EPA's approach requires compliance actions that could degrade system reliability. Installing FGD's and SCR's will require taking plants offline while equipment is being installed. The large number of required retrofits within a short timeframe will require many units to be off-line simultaneously. This could affect the industry's ability to provide reliable power to the nation. EPA should coordinate with the Federal Energy Regulatory Commission (FERC), the Department of Energy, and states to determine a compliance target that will ensure maintaining system reliability. [EPA-HQ-OAR-2009-0491-2797.1, p.3]
Edison Electric Institute (EEI)
Some companies also are concerned about the potential regional reliability risks that could come from taking key power plants offline while retrofits are completed, or from having many units off-line concurrently. This concern is more an issue for the broader suite of regulations discussed in Section I than for the proposed Transport Rule alone.  [EPA-HQ-OAR-2009-0491-2697.1, p.7]
First Energy
Multiple concurrent outages of generating equipment also may pose electricity reliability issues that will be unacceptable to the Independent System Operators managing electrical system reliability in the affected regions. EPA should confer with the ISO's to assure electric system reliability standards can be met. [EPA-HQ-OAR-2009-0491-2657.1,p.6]
Four Flags Area Chamber of Commerce
The most significant reductions under the current proposal occur in 2014 - only two-and-a-half years after the Rule is expected to become effective. Two-and-a-half years are not enough to design, permit, fabricate and install the necessary equipment. This unrealistic deadline could affect grid reliability if power companies are forced to prematurely close generation units to comply. If new scrubber byproduct storage facilities are needed in addition to emissions control equipment, the time line becomes much longer. [EPA-HQ-OAR-2009-0491-3807, p.2]
Independence Power & Light (IPL)
IV. THE RULE FAILS TO CONSIDER GRID RELIABILITY AND THE BURDENON EXISTING TRANSMISSION
The Rule demonstrates a misunderstanding about the potential effects that the proposed rule may have on grid reliability. The Rule postulates potential grid reliability problems in terms of the availability of electric generation: noting the preferred trading option 'gives ISOs (Independent System Operators) the flexibility to manage regional electricity generation so that reliability is maintained.' 75 FR at 45315/1; see also id. at 45328/3 ('the ability to obtain additional or replacement supply from sources in another part of the state or from another state enhances electric reliability'). But that tells only half the story, and not the more important part; the availability of electric generation has not been the sticking point for reliability. See, e.g., New York v. FERC, 535 U.S. 1,7 (2002) ('since 1935, and especially beginning in the 1970's and 1980's, the number of electricity suppliers has increased dramatically. Technological advance have made it possible to generate electricity efficiently in different ways and in smaller plants.')(footnote omitted). Rather, reliability problems arise because grid transmission facilities are not always adequate to move electricity from where it is generated to where it is consumed. See id. at 9-10 (summarizing statutory and regulatory efforts to encourage increased access to transmission). [EPA-HQ-OAR-2009-0491-2741.1, p.12]
Similarly, the Rule's view that ISOs 'manage regional electricity generation' (75 FR at45315) overstates the case. ISOs neither control nor operate generation facilities, but, rather, control and operate transmission facilities. See 16 U.S.C. § 8240(a)(6)('The term 'transmission organization' means ... Independent System Operator ... finally approved by the [FERC] for the operation of transmission facilities'); see, e.g., PUD No.1 Snohomish County v. FERC, 272F.3d 607, 611 n. 3 (D.C. Cir. 2001)('Independent system operators (ISOs), in contrast, are nonprofit organizations that operate the transmission facilities that others own.') 2 [EPA-HQ-OAR-2009-0491-2741.1, pp.12-13]
These factors raise doubt about the Rule's implicit assumption that the preferred trading program will not adversely affect grid reliability because adequate generation is available. 75 FR at 45315/1. Even accepting that adequate generation is available, that, by itself, does not assure grid reliability now and could not expected to do so after the rule is implemented, given that the preferred approach could easily increase potential transmission capacity constraints (congestion) that would impede the flow of electricity. In determining the potential impact of the proposed rule on grid reliability, EPA failed to consider the extra burden that the rule will place on existing transmission constraints or in creating new congestion points. Both situations present complex and costly issues related to assuring grid reliability. The failure to consider this central problem to the instant matter constitutes arbitrary and capricious decision-making. See, e.g., Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)('an agency rule would be arbitrary and capricious if the agency ... entirely failed to consider an important aspect of the problem'). [EPA-HQ-OAR-2009-0491-2741.1, p.13]
The situation faced by IPL under the proposed rule presents a representative example of the problems that transmission constraints pose for utilities that must rely on purchasing power or emissions allowances to satisfy the rule. Utilities serving retail customers, such as IPL, have a statutory obligation to provide all the electricity needed by their customers (commonly referred to as 'load'). This precludes options in responding to the rule that might be available to nonutility sources, such as reducing the amount of electricity made available to customers or moving operations to another location. Under the proposed rule, IPL has been given zero allocations for two of its EGUs, which represents approximately one-third of IPL's generation capacity. As IPL must nonetheless continue to supply its customers' full load, the proposed rule requires IPL either to purchase replacement power because it cannot run the EGUs or to purchase emissions allocations so it can run them. 3 [EPA-HQ-OAR-2009-0491-2741.1, pp.13-14]
IPL is a member of the Southwest Power Pool (''SPP'), which experiences constraints (congestion) on transmission paths throughout the year. Congestion can be caused by a number of factors: load increasing faster than transmission growth; scheduled (maintenance) or unscheduled (storm) outages; large interjections of electricity at a specific grid point. While unscheduled outages can occur at any time, congestion is likely to occur in peak load periods, which are also the likely times that older, less efficient EGUs will be called into service. Congestion does not necessarily mean customers will not receive electricity, but it does mean that they will pay substantially higher prices for that electricity. SPP offered an example (copy of page attached hereto) of the pricing differential experienced due to congestion at the Missouri- Kansas border, where IPL is located, on January 26, 2010: congestion 'triggered significant price separation in SPP, with prices ranging between -$475.00/MWh and $1,480.00/MWh. Absent this congestion event, the price at all locations would have been $24.26/MWh.' (Available at http://www.spp.org/section.asp?pageID~28, 'Intro to SPP Slideshow.' slide 40; last visited September 25, 2010). Obviously, this is an extreme example, but in many cases, congestion costs can easily double the cost of electricity in the transmission-constrained area. Further, while this example pertains to the Missouri-Kansas border, other transmission paths on SPP experience similar congestion events. Finally, these types of congestion problems are found in all the ISOs that serve the States covered by the proposed rule. [EPA-HQ-OAR-2009-0491-2741.1, p.14]
These types of congestion problems, causing serious price differentials, are occurring now - before the rule change. Yet, no effort was made to examine how the rule change will affect this important concern or to quantify possible impact. For example, EGUs currently serving load in a specific area could shut down as they become uneconomic to operate with the required additional emission controls or as their owners decide to bank or to apply the units' emissions allocation for other owned generation. Any of those scenarios could create new transmission constrained areas or exacerbate existing ones, thus increasing congestion and costs of obtaining electricity. In other cases, owners may decide that it is cheaper to import purchased electricity than to retrofit existing EGUs, thereby placing more pressure on existing transmission facilities to serve increased load into a specific area. More examples can undoubtedly be fashioned, but the point is such foreseeable consequences should have been factored into the calculus of the rule's impact. The failure to do so ignores real, not abstract, concerns about grid reliability resulting from the proposed rule change as well as about the actual financial impact of following the preferred approach. Ignoring such important considerations is arbitrary and capricious. [EPA-HQ-OAR-2009-0491-2741.1, pp.14-15]
For the reasons stated herein, IPL requests that EPA modify the proposed Rule by:
1. taking into account the potential adverse effects of the proposed rules on transmission facilities and how that will impact grid reliability. [EPA-HQ-OAR-2009-0491-2741.1, p.18]

2 To be sure, ISOs operate real time markets that provide balancing services to compensate for differences between projected and actual electric loads as well as offer continuous economic dispatch of resources to serve load. In both cases. however, the ISO relies on generation made available by third parties.
3 This ignores an obvious third option - adding sufficient controls to the units to reduce emissions to zero. This option is addressed later in these comments. The current discussion focuses only on options that would affect grid reliability.
Indiana Utility Shareholders Association
This unrealistic deadline could affect grid reliability if power companies are forced to prematurely close generation units to comply. [EPA-HQ-OAR-2009-0491-3845 p.2]
Lansing Board of Water & Light
This unrealistic compliance deadline will likely affect grid reliability as all power companies will be forced to bring units offline during the same time to install these controls. [EPA-HQ-OAR-2009-0491-2752.1,p.7]
Michigan Manufacturers Association (MMA)
The most significant reductions under the current proposal occur in 2014  -  only two and- a-half years after the Rule is expected to become effective. Two-and-a-half years are not enough to design, permit, fabricate and install the necessary equipment. This unrealistic deadline will affect grid reliability if power companies are forced to prematurely close generation units to comply. [EPA-HQ-OAR-2009-0491-2762.1, p.3]
Public Utilities Commission of Ohio
Statistics in 2009 demonstrate that coal fuels about 85% of the net electric generation in Ohio (Velocity Suite). The Edison Electric Institute Yearbook (2008 data) shows that the state of Ohio is sixth in electric generation and 24th in electricity consumption per capita. Coal makes up more than 65% of Ohio's generation capacity. The Transport Rule, which demands an SO2 emissions reduction of approximately 70%, could impact 16,000 MW of capacity. [EPA-HQ-OAR-2009-0491-2855.1 p.7]
EPA documents that implementing the rule as proposed will unquestionably have a negative impact on the production of electricity from coal. The proposed rule could force early decommissioning of coal-fired generating plants in Ohio, which, again, account for over 85% of net electric generation in the state.[EPA-HQ-OAR-2009-0491-2855.1 p.7]
U.S. EPA's analysis concludes that the proposed rule will not affect the flow of electricity. We are not convinced, however, that this conclusion adequately accounts for the potential that industry's reaction to this rule, in concert with other U.S. EPA rules, may be to remove capacity from the electric grid within the same region. It appears that this potentiality was not examined. This rule, as well as those to come, will drive the need for new transmission and generation infrastructure investment which will be reflected in electric rates. If this potentiality comes to fruition, it will have a profound effect on regional transmission organization planning, and will result in significantly increased concern over meeting reliability standards. [EPA-HQ-OAR-2009-0491-2855.1 p.7]
Federal Energy Regulatory Commission (FERC) Commissioners echo our concerns regarding reliability challenges arising from EPA regulations in the past. Most recently, at a FERC hearing on September 16, 2010, Chairman Wellinghoff called for an inter-agency taskforce to examine EPA requirements that could affect reliability and the need to keep older generating plants open. Additionally, Commissioner Moeller expressed the importance of the need to understand the implications of shutting down some of the older power plants as a method of complying with, and in response to, EPA regulations.2 Commissioner Moeller further noted that the challenges of removing generation from the grid and ensuring reliable electricity supplies are largely determined by the location of power plants, and in an interview with energywashington.com, stressed the importance of understanding the complicated issue, and noted the pressing need to enter into any remedial situation "with our eyes wide open."3 The FERC Commissioners' comments strongly support a slow-down in implementation. [EPA-HQ-OAR-2009-0491-2855.1 p.8]
We believe that in terms of reliability, implementation of the Transport Rule, as proposed, will result in a level of uncertainty that is unacceptable and, further, irresponsible. As the rule is proposed, it is unclear how many power plants will need to be retrofitted to meet the rule's stringent emissions requirements. In Ohio, as well as a number of other states that will be affected by the rule, there are many power plants for which decommissioning, rather than retrofitting, will be a more cost-effective option. When evaluating whether to retrofit or decommission, utilities will need to take both unit and site-specific considerations into account. There will likely be significant variation in decision making regarding which practice to employ from utility to utility, causing further uncertainty with regard to reliability in the future. Additionally, utilities need only provide 90 days notice of their intent to retire certain generating units. Although historically utilities have provided more than 90 days notice, this circumstance may well change under the proposed rule, as utilities will have to make compliance decisions in a short time frame. Such shortened notice periods bear the risk of seriously endangering reliability throughout the region. [EPA-HQ-OAR-2009-0491-2855.1 p.8]
We are concerned that the rule, as proposed, will lead to a dangerously low level of adequate planning reserve margin, which endangers the provision of reliable power supply. The large scale of units that will be affected by the proposed rule, combined with the implementation time frame and the obvious need for capacity replacement leads the PUCO to believe that a longer time table for implementation of the Transport Rule is necessary, and well warranted. [EPA-HQ-OAR-2009-0491-2855.1 p.9]
State of Ohio Environmental Protection Agency (Ohio EPA)
Ohio EPA has concerns over the reliability of the electrical grid. U.S. EPA must provide an implementation schedule that is reasonably achievable without jeopardizing reliability of the electrical grid. [EPA-HQ-OAR-2009-0491-2793.2, p. 3]
Considering the deadlines imposed by this proposal and the need for a number of sources to rush to install controls in the specified time frame, reliability during the retrofit period will be a concern. Considering the time required for planning, procuring materials and installing controls, states could find themselves with significant generating capacity needing to go off line all at once. In totality, such an effort raises significant concerns regarding electrical reliability during this period. [EPA-HQ-OAR-2009-0491-2793.2, p. 3-4]
Response:
These comments raise multiple concerns about how the rule will impact reliability of the generation system and the power grid as a result of retrofit requirement and potential retirements.  EPA does not agree that the concerns raised in these comments will result from the rule, and addresses the issues raised below.  For further information, see the Technical Support Document on Resource Adequacy and Reliability in this docket.
Retirements
EPA does not agree that retirements from the rule will cause reliability problems.  As stated in the preamble (VII.A) , EPA selected an interstate trading program structure in part because its market-based flexibility promotes the sector's capacity for providing electric reliability.  EPA believes that the level of potential retirements, projected to be approximately 4.8 GW in 2014 (see the RIA and IPM documentation in this docket) is well within the capability of utilities and regional organizations to manage effectively.  The IPM modeling for the rule takes into account both the required regional reserve margins and the limitations of firm power transfers between regions, so that the basic reliability requirements are already incorporated in the analysis of the impact of the rule.  Moreover, because the rule provides the flexibility to purchase allowances rather than retire, projected retirements under the rule are based on economic considerations rather than fixed deadlines or unit-specific compliance requirements.  Consequently, EPA anticipates that the Transport Rule will not affect the ability of regional grid management organizations and/or interconnected utilities to routinely manage any local grid issues that may arise.
Retrofits
EPA does not agree that retrofits resulting from compliance with the rule will cause reliability problems.  EPA recognizes that an outage for the final tie-in of a retrofitted system to the existing system may be required, but believes that this installation can be managed through normal system planning without impairing system reliability, for several reasons.  First, many parts of the tie-in process can be completed during normally scheduled maintenance.  Second, the Transport Rule's interstate trading program structure provides additional flexibility for units  to coordinate the timing of retrofit installation schedules in order to promote system reliability.  In addition, EPA performed a sensitivity analysis of the IPM modeling for a "no-FGD" case (see preamble section VII.C) where additional post-combustion retrofits were disallowed by the 2014 timeframe.  This sensitivity analysis showed that compliance with the rule, with only moderate adjustments, could occur even if there were no additional post-combustion retrofits in the policy case compared to the base case.  As a result, EPA does not believe that any specific unit's retrofitting activity is necessary for states to meet their Transport Rule budgets (due to the rule's considerable flexibility), and therefore such retrofitting cannot logically pose an unresolvable concern for maintaining electric reliability.  For these reasons, EPA does not believe that potential retrofits arising from the rule will raise reliability concerns.
Coordination
The commenters also recommend that EPA coordinate with other agencies and groups, such as FERC, NERC and RTOs on reliability issues, EPA notes that each of the entities referenced have had the opportunity to submit comments on EPA rules in the record of this rule. EPA has been in contact with many of these groups during the development of this rule and expects to continue to engage proactively to promote planning for environmental compliance; however, these groups have not filed comments or expressed concerns over reliability in the record for this rule.
Other issues
Commenters also raise some general issues with respect to timing and feasibility as a contributing factor in reliability concerns.  EPA does not believe the general concerns are warranted.  Response to these issues can be found in the Section V.C.2 of this document on feasibility and compliance deadlines.
Organization: Kansas City Board of Public Utilities (BPU)
Comment:
Kansas City Board of Public Utilities (BPU)
THE RULE FAILS TO CONSIDER GRID RELIABILITY AND THE BURDEN ON EXISTING TRANSMISSION
The Rule demonstrates a misunderstanding about the potential effects that the proposed rule may have on the reliability of the regional electrical grid. The Rule postulates potential grid reliability problems in terms of the availability of electric generation: noting the preferred trading option 'gives ISOs (Independent System Operators) the flexibility to manage regional electricity generation so that reliability is maintained.' 75 FR at 4531511; see also id. at 45328/3 ('the ability to obtain additional or replacement supply from sources in another part of the state or from another state enhances electric reliability'). However, the availability of electric generation has not been the sticking point for reliability. See, e.g., New York v. FERC, 535 U.S.I, 7 (2002) ('since 1935, and especially beginning in the 1970's and 1980's, the number of electricity suppliers has increased dramatically. Technological advance have made it possible to generate electricity efficiently in different ways and in smaller plants.') (footnote omitted). Rather, reliability problems arise because grid transmission facilities are not always adequate to move electricity from where it is generated to where it is consumed. See id. at 9-10 (summarizing statutory and regulatory efforts to encourage increased access to transmission). [EPA-HQ-OAR-2009-0491-2740.1, p.17]
Similarly, the Rule's view that ISOs 'manage regional electricity generation' (75 FR at 45315) overstates the case. ISOs neither control nor operate generation facilities, but, rather, control and operate transmission facilities only. See 16 U.S.C. § 8240(a)(6)('The term 'transmission organization' means... Independent System Operator... finally approved by the [FERC] for the operation of transmission facilities'); see, e.g., PUD No. 1 Snohomish County v. FERC, 272 F.3d 607, 611 n. 3 (D.C. Cir. 2001)('Independent system operators (ISOs), in contrast, are non-profit organizations that operate the transmission facilities that others own.'), 6 [EPA-HQ-OAR-2009-0491-2740.1, pp.17-18]
These factors raise doubt the Rule's implicit assumption that the preferred trading program will not adversely affect grid reliability because adequate generation is available. 75 FR at 4531511. Even accepting that adequate generation is available, that, by itself, does not assure grid reliability now and could not be expected to do so after the rule is implemented, given that the preferred approach could easily increase potential transmission capacity constraints (congestion) that would impede the flow of electricity. In determining the potential impact of the proposed rule on grid reliability, EPA failed to consider the extra burden that the rule will place on existing transmission constraints or in creating new congestion points. Both situations present complex and costly issues related to assuring grid reliability. The failure to consider this central problem to the instant matter constitutes arbitrary and capricious decision-making. See, e.g., Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S, 29,43 (I 983)('an agency rule would be arbitrary and capricious if the agency... entirely failed to consider an important aspect of the problem'). [EPA-HQ-OAR-2009-0491-2740.1, p.18]
[See pp.18-20 of this comment for additional comments pertaining to The Rule Fails to Consider Grid Reliability and the Burden on Existing Transmission]
For the reasons stated herein, BPU requests alternative modifications to the proposed Rule by:
5. taking into account the potential adverse effects of the proposed rules on transmission facilities and how that will impact grid reliability;  [EPA-HQ-OAR-2009-0491-2740.1, p.23]

6 To be sure, ISOs operate real time markets that provide balancing services to compensate for differences between projected and actual electric loads as well as offer continuous economic dispatch of resources to serve load. In both cases, however, the ISO relies on generation made available by third parties.
Response:
      EPA modeling with IPM considered the issues of regional resource adequacy and inter-regional transmission of power. EPA recognizes that local grid issues, such as shifts in congestion patterns and transmission impacts from the retirement of specific power plants, will need to be coordinated at the utility and regional levels as they routinely managed for all changes in the power sector. However, EPA also believes that there are sufficient provisions in the rule for flexible coordination with regional entities and among utilities to permit these local issues to be resolved in the normal course of business.
      IPM modeling considers regional resource adequacy based on current and projected NERC reserve margins, and considers transmission system limitations by placing limits on flows between regions and on the amount of capacity that can be transferred between regions to meet regional reserve margins. This modeling is conservative, in the sense that it considers only current transmission capacity between regions and does not consider ways in which the transmission grid may be improved in the future to allow for additional flexibility in dispatch to meet load. In other words, EPA's projections show cost-effective EGU emission reductions subject to regional limitations of the transmission grid as it exists today, and its projections are fully compatible with the power sector's ability to comply with the rule's emission reductions while successfully operating the grid.
Organization: Louisiana Energy and Power Authority (LEPA)
Comment:
Louisiana Energy and Power Authority (LEPA)
LEPA strenuously objects to the January 2012 compliance deadline in the proposed rule. That deadline does not provide sufficient time to permit Louisiana to develop SIPs that would more appropriately consider and account for transmission constraints and reliability concerns in LEPA's service territory. [EPA-HQ-OAR-2009-0491-2700.1, p.3] [[This comment can also be found in Section VII.C.]]
The January 2012 compliance deadline also does not provide LEPA with sufficient time to secure and make capital investments necessary to comply with the proposed rule and reliably serve load if it does not receive its fair allocation of allowances. [EPA-HQ-OAR-2009-0491-2700.1, p.3]
If it receives or is unable to obtain sufficient allowances, LEPA's only options for compliance, other than curtailing power, would be either to pay Entergy or Cleco to upgrade their transmission lines or to invest in new generation construction within its control area. LEPA's past experience has proven that transmission upgrades would be very difficult to accomplish, could cost in excess of a hundred million dollars, and would likely take five to seven years to complete. LEPA would have no control over the upgrades. They would be subject to Entergy's and/or Cleco's approval and would be under their control. Necessary permits and rights-of-way would have to be obtained, which could take untold numbers of years. And there would be no guarantee the upgrades would improve transmission conditions for LEPA. The effect of transmission upgrades is uncertain, and, even if they are built, they may not alleviate transmission constraints as anticipated. LEPA's other option for compliance, building a new generator, would also cost millions and would take four to five years to complete. [EPA-HQ-OAR-2009-0491-2700.1, p.18]
Neither option could be completed by January 1, 2012. LEPA thus would experience disruptions in electric service in its control area for a minimum of three years under the proposed Transport Rule. This is an unacceptable result. The EPA should extend the deadline for compliance to a reasonable date that would allow LEPA a reasonable time to achieve compliance. [EPA-HQ-OAR-2009-0491-2700.1, p.18]
Proposed Transport Rule § III(C)(2), 75 Fed. Reg. 45227. The proposed Transport Rule does not 'ensure a reliable power supply;' to the contrary, it threatens to cut off power to the constrained areas of South Louisiana and potentially to other transmission constrained areas in the United States. [EPA-HQ-OAR-2009-0491-2700.1, p.16]
Response:
      As discussed in Section VII.C of the Preamble, EPA believes the 2012 deadline is feasible and will not result in any reliability issues. As noted in the preamble, there is a diverse set of readily attainable compliance options that can be undertaken by industry within the applicable compliance schedule. In addition, because the Transport Rule's interstate trading programs provide large, liquid markets for allowances, individual facilities may obtain allowances at any time from the market if necessary to cover their 2012 emissions.
Organization: Minnesota Power
Comment:
Minnesota Power
Wind backup.  As the production of wind based generation increases in a region subject to renewables performance standards, there is an increasing need for backup resources like natural gas and coal based generation to provide reliability to the electric system when the wind is not blowing.  That sort of service can require that coal and natural gas units targeted for control under the proposed Transport Rule can fall short of budget allocations needed to preserve electric system reliability.  EPA should address the role of fossil fuels for supporting system reliability under wide scale deployment of renewables before they impose emission budgets that can impede local unit dispatch, prior to finalizing the Transport Rule. [EPA-HQ-OAR-2009-0491-2750.1, pp.9-10]
Response:
      The comments are mistaken in the assumption that the analysis does not take into account the need for dispatchable resource to back up wind development. The IPM model considers the need for backup in two primary ways. First, the percentage of wind generation is limited to 20 percent of load in each region, a generally conservative assumption of the maximum amount of wind that can be supported in a region without additional backup requirements. Second, the contribution of wind to capacity requirements in each region varies as a function of the type of wind resource and is designed to ensure that sufficient dispatchable capacity remains in the region to ensure reliable dispatch of the power system to meet projected loads. (For details of these parameters, see the IPM documentation in this docket.)
Organization: Morgan Stanly Capital Group
Comment:
Morgan Stanly Capital Group
Forty years ago when the EPA made decisions regarding curtailing pollution, power plants were owned and operated primarily by integrated utilities. Wholesale power markets mostly amounted to occasional sales of "economy energy" between such utilities. Today, there is a thriving, diverse wholesale power market, a large independent power producer sector, and several multi-state ISOs that engage in optimizing cost and reliability decisions over large areas. For this reason, developing the optimum emissions control program is much more complicated than it has been at any time in the past. As it evaluates various options for achieving statutorily mandated emissions and ambient air quality standards, the EPA should consider the impact of the Proposed Rule on these sectors. Failure to take these impacts into account would likely result in significantly higher societal costs. These costs include less efficient generation dispatch, decreased electric system reliability, and reduced competition in the wholesale power markets. [EPA-HQ-OAR-2009-0491-2819.1 p.10]
The Federal Energy Regulatory Commission,29 the North American Electric Reliability Corporation,30 RTOs, and/or ISOs may proactively participate in this rulemaking and offer detailed analyses of such impacts. The Proposed Rule would impose significant constraints on the operation of RTOs and ISOs.31 By definition, additional constraints add costs, which will ultimately be borne by consumers. While it is clear that the EPA's primary responsibility is to ensure air quality standards, we encourage the EPA to do so in the least costly and disruptive manner possible. Therefore, if these entities do not participate in the rulemaking, we urge the EPA to reach out to them for expert advice on how various proposals would impact power markets. [EPA-HQ-OAR-2009-0491-2819.1 p.10]
Response:
      EPA believes that the trading approach taken in the rule is consistent with the request in the comment to consider the impact on the wholesale power market in developing this rule.
      The commenters also recommend that EPA reach out to other agencies or groups for expert advice, specifically to FERC, NERC and RTOs on reliability issues. EPA notes that each the entities referenced have had the opportunity to submit comments on EPA rules in the record of this rule. EPA has been in contact with many of these groups during the development of this rule and expects to continue to engage proactively to promote planning for environmental compliance; however, these groups have not filed comments or expressed concerns over reliability in the record for this rule.
Organization: National Rural Electric Cooperative Association (NRECA)
Old Dominion Electric Cooperative
Comment:
National Rural Electric Cooperative Association (NRECA)
The proposal encounters a similar problem regarding the presumption that dual fuel natural gas/oil turbines can utilize natural gas exclusively, even during the winter season when regional or local requirements may effectively prohibit natural gas use to generate electricity. EPA has not identified anywhere in the proposal how the additional natural gas and pipeline transportation needed to meet this presumption would be met, or how long constructing needed infrastructure is anticipated to take. [EPA-HQ-OAR-2009-0491-2723.1, p.6]
Old Dominion Electric Cooperative
As stated above ODEC owns and operates two simple cycle combustion turbine power stations that are dual fueled. The reason these stations are dual fuel is because natural gas becomes constrained during the winter months forcing the stations to use fuel oil for electric generation. This proposed rule assumes that dual fuel natural gas/oil turbines can utilize natural gas exclusively, even during the winter season when regional or local requirements may effectively prohibit natural gas use to generate electricity. Based upon information from EPA staff, ODEC understands that the IPM model is apparently not capable of modeling for dual fuel operation. However, there was no indication that an effort was made to adjust the model based upon actual operation. Further, EPA has not identified anywhere in the proposal (1) how their additional natural gas and pipeline transportation assumptions would be met, (2) the anticipated timeframe for construction of needed infrastructure, or (3) the increase in cost associated with the development of this infrastructure. [EPA-HQ-OAR-2009-0491-2877.1,p.4]
Response:
Treatment of dual-fueled units
      In the IPM model, units are classified by whether they can burn only oil, only natural gas, or either oil or natural gas (dual-fired units). This classification is based on available historical information about each unit. The model dispatches units on an economic basis; dual fired units are permitted to burn natural gas during all time periods if it is economic to do so. This is a necessary modeling simplification; however, the model does incorporate a detailed natural gas pipeline representation where the cost of natural gas transportation to the unit includes any infrastructure upgrades that are needed if there are constraints in the pipeline system from increased use of natural gas.
      There are several reasons why these modeling simplifications do not affect the conclusions of the impact analysis with respect to reliability. First, dual fired units are not prohibited from using oil under the policy if, for example, natural gas is not available during those limited times when natural gas supply may be constrained in the winter. Second, the IPM modeling does not project additional closures of oil/gas steam plants from the policy, so that oil/gas steam units available under the base case are expected to remain in service under the policy and be available capacity for reliability purposes. For these reasons, EPA does not expect reliability problems related to the modeling of oil/gas unit operations under the Transport Rule.
       Natural Gas Infrastructure
      EPA disagrees with comments that maintain the analysis of the rule did not include costs associated with the development of natural gas infrastructure needed to serve any additional natural gas consumption that arises from the policy. IPM incorporates a detailed natural gas pipeline representation as well as a representation of natural gas resources and reserve development (see IPM documentation in this docket). The cost of natural gas delivered to a power plant includes both the cost of delivery from current infrastructure as well as the cost of any additional natural gas infrastructure needed to develop new reserves or construct new pipeline capacity to deliver increased flows of natural gas to power plants.
Organization: New Orleans City Council
Comment:
New Orleans City Council
New Orleans is located in the Amite South planning region of the Entergy System behind a significant transmission constraint. This constraint is so severe that in early September 2008, Hurricanes Gustav and Ike highlighted the vulnerability of New Orleans to being cut off electrically from the rest of the electrical power grid -- the hurricanes severed the only major transmission pathway into New Orleans and New Orleans essentially became an electrical island unable to import or export power from anywhere else in the nation. Even when operating at full capacity, the transmission pathway into New Orleans does not allow enough power to be transmitted to offset uneconomic units in the Amite South planning region. [EPA-HQ-OAR-2009-0491-2719.1 p.3]
This severe transmission constraint requires the Entergy System to operate units at ENO's Michoud facility to provide load-following capability and voltage support -- regardless of whether or not it is economic to run those units. Michoud is a reliability-must-run facility. If the modeling system used to allocate emissions credits assumes that Michoud will not be run because it is uneconomic to do so, it will not reflect the reality of the operation of the Entergy System, and will unduly penalize New Orleans retail electricity customers. Any system for the allocation of emissions allowances adopted by the Agency must take into account the necessity of running units for load-following capability and voltage support. Such units cannot be ramped down -- the electrical system would collapse and blackouts would occur. Under regulatory ratemaking principles, costs associated with complying with federal regulations such as emissions regulations are generally allowed to be recovered from consumers by the utilities, so in most instances it will be the retail ratepayers who bear the burdens of increased compliance costs, not the utility. If allowances are not allocated to reliability-must-run units, such as Michoud, the Council is concerned that the utility will incur and pass on to its retail customers the substantial cost of bringing such units into compliance. This result would be highly detrimental to New Orleans ratepayers, many of whom are already facing significant financial hardship. [EPA-HQ-OAR-2009-0491-2719.1 p.4]
WHEREFORE, the Council respectfully requests that the Agency consider the comments set forth above and make the adjustments to the proposed rule necessary to minimize costs to ratepayers and to reflect the existence of transmission constraints in the allocation of emissions allowances. [EPA-HQ-OAR-2009-0491-2719.1 p.5]
Response:
These comments assume the use of modeling projections for allocation of allowances.  In the final rule, EPA is basing allocations on historical data, so these comments no longer apply.
 To the extent that these concerns go beyond the issue of allocations, EPA believes that the flexibility inherent in the trading systems adopted in this rule permits dispatch of units where needed for reliability.  As discussed in the Preamble (Section XII.C) there are multiple compliance options that can be employed where needed to permit individual units to remain in service and comply with the rule while longer-term upgrades (such as transmission system modifications) are completed.  Because the Transport Rule's interstate trading programs provide large, liquid markets for allowances, individual facilities may obtain allowances at any time from the market to cover their emissions.
Organization: State of Louisiana, Department of Environmental Quality
Comment:
State of Louisiana, Department of Environmental Quality
Comment: EPA proposed compliance deadlines and schedules are inappropriate and unfeasible in light of electrical generation and transmission system constraints. Again, EPA should gather additional real-world information regarding must-run units and local grid constraints to update the expected conditions before finalizing this rule. [EPA-HQ-OAR-2009-0491-2655.1, p.5]
Response:
      To the extent that these concerns go beyond the issue of allocations, EPA believes that the flexibility inherent in the trading systems adopted in this rule permits dispatch of units where needed for reliability. As discussed in the Preamble (Section XII.C) there are multiple compliance options that can be employed where needed to permit individual units to remain in service and comply with the rule while longer-term upgrades (such as transmission system modifications) are completed. Because the Transport Rule's interstate trading programs provide large, liquid markets for allowances, individual facilities may obtain allowances at any time from the market to cover their emissions.
Organization: U.S. Congressman Pete Hoekstra
Comment:
U.S. Congressman Pete Hoekstra
It is my understanding that the proposal may negatively impact the reliability and diversity of public power entities and their ability to contribute to the national electric system and their local communities. [EPA-HQ-OAR-2009-0491-3662, p.1]
Response:
EPA does not believe that the rule will harm reliability of the power system, and consequently will not diminish the ability of public power entities to reliably serve their local communities.  As stated in the preamble (VII.A) , EPA selected an interstate trading program structure in part because its market-based flexibility promotes the sector's capacity for providing electric reliability.  EPA believes that the level of potential retirements, projected to be approximately 4.8 GW in 2014 (see the RIA and IPM documentation in this docket) is well within the capability of utilities and regional organizations to manage effectively.  The IPM modeling for the rule takes into account both the required regional reserve margins and the limitations of firm power transfers between regions, so that the basic reliability requirements are already incorporated in the analysis of the impact of the rule.  Moreover, because the rule provides the flexibility to purchase allowances rather than retire, projected retirements under the rule are based on economic considerations rather than fixed deadlines or unit-specific compliance requirements.  Consequently, EPA anticipates that the Transport Rule will not affect the ability of regional grid management organizations and/or interconnected utilities to routinely manage any local grid issues that may arise.  For further information, see the Technical Support Document on Resource Adequacy and Reliability in this docket.
Organization: we energies
Comment:
we energies
If retained as proposed, the 2012 deadline could pose a potential threat to electrical system reliability. We Energies service area in Michigan's Upper Peninsula has transmission system constraints, and unit outages at We Energies Presque Isle facility are limited to one planned unit outage at a time in order to avoid threats to system voltage and stability. [EPA-HQ-OAR-2009-0491-2629.1,p.6]
Response:
      As discussed in Section VII.C of the Preamble, EPA believes the 2012 deadline is feasible and will not result in any reliability issues. As noted in the preamble, there is a diverse set of readily attainable compliance options that can be undertaken by industry within the applicable compliance schedule. In addition, because the Transport Rule's interstate trading programs provide large, liquid markets for allowances, individual facilities may obtain allowances at any time from the market if necessary to cover their 2012 emissions.
      EPA believes that the flexibility inherent in the trading systems adopted in this rule permits dispatch of units where needed for reliability. As discussed in the Preamble (Section XII.C) there are multiple compliance options that can be employed where needed to permit individual units to remain in service and comply with the rule while longer-term upgrades (such as transmission system modifications) are completed. Because the Transport Rule's interstate trading programs provide large, liquid markets for allowances, individual facilities may obtain allowances at any time from the market to cover their emissions.
Organization: Westar Energy, Inc.
Comment:
Westar Energy, Inc.
THE RULE FAILS TO CONSIDER GRID RELIABILITY AND THE BURDEN ON EXISTING TRANSMISSION [EPA-HQ-OAR-2009-0491-2757.1, p.18]
The Rule demonstrates a misunderstanding about the potential effects that the proposed rule may have on grid reliability. The Rule postulates potential grid reliability problems in terms of the availability of electric generation: noting the preferred trading option 'gives ISOs (Independent System Operators) the flexibility to manage regional electricity generation so that reliability is maintained.' 75 FR at 45315/1; see also id. at 45328/3 ('the ability to obtain additional or replacement supply from sources in another part of the state or from another state enhances electric reliability'). But that tells only half the story, and not the more important part; the availability of electric generation has not been the sticking point for reliability. See, e.g., New York v. FERC, 535 U.S. 1, 7 (2002) ('since 1935, and especially beginning in the 1970's and 1980's, the number of electricity suppliers has increased dramatically. Technological advances have made it possible to generate electricity efficiently in different ways and in smaller plants.')(footnote omitted). Rather, reliability problems arise because grid transmission facilities are not always adequate to move electricity from where it is generated to where it is consumed. See id. at 9-10 (summarizing statutory and regulatory efforts to encourage increased access to transmission). [EPA-HQ-OAR-2009-0491-2757.1, p.18]
Similarly, the Rule's view that ISOs 'manage regional electricity generation' (75 FR at 45315) overstates the case. ISOs neither control nor operate generation facilities, but, rather, control and operate transmission facilities. See 16 U.S.C. § 8240(a)(6)('The term 'transmission organization' means ... Independent System Operator ... finally approved by the [FERC] for the operation of transmission facilities'); see, e.g., PUD No.1 Snohomish County v. FERC, 272 F.3d 607, 611 n. 3 (D.C. Cir. 2001)('Independent system operators (1S0s), in contrast, are nonprofit organizations that operate the transmission facilities that others own.'). 6 [EPA-HQ-OAR-2009-0491-2757.1, pp.18-19]
These factors raise doubt concerning the Rule's implicit assumption that the preferred trading program will not adversely affect grid reliability because adequate generation is available. 75 FR at 45315/1. Even accepting that adequate generation is available, that, by itself, does not assure grid reliability now and could not be expected to do so after the rule is implemented, given that the preferred approach could easily increase potential transmission capacity constraints (congestion) that would impede the flow of electricity. In determining the potential impact of the proposed rule on grid reliability, EPA failed to consider the extra burden that the rule will place on existing transmission constraints or in creating new congestion points. Both situations present complex and costly issues related to assuring grid reliability. The failure to consider this central problem to the instant matter constitutes arbitrary and capricious decision making. See, e.g., Motor Vehicle Mfrs. Ass 'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)('an agency rule would be arbitrary and capricious if the agency ... entirely failed to consider an important aspect of the problem'). [EPA-HQ-OAR-2009-0491-2757.1, p.19]
[See EPA-HQ-OAR-2009-0491-2757.1, pp.19-22 for additional comments pertaining to THE RULE FAILS TO CONSIDER GRID RELIABILITY AND THE BURDEN ON EXISTING TRANSMISSION]

6 To be sure, ISOs operate real time markets that provide balancing services to compensate for differences between projected and actual electric loads as well as offer continuous economic dispatch of resources to serve load. In both cases, however, the ISO relies on generation made available by third parties.
Response:
      EPA does not agree that the rule impairs grid reliability and believes it has considered the burden of the rule on existing transmission.  EPA modeling with IPM considered the issues of regional resource adequacy and inter-regional transmission of power. EPA recognizes that local grid issues, such as shifts in congestion patterns and transmission impacts from the retirement of specific power plants, will need to be coordinated at the utility and regional levels as they routinely managed for all changes in the power sector. However, EPA also believes that there are sufficient provisions in the rule for flexible coordination with regional entities and among utilities to permit these local issues to be resolved in the normal course of business.
      IPM modeling considers regional resource adequacy based on current and projected NERC reserve margins, and considers transmission system limitations by placing limits on flows between regions and on the amount of capacity that can be transferred between regions to meet regional reserve margins. This modeling is conservative, in the sense that it considers only current transmission capacity between regions and does not consider ways in which the transmission grid may be improved in the future to allow for additional flexibility in dispatch to meet load. In other words, EPA's projections show cost-effective EGU emission reductions subject to regional limitations of the transmission grid as it exists today, and its projections are fully compatible with the power sector's ability to comply with the rule's emission reductions while successfully operating the grid.

V.D.2.h. How Proposed Remedy is Consistent With Court's Opinions

Organization: Capital Power Corporation
Comment:
Capital Power Corporation
We commend EPA for responding largely to the court decision remanding the Clean Air Interstate Rule (CAIR). The limitations on interstate trading in the proposed rulemaking, while potentially creating issues regarding market liquidity, respond to the court's opinion that unlimited interstate trading cannot guarantee the necessary reductions in all the upwind states. [EPA-HQ-OAR-2009-0491-2753.1, p.2]
Response:
EPA agrees that the remedy in the final rule is consistent with and responds to the decision of the D.C. Circuit in the North Carolina case.
Organization: Class of '85 Regulatory Group
Comment:
Class of '85 Regulatory Group
The Preferred Option is Consistent with North Carolina v. EPA. In North Carolina v. EPA, the Court of Appeals for the District of Columbia Circuit ('D.C. Circuit') found CAIR unlawful and identified problems with CAIR's methodology for measuring and addressing each state's significant contribution to downwind nonattainment, as well as problems with certain aspects of CAIR's emissions trading programs. The preferred option addresses both of these concerns and is consistent with the court's remand of CAIR. [EPA-HQ-OAR-2009-0491-2854.1,p.4]
The Preferred Option relies on a state-specific methodology for identifying significant contribution to nonattainment and interference with maintenance. This methodology incorporates both air quality modeling and cost considerations to identify the portion of a state's contribution that is significant or that interferes with maintenance. The preferred option then eliminates this contribution by imposing annual state and unit-specific emissions budgets based directly on EPA's quantification of each individual state's significant contribution and interference with maintenance. In contrast to CAIR, in which 'EPA's apportionment decisions have nothing to do with each state's significant contribution, emission budgets and allowance allocations under EPA's preferred option are directly linked to in-state emissions and required reductions to those emissions. This methodology addresses the court's concern-and the CAA's mandate-that emissions reductions occur 'within the State.' The Class of '85 supports EPA's methodological approach defining 'significant contribution' on a state-by-state basis, and EPA's consideration of both air quality and cost factors in that analysis. [EPA-HQ-OAR-2009-0491-2854.1,p.4]
The limited interstate trading and variability provisions of the preferred option are consistent with the D.C. Circuit's opinion in North Carolina. Because CAIR based its allocations on the Acid Rain program (as opposed to required or quantified in-state emissions reductions targets) and allowed unlimited interstate trading, there was little assurance that required emissions reductions would occur in a given state. As a result, CAIR could not satisfy the CAA's mandate to address significant contribution by upwind states. As discussed, the preferred option solves this problem by setting state-specific emissions budgets that are directly tied to that state's 'significant contribution' and allocating allowances based on those budgets. At the same time, and in recognition of the inherent variability in both baseline emissions and year-to-year fluctuations in electricity demand, the preferred option provides for a modest 10 percent variability of emissions budgets in any given year, at both the state and unit level. To constrain variability further and assure that emissions reductions occur in-state, the preferred options' assurance provision imposes a rolling three-year variability limit at the state level, which effectively limits the total potential variability to 5.8 percent. The preferred option's interstate trading mechanism is a necessary component of the variability provision because interstate trading allows allowances to move from areas of low demand to areas of high demand in a given year (within the 10 and 5.8 percent variability limits), creating a viable emissions allowance market. [EPA-HQ-OAR-2009-0491-2854.1, p.4]
When remanding CAIR, the D.C. Circuit in North Carolina did not prohibit interstate trading or even suggest that all interstate trading was impermissible. Instead, the court expressed concern that unfettered trading, combined with an impermissible allocation scheme, would not assure that emissions reductions took place in specific upwind states. In defining EPA's obligations on remand, the court wrote that 'CAIR must include some assurance that it achieves something measurable towards the goal of prohibiting sources 'within the State' from contributing to nonattainment or interfering with maintenance in 'any other State. ', The preferred option is more than 'something measurable.' It is a quantifiable emissions reduction program based on state-specific emissions budgets and unit-specific allocations based on those budgets. The modest and well-constrained variability provisions contained in the preferred option assure long-term compliance with these budgets while smoothing out small year-to-year changes in electricity demand in a cost-effective manner. [EPA-HQ-OAR-2009-0491-2854.1, p.5]
Without variability provisions (and the interstate trading necessary to make them work), sources would face penalties for meeting an unexpected increase in demand caused by an unpredictable weather or economic events. The alternative is to not meet that demand, resulting in blackouts, brownouts, and a corresponding economic impact. A penalty would be neither cost-effective nor helpful from an environmental perspective, because it would do nothing to actually constrain emissions (most EGUs and all regulated public utilities cannot simply 'shut down' to avoid exceeding emissions budgets in a high-demand year). In contrast, the preferred option's variability provisions would allow sources to meet an unexpected increase in annual demand (which would cause a corresponding emissions increase) by purchasing and removing allowances from a lower-demand area. Not only is a variability provision more cost-effective and better aligned with reality, it actually assures a better overall environmental result because emissions allowances from low-demand areas are removed from the market, reducing overall emissions. [EPA-HQ-OAR-2009-0491-2854.1,p.5]
The variability provision in the preferred option was carefully designed to limit any annual variance to 10 percent and to constrain long-term use of variability provisions (by imposing a three-year variability limit on states). Under the preferred option, interstate trading can occur only within the constraints of the variability limits. Allowance surrender requirements would enforce variability limits while also helping to assure future emissions reductions by removing allowances from the market. As EPA explains, this 'approach takes into account the inherent variability of the baseline emissions without excusing any state from eliminating its significant contribution.' Accordingly, the preferred option is consistent with North Carolina and 'achieves something measurable' toward reducing significant contribution by upwind states. [EPA-HQ-OAR-2009-0491-2854.1,p.5]
Response:
EPA agrees that the remedy in the final Transport Rule, which is based on the preferred option in the proposal, is consistent with the opinion of the D.C. Circuit opinion in North Carolina v. EPA.  EPA does, as the commenter suggest, define significant contribution to nonattainment on a state specific basis, considering both cost and air quality factors in that analysis.  In addition, EPA agrees that the D.C. Circuit did not hold that all interstate trading was impermissible.  The remedy utilized in the final transport rule was crafted to respond to the opinion in North Carolina while still providing regulated sources with flexible compliance options.
Organization: New York University School of Law, Institute for Policy Integrity
Comment:
New York University School of Law, Institute for Policy Integrity
The preferred approach's overall structure should satisfy the D.C. Circuit requirement that the EPA "include some assurance that it achieves something measurable towards the goal of prohibiting sources `within the State' from contributing to nonattainment or interfering with maintenance in `any other State.'" But a clearer definition of "significant contribution" and some programmatic modifications would help EPA hew even more closely to the court's interpretation of statutory language, even while improving the rule's efficiency and predictability. [EPA-HQ-OAR-2009-0491-2691.1, p.5]
Response:
EPA agrees that the final Transport Rule is consistent with the D.C. Circuit opinion in North Carolina v. EPA.  The rule clearly defines and quantifies emissions in each state that signmissions that must be prohibited because they have been found to significantly contribute to nonattainment or interfere with maintenance in another state.
Organization: Pennsylvania Department of Environmental Protection
Comment:
Pennsylvania Department of Environmental Protection
In North Carolina v. EPA, the Court held that EPA gave no 'independent significance' to the 'interfere with maintenance' prong of Section 110(a)(2 )(D)( i)(I) to separately identify upwind sources interfering with downwind maintenance. EPA must ensure that the two components-- year to year variability in emissions and air quality and continued maintenance of air quality standard over time, comport with Section 110(a)(D)(i)(I) of the CAA. The final TR must also ensure that the reductions achieved under SIP-approved programs for the CAIR continue in effect-failure to do so would be contrary to the anti-backsliding provisions of the CAA. [EPA-HQ-OAR-2009-0491-2660.1 p. 4]
Response:
As explained in the preamble, the analysis for the Transport Rule gives independent significance to the interfere with maintenance prong of section 110(a)(2)(D)(i)(I), and is consistent with the statutory mandate of that section as interpreted by the D.C. Circuit.  EPA does not agree, however, with the commenters' suggestion that the anti-backsliding provisions of the CAA require certain CAIR requirements to remain in effect.  The D.C. Circuit found CAIR to be unlawful and EPA promulgated the Transport Rule to replace CAIR.  EPA believes it would be inconsistent with the opinion of the Court in North Carolina, to require all states to continue meeting emission budgets established in CAIR, budgets the D.C. Circuit found to be unrelated to the statutory mandate of section 110(a)(2)(D)(i)(I)

V.D.2.i. Other Comments on State Budgets/Limited Trading Proposed Remedy

Organization: Constellation Energy
Comment:
Constellation Energy
Constellation Energy acknowledges EPA's exemplary efforts in this difficult task, and enthusiastically supports EPA's Preferred Option. The Preferred Option continues the efficient market based system successfully employed in the Acid Rain control program and the Clean Air Interstate Rule with improvements to address the concerns of the U.S. Court of Appeals for the D.C. Circuit related to the Clean Air Interstate Rule. Implementation of the Preferred Option will lead to a reduction in emissions within the 31-state area that is subject to the Transport Rule. The emission caps are tight enough to ensure reductions throughout the region. Moreover, the compliance assurance provisions ensure that trading does not undermine local emission concerns. [EPA-HQ-OAR-2009-0491-3613,p.2]
Response:
EPA appreciates Constellation's support.
Organization: Maryland Department of Environment (MDE)
Comment:
Maryland Department of Environment (MDE)
Also, while there are aspects of EPA's preferred State Budgets/Limited Trading proposed remedy option that we like and support, we offer improvements to that option. Please see Appendix D: OTC-LADCO Recommendations to EPA Regarding the CAIR Replacement Rule, dated September 2, 2009, and Appendix E: OTC Additional Recommendations to EPA on the CAIR Replacement Rule, dated September 10, 2009. [See EPA-HQ-OAR-2009-0491-2639.2, p.35 for comments pertaining to Appendix D and p.42 for comments pertaining to Appendix E; EPA-HQ-OAR-2009-0491-2639.2, p.14]
Response:
See Preamble Section VIIA
Organization: National Rural Electric Cooperative Association (NRECA)
Comment:
National Rural Electric Cooperative Association (NRECA)
NRECA has traditionally supported allowance trading as a preferred means of achieving a given emissions reduction goal because practical economics demonstrates emissions trading reduces overall compliance costs. A primary goal of NRECA and its electric cooperative membership is the support of policies that keep electric cooperative consumer rates affordable. [EPA-HQ-OAR-2009-0491-2723.1, p.4]
Response:
EPA appreciates your support and agrees with your goals.
Organization: Ozone Transport Commission (OTC)
Comment:
Ozone Transport Commission (OTC)
Transition to Performance Standards
In OTC's supplemental letter to EPA the OTC states requested that EPA work with the states to develop and phase in unit-specific performance standards that owners of fossil fuel-fired units should comply with between 2017 and 2025, or earlier if EPA's technical analysis demonstrates that an earlier date is reasonable. We further recommended that the performance standards should be developed on a 1-hour to 24-hour time period in conformance with the appropriate NAAQS, and should either be output-based or transition to output-based standards to reward efficiency. Such performance standards will give greater regulatory certainty to EGU owners and encourage transformational change in the energy market. We also provided the following specifics regarding the development of performance standards for EGUs:
 :: EPA should consider fuels, types and sizes of EGUs, the timing of other requirements included in this and the September 2, 2009 letter, cost-effectiveness and the pollution control equipment already in place on the existing fleet of EGUs;
 :: EPA should phase in the performance standards to maximize efficiency and minimize costs to affected sources, for example: o The performance standards for coal-fired units greater than 100 MW should be coordinated with the state-by-state caps; and o The performance standards for units subject to the upcoming federal MACT requirements should be coordinated with the MACT requirements;
 :: In later phases (2020 to 2025), the performance standards should be coordinated with greenhouse gas reduction programs and other energy efficiency initiatives and be output-based; :: OTC's analysis (see the Technical Support Document included as part of Appendix 6) shows that performance standards on larger fossil-fuel fired EGUs (based on a 30-day rolling average) are feasible and should be implemented on an aggressive timeframe (as early as 2017); :: EPA should consider including incentives (e.g., alternative compliance schedules not to exceed three years), to promote the repowering or replacement of existing units; and :: After the adoption and implementation of performance standards, EPA should evaluate the feasibility of eliminating the state-by-state caps.
We highly recommend that EPA take the opportunity to include the transition to performance based standards in the final Transport Rule, and strongly recommend it be included in Transport 2.
Response:
EPA appreciates the comments and input from OTC throughout the regulatory process.  Several of the comments go beyond the scope of this rule, which proposed to regulate emissions of SO2 and NOx from fossil-fuel-fired power plants in the eastern part of the US, and replaces the court-remanded CAIR rule.  As described in section VI of the proposal preamble (75 FR 45341) EPA engaged stakeholders early and often in the development of the Transport Rule, weighing suggestions, ideas, and approaches seriously for their technical, administrative, and legal merit.  While not all of the OTC's ideas are reflected in the rule, many are.  For the Transport Rule, EPA did not propose output-based standards because of the difficulty at this time of the availability of the necessary data to implement such an approach.  However, this idea is of interest and relevance and will continue to be considered in the future. For the Transport Rule, EPA tried to design a program that is fuel- and control-neutral in order not to disadvantage any class of EGUs.  As emission reductions become stricter and controls on uncontrolled units become necessary, EPA believes that market economics will put pressure on older, less efficient plants.  For the Transport Rule, EPA did not proposed performance standards for the preferred approach because we felt that our approach delivered the necessary reductions to address the statutory mandate under CAA section 110(a)(2)(D)(i)(I) efficiently and cost-effectively. The OTC's forward looking comments in the timeframe beyond 2016 concerning greenhouse gas programs and other energy efficiency initiatives, as well as comments related to the MACT standards, are beyond the scope of this rule.
Organization: we energies
Comment:
we energies
Interstate trading and allowance banking are critical rule provisions and must be fully available to provide compliance flexibility. As proposed, the rule does not adequately define how the implementation of interstate trading would occur, and we request additional specificity on the mechanics of interstate trading.  [EPA-HQ-OAR-2009-0491-2629.1, p.7]
We also request that EPA provide an option for utilities that have generation facilities in multiple states. EPA could allow for utilities to request EPA approval of a utility-specific emission averaging plan that would allow for interstate "trading" across units included in the utility's generation fleet located in multiple states. EPA could use the underlying CAMX analysis supporting the rule in order to confirm that the "trading" does not negatively impact transport and downwind attainment. This is consistent with the transport and attainment objectives of the transport rule, and would allow additional compliance flexibility for utilities with generation facilities in multiple states.  [EPA-HQ-OAR-2009-0491-2629.1,p.7]
We Energies would benefit from this additional flexibility by being able to make additional reductions at our facilities in southeastern Wisconsin to supplement reductions made at our facilities in Michigan's Upper Peninsula. This type of compliance plan is consistent with regional air quality goals, and would both lessen compliance costs and address potential reliability issues in our transmission constrained northern service territory. [EPA-HQ-OAR-2009-0491-2629.1, p.7]
Response:
EPA appreciates WE Energies comments.  In the preamble to the final rule (see Section VII.A), EPA explains that 4 trading programs will be established.  Specifically, SO2 states are in either group 1 or group 2.  Group 1 states need to make larger reductions to eliminate their significant contribution.  A source in a group 1 state can only use SO2 allowances allocated to group 1 states for compliance with the SO2 trading program.  A source in a group 2 state can only use SO2 allowances allocated to group 2 states for compliance with the SO2 trading program.  For compliance in the annual NOx and ozone-season NOx trading programs respectively, sources may use annual NOx and ozone-season allowances allocated for any state, even if that state is in a different group for SO2 than the source's state.  Banking is the same as in the Title IV program.  Allowances may be banked (saved) and do not expire.  While EPA understands how your proposed averaging plan could offer additional flexibility, we have not included it in the final rule due to the prescriptions in the 2008 court decisions requiring emissions reductions necessary to eliminate significant contribution and interference with maintenance occur in the state linked to downwind impacts.

V.D.3. State Budgets/Intrastate Trading Remedy Option

Organization: Adirondack Mountain Club
Comment:
Adirondack Mountain Club
EPA's preferred alternative, which would allow for interstate trading among power plants, does not address the New York's problem with pollution hotspots. EPA acknowledges in this rulemaking that particular plants have very significant affects on very specific downwind regions. The preferred alternative, along with the first alternative to allow for unlimited trading within States and no interstate trading, do not address the regional pollution problems associated with upwind polluters. [EPA-HQ-OAR-2009-0491-2761, p.2]
Response:
EPA is finalizing the air quality-assured trading remedy, not the alternative intrastate trading remedy.  The final remedy has been designed to ensure that all significant contribution and interference with maintenance from upwind states is eliminated in downwind states as required by CAA section (110)(a)(2)(D).  For more details on EPA's decision to finalize the air quality-assured trading remedy, see section VII.A of the preamble.
Organization: Clean Air Council
Comment:
Clean Air Council
In testimony, the Council viewed favorably EPA's effort to limit interstate trading of emission allowances under the Transport Rule. EPA has sought comment upon three possible approaches to trading, with a preference for limited interstate trading. Although the Council respects the Agency's inclination in this regard, our preference would be to see the 'first alternative' employed, which would limit trading to power plants only within the same state. Too many power plants in Pennsylvania have avoided serious investment in pollution controls by buying allowances from other plants. As a result, some Commonwealth residents have not seen the improvements in air quality that should be their due. As the availability of allowances tightens up, the ability of old dirty units to continue to play this game should diminish. However, if access to a 31-state market is afforded by the Transport Rule, a lack of pollution control modernization at some power plants may plague communities in Pennsylvania for years to come. [EPA-HQ-OAR-2009-0491-2804.1, p.2]
Response:
EPA is finalizing the air quality-assured trading remedy, not the alternative intrastate trading remedy.  The final remedy has been designed to ensure that all significant contribution to nonattainment and interference with maintenance from upwind states is eliminated in downwind states as required by CAA section (110)(a)(2)(D).  For more details on EPA's decision to finalize the air quality-assured trading remedy, see section VII.A of the preamble.  For more details on the air quality and human health benefits, see sections VI.C and VII.C of the preamble.
Organization: Clean Energy Group
Comment:
Clean Energy Group
The Clean Energy Group Does Not Support Alternative 1 or Alternative 2
The first alternative approach proposed in the Transport Rule would use state-specific control budgets and allow intrastate trading of emissions allowances allocated to EGUs, but it would not allow interstate trading. The second alternative would be a direct control program and also would prohibit trading. Both options would be inefficient, more costly, and would unnecessarily limit the flexibility of interstate trading available under the preferred option. The preferred approach is structured to allow maximum trading while also addressing the court's concerns. We would strongly oppose any alternative that does not include an interstate trading component. [EPA-HQ-OAR-2009-0491-2702.1, p. 10] [This comment can also be found at Section V.D.5 of this comment summary.]
Response:
EPA is finalizing the air quality-assured trading remedy, not the alternative intrastate trading remedy.  The final remedy has been designed to ensure that all significant contribution to nonattainment and interference with maintenance from upwind states is eliminated in downwind states as required by CAA section (110)(a)(2)(D).  For more details on EPA's decision to finalize the air quality-assured trading remedy, see section VII.A of the preamble.
Organization: Maryland Department of Environment (MDE)
Florida Electric Power Coordinating Group, Inc. (FCG)
Dynegy, Inc.
Michigan Department of Natural Resources and Environment
First Energy
Comment:
Dynegy, Inc.
In the event EPA does not defer the effective date of the Transport Rule until 30-36 months after promulgation, Dynegy strongly supports EPA's proposal for unlimited intrastate trading and no variability limits prior to 2014. Such compliance flexibility will be essential for effective transition to the Transport Rule program. [EPA-HQ-OAR-2009-0491-2698.1,p.8]
First Energy
Intra-State Trading Alternative
FE does not support EPA's proposal to limit or potentially eliminate interstate trading in the proposed CATR rule. Interstate emissions trading was one of the hallmark successes of the Acid Rain program, providing sources cost-effective options that led to an extremely successful program. Arbitrarily limiting trading based on state boundary lines will significantly increase the cost of compliance of the proposed CATR rule. [EPA-HQ-OAR-2009-0491-2657.1,pp.13-14]
Florida Electric Power Coordinating Group, Inc. (FCG)
Regarding the state budgets/intrastate trading option, the FCG agrees with EPA that this approach is more problematic and costly than the preferred option. EPA notes in the proposed rule that this option would be 'more resource intensive, more complex, less flexible, and potentially more susceptible to market manipulation' than the other two options. EPA states that the additional resources and administrative burden would be required due to the 82 new trading programs (28 for annual NOx, 26 for ozone season NOx, and 28 for S02) that would result from the Intrastate Trading method. According to the proposed rule this option would provide less flexibility to ensure electric reliability than the preferred method, and according to the Regulatory Impact Analysis this option would result in greater private costs to the power sector and greater social costs for consumers than the preferred method. Due to the increased resources and costs and to the decreased flexibility, the FCG supports the preferred remedy over the intrastate trading option. [EPA-HQ-OAR-2009-0491-2658.1,pp.11-12]
Maryland Department of Environment (MDE)
In the State Budgets/Intrastate Trading Remedy Option there is no variability included. That fact is the only part of this option that is appealing. On the other hand, this option would result in 82 trading programs being created. Allowance banking would be permitted and some allowances would be withheld from larger generators for use in an annual auction. Overall this option is quite unwieldy, especially from a compliance perspective, due to the large number of trading programs that would need to be administered. Maryland does not believe that EPA has the resources to manage such a large trading program effectively. [EPA-HQ-OAR-2009-0491-2639.2, p.15]
Michigan Department of Natural Resources and Environment
An alternative compliance option that would use state-specific emissions budgets and allow for intrastate trading but prohibit interstate trading is included in the proposal. The DNRE disagrees with this alternative because it limits the ability of the subject sources to participate in a robust trading program and recoup some of their costs from implementing various control options. [EPA-HQ-OAR-2009-0491-2774.1 p.5]
Response:
EPA is finalizing the air quality-assured trading remedy, not the alternative intrastate trading remedy.  The final remedy has been designed to ensure that all significant contribution and interference with maintenance from upwind states is eliminated in downwind states as required by CAA section (110)(a)(2)(D).  For more details on EPA's decision to finalize the air quality-assured trading remedy, see section VII.A of the preamble.
Organization: New York State Department of Environmental Conservation
Comment:
New York State Department of Environmental Conservation
While the Department supports the preferred option that provides for limited inter-state trading, EPA's analysis of the intra-state trading option did not include New York State's successful Acid Deposition Reduction Program (ADRP). The ADRP was a NOx and SO2 cap and trade program for EGUs of 25 megawatts and greater, which is nearly identical to the alternative program being proposed. To be complete, EPA should include the ADRP in its analysis.  [EPA-HQ-OAR-2009-0491-2730.1, p.6]
Response:
EPA is finalizing the air quality-assured trading remedy-- similar to the preferred remedy in the proposal with some modifications.  As such, EPA did not conduct additional analysis on the alternative intrastate trading remedy option.  This comment does not provide information about the ADRP program and what type or how additional analysis would benefit the final rule.
Organization: New York University School of Law, Institute for Policy Integrity
Comment:
New York University School of Law, Institute for Policy Integrity
The first alternative approach does not create specific variability ranges or permit interstate trading, though it would permit unlimited intrastate trading.  This approach also would permit allowance banking from year to year. Consequently, despite the prohibition on interstate trading, this approach would also lead to variability in total state emissions if allowance banking occurred. [EPA-HQ-OAR-2009-0491-2691.1, pp.5-6]
EPA's first alternative approach is significantly less cost-effective because is prohibits interstate trading. EPA acknowledges concerns about the first alternative approach and notes that it is less flexible and more resource-intensive. Consequently, despite the prohibition on interstate trading, this approach would also lead to variability in total state emissions if allowance banking occurred. However, this approach is the only option that would include an auction system to allocate emissions allowances, although it would only auction a small portion of allowances. An auction-based method to allocate allowances would ensure the most efficient and fairest distribution of emissions allowances, and this method of allocation should be considered by EPA in its final rule. [EPA-HQ-OAR-2009-0491-2691.1, p.6]
Response:
EPA is finalizing the air quality-assured trading remedy, not the alternative intrastate trading option.  The power sector, by its very nature, has operational and emissions variability that are a necessary part of reliable service.  EPA has modified the allowance allocation approach from what was proposed.  The final rule does not include auctions, which would increase program costs.
Organization: North Carolina Department of Environment and Natural Resources
Comment:
North Carolina Department of Environment and Natural Resources
The NCDAQ submits that if EPA is not able to resolve . issues with the variability limits, then interstate trading ~ as considered in the 'proposed remedy option' - cannot be permitted. Instead, NCDAQ would propose the 'first alternative remedy option' (option 1 throughout). It provides some flexibility while ensuring that a substantial portion of a state's assigned emissions reductions occur in that state. Option 1 most closely aligns with the C5A with respect to trading among only intrastate sources. Our experience with this type of approach shows that it is a feasible option. The (SA program has successfully reduced NOx and 502 emissions with minimal agency oversight. We do not support the 'second alternative remedy option' (option 2 throughout) and have concerns with its prescribed limits and feel that this offers sources little incentive to be more energy efficient and limits flexibility. [EPA-HQ-OAR-2009-0491-2767.1 p.6]
EPA's FIP approach using the 'first alternative remedy option' is satisfactory to NCDAQ for this FTR, but it should not be construed as support for using this approach for the second FTR aimed at addressing the pending revision to the 8-hour ozone standard. The NCDAQ suggests the simplest and most defensible way to effectuate the mandate in §110(a)(2)(D)(i)(l) is for EPA to determine each State's significant contribution level and then allow the State to determine how to reduce its emissions to a level below that. [EPA-HQ-OAR-2009-0491-2767.1 p.7]
Response:
EPA is finalizing the air quality-assured trading remedy, not the alternative intrastate trading remedy.  The final remedy has been designed to ensure that all significant contribution and interference with maintenance from upwind states is eliminated in downwind states as required by CAA section (110)(a)(2)(D).  For more details on EPA's decision to finalize the air quality-assured trading remedy, see section VII.A of the preamble.
Organization: Old Dominion Electric Cooperative
Comment:
Old Dominion Electric Cooperative
ODEC also supports the proposal's remedy option and the intrastate trading option in the second compliance period to the extent that both allow allowance trading, because program costs would be reduced without jeopardizing emission reduction goals. [EPA-HQ-OAR-2009-0491-2877.1,p.3] [[This comment is also in Section V.D.2.]]
Response:
EPA is finalizing the air quality-assured trading remedy, not the alternative intrastate trading remedy.  The final remedy has been designed to ensure that all significant contribution and interference with maintenance from upwind states is eliminated in downwind states as required by CAA section (110)(a)(2)(D).  For more details on EPA's decision to finalize the air quality-assured trading remedy, see section VII.A of the preamble.
Organization: Public Interest Law Center of Philadelphia
Comment:
Public Interest Law Center of Philadelphia
[These comments were submitted as testimony at the Philadelphia, Pennsylvania public hearing on August 26, 2010.  See Docket Number EPA-HQ-OAR-0491-1938, p.125.]
Under the agency's first alternative, only intrastate trading would be allowed.
Response:
EPA is finalizing the air quality-assured trading remedy, not the alternative intrastate trading remedy.
Organization: Southern Company
Owensboro Municipal Utilities (OMU)
Comment:
Owensboro Municipal Utilities (OMU)
We do not support EPA's first alternative because it unnecessarily limits the allowance trading market and ability to achieve more cost-effective compliance options. This alternative would result in higher electricity costs that would be very detrimental to the already weakened economy. [EPA-HQ-OAR-2009-0491-2811.1, p.1]
Southern Company
XIV. EPA Should Adopt an Interstate Trading Program and Abandon the Alternatives Offered for Comment
EPA's proposed limited interstate trading option provides a limited amount of flexibility and allows more cost-effective compliance options. EPA has historically allowed interstate trading in transport rules and should do so in this case. The intrastate trading option (Alternative 1) is completely unworkable and cumbersome. And EPA has no authority for the direct control option (Alternative 2), which provides for little to no flexibility. As stated, Southern Company strongly supports a flexible interstate trading program. Although EPA's interstate trading option is preferable to either of the two proposed alternatives, as explained in Section V, EPA should evaluate whether less stringent limits on trading can be adopted without compromising the anticipated air quality benefits of the Transport Rule. [EPA-HQ-OAR-2009-0491-2864.1, p. 50]  [This comment can also be found at section V.D.2, V.D.3. and V.D.5 of this comment summary.]
A. The Intrastate Trading Alternative Is Unworkable, Cumbersome and Far Inferior to EPA's Proposed Remedy
Southern Company agrees with EPA that the State Budgets/Intrastate Trading option is more problematic and costly than the preferred option. As noted, this option would be more resource intensive, more complex, and less flexible than the other two options. 51 Southern Company can hardly fathom the waste of federal, state and industry resources and the administrative burden if there were 82 allowance trading programs. Such limited allowance markets would provide very little of the flexibility that trading is designed to create, and would involve orders of magnitude more resources to implement. In addition to this alternative's lack of benefits and excessive burdens, it does not make sense given the regional analysis EPA applied for some of the rule's most significant determinations. For example, the proposed rule uses regional analysis to determine that the required reductions should come from the electric power sector and, in a limited way, to determine cost effectiveness, despite the fact that some states may have more cost effective control options from other sectors. [EPA-HQ-OAR-2009-0491-2864.1, p. 50]
Under this proposed alternative, it is all the more critical that EPA allow states the flexibility to determine how best to achieve any required reductions. As articulated in the proposed rule, under this alternative, EPA would identify linkages based on total anthropogenic emissions and then hamstring the states by imposing a FIP that requires all needed reductions to come from EGUs. If EPA were tempted to limit trading to state boundaries, there is absolutely no justification for further limiting where those reductions must be derived. As noted above, how reductions are achieved is the primary responsibility of the state. Absent the flexibility interstate trading allows, there is little to no basis for proscribing over 80 complex intrastate trading programs that are essentially identical for all states. [EPA-HQ-OAR-2009-0491-2864.1, pp. 50-51
More basically, however, Southern Company is certain that the modicum of benefit associated with such a restricted trading program is underwhelming in the face of the extraordinary administrative burden needed to implement this alternative. [EPA-HQ-OAR-2009-0491-2864.1, p. 51]
Response:
EPA is finalizing the air quality-assured trading remedy, not the alternative intrastate trading remedy.  The final remedy has been designed to ensure that all significant contribution and interference with maintenance from upwind states is eliminated in downwind states as required by CAA section (110)(a)(2)(D).  For more details on EPA's decision to finalize the air quality-assured trading remedy, see section VII.A of the preamble.

V.D.3.a. Auctions of Allowances

Organization: DTE Energy
Comment:
DTE Energy
EPA should remain opposed to allowance auctioning under the preferred option or the intrastate trading alternative. [EPA-HQ-OAR-2009-0491-2851.1, p.3]
Response:
EPA is not implementing auctions of allowances in the final Transport Rule FIPs. See section VII.D of the preamble in the FR for more about allowance allocations.
Organization: DTE Energy Services (DTEES)
Comment:
DTE Energy Services (DTEES)
Another option from the proposal that would provide relief for stranded units is an annual auction for small generators as described in the State Budgets/Intrastate Trading Alternative Remedy (described in 75 FR 45327). [EPA-HQ-OAR-2009-0491-2699.1,p.2] [EPA-HQ-OAR-2009-0491-3721.1_NODA, p.1]
Response:
EPA is not implementing auctions of allowances in the final Transport Rule FIPs. See section VII.D of the preamble in the FR for more about allowance allocations.
Organization: Dynegy, Inc.
Comment:
Dynegy, Inc.
Dynegy Supports EPA's Decision Not to Auction Allowances
Although Dynegy does not support the intrastate-only trading option, in the event that EPA promulgates a final rule based on this option, EPA should not enable or endorse government-run allowance auctions. Governmental auctioning of allowances would substantially increase the cost of the Transport Rule upon regulated entities, adding to viability concerns for many units and, thus, ultimately increasing costs to consumers and decreasing the reliability of electric supply. [EPA-HQ-OAR-2009-0491-2698.1,pp.8-9]
Response:
EPA is not implementing auctions of allowances in the final Transport Rule FIPs. See section VII.D of the preamble in the FR for more about allowance allocations.
Organization: Florida Electric Power Coordinating Group, Inc. (FCG)
Comment:
Florida Electric Power Coordinating Group, Inc. (FCG)
The FCG supports EPA's proposal not to permit government-run allowance auctioning. In addition, FCG urges EPA not to allow allowance auctioning under the intrastate trading remedy option. Governmental auctioning of allowances is contrary to the principle that regulated sources are permitted to emit up to their allowance allocation levels without any obligation to pay for the right to emit up to those levels, and any type of allowance auctioning would cause great uncertainty within FCG members' planning groups regarding their current financial obligations and financial forecasting procedures. [EPA-HQ-OAR-2009-0491-2658.1,p.12]
Response:
EPA is not implementing auctions of allowances in the final Transport Rule FIPs. See section VII.D of the preamble in the FR for more about allowance allocations.
Organization: Large Public Power Council (LPPC)
Comment:
Large Public Power Council (LPPC)
Second, LPPC is concerned that the Intrastate Trading option presumes auctions will be necessary in all states. LPPC believes allowances should be allocated directly to EGUs to the greatest extent possible in order to reduce cost impacts for consumers, and objects to the potential use of auctions to generate revenue for the U.S. Treasury. Moreover, LPPC is not convinced that EPA is in the best position to determine whether market power issues are present and must be remedied. If the Intrastate Trading option is adopted, LPPC suggests that a two-year trial period be established, during which time EPA can consult with the Federal Trade Commission to determine whether the emissions trading markets are functioning properly and whether any policy changes are warranted. LPPC notes that the federal government is already well-equipped to police markets for manipulation and other abusive practices if market power issues do arise during this trial period. [EPA-HQ-OAR-2009-0491-2667.1, p.19]
Response:
EPA is not implementing auctions of allowances in the final Transport Rule FIPs. See section VII.D of the preamble in the FR for more about allowance allocations.
Organization: Missouri Public Utilities Alliance (MPUA)
Comment:
Missouri Public Utilities Alliance (MPUA)
1. We join with APPA and other commentators in supporting the decision to avoid the unnecessary development costs and ongoing expense of operating an auction system for allocation of allowances.  There is no evidence that such an auction would increase compliance with the law, and in fact diverts limited resources from projects which will [sic] 6 month deadlines for compliance in a number of areas where it is impossible to secure the necessary engineering and manufacturing to fabricate the required units. [EPA-HQ-OAR-2009-0491-2785.1, pp.1-2]
Response:
EPA is not implementing auctions of allowances in the final Transport Rule FIPs. See section VII.D of the preamble in the FR for more about allowance allocations.
Organization: National Rural Electric Cooperative Association (NRECA)
Comment:
National Rural Electric Cooperative Association (NRECA)
Additionally, allowance auctions necessarily increase program costs while serving no environmental benefit. Moreover, depending on design, an auction can increase allowance price and allowance availability uncertainty. [EPA-HQ-OAR-2009-0491-2723.1, p.4]
NRECA commends EPA as well for proposing options that exclude auctions. [EPA-HQ-OAR-2009-0491-2723.1, p.4]
Response:
EPA is not implementing auctions of allowances in the final Transport Rule FIPs. See section VII.D of the preamble in the FR for more about allowance allocations.
Organization: San Miguel Electric Cooperative, Inc.
Comment:
San Miguel Electric Cooperative, Inc.
 The preferred remedy option allowing unlimited emissions trading during the initial 2012 compliance period and limited interstate trading in the second compliance period recognizes the economic benefits of trading and should be retained. The auctioning of allowances would drive up program compliance costs. Therefore, it is justifiably excluded from the preferred remedy and proposed intrastate option.   [EPA-HQ-OAR-2009-0491-2641.1, p.6][[This comment can also be found in Outline Heading V.D.2.b.ii.]]
Response:
EPA is not implementing auctions of allowances in the final Transport Rule FIPs. See section VII.D of the preamble in the FR for more about allowance allocations.
Organization: Southern Company
Comment:
Southern Company
In addition to the extraordinary administrative burden associated with allowance trading programs that may be required under this option, EPA proposes to run numerous auctions. Southern Company fundamentally disagrees that such auctions are necessary to avoid the exercise of market power.  [EPA-HQ-OAR-2009-0491-2864.1, p. 51]
If, however, EPA promulgates a final rule based on the Intrastate Trading Remedy Option, an option that Southern Company does not support, EPA should remove from that option the proposed provisions for allowance auctions. It is entirely possible to accomplish the objectives of those proposed auctions through distribution of allowances free of charge. [EPA-HQ-OAR-2009-0491-2864.1, p. 53]
Response:
EPA is not implementing auctions of allowances in the final Transport Rule FIPs. See section VII.D of the preamble in the FR for more about allowance allocations.
Organization: Utility Air Regulatory Group (UARG)
Comment:
Utility Air Regulatory Group (UARG)
EPA Should Not Establish Any Government-Run Allowance Auctions.
Although UARG does not support EPA's Intrastate Trading Remedy Option, if EPA promulgates a final rule based on this option, EPA should not provide for government-run allowance auctions. As noted above in section II.C, governmental auctioning of allowances is contrary to the principle that regulated sources are permitted to emit up to their allowance allocation levels without bearing any obligation to pay for the right to emit up to those levels. EPA explains in the Proposed Transport Rule that revenues from the allowance auctions described in the section on the Intrastate Trading Remedy Option would be deposited into the U.S. Treasury. 75 Fed. Reg. at 45327/2. The effect of such auctions, besides providing revenue to the federal government, would be to force affected sources to pay not only for emissions that exceed their emission allowance allocation limits (by purchasing allowances on the market) but also for the right to emit below those limits. No legal basis exists for charging sources for emissions below their allocation levels, and providing revenue to the U.S. Treasury is not a legitimate purpose of section 110(a)(2)(D)(i)(I) of the CAA. Moreover, as discussed above, EPA has not shown that any legal authority exists for EPA to auction allowances and thereby impose what amounts to a tax, with tax revenue flowing to the federal government. [EPA-HQ-OAR-2009-0491-2756.1, pp.95-96]
In short, EPA should not promulgate a rule based on the intrastate trading option, but if it does, it should remove government-run allowance auctions from the design of that option. Instead, to the extent EPA concludes it is necessary to make additional allowances available under that option to energy producers with limited market share, EPA should provide for adjustments in the distribution of allowance allocations but without auctioning the allowances. [EPA-HQ-OAR-2009-0491-2756.1,p.96]
Response:
EPA is not implementing auctions of allowances in the final Transport Rule FIPs. See section VII.D of the preamble in the FR for more about allowance allocations.

V.D.3.b. Other Comments on State Budgets/Intrastate Trading Remedy Option

Organization: Attorney General of North Carolina
Comment:
Attorney General of North Carolina
North Carolina submits that if EPA is not able to resolve these issues with the variability limits, then interstate trading cannot be permitted. Instead, in order to comply with Congress' clear mandate to "prohibit[] . . . emissions activity within the State" (emphasis added), as interpreted by the D.C. Circuit in North Carolina, EPA must implement a remedy that does not include interstate trading.
In that event, North Carolina would recommend EPA's "State Budgets/Intrastate Trading Remedy Option" [hereinafter "intrastate trading option"]. See 75 Fed. Reg. at 45,326/1. The intrastate trading option is consistent with North Carolina's successful Clean Smokestacks Act ("CSA"). The CSA caps coal-fired power plant SO2 and NOX emissions on a companywide basis within North Carolina for the two largest utilities. The NOX caps have been in place since 2007 and the SO2 limits began in 2009. N.C. Gen. Stat. §143-215.107D(b)-(g). The program has successfully reduced NOX and SO2 emissions with minimal agency oversight.
The CSA does not raise the problem of intercompany trading in a state-sized market. EPA discusses trading in more limited markets as a drawback of the intrastate trading option. 75 Fed. Reg. at 45,326/3-28/1. However, North Carolina submits that any difficulties raised by developing intrastate markets is outweighed by the need for expeditious implementation in compliance with the mandates of North Carolina. That is, considering the legally problematic nature of EPA's preferred option, EPA should pursue the remedy that has a greater chance of withstanding judicial scrutiny and delivering, in a certain and timely manner, the result required by North Carolina. EPA even concedes that "[o]f the three remedy options considered" the intrastate trading option "provides the most certainty regarding . . . emissions from each state. For this reason, it most directly addresses the statutory mandate that the emissions reductions occur `within the State.'" Id. at 45,328/2. Based on the current record, the intrastate trading option is more likely to provide downwind States with the relief that Congress required EPA to provide under the Clean Air Act.
Response:
EPA is finalizing the limited interstate trading remedy, not the alternative intrastate trading remedy.  The final remedy has been designed to ensure that all significant contribution and interference with maintenance from upwind states is eliminated in downwind states as required by CAA section (110)(a)(2)(D).  This comment from the North Carolina AG does acknowledge that market power problems may arise, which continues to be a concern for EPA.  In addition, EPA received a significant number of comments supporting the limited interstate trading remedy and opposing the intrastate trading remedy.  For more details on EPA's decision to finalize the limited interstate trading remedy, see section VII.A of the preamble.
Organization: Large Public Power Council (LPPC)
Comment:
Large Public Power Council (LPPC)
If EPA nonetheless reverses course and decides to propose one of these alternative remedies, LPPC urges EPA to consider modifying the options in the following ways. First, LPPC believes that the Intrastate Trading option must make accommodation for natural year-to-year variability in emissions. As EPA argues at several points in the preamble, allowing for variability is consistent with the mandate of Section 110 so long as the underlying state budgets ensure the elimination of significant contributions to downwind air quality problems. Moreover, variability limits are essential to ensuring reliability of electric service and coping with external shocks to electricity demand and emission rates. EPA should therefore ensure that state emission budgets established under the Intrastate Trading option include variability limits. [EPA-HQ-OAR-2009-0491-2667.1, pp.18-19]
Response:
EPA is not finalizing the State Budgets/ Intrastate Trading remedy option in the Transport Rule.  See section VII of the preamble for more details on the final remedy and EPA's reasons for its decision to implement limited interstate trading.

V.D.4. Direct Control Remedy Option

Organization: Public Interest Law Center of Philadelphia
Ailey, John
Comment:
Ailey, John
[These comments were submitted as testimony at the Chicago, Illinois public hearing on August 19, 2010.  See Docket Number EPA-HQ-OAR-0491-1746, pp.50-52]
The second point that I would like to emphasize is looking at your alternatives for enforcing this, to me it appears that the second alternative that you are proposing would be the best one in terms of the environmental justice standpoint.
Part of the issue is that in particular we are very familiar with these two plants. There's a huge population density in the surrounding area. It's also a relatively low income area.
If plants are allowed to trade, we're afraid that what's going to happen is that these two plants, which are relatively expensive to retrofit, and relatively small, the companies will avoid or postpone the retrofits that are needed and that our communities will continue to suffer the bad effect from these plants.
And so, therefore, we feel that a fair approach, better approach would be to look at what is the population density around the various plants, try to set limits prioritizing, shall I say, those plants that are closest to large population densities. I feel that would be a fair way to do it.
I support that second alternative. I think that would be the fairest way of determining environmental justice to implement the Rule.
Public Interest Law Center of Philadelphia
II. The EPA's Direct Control Approach to Implementation Would Provide the Greatest Amount of Protection to EJ Communities.
The EPA's "direct control" approach would require setting strict guidelines that, in addition to setting an overall emissions cap for every state, would also create an individual emissions cap for each pollution source or power plant. The current structure of this option would still allow for limited, company-level emissions averaging within each state. This direct control alternative would provide the greatest amount of protection to EJ communities by ensuring that the pollution cap at each and every power plant is lowered. Under either of the other two approaches, there is the chance that localized pollution could increase as a result of intrastate and interstate trading of emissions allowances. By capping the maximum amount of emissions to be produced by any individual plant, the EPA can at least ensure that power plants located in close proximity to EJ communities do not acquire additional allowances under the trade system, which allow them to produce emissions at a higher level than under current regulations. [EPA-HQ-OAR-2009-0491-2817.1, pp.3-4]
The EPA has stated that this approach is unattractive because it is both expensive and difficult to handle from an administrative standpoint. The additional cost of implementing the direct control approach rather than the preferred approach is estimated at $600 million dollars, approximately a 36% increase over the estimated $2.2 billion dollar implementation cost for the preferred approach. However, that additional cost would represent a mere 0.002% of the total projected benefits of the Transport Rule, which the EPA has suggested could be upwards of $290 billion. Obviously the cost of implementing this approach is slightly higher than the cost of either of the other two approaches. However, if the EPA estimations of the projected economic benefit are correct, the additional expense of the tighter regulations set forth in the direct control approach offers an unpersuasive argument for settling for an approach with allowance trading provisions that could very easily create significant disparate impacts for EJ communities. [EPA-HQ-OAR-2009-0491-2817.1, p.4]
Equally uncompelling is the EPA's concern that implementing the direct control approach would be too difficult. While a direct control approach would clearly require more administrative oversight, these administrative "headaches" are no less warranted than the physical manifestations, or "disbenefits", that would be suffered by EJ communities who would have to endure increased localized pollution as a result of locally unfavorable emissions trading under either the preferred option or the more limited intrastate trading option. [EPA-HQ-OAR-2009-0491-2817.1, p.4]
We believe that the best implementation approach the EPA has presented would be the second alternative, or direct control option. The direct control approach provides the most protection to EJ communities by eliminating the allowance trading that could potentially impose disparate health impacts at a local level in the communities that can least endure them, even while emission caps are met at the state level. While we would support the removal of allowance trading all together, we believe that the Transport Rule can be highly effective with allowance trading if proper protections are afforded to EJ communities. Specifically, we suggest the implementation of additional rules aimed at regulation and monitoring of any allowance trading which sends emissions allowances to coal-fired power plants located in close proximity to EJ communities. [EPA-HQ-OAR-2009-0491-2817.1, pp.5-6]
[These comments were submitted as testimony at the Philadelphia, Pennsylvania public hearing on August 26, 2010.  See Docket Number EPA-HQ-OAR-0491-1938, p.125.]
Even under the second alternative, which would set emissions limits for each power plant individually, company-level averaging for sites within a given state would be permitted.
Response:
EPA decided to finalize the air quality-assured trading programs instead of the direct control option, for the reasons presented in section VII.A of the preamble.  EPA has conducted an analysis of the effects of the Transport Rule on environmental justice and other vulnerable communities, as discussed in sections VII.A and XII of the preamble and Chapter 5 of the Regulatory Impact Analysis (RIA) for this rule.
Organization: State of Delaware Department of Natural Resources & Environmental Control
Adirondack Mountain Club
Peoria Families Against Toxic Waste
New Jersey Department of Environmental Protection (NJDEP)
Comment:
Adirondack Mountain Club
The Clean Air Transport Rule (CATR) suggests three alternatives for states to obtain emissions reductions. Each alternative requires States to create an individual state budget of emissions. ADK supports EPA's second alternative to allow plants to participate in trading emissions allowances while setting a pollution limit for each state and specifying the allowable emission limit for each power plant and allow some averaging. Under the cap and trade system, a region encompassing 31 states plus the District of Columbia would reduce emissions by 6.3 million annual tons for SO2 and 1.4 million annual tons for NOx by 2014. [EPA-HQ-OAR-2009-0491-2761, p.2]
New Jersey Department of Environmental Protection (NJDEP)
[These comments were submitted as testimony at the Philadelphia, Pennsylvania public hearing on August 26, 2010.  See Docket Number EPA-HQ-OAR-2009-0491-1938, p.160.]
Although the USEPA offered a direct control alternative in the Transport Rule, it allows for annual averaging, which also will not solve the peak ozone day problem.
Peoria Families Against Toxic Waste
[These comments were submitted as testimony at the Chicago, Illinois public hearing on August 19, 2010.  See Docket Number EPA-HQ-OAR-0491-1746, p.111.]
Your second alternative which sets a pollution limit for each state and specifies limits for each power plant I believe is the way to go, and I say that -- I live in Illinois, and I know that if there's a way to wheel and deal and put something off, it will happen in Illinois, and we'll be here 5 years from now, and Illinois won't be any further along, so I encourage that you do the strictest possible way to -- so that everybody knows what's happening in the state, what's going to happen for each power plant, not only in Illinois but all around us, because the other part of my thinking is that -- and I believe Mr. Aburano was gracious to be at an ozone forum in Peoria.
State of Delaware Department of Natural Resources & Environmental Control
Delaware generally agrees with the concept presented for EPA's second alternative to the proposed program that includes establishing unit-by-unit performance standards/emission rates along with an overlaying cap-and-trade program, but recommends EPA consider some revisions to the process presented by the EPA for that second alternative. EPA-HQ-OAR-2009-0491-2980.1, p.4]
The second recommendation is that EPA reconsiders the use of averaging the emission rate of all of a single company's EGUs in a given state as a compliance alternative. While Delaware agrees that this concept has merit in providing a company flexibility in control installation planning and compliance strategy, Delaware also believes that this flexibility could result in a number of smaller and/or low capacity factors to continue operation with little or no controls. The existence of such units contributes to transport issues and compliance with short term NAAQS. If EPA retains the concept of permitting same- company averaging for compliance, Delaware recommends that EPA consider doing so for only a small number of compliance periods to provide some initial flexibility for control installation planning until transitioning to a true unit-specific compliance requirement. [EPA-HQ-OAR-2009-0491-2980.1, p.5]
Response:
EPA decided to finalize the air quality-assured trading programs instead of the direct control option, for the reasons presented in section VII.A of the preamble.
Organization: United States Clean Heat & Power Association (USCHPA)
Comment:
United States Clean Heat & Power Association (USCHPA)
First, and most important, EPA should adopt output-based emissions standards in the Federal Plan. Rather than base pollution limits on the amount of fuel consumed, standards based on each unit of electricity (and thermal energy) produced would encourage efficiency and allow the EPA to calculate compliance based on efficiency and not on fuel consumed. As a result, pollution would be prevented and emissions reduced. [EPA-HQ-OAR-2009-0491-2823.1, p. 2]
Response:
EPA believes that this comment may be about the alternative direct control remedy option on which we took comment in the proposal (although this comment is not clear) because the Transport Rule limited interstate trading programs do not include emissions standards.  EPA's response to this comment is based on that assumption.  EPA decided to finalize the limited interstate trading option instead of the direct control option, for the reasons presented in section VII.A of the preamble to the final Transport Rule.  In addition, as presented in preamble section VII.D, EPA is not allocating emission allowances to existing units using an output-based approach in the Transport Rule FIPs, because the Agency does not have access to unit-level output data that is as quality-assured or comprehensive as its data sets on heat input across the units considered.
Organization: Utility Air Regulatory Group (UARG)
Southern Company
Clean Energy Group
Tennessee Department of Environment and Conservation, Division of Air Pollution Control
Florida Electric Power Coordinating Group, Inc. (FCG)
GE Energy Financial Services (GE EFS)
Michigan Department of Natural Resources and Environment
Owensboro Municipal Utilities (OMU)
National Mining Association (NMA)
Michigan Municipal Electric Association (MMEA)
New York University School of Law, Institute for Policy Integrity
Comment:
Clean Energy Group
The Clean Energy Group Does Not Support Alternative 1 or Alternative 2
The first alternative approach proposed in the Transport Rule would use state-specific control budgets and allow intrastate trading of emissions allowances allocated to EGUs, but it would not allow interstate trading. The second alternative would be a direct control program and also would prohibit trading. Both options would be inefficient, more costly, and would unnecessarily limit the flexibility of interstate trading available under the preferred option. The preferred approach is structured to allow maximum trading while also addressing the court's concerns. We would strongly oppose any alternative that does not include an interstate trading component. [EPA-HQ-OAR-2009-0491-2702.1, p. 10] [This comment can also be found at Section V.D.3 of this comment summary.]
Florida Electric Power Coordinating Group, Inc. (FCG)
Regarding the direct control option, the FCG agrees with EPA that it is inferior to the limited interstate trading option. EPA states in the proposed rule that for the direct control approach fewer emissions reductions were projected through modeling and those reductions would be more costly than under the preferred method. According to the proposed rule, this option would provide less flexibility to ensure electric reliability than the preferred option, and according to the Regulatory Impact Analysis this option would result in greater private costs to the power sector and greater social costs for consumers than the preferred option. EPA notes in the proposed rule that without a price on NOx and S02 emissions there is no incentive to reduce emissions, and as a result 'the direct control program provides less certainty regarding the location of emissions in the short term.' In addition to the economic concerns, EPA does not appear to have the legal authority to set direct control limits under Section 110(a)(2)(d)(i)(I). Due to the increased cost and uncertainty and to the decreased flexibility and clear legality, the FCG supports the preferred remedy over the Direct Control method. [EPA-HQ-OAR-2009-0491-2658.1,p.12]
GE Energy Financial Services (GE EFS)
GE EFS does not support EPA's proposed alternative of implementing a direct control program without any emissions trading. [EPA-HQ-OAR-2009-0491-2701.1, p.5]
Michigan Department of Natural Resources and Environment
The third compliance option would use state-specific budgets and emissions rate limits. The DNRE disagrees with this alternative due to the loss of any allowance trading within the program. There is also the potential for electricity market unreliability as sources, out of concerns for enforcement, may cease operations of specific units when approaching their emission rate limitations during high electricity demand periods. [EPA-HQ-OAR-2009-0491-2774.1 p.6]
Michigan Municipal Electric Association (MMEA)
9.) The Direct Control Remedy Would Be Particularly Harmful to Michigan Public Power
MMEA and its members strongly discourage EPA from adopting a direct control remedy, because the application of emission rates to small municipal units will cause drastic, disproportionate impacts on power plants that have major diseconomies of scale in pollution control. Engineering studies conducted by each one of the entities represented here show NOx control costs exceeding an average of $7,500 per ton of NOx removed for the control technologies that would be forced by the unit-specific FIP allocations proposed in this Transport rule. The systems in Holland and Marquette project NOx control costs for ozone season requirements exceeding $20,000 per ton of NOx removed. Given the diseconomies of scale and relatively insignificant contribution of small, municipal utility units to interstate transport, and the critical role of these units to public power communities, costs of this magnitude under a direct control remedy would simply be unbearable. [EPA-HQ-OAR-2009-0491-2828.1, pp.15-16]
9.) Do not adopt a direct control remedy for air pollution control, which would be particularly harmful to small public power communities. [EPA-HQ-OAR-2009-0491-2828.1, p.16]
National Mining Association (NMA)
The Direct Control Remedy Option Also Usurps State Authority
EPA requests comments on the option of EPA imposing a Direct Control Remedy on individual units by assigning them emission rates. As discussed, however, EPA does not have authority to bypass SIPs and impose specific requirements on individual units. In remedying significant contributions by states to downwind attainment under section 110, EPA may impose emission reduction obligations on states -- but not on individual units. [EPA-HQ-OAR-2009-0491-2868.1,p.18]
New York University School of Law, Institute for Policy Integrity
While on the surface EPA's second alternative approach may be easier to understand and to comply with, it would lead to fewer emissions reductions and a higher cost. EPA acknowledges serious concerns about the inflexibility and lack of cost-effectiveness of this approach, as compared to an approach that permits trading. [EPA-HQ-OAR-2009-0491-2691.1, p.6]
Owensboro Municipal Utilities (OMU)
OMU also does not support EPA's second alternative that takes a command and control approach to reduce emissions. This alternative is even more restrictive because it further reduces compliance flexibility and would increase compliance costs significantly. [EPA-HQ-OAR-2009-0491-2811.1,p.1]
Southern Company
XIV. EPA Should Adopt an Interstate Trading Program and Abandon the Alternatives Offered for Comment
EPA's proposed limited interstate trading option provides a limited amount of flexibility and allows more cost-effective compliance options. EPA has historically allowed interstate trading in transport rules and should do so in this case. The intrastate trading option (Alternative 1) is completely unworkable and cumbersome. And EPA has no authority for the direct control option (Alternative 2), which provides for little to no flexibility. As stated, Southern Company strongly supports a flexible interstate trading program. Although EPA's interstate trading option is preferable to either of the two proposed alternatives, as explained in Section V, EPA should evaluate whether less stringent limits on trading can be adopted without compromising the anticipated air quality benefits of the Transport Rule. [EPA-HQ-OAR-2009-0491-2864.1, p. 50] This comment can also be found at section V.D.1, V.D.2. and V.D.3 of this comment summary.]
B. EPA Cannot and Should Not Adopt the Direct Control Alternative
Under this alternative for addressing interstate transport, EPA would simply mandate unit-specific emission limits for the units in the affected states. 52 However, it is well-established that under Section 110 of the Act Congress reserved for the states the authority to decide which sources to control and to what extent. 53 Even if EPA had authority to mandate unit-specific limits under Section 110 of the Act, unit-specific reductions could not be achieved within the timeframes provided by the rule for the many reasons outlined in Sections VI and VII above. Furthermore, EPA's Regulatory Impact Analysis confirms that the cost of any reductions that could be achieved would be significantly higher than EPA's preferred limited trading option. These are costs that in most instances would be borne by our customers at a time when they can least afford it - just as they are trying to recover from the worst recession in our nation's history. For all of these reasons, Southern Company urges EPA to reject the direct control alternative. [EPA-HQ-OAR-2009-0491-2864.1, p. 51]
Tennessee Department of Environment and Conservation, Division of Air Pollution Control
Comment on Direct Control Option: We agree with EPA that limited interstate trading is preferable to the direct control option for the reasons stated in the proposed rule.  [EPA-HQ-OAR-2009-0491-0553.1,p.5]
Utility Air Regulatory Group (UARG)
With respect to EPA's Direct Control Remedy Option, the second alternative option on which EPA requests comment in the Proposed Transport Rule, EPA explains that it would regulate individual units directly by assigning emission rate limits to individual units. 75 Fed. Reg. at 45330/1. As discussed above, EPA is without authority to dictate how a state implements section 110(a)(2)(D)(i)(I). As LADCO aptly observed in 2009 in its recommendations to EPA, "unit-specific performance standards go beyond the requirements of section 110 [of the Act] and the scope of the CAIR replacement rule." LADCO Letter, attachment at 5. Indeed, all such matters are reserved to the states in the first instance. See, e.g., Michigan, 213 F.3d at 686 ("section 110 left to the states `the power to [initially] determine which sources would be burdened by regulation and to what extent.'") (quoting Union Elec. Co. v. EPA, 427 U.S. 246, 269 (1976)) (alteration and emphases in original); Virginia, 108 F.3d at 1408 (same). Consistent with those cases, EPA at most can determine what overall emission tonnage level a state must achieve; it may not impose any unit-specific rules or requirements. [EPA-HQ-OAR-2009-0491-2756.1, p.32]
Response:
EPA decided to finalize the air quality-assured trading programs instead of the direct control option, although we continue to believe that we have authority to impose a direct control remedy.

V.D.4.a. Emission Rate Limits - Data and Methodology

Organization: American Public Power Association (APPA)
Comment:
American Public Power Association (APPA)
With respect to EPA`s Direct Control Remedy Option, the second alternative option on which EPA requests comment in the Proposed Transport Rule, EPA explains that it would regulate individual units directly by assigning emission rate limits to individual units. 75 Fed. Reg. at 45330/1. As discussed above, EPA is without authority to dictate how a state implements section 110(a)(2)(D)(i)(I). As LADCO aptly observed in 2009 in its recommendations to EPA, "unit-specific performance standards go beyond the requirements of section 110 [of the Act] and the scope of the CAIR replacement rule." LADCO Letter, attachment at 5. Indeed, all such matters are reserved to the states in the first instance. See, e.g., Michigan, 213 F.3d at 686 ("section 110 left to the states `the power to [initially] determine which sources would be burdened by regulations and to what extent.'") (quoting Union Elec. Co. v. EPA, 427 U.S. 246, 269 (1976)) (alteration and emphases in original); Virginia, 108 F.3d at 1408 (same). Consistent with those cases, EPA at most can determine what overall emission level a state must achieve; it may not impose any unit-specific rules or requirements. [EPA-HQ-OAR-2009-0491-2812.1, pp.28-29]
Response:
As discussed in section VII.A of the preamble, EPA is not finalizing the Direct Control Remedy Option.
Organization: Lafayette Utilities System
Comment:
Lafayette Utilities System
Under the Direct Control Alternative, EPA projects that the ozone season NOx rates for Louis Doc Bonin Unit 3, T J Labbe' Unit 1 and Unit 2 and Hargis-Hebert Unit 1 and Unit 2 are significantly higher than actual reported emission rates. However, the emission rates, as distinguished from the mass emissions, should not change from annual to ozone season. [EPA-HQ-OAR-2009-0491-2983.1,p.13]
Response:
As discussed in section VII.A of the preamble, EPA is not finalizing the Direct Control Remedy Option.
Organization: State of Delaware Department of Natural Resources & Environmental Control
Comment:
State of Delaware Department of Natural Resources & Environmental Control