I emissions limitation compliance begins, except for sources with extensions. Closing date for sources to.submit applications for 15-month NOx extensions. April 1, 1995: Deadline for EPA to act on NOx extension petitions January 1, 1996: Phase II permit applications and proposed compliance plans due. (Must be' submitted to States or localities and to EPA since we will not know until July who has to issue the permits. Sqe. below). July 1, 1996: Deadline for approval of State/local permit programs. If State or local program is not approved by this date, EPA must issue Phase II permits by 1/1/98. December 31, 1997: Deadline for States/locals with approved programs to issue Phase II permits for S02 (including approved compliance plans). since permits are of 5-year duration, query whether we can make the effective date of the permit begin in the year 2000 in order to avoid re-issuance in 2002? January 1, 1998: Deadline for EPA to issue Phase II permits for 502, where State/local does not have approved program by July l, 1996. (Permits shall include approved compliance plans). Note, permits are of 5-year duration. One issue is whether we can make the effective date of the permit begin in year 2000 in order to avoid re-issuance in 2002. January 1, 1998: Sources must submit (Phase II) NOx permit application and proposed compliance plan. ------- January 1, 2000: Phase II emissions limitations compliance begins (except for sources with three-year Repowering extensions.) December 31, 2002: Reissue five-year Phase II permits. December 31, 2003: Phase II compliance begins for sources vith three-year Repovering extensions. II. PERMITS TITLE TIKELINI3: The General Penaits Title calls for the following regulatory development and implementation timeline — November 15, 1991: Promulgate final regulation November 15, 1993: Deadline for submission of State or local permit programs to EPA November 15, 1994: Deadline for EPA to act on State or local permitting program November 15, 1995: Deadline for sources to submit permit applications unless EPA has to promulgate the permit program (presumably for non-acid rain permitting requirements) November 15, 1996: EPA promulgates State/local permit program where State or locality defaults May 15, 1997: State must have issued 1/3 of initial permits with terms of up to five years May 15, 1998: State must have issued 2/3 of initial permits with tens of up to five years in duration. (Presumably Acid Rain 502 permits issued by December 1997, and NOx permits issued based on January 1, 1996 submissions, can be counted in meeting this obligation.) May 15, 1999: State must have issued initial permits for all sources,vith terms of up to five years in duration. (Presumably, Acid Rain NOx permits, which must be issued before I/1/2000 can be included in this nuaber). ------- Other Issues: There is a conflict in the repovering extension referred to as. a 1-year extension at section 403{a) (1), on p. 15, and as a 3 year extension in section 409. Is the reference on p. 15 a typo?. The closing date for sources to submit applications for a 15-day NOx extension for Phase I is the date that Phase I compliance begins. How will last minute applications be handled? Repovering extension documentation for Phase II is due on the date that Phase II compliance begins. How will last minute submissions be evaluated in time to require Phase II compliance if the documents fail to show adequate advancement in the repovering process. ------- ------- MEETING MINUTES PERMITS AND TECHNOLOGY SUBCOMMITTEE DATE: December 14, 1990 LOCATION: Omni Shorham Hotel Washington, DC ATTENDEES: • --Subcommittee Members Willinm Steinmeier, Acting Chair • Missouri Public Service Commission C. Luther Heckman Coalition -for Envirorjner.t-Energy Balance Steven D. Burton S'ithe Energies U.S.A., Inc. Jerry Eyster A. T. Massey Coal Company, Inc. Thomas Maiman (for James T. O'Connor. Chairman of the Soard) Commonwealth Edison Company C. V. Mathai (for 0. Mark de Michele) ' Arizona Public Service -James Harabright Pennsylvania Department of Environmental Resources Paul Feira Vheelabrator Air Pollution Control James rtarkowsky AEP Service Corporation • Steven Winberg Consolidated Natural Gas Company William Samuel ' United Mine Workers of America Page 1 ------- ATTENDEES: --For EPA Rachel Hopp, EPA Lead EPA/ARD David N'ovello EPA/GGC REFERENCES .ATTACHED): Agenda, Acid Rain Permits and Compliance Subcommittee Break-Out Session ' " • PI - Background Paper on Permits and Compliance Plans ?2 - Key Issues for Acid Rain Permits, Permit App I icacior.s arc Compliance Plans ?3 - Acid Rain Permits, Permit Applications and Compliance Plans - Permit Term Issue TOPICS DISCUSSED: Acting Subcommittee Chair Steinmeier introduced the major agenda Lre^s /attached): 1) Issue.identification: • - . 2) Schedule for Option Development; 2) Address the permit-term discrepancies between Title IV - Acid Rain, and Title V - General Permits; and i) Establish procedures for the subcommittee. Mr. Steinmeier agreed to be acting chairperson since 0. Mark-de Michele was unable to attend the ARAC. EPA would like a. utility CEO able to attend-a: least two of ch« next three meetings, to be the subcommittee chair, sir.ce the other subcoBBittees are not chaired by a utility. Mr. Hainan will see if ths CEO of Coonoiw«»lth Edison, Mr. O'Connor, will be able to fill that role. Eileen Claugcan will contact subcommittee members to resolve this matter. Ms. Hopp introduced a preliminary list of issues that EPA sees in developing permit regulations to implement Title IV. These are listed ir. Reference P2. The key issues EPA needs early input on ar - listed in Reft.ar.:^ ?3. These kev issues arise from conflicts between Title / and Title V relating to permit duration and scheduling. It is important to resolve how t: deal with conflicts between these two titles quickly because the Title V general permit regulations have to be promulgated within 12 months of enact- Page 2 ------- ment, i.e., by November, 1991. -£?A expects to have the first internal' craft of the general permit regulation by January. 1991. "in order" to be able to" propose the regulations in April, and to meet the statutory deadline in November. Several comments and questions about the issues listed in P2 and ?2 vere discussed. Some Highlights of this discussion were as follows: 1) With regard to whether the additional s'ulfur dioxide emissions allowances for sources using qualifying Phase I technologies- is available for sources that do not really need the tvo-year extension, both Mr. Hambright ar.z Mr. Heckman indicated that these are very important incentives that should :~ = included. Ms. Hopp noted that this would limit EPA's ability to process applications for sources that are really dependent on the extension but -ere not first in line. • • ' . 2) Mr. MArkowsky commented that it was important that allowance trading within associations or power pools be allowed. Compliance plans sho-uld not be structured in such a way that would impede intra-pool trades. Ms. Hopp noted that the legislation does not prohibit pools, 'but it does not expressly authorize EPA to treat units in allowance pools differently, and that the legislation is clear that the allowance limit is on a unit-by-unit basis. Recognizing allowance pools might, however, provide a basis for granting sources added flexibility in adjusting allowances at the end of the year. For example, a more expedited procedure might be used for register ing trades within a recognized pool. Mr. Mathai commented that definitions -eed to be made as to vhat constitutes an association or power pool and how ~uch flexibility will the association have to make'intra-pool trades. 3) Mr. Vinberg was concerned about whether compliance plans had := be amended for trades, since trades have to be registered with EPA. Can compli- ance plans be amended after the fact, as 'in the case of a trade that occurs just before the end of the year? Ms. Hopp clarified that there are several express statutory provisions making it clear that registered allowance- trades do not trigger a requirement to amend the permit. Rather, trades registered with EPA are automatically deemed to amend the permit by operation of law. Mr. Eyster indicated that the'procedures for trading allowances should be as unimpeded as possible, in particular avoiding a formal permit amendment process which would hamper flexibility. . : . A) --Kenbers recognized that certain actions, e.g. r.epowering, would require special permit and compliance plan provisions: 5) Mr. Mathai added that temporary-operating changes not requiring a permit change should not have to be reported to EPA, but some limits need to be specified on the limits and duration of such non-reportable changes. For purposes of the Acid Rain program, operators should have flexibilir. to make changes during the year that do not result in a unit exceeding the allowances held for the unit for the calendar year. However, all present Page-3 ------- agreed chat operating changes would still have to comply with other parts of the Act such as the State Implementation Plans (SI?s), New Source Perforrcar.ee Standards, new source review, and any required demonstrations that ambient air quality standards will '.e maintained. As observed by Mr. Maiman, the most restrictive of these other requirements will always apply, perhaps limiting 2 utility's flexibility notwithstanding the number of allowances available for a source. 6) Ms. Hopp noted the discretionary authority in the Acid Rain title 'to require demonstrations of attainment, and raised the issue of when such demonstrations would be appropriate. ' . '- 7) In discussing the interplay of flexibility and permits, Mr. Novello pointed out that new terminology is being discussed in development of the Title V permit regulations regarding permit changes and operational flexibility: a permit "modification" would require full public review under the administrative provisions of notice and comment involved in issuing a r.ev permit, whereas a permit "amendment" would follow a more informal process that EPA can approve internally, followed by a notice of the amendment. Ms.- Hopp indicated that EPA was interested in an ARAC recommendation on whether EPA car. increase flexibility by authorizing compliance plan "amendments", which would be virtually automatically subject to certain safeguards (e.g., no "amendment" could moot past violations of plan requirements), but subjecting the more static/fixed permit requirements to the "modification" procedure. 8) On the issue of coordination of the general permits regulations and .the Acid Rain provisions,., the subcommittee asked to see working drafts of the general permits regulations. Mr. Novello reported that no drafts car. be made available to the public before the public comment period in April. although EPA may have some public information material. Messrs. M'athai, Eyster, Winberg. and Maiman ail thought it important that this subcommittee have access to issue papers, outlines of the general permit regulations,, and the drafts themselves, when available. Mr. Eyster asked for a briefing on the status of the general permits title rulemaking at the next meeting of this . subcommittee. 9) Regarding the key issue of transition to state/local Acid Rain permitting in Phase II, a general consensus emerged that the states should r.ot have the ability to modify the allowance trading program and should be.limited in their authority to vary the permit requirements. Messrs. Heckman and Vinberg pointed out that regional or state restrictions on the allowance system would undermine the intent of Congress because the utilities themselves operate across state and regional boundaries. Ms. Hopp noted that Title V prohibits approval of State permit programs that do not implement Title IV. Mr. Hambright pointed out that states may have programs within their SIPs that would require an operator to do more than would be required for Title IV emissions reductions, e.g. if a modification is proposed it would have to be at least BACT. Mr. Hambright also observed that some states will have difficulty understanding and adjusting to the philosophy embodied in the ------- Acid Rain title. The states have been operating on a command and control basis for so long that it may be difficult for them to adjust to the flexibil- ity of the trading mechanisms. EPA will need to have an outreach program to the states to explain this new approach. It may even be better to treat Acid Rain permitting separate from permitting for other programs, particularly since state requirements of public notice, comment, and appeal may 'unnecessar- ily constrain the Acid Rain program. The subcommittee reached a broadly held consensus that a national standardized Acid Rain permitting program is needed. This program should, be unified, use mandated forms for standardization of permits, and ideally might allow for electronic submittal. EPA should develop necessary software to facilitate "transition to State permitting. The Acid Rain portion of permits ' should be stand-alone documents, not tied to any other requirements in the permits issued by the states. While this is the subcommittee's recommended approach, it is recognized that this could be restricted by the state's right* provisions of the Act. Therefore, the Office of General Counsel should be consulted to tailor the limitations on the States as appropriate. 10} On the key issue of the permit term, Ms. Hopp explained that the legislation requires that permits have a term of five years. One option would be to issue Phase I permits just before January 1, 1995, in order to avoid re- permitting in the middle of the Phase. Mr. Heckman pointed out that this could create a problem since it would not afford enough time to reach a resolution where the permit is challenged. Another option would be to streamline the reissuance process. The issue was left for further discussion. 11} The subcommittee did not have time to address each of the other potential issues listed in Reference P2. However, a list of issues was prepared on an easel. A revised list of issues is attached. The subc.o.Tunittee -embers should review these, and recommend which issues are important fc'r -the subcommittee to address. 12) On the subject of subcommittee assignments, several members agreed to work on the technology issues. These members are Messrs. Feira, Mathai, and *inberg. Mr. Markowsky expressed an interest in working on issues of how designated representatives for multiple owner facilities are defined, identi- fied, and empowered to deal with EPA. FUTURE ACTIOS: ' .' . EPA will consolidate an issue list and send it via facsimile to subcom- mittee members by Wednesday, December 19. The Subcommittee will have a conference call at 3:00 pm (EST), Thursday, December 20 to prioritize the is- sues, and set a schedule for the development of options papers. EPA will also send the members a preliminary list of the various compliance planning requirements of Title IV. Page 5 ------- ------- Subcommittee on Permits and Technologies Conference Call Minutes -- December 20, 1990 On December 20, 1990, a conference call was conducted with members of the Acid Rain Advisory Committee (ARAC) Subcommittee on Permits and Technologies. The following Subcommittee members participated: o William D. Steinmeier, Missouri Public Service Commission o C. Luther Heckman, Coalition for Environment-Energy Balance o Jerry M. Eyster, A. T. Massey Coai Company, Inc. o Thomas Maiman, Commonwealth Edison Company .o C. V. Mathai, Arizona Public Service Company o James K. Hambright, Pennsylvania Department of Environmental Resources o James J. Markowsky, AEP Service Corporation o William Samuel, United Mine Workers of America o Ned Helme, Alliance for Acid Rain Control Subcommittee members not participating in the call were: o Steven D. Burton, Sithe Energies U.S.A., Inc. o Steven E. Winberg, Consolidated Natural Gas Co. o Paul J. Feira, Wheelabrator Air Pollution Control The following EPA personnel participated in the call: o Rachel Hopp, Acid Rain Division (ARD) o Larry Kertcher, ARD o Joe Kruger, ARD o Karen Kent, ARD o Kathleen Ehrensberger, ARD o John Rudd, Office of Enforcement The purpose of the meeting was to assign Subcommittee member leads for the development of option papers, to establish a schedule for working on specific issues, and to discuss administrative issues and next steps for the Subcommittee. PRELIMINARY DRAFT FOR ARAC -DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY- ------- .P5 Focus of Upcoming ARAC Meetings After reviewing the revised P2 issue paper (attached), the Subcommittee agreed to develop papers focusing on the national consistency and technology, .ssues for the January 28-29 ARAC meeting. The February meeting will focus on permit procedure issues, and the March meeting will focus on permit content issues. Assignments Subcommittee members assumed lead responsibility for preparing papers on the topics to be presented at the next ARAC meeting (technologies and national consistency). In addition, a Subcommittee member volunteered to take the lead on the designated representative issue, which will be discussed at the February ARAC meeting. The following assignments were made (asterisk indicates lead person): Category of Issue Techno- logies ii ti M II It Nat'l Consist. Issue Reduced Utilization Substitution Plans Phase I Extension Repowering Opt-in Plans New Unit Plans National Consistency Members(s) •Eyster, Mathai 'Heckman Helme, Markowsky, Eyster, Samuel, Maiman •Markowsky, Steinmeier Steinmeier, Eyster 'Markowsky * Maiman, Markowsky ARAC Meeting Date January. 28- 29 January 28- 29 Januarv 28- 29 January 28- 29 January 28- 29 January 28- 29 January 28- 29 PRELIMINARY DRAFT FOR ARAC -DISCUSSION DOES NOT REPRESENT THE POSITIOK OF THE ENVIRONMENTAL PROTECTION AGENCY- ------- PS Permit Pro- cedures Permit Content Designated Representative (additional permit procedure issues will be assigned later) (Issues will be assigned later)" •Heckman February 20-21 March ' EPA will provide the Subcommittee with issue papers that summarize statutory requirements for the various compliance strategies and list some preliminary issues. These papers will be provided to the Subcommittee within the next two weeks. Additional Issues Raised Several issues or questions were raised during the meeting: o NOx issues - Mr. Mathai asked why NOx compliance issues were not being addressed by the Subcommittee. In.response, Ms. Hopp and Mr. Kertcher reiterated the discussion at the last ARAC meeting that the Agency is considering a negotiated rulemaking on the NOx provisions of Title IV. Therefore, at this time, NOx issues will not be addressed through the ARAC process. However, EPA will brief the ARAC on the status of NOx issues in February. Mr. Mathai and Mr. Markowsky asked to be included in the negotiated rulemaking process for NOx regulations. ; o Relationship Between Allowances and Permits: Mr. Markowsky noted that there was a need to frame the relationship between allowances and the permit program. He noted that the Utility Air Regulatory Group (UARG) was looking at this. He also said that it would be helpful to have up-front guidance from EPA on this issue. Ms. Hopp responded that EPA needs to receive input from the ARAC Subcommittee on this issue and invited Mr. Markowsky to develop a paper on the topic. She also invited submission of the UARG issue paper. Mr. Markowsky said he would raise the issue with UARG. o Issues Not Recommended for Consideration at This Time: Mr. Hambright said that while he understood the need to set priorities for issues addressed by the Subcommittee, it was important not to ignore the issues designated "not recommended for consideration at this time" in the revised P2 issue paper. Specifically, Mr. Hambright mentioned permit challenge issues and PRELIMINARY PRM"T FOR ARAC -DISCUSSION DOES NOT REPRESS^ THE POSITION THE^NVIROHMENTAL PROTECTIOH AGENCY-; ------- 4 PS issues involved in the interaction of Titles IV and V of the Clean Air Act. o Title V Permit Regulations: Mr. Mathai asked whether the Subcommittee could be provided with information on the Title V permitting regulations currently under development. Ms. Hopp, restating what had been reported in this regard at the last Subcommittee meeting, noted that the Title V regulations were being developed under a 12-month rulemaking process separate from the Acid Rain regulations, and that the proposed regulations would be made available to the public during the public comment period (approximately in April). Next Steps 1. Comments on the minutes of the first Subcommittee meeting must be submitted by January 2, 1990. 2. Ms. Hopp, stressing the importance of providing Subcommittee with draft options papers as soon as possible, recommended that the Subcommittee leads begin working on the options papers, rather than waiting until EPA sends them more in- depth issue papers. She noted that final versions of the options papers must be sent to the full Committee by January 21, one week prior to the January 28 meeting. 3. The Subcommittee will hold its next conference call on January 8, 1990, at 3:00 p.m. The Subcommittee agreed that the next conference call would be arranged by Bill Steinmeier through AT&T. PRELIMINARY PRATT FOR ARAC -DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY- ------- P6 ISSUE PAPER: ELIGIBLE PRASE I EXTENSIONS (SECTION 1. Statutory Requirements: A. Applicability 1. 2. Section 404(d) allows Phase I units with qualified Phase I technologies to receive a 2-year extension from emissions limitation requirements.1 Owner or operator must hold allowances for unit(s) equal to total annual emissions for each of the two years.2 B. Compliance Plan Requirements 1. Designation of unit(s) proposed for Phase I extension; 2. Designation of transfer unit(s), if any; 3. Designation of designated representative for extension and transfer unit(s); 4. Information and compliance demonstrations for transfer unit(s), if any (same type of information as with substitution or reduced utilization compensating units); *• . t- 5. Copy of executed contract for design engineering and construction of technology for the extension and/or transfer unit(s) - Note. contract may be contingent on EPA approval of plan; 6. Qualifying Phase I Technology certification and demonstration; 7. Each unit's baseline; 'Section 402(19) define* 'qualifying phase 1 technology" as 'a technological system of continuous emission reduction which achieves a 90 percent reduction in emissions of sulfur dioxide from the emissions thai would have resulted from the use of fuels which were not subject to treatment prior to combustion.* - Allowances are in pan obtainable from the allowance reserve created by Section 404(a)(2). However, see Section 404(d)(3) and (4) regarding the order of allocation of allowances from the reserve. PRELIMINARY DRAFT FOR ARAC -DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY- ------- 2 P6 8. Each unit's actual 1985 emissions rate; 9. Each unit's allowable 1985 emissions rate; 10. Each unit's projected utilization each year for 1995 through 1999; 11. CEMS by §412 deadline on eligible Phase I extension unit(s), 12. CEMS per Section 412 on transfer unit(s) that are not otherwise affected units by January 1, 1995; 13. Emissions limitations and number of allowances expected to be necessary annually before and after Qualifying Phase I Technology has been installed; 14. Demonstration of achievabiliry of 90% reduction using qualifying technology; 15. Demonstration that 90% was, in fact, achieved; 16. Average annual emissions 1988/89 (see Section 404(d)(4)(A))." C. Miscellaneous Provisions 1. Prohibition on emissions above those specified in permit and compliance plan unless owner/operator holds appropriate allowances (404(d)(5)); 2. Application processing and allowance allocation procedures (Section 404(d)(3), (4) and (5)); III. Background/Intent of Legislation Discussion: Legislative history on the Phase I extension provides two major reasons for its inclusion in Title IV: (a) protection of high sulfur coal mining jobs (by encouraging the use of technological controls on high sulfur coal); and (b) reduction of costs for mid-Western utilities and ratepayers (by providing an economic incentive for utilities that install qualified technologies).3 Although the •*See statement of Senator Baucus, Congressional Record. October 27. 1990. S 16980. PRELIMINARY DRAFT FOR ARAC ••:.. , -DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY- ------- 3 . • P6 Phase I extension-provides incentives for early, more stringent emissions reductions, the net environmental benefit of. these reductions is uncertain; allowances saved through early emission reductions could be sold to other sources who could then increase their emissions. iy. Issues B. Are sources eligible for additional allowances if they install qualifying technologies and reduce emissions before 1997 (and therefore don't require a 2 year extension)? ' Discussion: Representatives of several Phase I facilities have expressed interest in meeting the 90% emissions reduction requirements before 1997' so that they may bank the additional allowances from the reserve. It is unclear, however, if this is consistent with the intent of the statute. On one hand, the Act seems to provide bonus allowances to help cover the additional two years necessary to achieve more stringent reductions. On • the other hand, the October 26, 1990 Joint Statement of Managers supports the interpretation that sources are eligible to apply for bonus allowances if they install qualifying technologies before 1997.4 Does EPA have discretion in the manner in which it distributes allowances from the reserve? Discussion: Section 403(d)(3) states that the Administrator "shall .review • and take final action on each extension proposal in order of receipt..." and that he "may approve an extension proposal in whole or in part, and with such modifications or conditions as may be necessary, consistent with the orderly functioning of the allowance system, and to ensure the emissions reductions contemplated by the title," Several questions are raised by this provision: 1. Should EPA interpret this provision strictly as "first come, first served"? Such an interpretation may mean that a limited number of sources (by some estimates, as few as six) may benefit from this provision. 4'Plants that use certain control technologies to meet their Phase I reduction requirements may either postpone compliance until 1997 or receive early-reduction bonus allowances for reductions they achieve between 1995 and 1997.* (Joint Statement of Managers. Congressional Record. October 26, 1990. H 13200) PRELIMINARY DRAFT FOR ARAC -DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY- ------- 4 P6 2. May and should EPA reduce the allocation of allowances to individual applicants in order to "maximize" or "optimize" the distribution of bonus allowances to the widest number of applicants? Language quoted above on partial approval of extension applications may indicate that EP.-*. has the discretion or mandate to ensure that the widest possible number of sources receive some benefits from this provision-although the language may be too general to support such a specific interpretation. 3. Are there policy or other reasons to prefer one method of distribution over another? 4. Should approval of extension applications be conditioned upon the availability of allocations? C. What is the baseline used to determine whether a qualifying Phase I technology achieves a 90% emissions reduction? Discussion: A qualifying Phase I technology is defined as a "technological system of continuous emission reduction which achieves a 90 percent reduction in emissions of sulfur dioxide from the emissions that would have resulted from the use of fuels which were not subject to treatment prior to combustion." This definition produces different outcomes, depending on how one determines the type of coal used as a baseline for calculating the emissions reduction. At least two scenarios are possible: 1. Calculation based on type of coal used during future period of compliance: This is the most simple interpretation of the definition--a technology would have to achieve a full 90% emissions reduction over what would have been achieved without installing the equipment. This scenario would effectively preclude the use of low-sulfur coal. 2. Calculation based on type of coal used before extension proposal was approved: Under this scenario, it would be possible for a source to shift to low sulfur coal and then apply additional, less stringent (i.e., < 90%) emissions control technology. In such a case, there could be an overall reduction of 90% from the level of emissions before the shift to lower sulfur coal. D. Does a Phase I extension affect NOx requirements? PRELIMINARY DRAFT FOR ARAC -DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY- ------- P7 ISSUE PAPER: COMPLIANCE BY REDUCING UTILIZATION OR SHUTTING DOWN THE AFFECTED UNIT (408tomfB» I. Statutory Requirements A. Definition/Applicability Owner or operator of an affected unit under sections 404 and 407 (i.e. Phase I) proposes to comply by reducing utilization of the unit as compared with its baseline or by shutting down the unit, B. Notification Requirements '- Must be in compliance plan, submitted with permit application. C. Permit Application/Compliance Plan Requirements 1. Specification of the unit(s) that will provide electrical generation to compensate for reduced output at affected source; or Demonstration that reduced utilization will be accomplished through energy conservation or improved unit efficiency; 2. Compliance Plan must be submitted by one designated representative for both the affected and compensating units; 3. Compensating units must have fully operational emissions monitoring system; 4. Information concerning each compensating unit's baseline, its actual 1985 emissions rate, its allowable 1985 emissions rate; . : 5. Historical information on generation at the original and compensating units; " - 6. Other information as with substitution plans. D. Effect PRELIMINARY DRAFT FOR ARAC PERMITS SUBCOMMITTEE THIS DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY ------- 2 ' . ' P7 1. Removal of an existing or affected unit or source from commercial operation after enactment shall not affect allowances allocated to it, except as in §409 and §410. (§403(a)(l)). 2. Allowances shall be allocated to compensating units in the amount j. equal to the product of the unit's baseline multiplied by the lesser of the ' unit's actual 1985 emissions rate or its allowable 1985 emissions rate divided by 2000. 3. Unit(s) specified for compensation shall be deemed affected unit(s), and fully subject to Acid Rain regulations. 4. Congressional intent is to prevent ut; ities with Phase I affected units from getting around Phase I reduction requirements without deriving some environmental benefit. This intent ties in with the requirement that CEMs be operational on Phase II units by the beginning of Phase I. II. Issues A, What is "reduced utilization"? Can reductions made for reasons other than reducing emissions be distinguished from reducing utilization as a method of compliance? What documentation of such reasons would be sufficient? Note units in power pools reduce and augment their generation temporarily for non-environmental reasons as a matter of course. Both the House and Senate Bills had provisions for 20% reduction in utilization as a trigger to make all compensating units affected units if they are not already. These provisions were ultimately stricken from the language, implying Congressional intent against using a percentage bench mark. B. Should reduced generation at the originally affected unit or increased generation at other units, or both be the triggers to determine whether compensating units become affected? C. What criteria can be used to evaluate a demonstration that reduced utilization will be accomplished through energy conservation or improved unit efficiency? Should this demonstration, as a matter of policy, require information that would encourage least-cost planning? PRELIMINARY DRAFT FOR ARAC PERMITS SUBCOMMITTEE THIS DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY ------- P7 D. What is the effect of a unit's owner or operator failing to submit a plan for reduced utilization? E. What information should be reported by all Phase I sources to ensure this planning requirement is met? Should EPA require generating information in every permit application in order to audit compliance with this planning requirement? PRELIMINARY DRAFT FOR ARAC PERMITS SUBCOMMITTEE THIS DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY ------- ------- PS ISSUE PAPER: REPOWERING EXTENSION PROPOSALS (SECTION. 409) I. Statutory Requirements A. Definition/Applicability -- Section 409 authorizes extensions of the Phase II compliance deadline to December 31, 2003, for Phase II units subject to Section 405(b) or (c) that replace an existing coal-fired boiler with a qualifying clean coal technology.1 B. Notification/Demonstration Requirements 1. By March 1, 1991, notification of intent to apply for repowering extension of compliance deadline until 12/31/2003; 2. By December 31, 1997, demonstration that one or more units will be repowered with a qualifying clean coal technology to comply with the requirements of section 405; 3. By January 1, 2000, submission of (a) documentation for the preliminary design and engineering effort for repowering; (b) an executed and binding contract for the majority of the equipment to repower such unit; and (c) other information required by the Administrator by regulation. 4. Requirement to notify the Administrator 60 days before removing extension unit from operation to install repowering technology; 5. In the event of a failed repowering demonstration an owner/operator must make several demonstrations before he/she is allowed to retrofit or repower with another clean coal technology, or use other available control technology to achieve the applicable . emission limitation (Section 409(b)(2)). Specifically, the : 1-There is no definition for "qualifying clean coal technology." Section 402(12). however, defines "repowering" as "replacement of an existing coal-fired boiler with one of the following clean coat technologies: atmospheric or pressurized fluidized bed combustion. integrated gasification combined cycle, magnetohydrodynamics. direct and indirect coal-fired turbines, integrated gasification fuel cells. or as determined by the Administrator, in consultation with the Secretary of Energy, a derivative of one or more of these technologies, and any other technology capable of controlling multiple combustion emissions simultaneously with improved boiler or generation efficiency and with significantly greater waste reduction relative to the performance of technology in widespread commercial use as of the date of enactment of the Clean Air Act Amendments of 1990." Repowering may also include "any oil and/or gas-fired unit which has been awarded clean coal technology demonstration funding as of January 1, 1991, by the Department of Energy." PRELIMINARY DRAFT FOR ARAC -DISCUSSION DOES NOT REPRESENT TH^ POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY- ------- PS c. owner/operator must demonstrate that: a. the repowering technology was properly constructed and tested: b. the emissions reductions were not achieved; and c. the technology is economically or technologically infeasible. Compliance Plan Requirements 1. Demonstrations and notifications (see I.B. above ) may also be permit conditions which must appear in the compliance pian. 2. Certification of extension i.-- required; 2. Identification of unit(s) governed by proposal; 3. Designation of designated representative; 4. For replacement of an existing utility unit with a new utility unit located at a different site using repowering technology: a. documentation by owner or operator that the replacement unit will replace the existing unit; b. documentation that the existing unit is retired from service on or before the date the designated replacement unit enters commercial operation; c. information on replacement unit, such as is required for substitution, transfer, or compensating units. 5. Allowance allocation information: a. each unit's baseline; b. each unit's SIP emissions limitation; c. each unit's actual emission rate for 1995; PRELIMINARY DRAFT FOR ARAC -DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTIONAGENCY- ------- 2 PS 6, In cases where no replacement unit is involved, requirement to demonstrate whether the actual hourly emissions at,the existing extension unit increased as a result of the repowering. Section 111 shall apply in the absence of such a showing. (Note, new replacement units are subject to NSPS in all cases.) D. Effect on Allowances : . 1. Prohibition against any transfer of allowances allocated for the extension unit during the. extension period (Section 409(c)(l)); 2. Existing unit's allowances will be reallocated to the designated replacement unit; E. Other Provisions . 1. Phase II compliance requirements shall apply beginning on the date the extension unit is removed from operation. 2. Expedited State permitting is encouraged for repowered units. II. Issues A. Units that repower but fail to meet Phase II emission reductions may, at the discretion of the Administrator, be allowed to retrofit or repower using another technology. 1. What are the criteria that must be met to receive this second chance? For example, what information must be provided to show (a) proper construction and testing; and (b) technical or economic infeasibility? Should this information go into the permit? If a demonstration is made, should the permit be modified? Should the demonstration requirement be a condition of the permit? Should the compliance plan specify a backup technology? 2. Should additional time be allowed for these units to comply? Is there any discretion and, if so, how much? B. Should EPA encourage States to expedite permitting of repowered units, as encouraged in section 409(e)? Is EPA obligated to do so? PRELIMINARY DRAFT FOR ARAC -DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY- ------- 4 PS C. What information should EPA require in various submissions for technology demonstrations? D. What does the provision for consultation with the Department of Energy over qualified repowering technologies imply? E. What application and processing procedures should be used for repowering notifications/demonstrations? F. Does a repowering extension affect NOx requirements? G. How should EPA define qualifying clean coal technology for purposes of the Section 409 compliance deadline extension? Is the definition for repowering in 402(12) (see Footnote 1) adequate? PRELIMINARY DRAFT FOR ARAC •DISCUSSION DOES NOT REPRESENT TRFf POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY- ------- P9 ISSUE PAPER: SUBSTITUTION UNITS §404(b> and (c) I. Statutory Requirements A. Definition/Applicability 1. A substitution unit is any unit under the control of an owner or operator of a Phase I affected unit which is reassigned, in whole or in . part, the sulfur dioxide reduction requirements of the Phase I affected unit. 2. The substitution provision is available for compliance by Phase I units only, since all units are affected units under Phase II. B. Compliance Plan Requirements 1. Designation of - (a) the original affected unit, and (b) the substitute unit or units, 2. Description of extent of substitution for reduction requirements of original affected unit; 3. Original affected unit's baseline; 4. . Original affected unit's actual 1985 emissions rate for sulfur dioxide; 5. Original affected unit's allowable 1985 emissions rate for sulfur dioxide; 6. Original affected unit's authorized annual allowance allocation (Table A for Phase I less any taps); 7. Calculation of annual average tonnage for calendar years 1985, 1986, and 1987 emitted by substitute unit(s) (calculated based on baseline for each unit as defined in Section 402(4) multiplied by lower of actual or allowable 1985 emissions rate); PRELIMINARY DRAFT FOR ARAC SUBCOMMITTEE THIS DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL AGENCY ------- 2 P9 8. Emissions rates and tonnage limitations that would be applicable to original and substitute affected units under substitution plan; 9. Documentation that reassigned tonnage limits will, as a whole. Achieve same or greater emissions reductions than -vould have been a^nieved by the original and substitute units without substitution; and 10. Certification that original and substitute units have (operational) emissions monitors per §412, and demonstration of compliance therewith. 11. §408(b) states that compliance plans for- substitute units must have a comprehensive description of the schedule and means of compliance. 12. Substitution plan must be submitted by the designated representative for all units. (See 408 (c) (1)). 13. The designated representative must certify that the substitution unit(s) has achieved sulfur dioxide emissions reductions commensurate with those required of the affected unit. (Note, other requirements of the CAA apply to substitute units.) 14. The number of allowances held by substitution units will be "borrowed" | from the affected unit as long as the substitution plan is in effect; 15. The substitution plan will be in effect until the onset of Phase II; 16. Joint and several liability of units governed by substitution plan (See. Section 404(c)(2)). All liability arising from excess emissions will apply to the original affected unit and the substitute unit jointly; 17. EPA Processing Procedures. II. Issues A. What does "under the control of the owner or operator" mean? Discussion: Section 408 contemplates that permits applications be submitted by a designated representative. The owner or operator or the designated representative of the affected unit must certify or be able to demonstrate legal control of the operations of the original and substitute unit(s), including PRELIMINARY DRAFT FOR ARAC SUBCOMMITTEE THIS DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL AGENCY ------- " . 3 P9 authority to represent and bind all unit(s) under a permit. B. Aside from the "under the control" requirement, should there be any other limitation on what units can be considered as substitute units? For example. should there be a restriction that units nominated as substitute units for one affected unit cannot be nominated as substitute units for another affected . unit? C. What happens if a substitute unit contained in an approved plan is sold to another owner or operator? Is the approved plan automatically rescinded? . Is this a mandatory basis for a permit modification? Discussion: It appears the owner or operator of the original affected unit would, in any event, be responsible for achieving the emissions reduction applicable to the original unit. - D. What constitutes adequate documentation under §404(b) (5)? 1. Section 404(b)(5) requires assurances provided in the permit application/compliance plan that the proposed original affected unit and the substitute unit(s) will jointly achieve the same or greater emissions reductions than would be achieved by the original affected unit. 2. Should this requirement be a binding condition of the permit? 3. Should the "adequate documentation" clause require that each substitute unit identify and be, bound by the specific anticipated quantity of emission reduction expected from each substitute unit? 4. ' Should documentation include a discussion of the experience .the owner or operator has with the particular method of emissions reduction proposed for the substitute unit? . . : E. Is there any reason/authority for NOx limitations, information, and compliance certifications, to be altered by a substitution plan? F. Should EPA require the designated representative to certify compliance with other CAA requirements as well as §404(b)? Should the certification associated with other CAA requirements be different for substitution units PRELIMINARY DRAFT FOR ARAC SUBCOMMITTEE THIS DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL AGENCY ------- P9 than it is for the original affected units? Why? G. Are allowances borrowed by, transferred to, or leased by a substitute unit? If transferred, can those allowances subsequently be marketed? H. Should there be any constraints on the duration of substitution plans? Why? Once substitution plans are approved, should they become effective until the onset of Phase II? .1. Can or should EPA approve substitution plans with different designated representatives responsible for different substitute units for a single affected unit? Discussion: This seems contrary to §408. One individual needs to accept responsibility for the emission reductions of all units governed by a substitution plan. PRELIMINARY DRAFT FOR ARAC SUBCOMMITTEE THIS DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL AGENCY ------- P10 ISSUE PAPER: ELECTION FOR ADDITIQN7AL SOURCES (SECTION 410) (OPT-IN REQUIREMENTS) 1. Statutory Requirements A. Applicability: 1. Units that emit sulfur dioxide but are not affected units under Phase I, Phase II, or new unit provisions; 2. Qualified process sources that emit sulfur dioxide (410 (d)); and 3. Small diesel refineries (410 (h)). -. . B. Effect: • 1. Owner or operator may elect to designate the unit to become an "affected unit" and to receive allowances. 2. Election sources are subject to requirements of sections 403 (allowances), 408 (permits), 411 (excess emissions), 412 (emissions monitoring, reporting, and record keeping), 413 (general compliance with Act), 414 (enforcement). 3. Limitations regarding allocation and use of allowances by election sources (410 (f)): * a. Designated units shall not transfer or bank allowances produced as a result of reduced utilization and shutdown. Exception: Such allowances may be transferred or carried forward: (1) if reduced utilization or shutdown results from the replacement of thermal energy from a designated unit • under this section with thermal energy from a unit or units subject to the requirements of Title IV; and (2) if the designated unit's allowances are transferred or carried forward for use at such replacement unit(s). PRELIMINARY DRAFT FOR ARAC -DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY- ------- •pio b. Source may hot receive allowances greater than the emissions that would result from re source'operating in full compliance with the Clean Air Act. 4. Qualifying small diesel refineries allocations are authorized for the period 10/1/93 - 12/31/99 only, based on reduced sulfur dioxide attributable to using §211(i) desulfurization. up to 1,500 allowances per refinery (§410 (h)(4)). No more than 35,000 allowance allocations per year overall (§410(h)(5)). C. Permit/Compliance Plan Requirements: 1. Election shall be submitted to EPA along with a permit application and proposed compliance plan in accordance with section 408 (section 410(a)). : 2. Certification/demonstration that unit or source one of the three types of eligible sources; 3. Actual and allowable 1985 emissions rates; 4. Specification of the operating data, fuel consumption, arid other emission baseline data requirements; 5. Demonstration that CEMs is operational on unit; 6. Additional requirements for process sources (§410(d)); 7. Requirements for small diesel refineries (410(h)): a. Certification that all fuel was produced, beginning October 1, 1993, meeting the requirements of §211(i) of the Act (desulfurization); b. Certification that the "refinery" or a "portion of the refinery" has crude oil throughput of less than 18,250,000 barrels per year (410 (h)(3)(A)); PRELIMINARY DRAFT FOR ARAC -DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY- ------- P10 c. Certification that the "refinery" or a "portion of the refinery" is owned or controlled by a "refiner" with a total combined "bona fide" crude oil throughput of less than 50,187,500 barrels per year, as reported to DOE (§410(h)(3)(B)); d. Certification that all diesel fuel produced by the refinery for which allowances are claimed meets the requirements of subsection 211(i) of the CAA; and e. Information regarding the annual tons of sulfur dioxide reduction attributable to desulfurization. 8. Information regarding utilization (§410(0), e-g-* historical thermal energy generation; 9. Demonstration of historical compliance with other requirements of the Act (410(f)); and 10. Other data as required by regulations, which shall be issued not later than 18 months after enactment of the Clean Air Act Amendments of 1990. II. Issues A. What operating data should be required for establishing the unit's baseline under "section 410(b)? B. If 1985-87 operating data is not available, what "alternative representative data" should be required (section 410(b)), or what procedures should be established for determining same? C. Should there be minimum emissions reduction requirements for process and other sources to opt-in? D. What types of process sources should be eligible for designation as an "affected unit" (§410(d))? E. Should there be any restrictions on the types of process sources that qualify? PRELIMINARY DRAFT FOR ARAC -DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY- ------- 4 P10 F. What specific types of information should be required for specific types .of sources? G. What information should be required to monitor against the reduced utilization and shutdown limitations in.§410(f)? H. What demonstrations should be required to ensure that allowances are allocated only to the extent of emissions at the source in full compliance with the requirements of the Act (§410(f))? I. What information/demonstration should be required to establish the tonnage sulfur dioxide reduction attributable to desulfurization per 211(i) (see formula)? J. The crude oil throughput requirements for qualifying as a "small refinery" can be applied on a refinery-wide basis or on the basis of a "portion of a refinery." What issues does this raise? K. How should the terms "refinery", "bona fide", and "refiner" be defined? (§410(h)(3)(A) and (b)) L. Is there a difference between the use of the term "diesel fuel" in 410(h) generally and "motor diesel fuel" in 410(h)(6)? PRELIMINARY DRAFT FOR ARAC -DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY- ------- Pll ISSUE PAPER: NEW UTILITY UNITS (Sections 408(eh 4Q3(e^: 405(gK2V (3V and (4k and 407fa)) I. Statutory Requirements A. Definition/Applicability: 1. The term "new unit" for purposes of the Acid Rain program is defined, in section 402(10), as "a unit that 'commences commercial operation'1 on or after the date of enactment of the Clean Air Act Amendments of 1990", i.e. November 15, 1990. (It is important tp distinguish this term from the term "new source" defined at Subsection lll(a)(2) in Title I of the Act, the ambient air program new source performance standards (NSPS) authority. The term "existing unit" for purposes of the Acid Rain program, defined in Subsection 408(8), can include units that are new units for the purposes of Section 111.) 2. After January 1, 2000, new utility units may not emit sulfur dioxide in excess of allowances held, and are subject to the excess emissions provisions of section 411 (Subsection 403(e)); . . 3. New utility units may obtain allowances (e.g. through purchase, lease, etc.), but are not eligible for allocations of allowances by the Administrator, except for: a. New units listed in Subsection 405(g)(2), Table B; . b. New units that commence, or have commenced, commercial operation on or after October 1, 1990, but not later than December 31, 1992 (Subsection 405(g)(3)); and c.- New units that commenced construction2 before December 31, 1 The term 'commenced commercial operation", defined at Subsection 402(22), means 'to have begun to generate electricity for sate.' Subsection 402(21) provides that the term "commenced1 as applied to construction of a new electric utility unit means that an owner or operator has undertaken a continuous program of construction or that an owner or operator has entered into a • contractual obligation to undertake and complete, within a reasonable time, a continuous program of construction.' Subsection 402(23) provides that the term "construction' means fabrication, erection, or installation of an affected unit.' PRELIMINARY DRAFT FOR ARAC -DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY ------- II. Pll 1990, and commence commercial operation between January 1, 1993 and December 31, 1995 (Subsection 405(g)(4)). B. Effect: 1. Except for sources listed in 3 a, b, or c above, no sulfur dioxide may be emitted from new units in the absence of allowances obtained on the market, e.g. through auctions, sales, or other trading; 2. New units must demonstrate annually that they have obtained enough allowances to account for their emissions; Permit/Compliance Plan Requirements: 1. New unit permit applications are due 24 months before the later of: a. January 1, 2000; or b. The date the unit commences "commercial" operation; 2. Must demonstrate that CEMs are in place and operational 3, Must include information identifying: (a) the category of new unit, i.e. the date construction commenced, and the date commercial operation commenced; (b) annual fuel consumption at 65% capacity factor; (c) allowable 1985 SO2 emissions rate; and (d) actual 1985 SO2 emissions rate 4. Must include designated representative certification 5. Must include NOx compliance information as required by regulation 6. Must include other information as required by regulation. Issues A. Should approval of Acid Rain compliance plans for new units be conditional on a demonstration of the unit's meeting NSPS, NSR/PSD, or other Clean Air Act requirements? PRELIMINARY DRAFT FOR ARAC -DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY ------- Pll B. Should permits be conditioned on a unit's obtaining allowances by a date certain? Should a demonstration that allowances are available be required? C. Should the owners, operators, and designated representative be required to notify the permitting authority in advance of submitting a permit application, or in the permit application, of the dates construction and commercial operation will begin? D. What documentation should be required to demonstrate commencement of construction, and of commercial operation? PRELIMINARY DRAFT FOR ARAC -DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY ------- ------- P12, ISSUE PAPER: NOx EMISSIONS AVERAGING I. Statutory Requirements A. Definition/Applicability This compliance alternative applies to Phase I and Phase II. The owner or operator of two or more units may petition the permitting authority for a permit establishing "alternative contemporaneous annual emissions limitations" for two or more units if: 1. the units are subject to one or more of the applicable emissions limitations set pursuant to §407(b) or (d); 2, the actual annual emissions'rate in Ibs. of NOx/mmBtu, averaged over the units covered by the petition, will be less than or equal to the Btu-weighted average annual emissions rate for the same units that would have resulted if each unit were operated during the same period in compliance with the otherwise applicable emissions limitation. B. Permit/Compliance Plan Requirments 1. The owner or operator must submit a permit application and compliance plan for each unit petitioning the permitting authority for the alternative contemporaneous annual emissions limitations. 2. The alternative contemporaneous emissions limitations shall remain in effect only so long as the units covered by the averaging plan continue operation under the conditions specified in their operating permits. 3. The averaging plan must be submitted by a designated representative for both units (§408). general matter, the 407 rutenukiog will probably be addressed through the Reg-Neg (regulatory negotiation) process. Issues regarding that rulemaking will, therefore, not be brought to the ARAC NOx requirements as they relate to alternative compliance plans do. however, raise permit procedural and compliance issues. ARAC consideration of this paper is solicited in this context only. Comments regarding the provisions of section 407 requirements or reg-neg may be submitted to the EPA. PRELIMINARY DRAFT FOR ARAC PERMITS SUBCOMMITTEE THIS DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY ------- II. Issues PI 4. The averaging plan must demonstrate that the actual emissions will not exce- a the total emissions that would otherwise have occurred. A. Sen. Chafee stated that "If the owner or operator that installs such [LNBj technology cannot then meet the emission rate established for a given type of boiler, the owner or operator has the right to seek and obtain either an alternative emission rate or average emissions between two or more units within its system." (Sen Chafee, S17238, October 26, 1990). Should we limit emissions averaging to those units which have installed LNB technology but are still unable to meet the applicable emissions rates? B. No date is specified for submission of the emissions averaging plan. Should the permitting authority require that the petition be submitted with the initial application and compliance plan? May the petition be submitted at any time? Would a permit revision be mandated? What happens while a permit revision is pending? C. It appears the permitting authority will need to receive notification of changes in operating conditions that would necessitate modifying the permit to eliminate the emissions averaging provisions. What kinds of changes in operating conditions should trigger this permit modification? When should the permitting authority require notification of changes in operating conditions? or Should the authority be revoked automatically as a result of the operating change? D. What kind of demonstration should be required to establish that averaging will not cause emissions greater than would otherwise be allowed? What criteria should the permitting authority use to etermine whether the actual annual emission rate averaged over the units is less than or equal to the average annual emissions rate for the same units if they had been operated separately? Should a violation of this requirement be an automatic basis for prohibiting averaging in the future? E. Should any common ownership and control demonstrations and/or certifications be required? Or can EPA presume this? How can EPA avoid any defenses based on control issues? PRELIMINARY DRAFT FOR ARAC PERMITS SUBCOMMITTEE THIS DISCUSSION DOES NOT REPRESENT THE POSITION OF THE-ENVIRONMENTAL PROTECTION AGENCY ------- P12 F. What should be required if a unit included in the averaging relationship goes out of operation? G. Should regulations encourage utilities to install NOx controls instead of petitioning? H. Should regulations limit this authority to units at the same plant site? PRELIMINARY DRAFT FOR ARAC PERMITS SUBCOMMITTEE THIS DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY ------- ------- P13 ISSUE PAPER: ALTERNATIVE EMISSION LI\fITATION7S ON N7Qx (§407(d))' I. Statutory Requirements . . A. Definitions/Applicability This compliance alternative applies to Phase I and Phase II. The owner or operator or designated representative may request an emissions limitation less stringent than the applicable emissions limitation established for the type of boiler if: . 1. a. the unit(s) subject to 407(b)(l) (tangentially fired boilers and dry bottom wall-fired boilers),'cannot meet the applicable limitation(s) using low NOx burner; or . ,b. the unit(s) subject to 407(b)(2) (wet bottom wall-fired boilers, cyclones, units applying cell burner technology, and all other types of utility boilers); cannot meet the applicable Hmitation(s) using a technology on which the Administrator based the applicable limitation; 2. The control equipment was properly installed to meet the applicable emissions limitation; 3. The equipment was properly operated for 15 months (or other period determined by regulation); and 4. Operating and monitoring data show that the unit cannot meet applicable emissions limitation. B. Permit/Compliance Plan Requirements 1. The owner, operator, or designated representative must request an alternative emissions limitation from the permitting authority. 1 As a general matter, section 407 ruleraabng will probably be addressed through the Reg-N'eg (regulatory negotiation) process. Issues regarding that rulemaking will, therefore, not be brought to the ARAC. NOx requirements as they relate to alternative compliance plans do. however, raise permit procedural and compliance issues. ARAC consideration of this paper is solicited in this context only. Comments regarding the provisions of section 407 requirements or reg-neg may be submitted in writing to the EPA. PRELIMINARY DRAFT FOR ARAC PERMITS SUBCOMMITTEE THIS DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY ------- 2. The owner, operator, or designated representative must demonstrate: a. that unit(s) subject to 407(b)(l) (tangentially fired boilers and dry bottom wall-fired boilers), cannot meet applicable limitation(s) using low NOx burners; b, that unit(s) subject to 407(b)(2) (wet bottom wall-fired boilers, cyclones, units applying cell burner technology, and all other types of utility boilers), cannot meet applicable limitation using the technology on which the Administrator based the applicable limitation; c, that, the control equipment was properly installed to meet emissions limitation; d. that the equipment was properly operated for 15 months (or other period determined by regulation); e. that operating and monitoring data show that the unit cannot meet the applicable emissions limitation; f. an emissions limitation that the unit can meet on ari annual average basis. 3. The Administrator shall issue an operating permit in accordance with section 408 and part B of title III: a. that permits the unit to emit at a rate in excess of the applicable emission rate during the demonstration period. b. at the conclusion of the demonstration period to reHse the operating permit to reflect the alternative emission rate demonstrated during proper operation for the specified period of time. 4. Alternatively, the owner, operator, or designated.representative of any Phase I unit may seek a 15-month extension by demonstrating that the necessary technology is not in adequate supply by January 1, 1995. PRELIMINARY DRAFT FOR ARAC PERMITS SUBCOMMITTEE THIS DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY ------- 3 P13 C. Effect 1. Alternative emissions limitation requests 2. Petitions for 15-month extension claiming inadequate supply of necessary technology. II. Issues A. No date is specified for submission of the alternate emissions limitation request. Should the permitting authority require that the request be submitted with the application and compliance plan, or may the request be submitted as a permit amendment at any time? If it is submitted as an amendment, what is its status while pending review? B. What kind of demonstrations should be required? What criteria should the permitting authority use to determine whether: 1. the unit(s) subject to 407(b)(l) cannot meet applicable limitation(s); 2. the unit(s) subject to 407(b)(2) cannot meet applicable limitations; 3. the control equipment is properly installed; 4. the equipment has been properly operated; What level of detail should be required for each of the required criteria? C. What operating and monitoring data should the permitting authority require to show that the unit cannot meet the applicable emissions limitation; D. How should the alternative emissions limit be determined? ; E. What information should the utility be required to submit to prove to the permitting authority that the necessary technology is not in adequate supply? F. If an applicable unit could average under 407(e) to meet the limitation, should this be required or left to the owner's discretion? PRELIMINARY DRAFT FOR ARAC PERMITS SUBCOMMITTEE . THIS DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY ------- ------- P14 ISSUE PAPER: PERMIT ISSUANCE PROCEDURES/DEADLINES f§408 and I. Statutory Requirements A. Permitting Deadlines 1. Acid Rain permits must be issued for a term of 5 years. 2. Phase I a. Permit applications and compliance plans are due no later than 27 months after enactment (Le^ 2/15/93), and are binding on the source until the permit is issued. b. EPA shall act on compliance plans within 6 months of receiving • complete application (latest 8/15/93). c. Phase I begins on 1/1/95 and ends on 12/31/99. d. No fees may be collected during 1995 through 1999 inclusive with respect to Phase I permitting of any unit which is an affected unit under §404 (Phase I). 3. Phase II a. Permit applications and compliance plans for SO2 are due 1/1/96 and, if timely received, are binding on the source until the permit is issued. b, Permits must be issued by 12/31/97 by the States with approved permit programs, or by 1/1/98 by EPA where the State defaults. 4. New Units a. New units must submit permit applications and compliance plans to the permitting authority not later than 24 months before the later of: (1) January 1, 2000 (L& 1/1/98); or ' . . : (2) the date on which the unit commences operation. b. No deadline is specified for when the permitting authority must issue permits. But see Title V (18 months). 5. NOx Limitations a. Phase II permit applications and compliance plans from all affected PRELIMINARY DRAFT FOR ARAC PERMITS SUBCOMMITTEE THIS DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY ------- 2 • • P14 sources for NOx requirements are due 1/1/98. b. No deadline is specified for when tue permitting authority must issue permits covering NOx requirements. But see Title V (18 months). 6. Under Title V, the permitting authority must issue or deny the .rmit within 18 months of receipt of a complete permit application (except that the permitting authority may submit a phased schedule to issue initial Title V permits within three years of EPA's approval or promulgation of the permit program). For purposes of the Acid Rain portion of the permit, these deadlines are partially superseded by the more specific permit issuance deadlines in Title IV (§506(b)). B. Permit Application Procedures (including Compliance Plans) 1. State permit program submissions are due to EPA three years afte- :he date of enactment, EPA re'- ew and approval or disapproval of permit programs must be completed within tw~;ve months of EPA receipt of a complete program. Under Title V, perm, applicatk .is and compliance plans are due 12 months after the date on which the source becomes subject to the permit program. This deadline is superseded by Title IV and §506(b) for Acid Rain sources. It can, however, be anticipated that some Phase II sources will submit their Acid Rain applications and compliance plans at the same time they apply for permitting for other CAA requirements (6 weeks earlier than the statutory deadline). 2. A responsible official must certify the accuracy of the permit application and compliance plan (Title V). Title IV contemplates submission by the designated representative. 3. The permitting authority must determine, in a timely fashion, whether the application is complete. . 4. If the applicant has submitted a timely and complete application (under Title V), but the permitting authority has failed to take action, under certain circumstances, the source's failure to have a permit shall not be deemed a violation of the Act (permit application shield). For purposes of the Acid Rain requirements, the application and compliance plan, if timely received. PRELIMINARY DRAFT FOR ARAC PERMITS SUBCOMMITTEE THIS DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY ------- 3 P14 are binding on the source until a permit is issued. 5. Copies of the permit application, compliance plan, certification, and each permit issued under Title V must be available to the public, except that certain confidential business information in the application, compliance plan. or certification need not necessarily be made available. 6. During Phase II a copy of each permit application must be submitted to the Administrator. C. Permit Issuance Procedures ' 1. Under Title V an opportunity for public notice and comment must be provided by States for all permits. 2. Under Title V the permitting authority must notify all States whose air quality may be affected and are contiguous to the State in which the emissions originate, or which are within 50 miles of'the source, of each permit application and proposed permit. 3. If any recommendations from neighboring States are not accepted, the permitting authority must notify the State and the Administrator of its reasons for not accepting the recommendations. 4. EPA may object in writing to any proposed permit within 45 days after receiving a copy. A copy of the objection shall be provided to the applicant (Title V). 5. Within 60 days after EPA's 45-day review period, any person may petition the Administrator to object to the permit. A copy of the petition shall be provided to the permitting authority and the applicant. The Administrator has 60 days to grant or deny the petition. Any denial of a petition is subject to judicial review under §307 of the Act. (Title V). 6. The permitting authority may not issue the permit if the Administrator has objected to it. The permit must be revised within 90 days, or the Administrator shall issue or deny the permit. No objection to a permit shall be subject to judicial review until EPA has taken-final action to issue or deny the permit. (Title V). PRELIMINARY DRAFT FOR ARAC PERMITS SUBCOMMITTEE THIS DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY ------- 4 P14 D. Permit Appeals Procedures State permitting programs must provide an opportunity for judicial review in State court of the final permit action. Review may be sought by the applicant, by any person who participated in the public comment process, and by any other person who could obtain judicial review of that action under applicable law. (Title V). E. Permit and Compliance Plan Amendment Procedures 1. The applicant may submit an amended application and compliance plan at any time after submission of their original application and compliance plan. (Title IV). 2. Permits and compliance plans must allow (certain) changes within a permitted facility without requiring a permit modification provided the permittee provides the permitting authority with written notice of the change before it occurs. (Title V). 3. Permits for "major sources" with terms of three or more years nr.ist be revised to incorporate applicable standards and regulations promulgated after permit issuance. This revision may be treated as a permit renewal if it complies with requirements regarding renewals. (Title V). There is no similar provision for "affected source" requirements. II. Issues A. EPA must act on compliance plans by 5/15/93, but is not required to issue permits by this date. Since permits may only be issued for five years, the Agency could take preliminary action on the plan yet postpone issuing Phase . I permits until 12/31/94, to ensure that the permit would apply throughout Phase I. This approach, however, would not afford sources time to challenge provisions of their permits prior to the beginning of Phase I. Alternatively, the Agency could issue operating permits to affected sources by 5/15/93, which would expire by 5/15/98, i.e. prior to the end of Phase I. States (or EPA) would, under this approach, have to include the applicable Phase I provisions in the Phase II permits to govern operations at the source for the duration of Phase I. B. The fee limitation provision in Title IV allows 5 res to collect fees from P: ;e II affected sources during Phase I. May fee e collected from Phase PRELIMINARY DRAFT FOR ARAC PERMITS SUBCOMMITTEE THIS DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY ------- 5 .; P14 I sources for SO2 and NOx SIP permitting prior to commencement of Phase II? May States collect tees for Phase II permitting from Phase I affected sources (in 1997-8), or must they wait until 1/1/00 to begin collecting fees from these facilities? C. How should NOx requirements be incorporated into Phase II permits? Can EPA, by regulation, require these applications to be submitted earlier than the statutory deadline? May EPA accept such early submissions? Can NOx requirements amend the permit without triggering the public notice requirements of permit issuance? PRELIMINARY DRAFT FOR ARAC PERMITS SUBCOMMITTEE THIS DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY ------- ------- 'Ms UNITED STATES ENVIRONMENTAL PROTECTION AGENCY WASHINGTON, O.C. 20460 OFFICE OF AIR AND RADIATION January 15, 1990 MEMORANDUM SUBJECT: Transmittal of Draft Minutes From January 8 Conference Call FROM: Rachel Hopp Chief, Permits and Technologies Section OAIAP/Acid Rain Division (ANR-445) TO: ARAC Subcommittee on Permits and Technologies The purpose of this memo is to transmit a draft of the minutes from the January 8 Conference call.' Please send us any comments or revisions by C.O.B. on January 17. After we receive your comments, we will revise the minutes and include them in the mailing to the full Committee. The minutes from the the most recent conference call (January 15) also will be included in this mailing. However, as we agreed during the conference call, these minutes will be sent out in draft form. • The next conference call will be held on January 22th at 2:00 p.m. Eastern standard Time. It will be arranged by Richard Abdoo's office. Attachments cc: Eileen Claussen Brian McLean Larry Kertcher Renee Rico Paul Horwitz Printed on Recycled Paper ------- ------- DRAFT P15 Minutes of Conference Call - January 8, 1991 Subcommittee on Permits and Technologies On January 8, 1991, a conference call was conducted with members of the Acid Rain Advisory Committee (ARAC) Subcommittee on Permits and Technologies.- The following Subcommittee members participated: o Richard Abdoo, Wisconsin Electric Power Co. o William D. Steinmeier, Missouri Public Service Commission o C. Luther Heckman, Coalition for Environment-Energy Balance o Jerry M. Eyster, A. T. Massey Coal Company, Inc. 0 Thomas Maiman, Commonwealth Edison Company • o C. V. Mathai for Mark De Michele, Arizona Public Service Company . o James JC Hambright, Pennsylvania Department of Environmental' . Resources • o James J. Markowsky, AEP Service Corporation o Ned Helme, Alliance for Acid Rain Control o Art Reisinger for Paul Feira, Wheelbrator Air Pollution Control o Steven D. Burton, Sithe Energies U.S.A., Inc. o Steven E. Winberg, Consolidated Natural Gas Co. Bill Roberts, Environmental Defense Fund and William Samuel, United Mine Workers of America, did not participate in the call. : The following EPA personnel participated in the call: o Rachel Hopp, Acid Rain Division (ARD) o Joe Kruger, ARD o Karen Kent, ARD o Kathleen Ehrensberger, ARD o John Rudd, Office of Enforcement o Tricia Pittan, Office of Policy, Planning, and Evaluation (OPPE) o Mary Cmz MaGowan, OPPE The meeting began with comments on the Subcommittee's role from the new Chair, Richard Abdoo. He noted that it was not necessary for the Subcommittee to come to a consensus on all issues. Rather, it would be appropriate for the Subcommittee to present a variety of recommendations to the full ARAC committee. PRELIMINARY DRAFT FOR ARAC DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY ------- DRAFT P15 Rachel Hopp added that if a proposed consensus position is reached by the Subcommittee on an is .e, the Subcommittee's recommendations must still be presented to the full committee for debate. Mr. Abdoo reviewed the Subcommittee assignments that had been summarized in the minutes to the December 20 conference call. There were several revisions and additions to the assignments. The revised list of assignments is summarized in the attached table. Status of Issue Papers '•* Several members had questions on the relationship between the issue paoers provided by EPA and the option papers that will be developed by the Subcommittee. Ms. Hopp responded that EPA's papers were designed to frame some of the key issues. The Subcommittee's option papers may respond to these issues or may raise and address additional issues. In addition, the option papers may present recommendations, or a variety of options, including minority views or options. Several Subcommittee members emphasized the need to set priorities for the issues to be addressed. These members expressed concern that because of the large number of issues faced by the Subcommittee, there may not be time to review all the option papers for the January ARAC meeting. The Committee decided that it would begin with the four issues addressed by the papers they had already received from EPA-- Reduced Utilization/Shut Down; Eligible Phase I Extension Proposals; Repowering Extension Proposals; and Substitution Units. Mr. Abdoo suggested that members send him a fax by noon on January 9 with their priority rankings for the four issues. He said that he would tabulate iheir responses and inform the Subcommittee of the results. Note: Following the meeting, Mr. Abdoo distributed by fax the following results of the priority voting: Priority Issue Average Vote V 1 El.gible Phase I Extension L8 2 Reduced Utilization 2.1 3 Repowering Extension 3.1 4 Substitution Plans 3.5 Thomas Maiman reported that the group working on national consistency issues was on its second draft. Ms. Hopp noted that she is seeking clearance to release a draft PRELIMINARY DRAFT FOR ARAC DISCUSSION DOES NOT REPRESENT THE POSITION OF THT ENVIRONMENTAL PROTECTION AGENCY ------- - 4 s 3 P15 of the Title V regulations to the Subcommittee. She said that many of the issues raised at the December 14 ARAC meeting were communicated to EPA staff working on the regulations. Some of these issues are expected to be addressed in the next draft of the regulations. Mr. Maiman responded that if there soon would be a draft of the regulations available, it would make sense to put the national consistency paper on hold until this draft could be reviewed. The Subcommittee agreed, and decided to delay discussion of national consistency issues until the February ARAC meeting (see revision in attached table.) Mr, Abdoo and other Subcommittee members stressed the need to get drafts to the Subcommittee as soon as possible. Regarding recommendations and option papers, Ned Helme expressed concern with releasing drafts to the full Committee in January. There was general consensus that only papers that had been reviewed by the Subcommittee should be submitted to the full Committee. Additional Issues Raised Several issues or questions were raised during the meeting: o C.V. Mathai again raised the issue of the role of the Subcommittee on NOx issues. Ms. Hopp reiterated that NOx regulations will be developed through a negotiated rulemakmg. However, she noted that the Subcommittee will be able to address some of the procedural issues related to how NOx will be treated in permits and compliance plans, and that EPA would send the Subcommittee issue papers on "NOx Averaging" and "NOx Alternative Emissions Limitations." o Mr. Burton asked whether EPA could provide the Subcommittee with a . sample permit. Ms. Hopp responded that EPA was planning to develop a sample permit form in conjunction with the development of the Title IV permitting and compliance regulations. She noted, however, that it was too early to provide the ARAC Subcommittee with a prototype because it still hasn't been determined what information will be required for submissions. Moreover, EPA is looking for input from ARAC on permit content issues, and needs to receive this input before the permit forms can be developed. o Mr. Mathai asked if someone could brief the group on Title V at the next ARAC meeting. Ms. Hopp said she would try to arrange a briefing by PRELIMINARY DRAFT FOR ARAC DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY ------- 4 . P15 EPA staff who are developing the regulations. Next Conference Call The next conference call meeting will take place on January 15 at 2:00 p.m. Eastern Time. The call will be arranged by Mr. Abdor office. In preparation for the meeting, Mr. Abdoo aske^.. .he leads for the four priority issues to prepare talking point responses to the issues raised in EPA's issue papers. Conversation Following Meeting Following the meeting, some Subcommittee members stayed on the line and asked questions about several of the issue papers provided by EPA. In addition, there was a general discussion of the Phase I Extension and Reduced Utilization compliance issues. Following were questions related to the issue papers: Question: In section I.B.6. of the Substitution Units issue paper, what does "less any taps" mean? Answer: Phase I allowance allocations will be reduced by 2.8% to create a special reserve for sales (see §416 (b)). •• Question: Should I.B.14. of the Substitution Units paper read "The number of allowances held by substitution units will be borrowed by the affected units..." rather than- "borrowed from the affected units..."? Answer: Yes. Question: Should C.2. on the Phase I Extension paper say "fuel" instead of "coal". Answer: Yes. Corrections will be made to the issue papers, as noted. In addition to clarifications of points made in the issue papers, there was considerable discussion about the Phase I extension and reduced utilization provisions. Following is a brief summary of the questions or issues raised in those discussions: Phase I Extensions PRELIMINARY DRAFT FOR ARAC DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY ------- DR.A 5 . :' P15 o Several Subcommittee members disagreed that fuel switching was a permissible component to a Qualifying Phase I technology 90% control demonstration. These members contended that the clear intent of Congress was to encourage the application of technological continuous emissions reduction systems to high sulfur coal. o There was considerable discussion over what constitutes "first come, first serve" in applying for Phase I extensions. Some Subcommittee members argued that EPA has no mandate to "maximize" or "optimize" the allocations of allowances. Ms. Hopp noted that EPA has responded to all early inquiries on this question by noting that no applications will be accepted until final permitting regulations are promulgated. Several Subcommittee members disagreed with this approach, arguing that the Agency should allow utilities to apply sooner for these extensions- to facilitate utility planning. Ms Hopp indicated that it would be difficult for EPA to change its position in this regard since so many issues needed to be resolved through rulemaking that are critical to implementation of this authority, and particularly since numerous interested parties are now relying on EPA's assurances that it will not accept applications at this time. Reduced Utilization The following issues were raised by Subcommittee members: o Does merely increasing generation from a compensating unit make that compensating unit an affected unit? ' o Should historical generation be a determining factor? o If a Phase I unit goes down unexpectedly and compensating generation is necessary, would a utility be penalized for not including this contingency in its compliance plan? o If the reduced generation is not for the purpose of reducing emissions, what is the effect? o How would power pools be affected by these provisions? Would all Phase II units in the pool become affected during Phase I? o Do all compensating units become capped? Would this be contrary to the PRELIMINARY DRAFT FOR ARAC DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY ------- P15 o possible intent of Congress to allow for capacity growth? Once a Phase II unit becomes affected, is the.- any way it CL : become "unaffected"? Several Subcommittee members expressed ideas on how to address some of these questions. Ms. Hopp asked that they include *hese Meas in the options papers now under development, so that all options can be consiaered by the en ~e Subcommittee, as well as the full ARAC PRELIMINARY DRAFT FOR ARAC DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY ------- •« i Subcommittee Assignments P15 Category of Issue Techno- logies 11 M n n M it II Nat'l Consist. Permit Pro- cedures Permit Content Issue Reduced Utilization Substitution Plans Phase I Extension Repowering Opt-in Plans New Unit Plans NOx Averaging NOx Alternative Emission Limits National Consistency Designated Representative (additional permit procedure issues will be assigned later) (Issues will be assigned later) Members(s) 'Helme, Eyster, Mathai, Winberg 'Heckman •Eyster, Heime, Markowsky, Samuel, Maiman 'Markowsky, Steinmeier 'Steinmeier, Eyster, Burton •Markowsky, Feira Mathai Mathai 'Maiman, Markowsky, Steinmeier, Mathai •Heckman ARAC Meeting Date January 28- 29 January 28- 29 January 28- 29 January 28- 29 January 28- 29 January 28- 29 January 28-29 January 28-29 February 20-21 February 20-21 March 20-21 ; PRELIMINARY DRAFT FOR ARAC DISCUSSION DOES NOT REPRESENT THE POSITION OF THE ENVIRONMENTAL PROTECTION AGENCY ------- ------- Revised Subcommittee Assignments P16 Category of Issue Techno- logies i) n H fl tt « tl Nat'l Consist. Permit Pro- cedures Permit Content Issue Reduced Utilization Substitution Plans Phase I Extension Repowering Opt-in Plans New Unit Plans NOx Averaging NOx Alternative Emission Limits National Consistency Designated Representative (additional permit procedure issues will be assigned later) (Issues will be assigned later) Members(s) •Helme, Eyster, Mathai, Winberg, Markowski •Heckman •Eyster, Helme, Markowsky, Samuel, Maiman "Markowsky, Steinmeier •Steinmeier, Eyster, Burton •Markowsky, Feira Mathai, Markowski •Markowski, Mathai •Maiman, Markowsky, Steinmeier, Mathai •Heckman ARAC Meeting Date January 28- 29 January 28- 29 January 28- 29 January 28- 29 January 28- 29 January 28- 29 January 28-29 January 28-29 February 20-21 February 20-21 March 1 20-21 1 ------- ------- |