»oi           United States
    ' '           Environmental Protection Air and Radiation  EPA/400/1-91/006.D
    £-      '     Agency         (ANR-445)     April 1991
   en
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   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

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                              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

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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

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     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

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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

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     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.

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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.

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     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.

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                                                                 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

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                                        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.

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        THIS DISCUSSION DOES NOT REPRESENT THE POSITION OF
               THE ENVIRONMENTAL PROTECTION AGENCY

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                                 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.
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  IMS DISCUSSION DOES NOT REPRESENT THE POSITION OF
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                                        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
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                                 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?
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                                       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

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                                 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

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                                 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

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  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

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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?

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                            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.

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     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).

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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.

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                               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

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 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

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 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

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 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

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 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

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                    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-

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                                                                           .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
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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
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            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.
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                                                                                 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.

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             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.

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       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)

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      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?
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                                                                         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
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             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?
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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?
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    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."

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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;

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            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?

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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?
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             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);

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             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

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                         "   .     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


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      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.
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                                                                          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).


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            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));
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                  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?

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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)?
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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.'

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      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?
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      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?
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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.

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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?
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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?
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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.

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    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.

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      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?


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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


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            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.

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      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).
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      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


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      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?
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                                                                    '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

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                                                                   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.


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      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


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                                                                  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


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            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

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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


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                                                                  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
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                                       •« 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 ;
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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

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