The CAIR SIP revision codified at 40 CFR 52.2020 established a federally enforceable CAIR annual NOx budget of 99,049 tons. However, under the proposed Transport Rule, the annual NOx budget for Pennsylvania is increased to 113,903 tons prior to variability. By 2014, DEP projects that the TR would allow up to a 4.2% increase in annual NOx emissions in the Commonwealth and as much as a 20% increase in ozone season NOx emissions from 2009 levels, depending on the remedy option promulgated in the final rule. It is imperative that the final rule establish more stringent NOx emission budgets to address transported pollution from upwind sources; otherwise, Pennsylvania and downwind areas would have to find other emission reductions to replace those lost due to EPA's lack of stringency. Additionally, Pennsylvania has recorded 28 exceedances of the 1997 ozone standard and 145 exceedances of the 2008 ozone NAAQS during the 2010 ozone season. The fact that ozone season actual reductions under CAIR Phase I and the proposed Transport Rule would be similar is further indication that a tighter ozone season NOx budget must be established to comply with Title I of the CAA. [EPA-HQ-OAR-2009-0491-2660.1, p.5]
Similarly, more stringent SO2 emission budgets must be established in the final Transport Rule. Pennsylvania's SIP-approved CAIR 2010 SO2 budget is 275,990 tons, whereas under the proposed rule, the 2012 SO2 budget for EGUs in the Commonwealth is increased to 388,612 tons. The SIP-approved CAIR annual 2015 SO2 budget for EGUs in Pennsylvania is 193,193 tons, whereas under the proposed Transport Rule, the annual 2014 SO2 budget is 141,693. [EPA-HQ-OAR-2009-0491-2660.1, pp.5-6]
The DEP is relying on the NOx and SO2 emission reductions achieved under the CAIR in Pennsylvania and other upwind states to support attainment demonstrations for the 1997 ozone and PM2.5 health-based standards. Therefore, the final Transport Rule must not violate the 'anti-backsliding' provisions in Sections 110 and 193 of the CAA, 42 D.S.C. §§ 7416 and 7515. Failure to address backsliding would require states with relaxed NOx and SO2 emissions budgets under the TR to insure 'equivalent or greater emission reductions of such air pollutant.' 42 U.S.C. § 7515. [EPA-HQ-OAR-2009-0491-2660.1, p.6]
The DEP urges EPA to establish stringent state-specific NOx and SO2 emissions budgets in the final Transport Rule that are at least equivalent to or greater than the SIP-approved CAIR budgets. EGU owners and operators must not be allowed to backslide on the NOx and SO2 emission reductions achieved in this Commonwealth and upwind areas. [EPA-HQ-OAR-2009-0491-2660.1, p.6]
[These comments were also submitted as testimony at the Philadelphia, Pennsylvania public hearing on August 26, 2010.  See Docket Number EPA-HQ-OAR-0491-1938, p.52.]

South Carolina Department of Health and Environmental Control
DHEC notes that the proposed Transport Rule SO2 budget for South Carolina is greater than its SO2 budgets under CAIR and the Acid Rain Program. The proposed Transport Rule SO2 budget is 116,483 tons per year,43 while under CAIR the SO2 budget was 57,271 tons per year,44 and, under the Acid Rain Program, the SO2 budget was 111,342 tons per year.45 This 103% increase from CAIR in possible SO2 emissions is troubling, especially given the recently lowered SO2 NAAQS and the imminent review of the PM2.5 NAAQS. The proposed Transport Rule divides states controlled for PM2.5 into two groups, Group 1 and Group 2. Group 1 requires SO2 reductions in 2012 and 2014, and Group 2 requires SO2 reductions in 2012 only. Only two other Group 2 states, Louisiana and Alabama, experienced an increase in their SO2 budgets from CAIR to the Transport Rule. Louisiana's increase was only 51%, and Alabama's increase was only 2.6%. [EPA-HQ-OAR-2009-0491-2677.1 p.18]
DHEC understands that the proposed Transport Rule is designed to address downwind nonattainment and maintenance, not local air quality, as required by section 110(a)(2)(D)(i)(I).46 DHEC also acknowledges that the budgeting process considered downwind nonattainment and interference with maintenance. South Carolina's Transport Rule SO2 budget is the amount of SO2 that sources within the state can emit without significantly contributing to nonattainment or interfering with maintenance downwind.47 DHEC further understands that the Transport Rule budget is a firm cap, unlike the CAIR budgets, which states could exceed.48 CAIR sources within a state could emit more than a state's budget by purchasing allowances from sources inother states. Even in light of these acknowledgements, DHEC is concerned that sources within South Carolina subject to the Transport Rule would be given an increase in their allowableemissions cap under the Transport Rule. [EPA-HQ-OAR-2009-0491-2677.1 p.18]
DHEC could not find evidence in the modeling Technical Support Documents that the EPA accounted for the result of the economic incentive of a larger budget on future emissions. In the Budgets and Allocations Spreadsheet, DHEC notes that the EPA predicts SO2 emissions decreases for South Carolina sources.49 Without accounting for the incentive that a greater budget provides, this projection would be specious. [EPA-HQ-OAR-2009-0491-2677.1 p.19]
As noted above, the EPA states in the proposed Transport Rule that the Transport Rule is only designed to meet the requirements of section 110(a)(2)(D)(i)(I). That section of the Act, the EPA notes, "does not grant EPA authority to require emissions reductions solely because they provide large health and environmental benefits...."50 DHEC agrees with this reading of the section 110(a)(2)(D)(i)(I), but DHEC contends that in section 110(c)(1) of the CAA, the basis of the EPA's authority for the FIP,51 Congress did not intend for the EPA to enact programs that increase emissions locally, even if those programs reduce interstate transport. [EPA-HQ-OAR-2009-0491-2677.1 p.19]
DHEC further contends that an emissions increase resulting from the Transport Rule is not in line with the spirit of the anti-backsliding provisions of the CAA (sections 172(e) and 193). These provisions do not specifically address the current situation: The EPA is proposing a FIP based on section 110(c)(1) that could lead to emissions increases in a state which would likely contribute to nonattainment with a NAAQS. To be clear, DHEC is not arguing that the proposed  Transport Rule violates CAA sections 172(e) and 193. We are simply submitting our concern with the increased budget, and requesting clarification for how the EPA accounted for the impact of increased SO2 allowances available to South Carolina electricity-generating units under the proposed Transport Rule on SO2 emissions in South Carolina. [EPA-HQ-OAR-2009-0491-2677.1 p.19]
DHEC is also concerned that the anomaly of the 103% increase in the Transport Rule SO2 budget is further evidence of a flawed modeling process. More than 57,271 tons of SO2 per year from South Carolina under the CAIR would significantly contribute to downwind nonattainment, yet under the purportedly more stringent Transport Rule, South Carolina's sources can emit more than twice that amount without significantly contributing to nonattainment or interference with maintenance. Additionally, if the EPA were to include the FGD units on Santee Cooper's Cross Units 1, 2, and 3 in the IPM assumptions, then South Carolina's modeled SO2 emissions would be thousands of tons lower. We do not understand how the EPA can conclude in the CAIR that South Carolina sources could only emit 57,271 tons of SO2 per year, yet in the Transport Rule, even with the missing controls and over-estimated emissions, the EPA is proposing to allow South Carolina sources to emit 116,483 tons of SO2 per year. The intent of the Transport Rule is to correct the deficiencies in the CAIR. DHEC assumed that the Transport Rule was going to be more stringent than CAIR, and we note that such unexpected budgets call into question the fundamental assumptions of the modeling. [EPA-HQ-OAR-2009-0491-2677.1 p.20]
[These comments were submitted as testimony at the Atlanta, Georgia public hearing on September 1, 2010.  See Docket Number EPA-HQ-OAR-0491-1939, p.86.]
For example, there is a proposed 103 percent increase in South Carolina's SO2 budget from the CAIR to the Transport Rule. Under the CAIR, South Carolina sources were allowed a budget of 57,271 tons of SO2 per year. However, in the proposed Transport Rule, South Carolina sources would be given a budget of 111,342 tons of SO2 per year.
Response:
See Section VI.D of the Preamble for additional discussion on concerns over backsliding.
Some commenters expressed concern that, under the proposed Transport Rule, states had some state budgets that were higher than those under CAIR.  Commenters suggested that this would be inconsistent with requirements or spirit of certain CAA provisions aimed at preventing backsliding, i.e., sections 110(l), 172(e), and 193.   However, the D.C. Court of Appeals rejected the state budgets in CAIR as arbitrary and capricious and not consistent with CAA section 110(a)(2)D)(i)(I)  ( North Carolina, (531 F.3d  918 and 921) and remanded CAIR to EPA to promulgate a new rule replacing CAIR and consistent with the Court's decision ( North Carolina, 550 F.3d 1178 ).  As discussed elsewhere in this section, on remand EPA developed new, final state budgets that address the Court's concerns and meet section 110(a)(2)(D)(i)(I) requirements.   Although, for some states, some state budgets under the final rule are higher than those under CAIR, this does not violate either the letter nor the spirit of CAA provisions aimed at backsliding.   In particular, CAA section 110(l) provides that the Administrator may not approve  a plan revision  that would "interfere with any...applicable requirement" of the CAA.  42 U.S.C. 7410(l).   Because the Court reversed and remanded CAIR with instructions to "remedy" the rule's  "fundamental flaws"  (including specifically the state budgets found to be unlawful (North Carolina, (550 F.3d 1178 )), it is difficult to see how new state budgets replacing unlawful budgets and meeting section 110(a)(2)(D)(i)(I) requirements could be viewed as interfering with requirements of the CAA.   Indeed, the commenters' approach would severely limit  EPA's ability to meet the Court's mandate to develop a new rule consistent with section 110(a)(2)(D)(i)(I).  See North Carolina, 531 F.3d 921 (explaining that EPA may not require  "some states to exceed the mark" of eliminating their significant contribution).  Further, the other CAA sections cited by the commenters (section 172(e), addressing circumstances where the Administrator relaxes a NAAQS,  and section 193, addressing the treatment of requirements promulgated before the November 15, 1990, enactment date for the 1990 Amendments to the Clean Air Act) are not applicable here.
Organization: Sierra Club, Georgia Chapter
Comment:
Sierra Club, Georgia Chapter
[These comments were submitted as testimony at the Atlanta, Georgia public hearing on September 1, 2010.  See Docket Number EPA-HQ-OAR-0491-1939, pp.97-98.]
Whereas CAIR would have given Georgia an SO2 budget of 213,000 tons per year, the revised Transport Rule gives Georgia a bigger budget of 233,000 tons in 2012.
The construction schedules for the sulfer dioxide controls at Georgia power plants can achieve bigger reduction than the Transport Rule will require. We also need controls as fast as possible from our neighboring states, in particular Alabama and Tennessee.
Response:
In the final Transport Rule, EPA accounts for emission reductions already occurring in the baseline (for example, due to Georgia's state rule) when setting emission budgets under the Transport Rule programs in 2012 and 2014.  In this manner, Georgia's 2014 SO2 budget accurately reflects the emission remaining after the identified cost-effective emission reductions have been made and all other legally binding emission requirements are in place.  Please see section VI.D in the preamble for more detail on this methodology.
Organization: Southern Alliance for Clean Energy
Comment:
Southern Alliance for Clean Energy
[These comments were submitted as testimony at the Atlanta, Georgia public hearing on September 1, 2010.  See Docket Number EPA-HQ-OAR-0491-1939, pp.38-39.]
While we're pleased to see that EPA has set strong and rigorously modeled budgets for upwind states, we are concerned about the confusing nature of group-one classification as it applies to the Tennessee Valley Authority.
EPA explains that certain states are categorized as group-one states and are tasked with sulfer dioxide reductions in 2012 and again in 2014. Tennessee is a group-one state and yet Tennessee's sulfer dioxide budget is 100,007 tons in 2012 and in 2014. In other words, it appears that Tennessee is not required to further reduce its sulfer dioxide emissions as other group-one states will be required to do.
We, therefore, ask that you please clarify why Tennessee as a group-one state has only one sulfer reduction goal set for 2012 and ask that you consider setting a more stringent budget for 2014.
Response:
In the final Transport Rule, the 2014 budget for Tennessee is tighter than its 2012 budget.  The budget formation process is described in Section VI.D of the preamble and in the "Significant Contribution and State Emissions Budgets for the Final Transport Rule TSD"
Organization: State of Connecticut
Comment:
State of Connecticut
Connecticut also generally supports the proposed sulfur dioxide emissions caps as they will lead to significant reductions in fine particulate matter throughout the eastern United States. However, EPA must improve the Transport Rule with respect to ozone in order to fully meet its responsibilities with respect to air pollution transport. [EPA-HQ-OAR-2009-0491-2534.1, pp. 1-2]
Response:
See Sections III and VI of the final Transport Rule preamble for discussion of ozone season NOx budgets and elimination of significant contribution.
Organization: State of Ohio Environmental Protection Agency (Ohio EPA)
Comment:
State of Ohio Environmental Protection Agency (Ohio EPA)
Ohio EPA believes the overall state NOx budgets are achievable. However, U.S. EPA must provide sufficient time for all units to meet the implementation deadline for their specific allocations and ensure that the allocations are determined in a fair and accurate manner. [EPA-HQ-OAR-2009-0491-2793.2, p. ]
The CAIR NOx budget for Ohio was 45,664 tons during the ozone season of 2009, dropping to 39,945 tons in 2015. The Proposed Transport Rule proposes a budget of 40,661 tons in 2012. In contrast, Ohio utilities emitted 36,076 tons in 2009 (due in part to a relatively cool summer and low demand). In short, the 2009 NOx emissions from Ohio utilities were less than the proposed 2012 NOx emissions budget. Although Ohio believes the overall state budget is achievable, there are inconsistent calculation methods and/or erroneous data that was used to establish the unit level allocations, which must be corrected before finalizing unit level allocations. [EPA-HQ-OAR-2009-0491-2793.2, p. 9]
Response:
EPA has corrected unit level data based on comments (See Documentation Supplement for EPA Base Case v.4.10_FTransport - Updates for Final Transport Rule).  Furthermore, EPA has finalized an allocation methodology that relies on historic data, rather than projected data, to determine existing unit allocations under the Transport Rule FIPs.  The historic data is primarily based on reported data, which the sources' designated representatives have testified to its accuracy and completeness.
Organization: Tennessee Department of Environment and Conservation, Division of Air Pollution Control
Comment:
Tennessee Department of Environment and Conservation, Division of Air Pollution Control
Comment #1 on Emissions Budgets: As noted above (Comment #2 on 2012 Baseline Emissions for Tennessee) EPA appears to have made certain assumptions for Tennessee based on the U. S. District Court decision in North Carolina vs. TVA. Specifically, we note that the 2012 SO2 and NOX budgets assume add-on controls at John Sevier fossil plants (control assumptions for John Sevier can be found in the parsed file for the 2012 IPM run). EPA should revise these assumptions, since the district court's decision was overturned by the court of appeals. [EPA-HQ-OAR-2009-0491-0553.1,p.4]
Comment #2 on Emissions Budgets: For both SO2 and NOX, EPA's technical support documents indicate that the 2012 budgets are the lower of the recent actual emissions or projected emissions at the state level. For NOX, EPA also notes that 2009 emissions were adjusted as necessary to account for low utilization during that year. EPA needs to make similar adjustments for SO2 if low utilization was not taken into consideration. [EPA-HQ-OAR-2009-0491-0553.1,p.4]
Response:
In regards to comment #1: that modeling assumptions for the final rule did not include any constraints from the settlement that was overturned in that court case.
In regards to comment #2: In the final Transport Rule, EPA does not use historic emissions data to set the Transport Rule state budgets, but instead relies on projected emissions data under the marginal cost thresholds selected to define significant contribution and interference with maintenance.
Organization: Utility Air Regulatory Group (UARG)
Comment:
Utility Air Regulatory Group (UARG)
EPA Has Failed To Explain Why It Did Not Use 2008 Heat Input Data in Calculating SO2 Emission Budgets.
EPA proposes to set state emission budgets for annual and ozone season NOx and for SO2 based on the quantity of emissions that remain after elimination of significant contribution to nonattainment and interference with maintenance, but before accounting for variability. 75 Fed. Reg. at 45290/2. In its TSD addressing state budgets, EPA explains that it calculated 2012 state budgets using a combination of emissions and heat input data reported to EPA as of 2009 and IPM projections for 2012, each adjusted to reflect emissions control equipment projected by EPA to be in place by 2012. See State Budgets TSD at 3, 5.  [EPA-HQ-OAR-2009-0491-2756.1, p.78]
In that TSD, EPA notes that in creating the state budgets for annual and ozone season NOx, it "rebased" annual and ozone season NOx emissions for units reporting emission data to EPA by using 2008 rather than 2009 heat input. Id. at 9. According to EPA, this adjustment was made "to account for unusually low utilization [or heat input] in 2009." Id. During a conference call on August 30, 2010, however, EPA staff offered UARG members a different explanation for this adjustment. EPA staff indicated that the reason EPA used 2008 data was that the IPM projection of how sources would operate their NOx controls in 2012 did not align well with the 2009 data but aligned more closely with the 2008 data. [EPA-HQ-OAR-2009-0491-2756.1, p.79]
Whatever the reason or reasons EPA used 2008 instead of 2009 heat input data for NOx, EPA did not make a similar adjustment for unit-reported SO2 emissions. EPA does not provide any explanation for this differential treatment of the issue as between the two pollutants. EPA does, however, state repeatedly in the preamble that it developed the state budgets based on projected emissions "in an average year." See, e.g., 75 Fed. Reg. at 45214/2 ("A state's emissions budget is the quantity of emissions that would remain after elimination of the part of significant contribution and interference with maintenance the EPA has identified in an average year"); id. at 45271/2 (A state's budget "represent[s] the remaining emissions for the state in an average year"); id. at 45292/1 ("EPA has . . . developed state budgets based on its projections of state emissions in an average year"). Both the explanation in the TSD and the explanation offered on the August 30 conference call seem to indicate that EPA believes that 2009 heat input was not heat input for an average year, at least for NOx budget purposes.46 It is far from apparent why, if 2009 heat input was not average for -- and therefore was not used for -- NOx budget purposes, there would be any basis to use it for SO2 budget purposes. Before it proceeds further with this rulemaking, therefore, EPA will need to clarify and provide an adequate explanation for its decision to use 2009 heat input data for SO2. Prior to taking any final action to promulgate a rule, EPA should provide an opportunity for the public to comment on this important matter in light of an adequate explanation by the Agency. [EPA-HQ-OAR-2009-0491-2756.1, pp.79-80]

Footnote 46: UARG believes that EPA should have based state budgets on heat input in a higherthan- average year, at least for the first several years of the program, to allow for flexibility in the event that demand in those years requires higher-than-average generation.
Response:
In the final Transport Rule, EPA does not use historic emissions data to set the Transport Rule state budgets, but instead relies on projected emissions data under the marginal cost thresholds selected to define significant contribution and interference with maintenance.  EPA uses the same budget-setting methodology in the final rule on all pollutants analyzed (including ozone-season NOx, annual NOx, and SO2).  Please see section VI.D of the preamble for a thorough explanation of this approach.
Organization: Vectren Corporation
Comment:
Vectren Corporation
The proposed rule creates regional inequality.
The proposed Transport Rule creates regional inequality and further economic pressure for those thirteen states (including Indiana) that were singled out for even more stringent S02 reductions in 2014. The state emission caps for S02 in 2014 are significantly more stringent than those in 2012 for thirteen of the twenty-eight states covered under the Transport Rule. These states are the ones most reliant on coal and therefore shoulder the major portion of compliance burden for meeting these national goals. [EPA-HQ-OAR-2009-0491-2654.1, p. 5]
The extremely stringent S02 caps for states such as Indiana amount to an average rate of approximately 0.20 to 0.30 lbs S02 per million Btu, which can only just be attained by a scrubbed power plant using high sulfur coal meeting a 95% removal efficiency, 95% is the current maximum level of removal that most advanced retrofit scrubber designs can reliably achieve on an annual basis, Thus in order to achieve these stringent caps with a reasonable compliance cushion companies will face increasing pressure to move away from burning local high sulfur coal in favor of lower sulfur coal from Appalachia or the western states, This will further compound regional disparity if Indiana companies are unable to rely on local high sulfur coal mined in southern Indiana to meet the stringent state caps in the proposed rule, Indiana ratepayers will be faced not only with increases from higher fuel costs, but local southwestern Indiana economies will be further challenged by the loss of jobs in the coal-mining industry. [EPA-HQ-OAR-2009-0491-2654.1, p. 6]
Response:
The incremental cost thresholds and corresponding multi-factor analysis examined in the Final Transport Rule was applied "equally" to all states that were contributing to downwind nonattainment or interference with maintenance.  Depending on the current control and fuel status of the generation within a state, the state budgets resulting from "multi-factor" analysis may suggest a greater reduction, relative to base case, in some states over other states.  However, while the resulting reductions and elimination of "significant contribution" that results from the multi-factor test may be different for certain states, the methodology for determining these budgets is not.
EPA does not find the commenter's calculated "average SO2 rate" metric to be a meaningful indicator of what individual units (including coal-fired units) will face under the Transport Rule programs.  The Transport Rule does not establish any specific emission rate requirements on any given units.  EPA analyzed the availability of cost-effective emission reductions in Indiana using the same methodology and modeling tools as it did for all other states, and it established a state-wide budget for covered units to meet collectively in Indiana.  This regulatory approach allows units with a wide spectrum of SO2 emission rates to flexibly comply with the Transport Rule programs as long as they hold an allowance for each ton emitted.
Organization: Wisconsin Power and Light Company
Comment:
Wisconsin Power and Light Company
WPL is aware that EPA will be updating the final CATR in response to new and corrected information received in response to the Notice of Data Availability (NODA) published in the Federal Register on September I, 2010. EPA has developed the proposed CATR using a bottom-up approach that relies on modeled outcomes. EPA has stated that the modeled state budget levels are intended to be achieved by simply running existing or currently planned emission control equipment, or switching to lower sulfur coals where feasible. However, WPL believes that EPA has not sufficiently vetted this outcome and believes that many states, especially those subject to the tighter Group I S02 budget levels (that includes Wisconsin) will have significant difficulty achieving compliance. WPL's existing generation fleet is already predominantly burning low sulfur coal and the only further option to reduce S02 emissions is installation of new scrubber controls. The use of EPA models to develop air quality rules that require significant financial investments for compliance results in many uncertainties and potential implementation issues. Therefore, EPA must review final state budgets and associated EGU allocations to assure the models have not resulted in unreasonable or unintended controls by 2012. [EPA-HQ-OAR-2009-0491-2844.1 p.5]
Response:
EPA's modeling of cost-effective emission reductions by 2012 specifically bars the installation of scrubbers or other post-combustion control installations in that timeframe, except for any specific post-combustion controls that are already scheduled to go online by 2012.

IV.E.2. Ozone Season NOx State Emissions Budgets for EGUs - Data and Methodology

Organization: Connecticut Department of Environmental Protection
Comment:
Connecticut Department of Environmental Protection
Set an ozone season emission budget in this proposed rule necessary to address interstate air pollution as measured against the 1997 8-hour ozone standard and include a tighter NOx budget for 2014 that will set a strong framework in advance of the anticipated reconsidered 2008 8- hour ozone standard and any subsequent Transport Rule. Doing so will provide regulatory certainty to the numerous sources subject to the Transport Rule both in Connecticut and throughout the Eastern United States. [EPA-HQ-OAR-2009-0491-2780.1 p.7]
Response:
EPA is finalizing separate 2012 and 2014 state emission budgets for Ozone Season NOx.  As described in Section VI.D of the preamble, some states have tighter 2014 budget to capture potential reductions from non-Transport Rule state rules and consent decrees that come into effect between 2012 and 2014.  Also, the tighter 2014 budgets capture some of the co-benefit of tighter SO2 cost thresholds in 2014.
Organization: CPS Energy
Comment:
CPS Energy
Another comment, the J K Spruce ORIS 7097 BLR1 (Spruce 1) Ozone Season NOx Rate is not achievable. Spruce 1 is equipped with Low NOx burners and a Separated Over-fired Air (SOFA) system which does reduce the NOx emission rate down to about 0.13 lb/mmbtu and sometimes slightly lower. The reported average NOx rate to the EPA was 0.13 lb/mmbtu for 2008 and 2009. Although, the 0.122 Ib/mmbtu rate was reported for 4th Quarter 2009, the unit cannot achieve a rate of 0.122 lb/mmbtu on a continuous basis. While operating all of the NOx reduction equipment using best practices, a rate of 0.13 lb/mmbtu is typically the rate achieved by the unit.  [EPA-HQ-OAR-2009-0491-2524.1, p.2]
Regarding our J K Spruce ORIS 7097 BLR2 (Spruce 2), the ozone season NOx rate is listed as 0.582 lb/mmbtu. That rate is actually too high for Spruce 2. Spruce 2 is our newest coal unit and was constructed with Low NOx burners, SOFA, and an SCR. Spruce 2 is a new unit and no emissions were reported for 2009, the first year that emissions will be reported will be for emissions year 2010. Our 12 month rolling permit limit is 0.05 lb/mmbtu, and we will operate the unit below our permit limits. [EPA-HQ-OAR-2009-0491-2524.1, p.2]
Response:
See "Documentation Supplement for EPA Base Case v.4.10_FTransport-Updated for Final Transport Rule"  EPA made unit level updates to the units noted by commenter.
Organization: Georgia Department of Natural Resources, Air Protection Branch
Comment:
Georgia Department of Natural Resources, Air Protection Branch
[These comments were submitted as testimony at the Atlanta, Georgia public hearing on September 1, 2010.  See Docket Number EPA-HQ-OAR-0491-1939, p.92.]
One area that we have begun to look very closely at and would like sufficient time to prepare our best justification for is why we believe that EPA should not include NOx controls outside of the ozone season in the southeast as part of this rule.
Response:
Please see section V.A of the preamble for explanation of why EPA required annual NOx and SO2 reductions in all states linked for PM2.5 contribution to downwind states in the final Transport Rule.
Organization: Maryland Department of Environment (MDE)
Ozone Transport Commission (OTC)
Comment:
Maryland Department of Environment (MDE)
Maryland agrees with OTC, which has been unable to determine exactly how EPA developed the ozone season NOx budgets. We request clarification on EPA's methodology. EPA's allocations do not match up with the process described in the preamble to the proposed rule. It appears that EPA applies three different methodologies in developing the state emission budgets for ozone season NOx. As a result, EPA provides three different values for the ozone season budgets for all 26 states in the proposed rule. In the Air Quality Modeling Technical Support Document, EPA cites an ozone season NOx budget of 585,584 tons as representing the remedy. At the same time, EPA used an ozone season NOx budget of 641,614 tons (page 75 FR 45296) before variability, and allocations of a budget of 610,454 tons to the states after netting out the 3 percent new source set-aside. (Note that the 610,454 tons allocation was calculated by summing the unit-level projected NOx ozone season mass, from the Transport Rule TSD "Budgets and Allocations  -  Detailed Unit-Level Data"). EPA explains that they used a combination of historical data and projected data to make adjustments to achieve the final allocated budget (75 FR 45290  -  45291) but the precise methodology for those adjustments is not provided. [EPA-HQ-OAR-2009-0491-2639.2, pp.11-12]
Ozone Transport Commission (OTC)
[These comments were submitted as testimony at the Philadelphia, Pennsylvania public hearing on August 26, 2010.  See Docket Number EPA-HQ-OAR-0491-1938, pp.115-116.]
The seasonal NOX budget for the identical states under EPAs proposed Transport Rule is 475,000 tons; the CAIR phase 2 NOX cap was 429,000 tons. EPA further exacerbates the situation by retaining the 2012 NOX cap in 2014, rather than ratcheting it down, as it did for the SO2 caps in the proposed rule. In a recent plant-by-plant analysis by OTC of potential future NOX caps, we determine that a 375,000 ton ozone season NOX cap by 2014 is technologically feasible and cost-effective based on an annual NOX cap of 900,000 tons in the eastern U.S.
Response:
See Section VI of the Preamble for a comprehensive discussion of how EPA developed ozone season NOx budgets.  This section clarifies the step-by-step process for arriving at the final budgets.  Additionally, the "Significant Contribution and State Emissions Budgets for the Final Transport Rule Technical Support Document" provides a more detailed explanation on how the final state emissions budgets were determined.  EPA does include a separate 2014 ozone season cap budget in the final Transport Rule that is ratcheted down from 2012 levels for some states.  This is described in section VI.D.  In response to these comments, EPA also improved its budget formation process to improve its transparency and consistency with the air quality modeling.
Organization: New Jersey Department of Environmental Protection (NJDEP)
Comment:
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-0491-1938, pp.159-160.]
Two, perhaps most importantly, USEPAs proposal does not adequately address the daily nature of peak ozone. In order to states to attain and maintain the current 75 ppb and future ozone standards, it is necessary for the USEPA to additionally set short term (hourly to daily) performance standards that apply to each upwind source. New Jersey has adopted its own rules to address NOX and SO2 and particulate matter emissions on a 3 hour to daily basis. USEPA approved these RACT rules as a SIP revision on August 3, 2010. 75 Fed. Reg. 45483 (August 3, 2010) In an analysis NJDEP conducted for the northeast, it found that only a typical summer day in 2005, the NOX emissions were 551 tons per day, while on a high electric demand day, typically a hot summer day that corresponds with high ozone, the NOX emissions were 1,349 tons per day. Averaging emissions over the ozone season is insufficient to address high ozone days where the NOX emissions are almost three times the typical day. To properly address NOX emissions during high ozone days, the USEPA must adopt a rule with daily, or shorter time period, performance standards.
Response:
See Section VI.D of the Preamble.
Organization: Texas Commission on Environmental Quality
Southern Company
Mississippi Department of Environmental Quality
North Carolina Department of Environment and Natural Resources
West Virginia Department of Environmental Protection
NRG Energy
Florida Electric Power Coordinating Group, Inc. (FCG)
Prairie State Generating Company, LLC
Entergy Services, Inc.
American Public Power Association (APPA)
Comment:
American Public Power Association (APPA)
2. EPA requests comments on whether the ozone season should be longer than the five-month season used in the NOx SIP Call Rule, 63 Fed. Reg. 57356 (Oct 27, 2010), and CAIR (May 1 through September 30), perhaps to correspond to the ozone monitoring season for each state. 75 Fed. Reg. at 45292/1. If EPA expands the ozone season for some or all states, it would need to consider carefully how such an expansion would affect the proposed program, and at a minimum, would have to increase the NOx ozone season budgets in proportion to the extended season for affected states. Any such change should be addressed in a supplemental notice of proposed rulemaking. [EPA-HQ-OAR-2009-0491-2812.1, p.6]
Entergy Services, Inc.
Changing the Ozone Season Months
Entergy does not support changing the Ozone Season Program dates from the current season of May  -  September to March  -  October as suggested in the proposed rule.  The Ozone season should remain consistent with the approach taken by the OTAG, the NOx SIP Call, and the CAIR. [EPA-HQ-OAR-2009-0491-2847.1, p.14]
Florida Electric Power Coordinating Group, Inc. (FCG)
The FCG supports EPA's approach of using/retaining the definition of the 'ozone season' as May through September.  [EPA-HQ-OAR-2009-0491-2658.1,p.12]
Mississippi Department of Environmental Quality
The proposed rule sets a five month Ozone Season Control Period of May through September but invites comments on making it longer, such as March through October. For Mississippi, a southern state, the proposed control period is sufficiently protective. We agree with the proposed control period of May 1 through September 30. [EPA-HQ-OAR-2009-0491-2634.1, p.2]
North Carolina Department of Environment and Natural Resources
As standards are lowered, the need for a longer ozone season should be reassessed. [EPA-HQ-OAR-2009-0491-2767.1, p. 7]
NRG Energy
Maintaining the current ozone season definition In the development of the Transport Rule, EPA presents the option of an expanded Ozone Season from May  -  October to a March  -  October period. Many state specific regulatory programs are based on the May  -  October definition for the Ozone Season. Historic state ambient air quality data identify very few, if any, exceedances of the ambient air ozone standards occur in March and/or April. The expansion of the regulatory Ozone Season would only add more compliance obligations to sources on a federal and state level without a significant air quality improvement. Therefore, NRG does not support an expansion of the Ozone Season budget. [EPA-HQ-OAR-2009-0491-2749.1, p. 4]
Prairie State Generating Company, LLC
12. LENGTH OF OZONE SEASON
The U.S. EPA requested comment on the proposed ozone control period, May 1 through September 30, rather than the program covering the entire ozone season that is April 1 through October 31, p. 45292. PSGC agrees that the proposed ozone control period of May 1 through September 30 is appropriate. Continuing with a control period covering these months provides continuity with the CAIR and addresses the peak period in most areas of the country. Where states have longer periods that require reductions, local controls should suffice. [EPA-HQ-OAR-2009-0491-2842.1, p.10]
Southern Company
XVI. Southern Company Supports Several of EPA's Decisions in the Proposed Transport Rule
As discussed throughout these comments, Southern Company has many concerns with the Proposed Transport Rule. However, we support several of EPA's decisions in the proposed rule including EPA's decision to retain the current ozone season. [EPA-HQ-OAR-2009-0491-2864.1, p. 52]
F. EPA's Decision to Retain the Current Ozone Season
Southern Company fully supports EPA's decision to retain the current ozone season (May 1 to September 30). EPA has consistently used this five month period to define the ozone season in prior interstate transport rulemakings - CAIR and the NOx SIP Call. Extending it would represent a significant break from this established approach and would call into question EPA's ozone season analyses underlying this rule, which are all based on a five month ozone season. An extension would therefore require EPA to revise its ozone season analyses and publish a supplemental proposal to address ozone transport. [EPA-HQ-OAR-2009-0491-2864.1, p. 54]
Texas Commission on Environmental Quality
Ozone Season Expansion
The EPA has not provided sufficient information for states to develop comments regarding its proposed consideration of expansion of the ozone season in the Transport Rule.
The EPA has requested comments regarding whether the ozone season (May through September) should be extended in the proposed Transport Rule. However, the TCEQ cannot provide comment at this time, because the EPA has failed to provide sufficient information in the proposal, such as: the potential length of a proposed ozone season extension; how state budgets would be recalculated under an extended season; or how unit-level allocations would be recalculated under an extended season. The TCEQ requests additional information, with adequate notice and opportunity for comment, regarding a possible extended ozone season prior to inclusion in a finalized rule. [EPA-HQ-OAR-2009-0491-2857.2, p.9]
West Virginia Department of Environmental Protection
[[2790.1 p.7]]
EPA requested comment on whether the budgets for the final rule should be based on a longer ozone season, such as March through October. WVDAQ believes the current ozone season as defined under CAIR (May through September) is adequate for the final Transport Rule. However, EPA may reconsider the period of the ozone season for purposes of Transport Rule II and EPA's new secondary ozone standard.
Response:
EPA is finalizing the same ozone season period as proposed (May 1 through September 30).  See additional discussion in Section VI.D of the Preamble.

IV.F. Approach to Power Sector Emissions Variability

Organization: Connecticut Department of Environmental Protection
Comment:
Connecticut's electric distribution companies (EDCs) are required to develop an Integrated Resource Plan (IRP) through which adequate generation resources are identified and, if necessary, contractually secured to ensure the State of Connecticut will have sufficient electric generating capacity to meet its demand over a ten year planning horizon. In support of the IRP, the EDC's contractor ran an electric grid bid-stack model to better predict the future operation of EGUs in Connecticut. The IRP model shows that load following boilers (LFBs) in Connecticut are projected to continue to operate on High Electric Demand Days (HEDD). When Connecticut's LFBs operate on HEDD, daily NOx emissions increase by as much as 29 tons per day, which is a significant amount. [EPA-HQ-OAR-2009-0491-2780.1 p.9]
As currently proposed, EPA's framework for addressing significant contribution does not help states address the short-term (e.g., one-hour to 24-hour) public health effects of ozone, PM 2.5, NOx and SO2 exposures. It may, in fact, exacerbate this problem. Analyses indicate that, in the Northeast, NOx emissions are much higher, and in Connecticut can be as much as five times higher, on HEDD than during average summer days (see Table A-3):
[[Data Table Here]]
The proposed Transport Rule does not guarantee that a specific source that has a significant impact on a downwind area will control its emissions, and in such case those states will be in violation of Section 110(a)(2)(D) of the CAA. Therefore, any regulatory approach that sets standards, caps, or budgets that are based on annual or seasonal averaging will be insufficient to address peak ozone exposures that typically occur on HEDD. Consistent with Ozone Transport Commission (OTC) comments on the proposed Transport Rule, EPA should incorporate short term performance standards for electric generating units that apply to each upwind source. Furthermore, in order to address high electric demand days, performance standards should apply on a 24-hr basis. Such performance standards should be in addition to the proposed Transport Rule trading program and any subsequent trading program to ensure such emissions are addressed as required by North Carolina v. EPA. [EPA-HQ-OAR-2009-0491-2780.1 p.10]
Response:
It is important to note that EPA's authority for this rule is limited to eliminating emissions from upwind states that "significantly contribute" to nonattainment or interfere with maintenance of the 1997 and 2006 fine particulate matter national ambient air quality standards (NAAQS) and the 1997 ozone NAAQS.  As described in section III and section VI.D of the preamble for the final Transport Rule, EPA believes that downwind states also have control responsibilities because, among other things, the Clean Air Act requires each state to adopt enforceable plans to attain and maintain air quality standards.  Indeed, states have put in place measures to reduce local emissions that contribute to nonattainment within their borders.  Section 110 (a)(2)(D)(i)(I) only requires the elimination of emissions that significantly contribute to nonattainment or interfere with maintenance of the NAAQS in other states; it does not shift to upwind states the responsibility for ensuring that all areas in other states attain the NAAQS.
Organization: Indiana Energy Association
Comment:
Indiana Energy Association
c. To the extent that EPA continues to rely on limited baselines (one year of data) to establish budgets, the Indiana Utility Group generally supports the variability limits concept because it provides flexibility for compliance. [EPA-HQ-OAR-2009-0491-3711 p.5]
Response:
EPA appreciates the commenters support.  See preamble section VI.E for more on variability limits.

IV.F.1. General Comments on Variability Approach

Organization: Ameren Services Company
Oglethorpe Power
Comment:
Ameren Services Company
Ameren also supports the concept of variability limits and the delay in implementation of these limits until 2014. However, EPA in the preamble has calculated 'maximum variability' among the covered states of 21% for NOx and 28% for S02. EPA should consider using these percentage rates instead of a flat 10% of a states budget along with the tonnage defaults. These rates are more supportable than the 10% rate EPA has chosen seemingly out of thin air. [EPA-HQ-OAR-2009-0491-2722.1, p.9]
Oglethorpe Power
IV. Variability
Oglethorpe Power believes that EPA should consider the basis for using a higher percentage than the 10% uniform variability chosen for the proposed Transport Rule. EPA's analysis for examining the effect of variability in upwind state emissions on air quality in downwind states - set forth in its TSD on Power Sector Variability 9 - does not appear to preclude a conclusion that a somewhat higher uniform percentage, such as 20% or greater, may be justified. In the Variability TSD, EPA's'worst case' variation (which assumes no more than the one year 10% variability in SO2 emissions in upwind states with the largest air quality impacts on downwind monitors) showed that the combined downwind air quality impacts were essentially negligible, and that the results of the worst case analysis indicated small resulting increases in air quality relative to other factors like weather. EPA should perform the analysis using higher variability limits, in the range of at least 20 to 30% of each state's budget, to see whether these analyses also indicate that the impact of upwind emissions variability on downwind air quality remains small. If so, then higher variability limits would appear justified. Higher variability levels would increase the potential of the program to produce efficient and cost-effective emission reductions in the Transport Rule regions, producing larger air quality benefits, likely at reduced costs to the rate-payers (which for Oglethorpe Power are its wholesale power EMC purchasers who, like it, provide power on a not-for-profit basis). [EPA-HQ-OAR-2009-0491-2732.1, pp.9-10]
Oglethorpe Power also supports EPA'sdecision not to apply variability limits in the first several years of the program, when state budgets are based on reductions EPA expects will occur with a 'high level of certainty.' 75 Fed. Reg. at 45306 col. l. Oglethorpe Power agrees and supports EPA's proposal that emissions from an owner's EGUsin excess of that owner's share of the state budget with the variability limit should not be a violation of the Transport Rule or the CAA. As EPA notes, the allowance surrender requirement (which is also supported, although we believe that the surrender ratio in this context should be less than 1-to-1) is significant and sufficient to ensure that Transport Rule state's emissions will not exceed its budget plus the variability limit. Oglethorpe Power also supports EPA'sproposal to define the ozone season as the 5-month period from May 1st to September 30th of each year, consistent with the approach taken by the Ozone Transport Assessment Group and by EPA in the NOx SIP Call and CAIR rulemakings.
 [EPA-HQ-OAR-2009-0491-2732.1, p.10]

9. TSD for the Transport Rule, 'Power Sector Variability,' U.S. EPA Office of Air and Radiation (July 2010) (the 'Variability TSD').
Response:
As described in sections VI.E and VI.F of the preamble and in the Technical Support Document "Power Sector Variability Final Rule", based on historic data on variation in heat input, EPA is providing sufficient variability to accommodate the inherent fluctuations in emissions resulting from power sector operations.  Covered sources have operational and compliance flexibility in this rule, to the extent possible under EPA's authority and the court rulings.
As described in the "power sector variability final rule" TSD, EPA has done an assessment using the air quality assessment tool examining the air quality impacts of emissions from upwind states up to the variability limit, where it found the impacts are small.  As described in the preamble, this rule is focused on the removal of significant contribution and interference of maintenance resulting from the emissions of upwind states.
As seen in the "power sector variability final rule" TSD, EPA also assessed the air quality impacts of higher possible variability limits, again estimating the effects are small.  Preamble section VI.E and VI.F as well as the TSD also provide details about EPA's rationale that the basis of the variability limits is inherent variation in electric generation.  The air quality assessment confirms that the level selected is unlikely to compromise the air quality goals of the rule.
For the analysis with the final Transport Rule, in the Technical Support Document "Power Sector Variability Final Rule", EPA estimated the air quality impacts for variability limits up to 20%.  EPA finds that the air quality impacts are small, in all cases up to and including 20%.  However, it is the historically observed variation in state-level EGU emissions specifically tied to inherent power sector operation that inform EPA's determination of the appropriate variability limits in the final Transport Rule, in order to allow states to accommodate this year-to-year variability while achieving the required cost-effective emission reductions.
Section VII.A of the preamble to the final Transport Rule describes EPA's rationale for applying variability limits and assurance provisions beginning in 2012.
Organization: Arkansas Department of Environmental Quality
Comment:
Arkansas Department of Environmental Quality
ADEQ supports the limited trading of allowances in order to ensure emission reductions happen where they are needed. ADEQ also understands the EPA's desire to allow for limited variability in emissions from affected sources due to market and other conditions. However, ADEQ is concerned that the wording in the Transport Rule is unclear. ADEQ would like further guidance in the final rule on how the variability provisions will affect attainment issues.  [EPA-HQ-OAR-2009-0491-2676.2 p.4]
Response:
EPA assessed the potential downwind air quality impacts related specifically to year-to-year variability in upwind emissions under the Transport Rule program.  Please see this analysis in the Variability Final Rule TSD.
Organization: City of Dover, Delaware
Comment:
City of Dover, Delaware
Central to the City's concerns with the Transport Rule is that EPA has not adequately accounted for the variability in emission levels that peaking units experience from year to year. [EPA-HQ-OAR-2009-0491-2636.1, p.1]
Response:
Variability was analyzed on a state-by-state basis and variability limits are set for the state emissions, as a whole, in any single control period.  This variability takes into account variability in baseline emissions while ensuring that all necessary emission reductions occur in each upwind state as required by section 110(a)(2)(D)(i)(I).  EPA's variability analysis thus necessarily focuses on variability in state level emissions, not variability at the unit or facility level. See section VI.E of the preamble for more on variability limits and how they are applied.
Organization: Connecticut Department of Environmental Protection
Comment:
CTDEP does not agree with EPA's proposed variability provisions, which are intended to cover a range of operational contingencies that may affect both electric reliability and resulting emissions of NOx and SO2. The concept of variability is critical to states like Connecticut that have very tight emission budgets coupled with a large percentage of electric generation capacity that is non-fossil based, but variability should not be applied to emissions that fluctuate based on changing electric demand due to weather. Variability provisions should be reserved for truly exceptional events such as natural disasters or the loss of significant generation resources that pose a threat to electric system reliability. In this event, states like Connecticut would require access to a substantially greater allowance pool than the proposed variability limits to ensure electric system reliability would not be compromised by a source's inability to access sufficient allowances to ensure lawful operation. Absent such access, electric load would likely shift to smaller higher emitting backup generators that are not subject to the Transport Rule. [EPA-HQ-OAR-2009-0491-2780.1 p.16]
By way of an example, in 1996, Millstone II and III nuclear powered EGUs were unexpectedly shut down by the Nuclear Regulatory Commission for an extended period of time (all of 1996 and 9 months in 1997). These shutdowns caused a serious capacity shortage in Connecticut. As a result, NOx emissions from all fossil-fuel generation capacity increased, and required emergency regulation by CTDEP to authorize the restart of previously retired EGUs as well as the use of emergency generators as a last line of reliability before voltage reductions and blackouts. If this scenario were to reoccur, approximately 25% of Connecticut's generation capacity would need to be replaced in short order (see Table A-5). [EPA-HQ-OAR-2009-0491-2780.1 p.16]
Connecticut has greatly improved both its generation fleet and transmission infrastructure since 1996- 97. Nearly 2,400 MW of clean new generating capacity is now operational and another 800 MW are expected to be available by the end of 2011. Additionally, the state has added approximately 350 MW of base-loaded distributed generation (see Table A-6). Regardless of these improvements and the fact that some displaced generation could be replaced by increasing power imports into Connecticut, internal transmission and distribution constraints would still require significant additional in-state generation in order to keep the lights on. [EPA-HQ-OAR-2009-0491-2780.1 p.17]
[[Data Table Here]]
During this same period Connecticut has only lost approximately 150 MW from the retirement of two older EGUs while seeing in state peak electric demand rise to 7367 MW up from 6030 MW in the 1996- 1997 timeframe.
Nonetheless, if Millstone II and III were to become unavailable today, CTDEP believes two scenarios highlight the range of impacts on Connecticut:
Scenario 1 All energy lost from nuclear shutdowns is replaced by new natural gas-fired combined cycle units with selective catalytic reduction:
o 2090 MW/h * 8760 hours/year * 0.95 capacity factor * 0.135 lbs/MWh/2000 lbs/ton = 1,174 additional tons per year NOx
Scenario 2 All energy lost from nuclear shutdowns is replaced by existing Connecticut load following boilers:
2090 MW/h * 8760 hours/year * 0.95 capacity factor * 1.5 lbs/MWh/2000 lbs/ton = 13,044 additional tons per year NOx
If Scenario 1 and 2 are bookends, the likely outcome in the event that electric capacity from Millstone II and III is lost for a year is that between 1,174 and 13,044 additional tons of NOx would be emitted. Using the average emission increase, this means that annual emissions of NOx in Connecticut would increase by 7,100 tons per year. EPA's proposed 1-year variability limit of 5,000 additional tons of NOx per year would be inadequate in this instance. [EPA-HQ-OAR-2009-0491-2780.1 p.18]
EPA should define an exceptional event as a natural disaster or mandated safety related shutdown that interrupts non-fossil based EGU operation for more than 30 days and requires the use of new EGUs or the increased use of existing EGUs to offset lost power generating capacity. EPA should establish a national set-aside allowance pool for exceptional events (e.g., 1-5% of the budgets) that EPA would administer and distribute only during an exceptional event. In order to determine the appropriate size of the set-aside, EPA should model the impact of exceptional, but reasonably foreseeable, events so as to establish a set aside of an appropriate size. [EPA-HQ-OAR-2009-0491-2780.1 p.19]
In the event that EPA chooses not to pursue CTDEP's initial recommendation and maintains the proposed variability provisions, CTDEP recommends that EPA adopt the proposed variability limits instead of the alternative variability limits set out in the proposed Transport Rule. However, EPA should recognize that this may jeopardize electric reliability in Connecticut should an exceptional event, such as the 1996-97 shutdown of Millstone Units II and III, occur again. [EPA-HQ-OAR-2009-0491-2780.1 p.19]
Response:
As described in sections VI.E and VI.F of the preamble to the final Transport Rule, and in the Technical Support Document "Power Sector Variability Final Rule", based on historic data on variation in heat input, EPA is providing sufficient variability to accommodate the inherent fluctuations in emissions resulting from power sector operations.  Covered sources have substantial operational and compliance flexibility in this rule due to the market-based structure of the air quality-assured trading programs.
Organization: Edison Electric Institute (EEI)
Northeast States for Coordinated Air Use Management (NESCAUM)
Comment:
Edison Electric Institute (EEI)
[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.28.]
Apart from our concerns, EEI supports several aspects of the flexibility provisions EPA has proposed.
Northeast States for Coordinated Air Use Management (NESCAUM)
[These comments were submitted as testimony at the Philadelphia, Pennsylvania public hearing on August 26, 2010.  See Docket Number EPA-HQ-OAR-0491-1938, pp.9-10.]
We also support the concept of the variability provisions that limit interstate trading.
Response:
EPA has finalized an assurance provisions approach similar to the one in the proposal, but with some small modifications and improvements.  See preamble section VII.E for more details on the final assurance provisions.
Organization: Edison Mission Energy (EME)
Comment:
Edison Mission Energy (EME)
The Proposed Rule's variability limits are too restrictive. EPA's proposed variability limits do not account for the emissions variability seen under real world conditions due to one-year anomalies (such as weather and unexpected unit outages) that are beyond the control of the power generation sector. [EPA-HQ-OAR-2009-0491-2707.1, p.3]
VI. EPA'S PROPOSED VARIABILITY LIMITS ARE TOO RESTRICTIVE
While EME agrees with EPA's proposal not to apply the variability limits during Phase I of the Transport Rule, EME has concerns that Phase II's variability limits are too restrictive.Under the current proposal, EPA establishes a one-year variability cap in all states equal to 10%of a state's emissions budget.71 Unfortunately, EME does not believe that a 10% cap is sufficient to cover all contingencies that might result in increased emissions in a given year. Based on its own experience, EME has observed circumstances where the EGUs in Illinois have approached the 10% limit under circumstances (e.g., weather and unit outages) that would not be considered anomalous. The fact that 10% has been approached under "normal conditions," suggests that a one-year 10% variability cap would not provide sufficient coverage to account for the range of like one-year anomalies. [EPA-HQ-OAR-2009-0491-2707.1, p.36]
For example, a significant percentage -- 48% of Illinois' generation capacity -- is provided by nuclear-power units.72 While these units are not typically down for extended periods, to the extent unexpected and prolonged outages occur (e.g., when unscheduled maintenance is required) fossil-fired generation would necessarily increase. Similarly, unusually hot summer weather and/or transmission line congestion can also result in unexpected increases in fossil-fire operations. Under the right circumstances these anomalies either individually or in aggregate could cause a given state to exceed a 10% variability limit. Since the common theme with respect to all of these anomalies is that they are, generally speaking, beyond either the State's or the individual EGU's control, penalizing individual sources within states for exceedences caused by such anomalies is unfair. Therefore, EPA should increase the one-year variability limit to ensure that it provides an adequate cushion to account for anomalies that are beyond a state's or a source's control. Based on this assessment, EME suggests that EPA increase the one-year variability limit to 15%, and that it use 10% to set the three-year variability limit. These adjustments will ensure that the Transport Rule's variability limits do not penalize sources for anomalies that they cannot control, but that nevertheless have the potential to result in emission increases that are material (at least relative to a 10% variability limit). [EPA-HQ-OAR-2009-0491-2707.1, pp.36-37]
Response:
EPA has used a wider set of data from 2000 - 2010 for analyzing variability in the final rule. As explained in the preamble section VI.E, the resulting increased variability limit percentages provide sources with sufficient operational flexibility.
Organization: Environmental Defense Fund (EDF)
Comment:
Environmental Defense Fund (EDF)
In addition, although EDF believes that the assurance provisions in the Proposed Rule in general provide ample confidence that individual states will eliminate their significant contributions to downwind nonattainment areas, for a few states in particular EPA's approach is unduly lax. In particular, the application of a uniform minimum variability limit (defined in tons) to all states, would allow far too much variability in small states. As EPA points out, a state like Connecticut would have a variability limit for SO2 equal to more than 55 percent of its emission budget  -- far greater than the maximum observed historical variability of 28 percent.17 EDF recommends that EPA follow the alternative approach of applying a maximum percentage of variability among covered states based on historical data  --  in this case, 21 and 28 percent of a state's budget for NOx and SO2, respectively. [EPA-HQ-OAR-2009-0491-2834.1 p.7]
In addition, although EDF believes that the assurance provisions in the Proposed Rule in general provide ample confidence that individual states will eliminate their significant contributions to downwind nonattainment areas, for a few states in particular EPA's approach is unduly lax. In particular, the application of a uniform minimum variability limit (defined in tons) to all states, would allow far too much variability in small states. As EPA points out, a state like Connecticut would have a variability limit for SO2 equal to more than 55 percent of its emission budget  -- far greater than the maximum observed historical variability of 28 percent.17 EDF recommends that EPA follow the alternative approach of applying a maximum percentage of variability among covered states based on historical data  --  in this case, 21 and 28 percent of a state's budget for NOx and SO2, respectively. [EPA-HQ-OAR-2009-0491-2834.1 p.7]
Response:
EPA has modified the approach to variability limits in the final Transport Rule to align variability limits with historic heat input variability between  2000 - 2010 for all covered states.  In addition, Connecticut, Delaware, and DC are no longer in the Transport Rule region. For more on variability limits, see section VI.E of the preamble.
Organization: EquiPower Resources Corp.
Comment:
EquiPower Resources Corp.
The Transport Rule's Variability And Assurance Provisions Are Flawed [EPA-HQ-OAR-2009-0491-2704.1, p.26]
The mechanism selected by the Transport Rule to provide assurance that upwind sources do not contribute to downwind nonattainment is to impose hard caps on statewide emissions. In recognition of the fact that some variability is inevitable, EPA created variability caps that allow the emissions cap to be exceeded in individual years so long as 1-year, and ultimately 3-year, variability limits are not exceeded. EPA argues that these variability limits provide flexibility by allowing one-time exceedances of a state's cap, and account for situations (e.g., weather) that might spike emissions in one year relative to another. EquiPower believes that EPA's approach is fundamentally flawed for four reasons. [EPA-HQ-OAR-2009-0491-2704.1, p.26]
First, EPA's proposed look-back reconciliation to determine whether a state cap plus variability limit has been exceeded is impracticable. In the later Phases of the Transport Rule, when states are subject to 3-year variability limits, EPA could potentially be looking back at data and imposing penalties on sources for emission exceedances the occurred several years earlier. This possibility makes it impossible for EGUs to manage their business with any sort of certainty, because they will never be certain that they will not be subject to a penalty in the future for past acts. [EPA-HQ-OAR-2009-0491-2704.1, p.26]
Second, as explained in Section III.B, this uncertainty will create an environment that encourages EGUs to retain allowances as opposed to trading them because sources will want to have allowances in reserve in case they are unexpectedly penalized. Allowance retention will deplete the supply of allowances available for trade, effectively eliminating any potential for an emissions market to be created. [EPA-HQ-OAR-2009-0491-2704.1, pp.26-27]
Third, these provisions are particularly unfair to natural gas units that did not receive any SO2 allowance allocations, even though they are presumed by EPA to have SO2 emissions. For example, if a state's emissions exceed its budget plus variability factor for SO2, then units who exceed their SO2 allocations would have to pay a penalty based on their proportional share of the SO2 exceedance. By not receiving any SO2 allowances, but being presumed to have SO2 emissions, natural gas units will always shave to pay a penalty for their full proportional share. This penalty will be particularly punitive because the Transport Rule will not create a robust emissions allowance market. So natural gas units will be forced to locate SO2 allowances for sale  -  no matter what the price  -  to pay a penalty that is entirely the result of EPA's unfair allocation methodology. [EPA-HQ-OAR-2009-0491-2704.1, p.27]
Finally, as explained in Section III.C above, EquiPower believes that there is an alternative to this approach that does not require the imposition of a rigid state cap or inflexible variability limits that effectively penalizes sources retroactively for actions that, at least in part, are out of an individual unit's control. The existence of an alternative approach that addresses the Court's concerns in North Carolina v. EPA while still allowing a robust emissions market renders EPA's approach unnecessary, rigid and punitive. EPA should revisit its approach in any Final Rule. [EPA-HQ-OAR-2009-0491-2704.1, p.27]
Response:
For the final rule, only 1-year variability limits have been implemented for reasons provided in section VI.E of the preamble and the Power Sector Variability Final Rule TSD.  There are no 3-year variability limits in the final rule.  In addition, the allocation approach in the final rule has been modified and is now based on historic heat input.  See preamble section VII.D for more information on allowance allocations.  The final rule implements FIPs for all covered states and uses an approach to assurance provisions allows for air quality assured trading that gives sources compliance flexibility while at the same time meeting the requirements of CAA section 110(a)(2)(D).
Organization: First Energy
Comment:
First Energy
State Variability Plan
FE does not believe the variability process should be included in the CATR rule. If the EPA truly expects to foster a competitive market and clone the success of the Acid Rain Program, placing a penalty stipulation on utilities because of an increase in plant generation would be counterproductive. [EPA-HQ-OAR-2009-0491-2657.1,p.12]
FE understands the EPA's concern that excessive interstate trading between states could contribute to ambient air quality concerns. One recommended solution would be to allow states within a regional area, similar to the size of Texas, to have unlimited trading. Limiting trading as strictly as EPA has proposed will significantly drive up the costs of the program and penalize companies like FE that have multi-state operations. [EPA-HQ-OAR-2009-0491-2657.1,p.12]
Response:
The final variability limits are designed to give sources the operational flexibility they need, while comporting with the court's decision in North Carolina.  See preamble section VI.E for more on variability limits.
Organization: George Washington University Regulatory Study Center
Comment:
There is good reason to believe that there is substantial uncertainty in the modeling estimates. 42 First, there is variability with EPA's projections of 2012 base case emissions projections. For example, EPA specifically recognizes variability in power sector emissions in developing state budgets as a part of this proposal and presents a calculation of that variability based on the standard deviation for state-level heat input over a 7 year period. EPA should incorporate information on emission variability from the power sector in an analysis of the uncertainty in its significant contribution approach. [EPA-HQ-OAR-2009-0491-2573.1, p.21]

 42 Throughout this discussion, the term "uncertainty" refers to both "variability" that reflects the statistical variation in estimates as well as to the uncertainty associated with a more fundamental lack of knowledge. Variability comes from the fact that there is variation within a population in terms of differences in exposure and in susceptibility. Variability cannot be reduced, but it can be better characterized with better data. Uncertainty results from a lack of knowledge about key elements or processes in the risk assessment. It can be represented by quantitative analysis -- and can be reduced with additional research -- but cannot be eliminated. One element of uncertainty is that which exists about the variability of a population estimate -- and thus the analyst often cannot be precise about the extent of variability. (For a more complete discussion, see NRC 2009a, 93-99.)
Response:

As described in the "power sector variability final rule" TSD, EPA has done an assessment using the air quality assessment tool examining the air quality impacts of emissions from upwind states up to the variability limit, where it found the impacts are small.  As described in the preamble, this rule is focused on the removal of significant contribution and interference of maintenance resulting from the emissions of upwind states.
Organization: Indiana Department of Environmental Management
Comment:
Indiana Department of Environmental Management
The variability allowances proposed will help mitigate this situation and are important to the rule; however, a mechanism should be developed to provide some relief to affected sources that cannot meet these timeframes, despite their best efforts to do so. There are sources covered by consent decrees and other actions that have dates for installing controls beyond 2014 and many of these sources have planned accordingly. Perhaps an alternate five year variability allowance could accommodate these circumstances. [EPA-HQ-OAR-2009-0491-2645.1, p.2]
Response:
Variability limits and assurance provisions are determined at the state level, not the individual unit or source level.  Sources that need more allowances to cover their emissions may use trading as a compliance mechanism.
Organization: Indiana Energy Association
City of Ames, Iowa
Comment:
City of Ames, Iowa
7) The assumptions and analysis used by U.S. EPA to calculate 'power sector variability' falls way short of addressing the variability experienced here at the City of Ames, especially due to the impact of the current economic recession which started in the 1st quarter of 2008 and became severe by the 3rd quarter of 2008. This is in spite of the fact that Ames, Iowa is economically fairly healthy as compared to many other locations. We are fortunate to be a city with a major university, plus the headquarters for significant state and federal departments. [EPA-HQ-OAR-2009-0491-2769, p.2]
However, as you can see from the data in the table below, the current recession has had a dramatic and highly variable affect upon the electric utility of the City of Ames. For the period 2000 through 2007, the average annual growth in sales (in kilowatt-hours) was 3.58%, yet for 2008 and 2009, sales of electricity fell off trend 5.62 and 12.73 percent, respectively. For the same period, local generation was off dramatically, down 5.73% for 2008 and down 31.33% for 2009. This was due to the combination of reduced native load (kilowatt-hour sales), and the significant reduction in the average price of purchased power due to the supply-demand softness of the economy. As the third row in the table below shows, the City of Ames significantly increased its use of purchased power in 2009. During this period, 2008 and 2009 (and continuing presently), utilities with larger and multiple power plant resources had base load capacity to sell at base load pricing, as compared to the more historically normal purchased power pricing based upon cycling and peaking type units typically burning more expensive natural gas. As an example, the average price we paid for purchased power in 2008 was $53.65/megawatt-hour (mwh), however, in 2009 the power market had softened so much due to the recession that the average price for purchased power had dropped to $29.74/mwh. Another important factor contributing to the reduced electricity sales and the reduced prices for purchased power in 2009, was the very mild (cool) summer which significantly reduced the need for air conditioning in the upper Midwest, and certainly in Iowa. [EPA-HQ-OAR-2009-0491-2769, p.3]
[The table can be found on page 3 of this comment.]
As the economy recovers, we would expect that the supply and demand relationship for electricity to tighten, resulting in an increase in the price and the availability of power on the market, ultimately reducing the attractiveness of purchased power, thereby increasing the demand for electricity required of native generation. [EPA-HQ-OAR-2009-0491-2769, p.3]
Indiana Energy Association
h. The proposed energy variability limits are another issue of concern. The Indiana Utility Group believes that the proposed limits are insufficient to account for recent economic conditions and the potential need for significant additional generating capacity during the anticipated recovery. [EPA-HQ-OAR-2009-0491-3711 p.5]
Response:
The assessment of variability was made at the state level on an annual basis.  This assessment incorporated substantial unit-to-unit and day-to-day variation in generation in the annual sum of heat input for each state.
As described in preamble section VI.E and the "power sector variability final rule" TSD, heat input data from 2000 through 2010 were used in the assessment of inherent variability in power sector operation, thereby accounting for the long-run impacts of the business cycle (economic contractions and expansions) in the year-to-year variability of state-level EGU emissions.  EPA's power sector modeling, which provided the basis for establishing the Transport Rule emission budgets in each state, includes an electricity demand forecast that takes into account the expected trajectory of economic growth as modeled by the Energy Information Administration.  Therefore, the commenter's concerns about the near-term evolution of electricity demand (and the impact that has on EGU emissions) are already accommodated in the development of the Transport Rule state budgets.
Organization: JEA
Comment:
JEA
JEA does not object to this general approach. However, JEA recognizes that variability limits inherently constrain cost-effective use of banking and trading, and could also have adverse impacts on reliability if not carefully designed - both key policy considerations for public power customers. Accordingly, JEA believes that the variability limits should be as flexible, generous, and straightforward as possible while remaining consistent with North Carolina. EPA's decision to establish two independent variability limits - an annual '1-year' limit and a '3-year' limit which restricts the average use of allowances over a rolling three-year period - fails these criteria. In particular, the 3-year limit will be impracticable, costly, and unnecessary. [EPA-HQ-OAR-2009-0491-2713.1, p.4]
Response:
EPA is finalizing one-year variability limits only for the Transport Rule.  See preamble section VI.E in the final Transport Rule for more information about variability limits.
Organization: Lansing Board of Water & Light
Comment:
Lansing Board of Water & Light
The entire concept of "variability limits" is unnecessarily complicated. If EPA is willing to allow a state to exceed a budget without penalty because the exceedances is not great enough to negatively impact a downwind area, then the budget should simply be raised. The artificial cap of the variability limit overly complicates the entire program. If a state is allowed to exceed its budget by up-to 10 percent, then the states budget should simply be raised by 10 percent and the concept of variability should be dropped. [EPA-HQ-OAR-2009-0491-2752.1, p.8]
Response:
The variability limits, as explained in section VI.E of the preamble, are to acknowledge and allow for the inherent fluctuations in the power sector on a yearly basis.  They are not meant to be considered as part of the state budget, which is equal to the number of allowances allocated each year.  Increasing the state budgets would permanently decrease the stringency of the programs and therefore fail to achieve the cost-effective reductions identified as necessary to eliminate significant contribution to nonattainment and interference with maintenance in this rulemaking.  The variability limits maintain the stringency of the program (because they do not alter the total number of allowances issued under the programs, and thus the total emissions allowed) while accommodating the inherent year-to-year variability in state-level EGU emissions.   EPA believes that providing for a limited amount of variability offers flexibility and maintains reliability while meeting the agency's responsibilities under the CAA.
Organization: Large Public Power Council (LPPC)
Comment:
Large Public Power Council (LPPC)
LPPC appreciates EPA's recognition that power sector emissions change from year to year because of factors including power demand, timing of maintenance activities, unexpected shutdown of units, extreme weather conditions, economic shocks, and other unpredictable events  -  and that EPA recognizes that proposed state budgets are based on average years or conditions. LPPC does not object to the general approach proposed by EPA to constrain total actual emissions from EGUs within states by means of variability limits. However, LPPC recognizes that variability limits inherently constrain cost-effective use of banking and trading, and could also have adverse impacts on reliability if not carefully designed  -  both key policy considerations four public power customers. Accordingly, LPPC believes that the variability limits should be as flexible, generous, and straightforward as possible while remaining consistent with North Carolina. EPA's decision to establish two independent variability limits  -  an annual "1-year" limit and a "3-year" limit which restricts the average use of allowances over a rolling three-year period  -  fails these criteria. In particular, the 3-year limit will be impracticable, costly, and unnecessary. [EPA-HQ-OAR-2009-0491-2667.1, p.11]
Response:
EPA has used a wider set of data from 2000 - 2010 for analyzing variability in the final rule. As explained in the preamble section VI.E, the resulting increased variability limit percentages provide sources with sufficient operational flexibility.  In addition, the final rule only establishes 1-year variability limits.  There are no 3-year variability limits in the final rule for reasons explained in the preamble and Power Sector Variability Limits Final Rule TSD.
Organization: Maryland Department of Environment (MDE)
Comment:
First, it does not appear that, in developing the variability concept, EPA considered which states export and which states import electricity and how that can affect emissions within groups of states such as when a large EGU shuts down. Likewise, EPA did not seem to take into account to degree to which a given state even needs the extra allowances provided by variability. Secondly, factors such as extended episodes of high temperature often affect large geographic areas and exacerbate ozone formation. While these emission surges may balance out over time, the actual extra emissions are likely to occur at the worst possible times, such as on hot, humid days that already have poor air quality. EPA claims that these assurances are not threatened because limited allowances will maintain the established emissions levels. However, this interpretation dismisses the fact that sources can have significant carryover allowances from year to year and in a short timeframe can accumulate enough allowances to increase overall emissions in any given year. As stated previously, Maryland believes that the NOx budgets are too lenient already and that the variability concept as proposed would not provide the necessary assurances that the current proposed NOx budgets would be met at even a minimum allowable level.  [EPA-HQ-OAR-2009-0491-2639.2, p.13; This comment can also be found at IV.F.2. of this comment summary]
Response:

See section IV.F.2 of the RTC for the response to this comment.
Organization: Morgan Stanly Capital Group
Comment:
Morgan Stanly Capital Group
2. Variability Limit Set-Aside for Peaking Plants
As now designed, the Proposed Rule would not allow peaking plants much, if any, portion of a state's variability limits.20 Consequently, peaking plants will have to purchase all of the emissions allowances that they need to operate and still may violate the Proposed Rule if the state has exceeded its budgeted emissions and variability limit.21 As a practical matter, such plants would probably have to price their services on a "worst case" basis, under the assumption that they would incur very high costs to procure allowances  -  perhaps double allowances  -  if they run, and might also pay penalties. [EPA-HQ-OAR-2009-0491-2819.1 p.6]
The Administrator should consider a special set-aside of the relevant variability limit to ensure that peaking plant emissions are compliant with the limit. This in turn may mean that such plants receive more than their proportionate share of the state's variability limits. An alternative or supplemental provision could extend the extremely tight deadline for attaining compliance with the Proposed Rule, since these emission sources may have to find allowances in order to operate and may need additional operating experience after the Proposed Rule has become effective in order to achieve compliant operation. [EPA-HQ-OAR-2009-0491-2819.1 p.6]
Response:
For the reasons explained above, variability limits are set at the state level, not the individual unit level, which accounts for and provides sufficient operational flexibility for all sources.  See preamble section VII.E for more information about assurance provisions and penalties.
Organization: National Association of Clean of Air Agencies (NACAA)
Comment:
EPA says it is including a variability factor to account for unplanned increased emissions in a state due to situations such as extreme weather events, unplanned outages or unexpected load demands because of an unusually hot summer. 9 We understand the need to account for variability in output due to unforeseen circumstances. We strongly suggest that EPA consider a different mechanism that accounts for variability in weather and possible unplanned outages of power plant units but that also preserves the environmental integrity of the Transport Rule. EPA should set aside an emergency reserve of allowances each year that can be used by plants that have to ramp up production because other plants out of state have experienced outages or that have to ramp up unexpectedly due to extreme weather events. These reserve allowances should be deducted proportionally from each state's budgets so that the overall caps remain intact. This approach still permits interstate trading  -  as long as purchases by in-state sources of out-of-state allowances matches out-of-state purchases of instate allowances. If there is an imbalance because of an unplanned outage or weather emergency, the emergency reserve of allowances is available to make up the difference in case of emergencies. This ensures the integrity of the cap while also accounting for variability. [EPA-HQ-OAR-2009-0491-2771.1, p.5]

Footnote:
9 In the case of an unusually hot summer, we note that these are precisely the circumstances where emissions reductions are needed the most, since increased temperatures can lead to higher ozone levels.
Response:
Thank you for your comments.  EPA notes that "the overall caps remain intact" already under the Transport Rule as finalized, because EPA will not issue any allowances beyond the state budgets.  The variability limits allow EPA to accommodate the inherent year-to-year variability in EGU emissions at the state level without reducing the stringency of the program's required cost-effective upwind emission reductions.
Organization: New York State Department of Environmental Conservation
Comment:
Basis of Emission Budgets I Variability
State emissions budgets should reflect the emission reductions necessary to prevent SC/IM using the maximum design value rather than an average value based on a three-year period. This is the only way to assure that during any given year, a NAAQS violation will not occur due to transport. Also, emission budgets should reflect levels needed to eliminate SC/IM and not 'cost effective' controls in a given state, and must be designed to prohibit emissions that cause SC/IM. Any variability limit should be applied in a manner such that emissions causing SC/IM are prohibited, or at least mitigated. That is, the sum of a state's budget and the variability limit should be equal to or less than the emission reductions necessary to avoid SC/IM or EPA's trading program mitigation measures need to be applied once the budget is exceeded. Still, any variability limit that EPA might establish should start at the beginning of the program (for this case, 2012). [EPA-HQ-OAR-2009-0491-2730.1, p.7; This comment can also be found at section IV.E of this comment summary]
Allowing an additional variable emission quantity over and above the state budget that is needed to achieve SC/IM may result in non-compliance with a NAAQS. For example, it is likely that plants in one state may have a higher than average cost of controls than the costs of another state due to higher costs of living or smaller power plants which generally have higher control costs than another state. It would be reasonable to expect that plants in the latter state would control more to offset their costs and sell allowances in the former. Without some mechanism to keep emissions in a particular state to a level at or below the budgets established to eliminate SC/IM, there can be no assurance that the transported emissions that significantly contribute to nonattainment or interfere with maintenance are eliminated. Another shortcoming is that the year to year variability treatment does not take into account that air pollution is generally episodic in nature. Higher emissions are more likely when the potential for ozone and PM2.5 formation is greatest. [EPA-HQ-OAR-2009-0491-2730.1, p.7; This comment can also be found at section IV.E of this comment summary]
CAMx Modeling of Emission Variability
EPA has failed to examine air quality impacts arising from the variability in emissions which is assumed to be up to 10%. This variability is associated with year-to-year variability in meteorology to a major extent, since it is often assumed that there are no major or significant changes in anthropogenic activities during these years, unless there are regulatory requirements affecting changes in emissions. [EPA-HQ-OAR-2009-0491-2730.1, p.12]
Response:
Thank you for your comments.
Organization: New York University School of Law, Institute for Policy Integrity
Comment:
New York University School of Law, Institute for Policy Integrity
:: The relationship between significant contribution and variability limits should be clarified; [EPA-HQ-OAR-2009-0491-2691.1, p.1]
3. Clarification of the Relationship Between Significant Contribution and Variability
EPA should clarify precisely what is meant by "significant contribution." It is unclear in EPA's preferred approach whether "significant contribution" encapsulates solely the state emissions budget, or whether it also includes variability limits. If it includes only the budget, then it appears that when a state emits more than the budget but still within the variability range, the state would exceed its significant contribution in violation of the statute. However, if EPA defines significant contribution to include the variability limit in addition to the budget, then it is unclear how EPA is authorized to mandate a budget that is lower than the state's significant contribution. [EPA-HQ-OAR-2009-0491-2691.1, p.11]
From the lengthy discussion of power sector variability, it appears as though EPA intends for significant contribution to vary in response to the inherent variability of the power sector. If so, it is appropriate for EPA to allocate state budgets that include such variability limits. Yet EPA must be clear about the relationship between a state's significant contribution and the state's budget and variability. Such an explanation is necessary to accurately evaluate whether EPA's preferred approach would satisfy the D.C. Circuit's interpretation of the section 110(a)(2)(D) mandate. [EPA-HQ-OAR-2009-0491-2691.1, p.11]
Response:
Thank you for your comments.
Organization: North Carolina Department of Environment and Natural Resources
Comment:
EPA's decision to propose State budgets calculated on a state-by-state basis and to limit emissions to those budgets is a supported approach. Further, NCDAQ agrees in principle with EPA's attempts to address utility sector variability by allowing limited interstate trading. However, NCDAQ has concerns with the means EPA has chosen. Under EPA's proposed remedy, State X's relevant emissions may have been relatively low during the base year and State Y's may have been high. Theoretically, EPA's variability approach would allow for sources in State X to buy allowances from sources in State Y during a normal year in order to balance this variability. This presents two conceptual problems. First, it punishes sources in State X and provides a windfall for sources in State Y based solely on the variability of electricity production during the single year EPA chose as the base year (2005). That is, had EPA chosen 2006 instead of 2005 as the base year, sources in State X may have profited at the expense of sources in State Y instead of the other way around.
Second, and more significantly from an air quality perspective, sources in State Y could very well emit up to the maximum of their variability allowance for evcry one-year and three-year period, despite the fact that sources in State Y were already at the high end of their variability in the base year. Put another way, although the variability limits may have been calculated in a defensible manner - these Comments take no position on that technical issue - oncc the limits are allowed there is no legal assurance that the variability margins will be used by market participants to account for variability. The variability limits are simply a trading budget overage margin and are forever unmoored from their intended purpose. As such, the variability limits, although stemming from a defensible theory, are themselves not consistent with the Clean Air Act.
NCDAQ submits that if EPA is not able to resolve these 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 I throughout). It provides some flexibility while ensuring that a substantial portion of a state's assigned emissions reductions occur in that state. Option I most closely aligns with the CSA with respect to trading among only intrastate sources. Our experience with this type of approach shows that it is a feasible option. The CSA program has successfully reduced NOx and S02 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.2-3]
In the preamble, EPA states: 'If the state emissions exceeded both the state budget with the I-year and with the 3-year variability limit, then the 3-year variability limit would be used in determining the owner's share of the state budget.' 75 Fed. Reg. at 45,313/2. However, the proposed rules provide that 'the amount by which' the State's emissions during any control period 'exceeds the State assurance level shall be the greater of the amounts of the exceedance calculated under paragraph[s]' requiring calculation of the State's one-year and three-year exceedances. E.g., 75 Fed. Reg. at 45,374/2 (proposing §97.406(c) (2) (iii) (C>>. The relationship between these two statements is unclear, as is the manner in which EPA will treat emissions should a State's sources exceed both the one- and three-year assurance levels. NCDAQ requests clarification on this issue in the final rule and suggests assurance provisions be based on the maximum exceedance. [EPA-HQ-OAR-2009-0491-2767.1 p.3]
Response:
First, the budgets are developed based directly on IPM emission estimates for 2012 and 2014, based on the availability of emission reductions at or below specific cost thresholds under modeled average conditions; these cost thresholds are applied equivalently to all states within a particular Transport Rule program (see section VI.B of the preamble to the final Transport Rule).  Therefore, the Transport Rule budgets for each state within a common Transport Rule program are based on that state's emissions under the same cost-effective threshold for that pollutant; there is no "bias" among states in this programmatic structure, so the commenter's concerns about "windfalls" are unfounded.  The commenter is also mistaken in that 2005 "base year" emission inventories were not relevant to EPA's IPM power sector modeling projections of 2012 and 2014 EGU emissions that formed the basis for establishing Transport Rule state budgets at the appropriate cost thresholds (as described in section VI.D of the preamble).
Second, to implement the statutory mandate of section 110(a)(2)(D)(i)(I) EPA must ensure that this rule prohibits all emissions within a state that it has identified as significantly contributing to nonattainment or interfering with maintenance of the relevant NAAQS in other states.  The assurance provisions in the final rule provide assurance that the necessary reductions will occur, as required by statute, within each covered state.  As described in sections VI.E and VI.F of the preamble and in the Technical Support Document "Power Sector Variability Final Rule" the assurance provisions also provide variability to accommodate the inherent fluctuations in emissions resulting from power sector operations. For the analysis with the final Transport Rule, in the Technical Support Document "Power Sector Variability Final Rule", EPA estimated the air quality impacts for variability limits up to 20%.  EPA finds that the air quality impacts are small, in all cases up to and including 20%.  However, it is the variation in emissions resulting from inherent power sector operation that define the limits.
Since no additional allowances are allocated to cover the variability provisions, and since purchase of additional allowance includes a cost disincentive, and based, in part, on EPA's modeling of the remedy, EPA only anticipates that emissions will increase to up to the assurance  levels when the variability is needed.  EPA disagrees with the commenters assertion that utilities will operate as if the budgets themselves have been increased; sources cannot universally increase emissions because EPA will not issue more allowances than the sum of the state budgets; at the outset of the programs, any utilization of a variability limit in one state necessarily requires that sources reduce emissions below the budget in another state.  Rather, with the significant additional allowance surrender requirements for sources within a state that exceed the assurance level, and additional cost burden of purchasing additional allowances, it is not likely that sources will risk approaching the assurance level.  Furthermore, EPA's modeling of the Transport Rule suggests that additional pollution control hardware will be installed; thus, it is likely that emissions will be lower under nearly all circumstances, including during the extended episodes of high temperature leading to increased electric demand.
Organization: Ozone Transport Commission (OTC)
Comment:
Ozone Transport Commission (OTC)
[[2737.1 p.15]]
We urge EPA to strengthen the integrity of the intrastate trading program by including the variability component of the budget within, rather than on top of, the proposed emission budgets.
Response:
Thank you for your comments.
Organization: Prairie State Generating Company, LLC
Comment:
Prairie State Generating Company, LLC
8. VARIABILITY'S IN GENERATION CAPABILITIES AMONG THE STATES
The U.S. EPA's proposed state caps do not reflect the variabilities in generation capabilities among the states. Illinois has more nuclear generation than any other state. Nuclear generation is recognized as 'clean' generation, in that there are no emissions associated with nuclear generation. Nuclear generation provides base-load electricity for millions of users. However, there are times when Illinois' nuclear units are shut down for various reasons. That generation capacity must be made up. Because Illinois is a net exporter of electricity, it would likely be made up through increased fossil-fueled generation for the duration of the nuclear outage. [EPA-HQ-OAR-2009-0491-2842.1, p.7]
Although Illinois is also home to hundreds of acres of windmills, windmills cannot provide sufficient base-load generation to reliably make up for nuclear generation during outages or to replace base-load coal-fired generation. [EPA-HQ-OAR-2009-0491-2842.1, p.7]
Illinois' variability limit should be increased to account for this disparate amount of nuclear generation and the potential for increased fossil-fueled generation during outages at the nuclear units, at least during periods when any of the Illinois reactors are off-line for either planned or forced outages. [EPA-HQ-OAR-2009-0491-2842.1, p.7]
Response:
EPA has used a wider set of data from 2000 - 2010 for analyzing variability in the final rule. As explained in the preamble section VI.E, the resulting increased variability limit percentages provide states and their sources with sufficient operational flexibility.
Organization: Progress Energy Service Company
Comment:
Progress Energy Service Company
Progress Energy recommends that EPA increase the variability limit threshold of 10 percent of each state's budget to a higher threshold, such as 20 percent of each state's budget. This level provides additional flexibility while assuring that interstate trading will be limited in order to satisfy the court's decision. [EPA-HQ-OAR-2009-0491-2831.1 p.8]
Response:
EPA believes that variability limits in the final rule are adequate to meet the states' operational needs. See preamble section VI.E for more details about variability limits.
Organization: Southern Company
Comment:
V. EPA Should Assess the Air Quality Effects of a Less Restrictive Form of Interstate Trading
As EPA revises the rule and considers a compliance deadline no earlier than 2015, it should also assess the effect of a less restrictive form of interstate trading such as a higher than 10% variability limit as well as trading among group 1 and 2 states. Inherent in the examples in Section IV above comparing the CAIR and the Transport Rule remedies is the assumption that each state achieves the emissions reductions specified (i.e., no interstate trading). However, as shown above, while the overall emissions reductions are very similar across the Transport Rule affected states, the state-by-state differences in emissions between the two scenarios are highly variable, and yet they produce very similar results in terms of remaining nonattainment/maintenance monitors. These results, along with EPA's assessment of the effect of the 10% variability limit, are indicative of the fact that some level of interstate trading can be supported; possibly even unlimited trading (See Table IV-3 above). [See EPA-HQ-OAR-2009-0491-2864.1, p. 11 for Table IV-3] [EPA-HQ-OAR-2009-0491-2864.1, p. 12]
In reviewing EPA's variability analysis, we think the approach to variability (using HI from 2002-2008) is somewhat reasonable although not necessarily straightforward. While there are issues with how the EPA determined that 10% (or a tonnage in some cases) was a reasonable variability limit, EPA did evaluate the effect of emitting 10% above the cap on air quality. EPA evaluated two approaches to estimate the variation in downwind air quality at each monitor for daily PM2.5 allowed under the Transport Rule in 2014 due to the inherent variability in S02 emissions. The first approach examined the I-year variability effects on daily PM2.5 concentration when variations in emissions from different states are independent from each other. This is intended to represent 'typical' random variations in emissions and the resulting typical variations in air quality that might be seen under the Transport Rule. The second approach examined the 'worst' case I-year scenario for each monitor, when the upwind states with the largest impacts per ton emit at the upper end of the variability limit, while upwind states with the lowest impacts per ton emit below their budgets. This is intended to estimate an upper bound for the effects of emissions variability on air quality. [EPA-HQ-OAR-2009-0491-2864.1, p. 12]
EPA made the following conclusions about both approaches: [See TSD, pp, 44, 46, and 47 for EPA's conclusions.]
'For both approaches, the effects of the inherent variation III emissions on daily PM2.5 concentrations were estimated to be small.'  [EPA-HQ-OAR-2009-0491-2864.1, p. 12]
EPA's conclusion about Approach #1: 'In conclusion, we found that, even while allowing each state's emissions to randomly vary up to 10% of its budget (the 2-tailed 95% confidence variability level prescribed or many states in the Transport Rule), the combined downwind air quality impacts were essentially negligible.' [EPA-HQ-OAR-2009-0491-2864.1, p. 12]
EPA's conclusion about Approach #2: 'These results suggest that even under a 'worst case' scenario, where nearby states minimize reductions in emissions, while states far away maximize reduction, the resulting increases in air quality are small relative to other factors (i.e., weather).' [EPA-HQ-OAR-2009-0491-2864.1, p. 12]
As described above and to its credit, EPA did provide a limited assessment of variability on air quality. However, that analysis was too limited in at least two ways. First, EPA should have assessed the air quality effect of an 'unlimited' trading scenario. Second, EPA's analysis only looked at the 'worst-case' scenario of a state essentially emitting 10% above their budget. Under this scenario, EPA concluded that the increases in air quality were 'small'. What would a similar analysis of 15%, 20%, 25%, 50%, etc. above the state budget had shown on air quality? EPA has not justified why their criterion did not also look to see if higher variability, or unlimited trading, had an impact on air quality. In fact, our assessment suggests that a higher percentage may be supportable. [EPA-HQ-OAR-2009-0491-2864.1, p. 13]
Response:
Thank you for your comments.
Organization: Southern Environmental Law Center
Comment:
Southern Environmental Law Center
EPA calculated state emissions budgets by applying the applicable cost thresholds to state-specific EGU data, before accounting for the 'inherent variability in power system operations.' EPA calls its proposed remedy for enforcing those budgets the 'state budgets/limited trading' option. While SELC does not express an opinion on the legality of the proposed variability adjustments, it does urge EPA, at a minimum, to not loosen those adjustments. [EPA-HQ-OAR-2009-0491-2801.1, p.5]
A state's basic emissions budget (without the variability adjustment) would still be used to determine how many emission allowances to allocate to EGUs in the state, so the variability adjustment would not increase the allocation to the EGUs in the state nor would it increase the total number of allowances available across the Transport Rule region. However, the variability adjustment would give a state breathing room to exceed its assigned basic budget. Moreover, if a state did so, because EPA proposes to allow interstate trading, each plant in that state would still be able to satisfy its fundamental requirement to possess an allowance for each ton of pollutant it emitted by purchasing allowances from plants in other states as necessary. [EPA-HQ-OAR-2009-0491-2801.1, pp.5-6]
This proposed flexibility would allow significant increases in emissions, and thus, the harmful downwind health and environmental impacts that the Transport Rule is designed to address. To provide an example from the Southeast region, Georgia's basic annual SO2 budget would be 85,717 tons per year ('tpy'). Its 1-year variability adjustment for that budget would be 8,572 tons and its 3-year average limit would be would 4,949 tons. In a single year, then, Georgia's EGUs could increase their collective SO2 emissions by 10% and still all be in compliance with the allowance holding requirement by purchasing as many as 8,572 allowances from power plants in Wisconsin, Illinois, or New York, among other states. While Georgia could not continue to overshoot its budget to this extent year after year because of the 3-year variability limitation, the 3-year adjustment would not prevent periodic, annual excess emissions that would have health impacts in Georgia and the downwind states it contributes to. [EPA-HQ-OAR-2009-0491-2801.1, p.6]
Response:
As explained in the preamble, state-level emissions are likely to vary even after all significant contribution to nonattainment and interference with maintenance that EPA identified in this final rule are eliminated. EPA believes that the remedy uses variability limits in a way that both provides the flexibility of air quality-assured trading for dealing with real-world variability in the operation of the power system while providing assurance for downwind states that significant contribution to nonattainment and interference with maintenance by upwind states will be eliminated.  EPA's remedy is consistent with CAA requirements and the court's rulings.  Three-year variability limits are not part of the final rule.  See preamble section VI.E for more information about variability limits and required reductions.
Organization: State of Delaware Department of Natural Resources & Environmental Control
Comment:
State of Delaware Department of Natural Resources & Environmental Control
Delaware is also concerned with EPA's concept of providing 1-year and 3-year average variability mass emission provisions that could serve to allow upwind states to increase their emissions above the limit that EPA has calculated to be required to fully eliminate that state's significant contribution or interfere with maintenance in a downwind state. It is Delaware's understanding that EPA has considered the use of this variability concept in order to help address concerns regarding the variability in electric demand and to prevent impact on electric grid reliability. While Delaware understands the need to maintain grid reliability, it is Delaware's concern that under this scenario any given upwind state, or group of upwind states, could potentially emit on a routine basis at levels that exceed the values calculated by the EPA as needed to eliminate significant contribution and interference with maintenance in a downwind state. It is Delaware's opinion that the proposed variability concept be eliminated or revised such that any revision would preclude the potential for and upwind state or group of upwind states to significantly contribute to a downwind state's inability to comply with applicable NAAQS, or interfere with maintenance of that NAAQS. [EPA-HQ-OAR-2009-0491-2980.1, pp.4-5; this comment can also be found at section IV.F.6 of this comment summary]
Response:
As explained in the preamble, state-level emissions are likely to vary even after all significant contribution to nonattainment and interference with maintenance that EPA identified in this final rule are eliminated. EPA believes that the remedy uses variability limits in a way that both provides the flexibility for dealing with real-world variability in the operation of the power system while providing assurance for downwind states that significant contribution to nonattainment and interference with maintenance by upwind states will be eliminated.  In addition, there are no 3-year variability limits in the final rule. Delaware is no longer included in the Transport Rule region.  See preamble section VI.E for more information about variability limits and required reductions.
Organization: State of Ohio Environmental Protection Agency (Ohio EPA)
Comment:
State of Ohio Environmental Protection Agency (Ohio EPA)
c. Ohio EPA believes it is imperative that U.S. EPA take the time to ensure that the appropriate historical emissions and assumptions are used when establishing allocations of the budgets as these allocations are not slated to be adjusted in the future. Ohio EPA believes it would be appropriate to use a similar methodology used when establishing the variability limits, i.e., averaging a series of years. The variability limit is based on the average heat input over several years, but starting budget allocations are based on emissions in one arbitrary year only, which, in this case, is a low demand year. A multi-year averaging approach should be used, continuing to account for controls put in place since such time, and making appropriate corrections and substitutions for periods of non (or very low) operation. [EPA-HQ-OAR-2009-0491-2793.2, p. 9]
Response:
EPA is finalizing a historic heat input methodology for allocation of emissions allowances under the FIP.  See final rule preamble section VII.D for more information about the date range and calculation used.
Organization: State of Wisconsin, Department of Natural Resources
Comment:
State of Wisconsin, Department of Natural Resources
Preferred Program Approach - Addressing year-to-year Variance - Within both its preferred inter-state trading/banking program and its alternate intra-state trading program, EPA has added a component of emissions they call variance to account for year-to-year meteorology and economic variability in the level of actual annual emissions from the power sector. This variance structure effectively increases the 'working' budget for states by 10% or more for anyone year. By allowing for variance, EPA has placed the burden of impact on downwind states rather than accounting for it within the state emission budgets and makes the EPA-recommended trading structures too complex. One consequence is any modeled benefit projected within an attainment demonstration must necessarily discount the enforceable emission reduction by the same 10% because modeling needs to reflect actual system response during ozone and 24 hour PM-2.5 episodes. [EPA-HQ-OAR-2009-0491-2829.2, p. 9; This comment can also be found at V.D.2.d. of this comment summary]
Wisconsin recommends that any variance in anticipated emission levels is addressed directly within the budget levels, thereby streamlining the trading and banking structure to avoid the potential air quality and legal problems associated with the proposed variance structure. A potential hybrid approach would be to combine a firmly limited inter-state trading program with a minimum rate-specified intra-state averaging program at a level that would reflect a slightly lower equivalent budget during typical periods. [EPA-HQ-OAR-2009-0491-2829.2, p. 9; This comment can also be found at V.D.2.d. of this comment summary]
A simple assessment of the level of heat input modeled to establish the 2012 and 2014 budgets indicated that EPA already includes some portion of variance within the proposed budget levels. Any alternate variance structure should provide a lower net buffer than proposed in the current rule which provides for significantly greater system fuel consumption than 2009 levels and also includes a separate variance component. Sensitivity analysis suggests the current system annual operation level based on heat input could be raised by 6% for a 2014 budget (on average) in order to reflect the maximum level of system operation by state for the period 2005-2009 (see Figure 1), thus precluding the need for a separate variance structure. [EPA-HQ-OAR-2009-0491-2829.2, pp. 9-10; This comment can also be found at V.D.2.d. of this comment summary]
Regardless of the final program structure adopted, EPA should retain some compliance flexibility, but focus that flexibility most in the early program years of 2012-2014 when it is most needed. 1t might make sense to start with a fairly open inter-state trading and banking program, but transition in later program phases (post-2014), to a structure that more reflects the Court's direction to meet state-by-state targets and to address the States' and Court's assurance concerns. [EPA-HQ-OAR-2009-0491-2829.2, p. 10; This comment can also be found at V.D.2.d. of this comment summary]
Response:
See response in RTC section V.D.2.d.
Organization: West Virginia Department of Environmental Protection
Comment:
West Virginia Department of Environmental Protection
EPA requested comment on the proposed variability limits and assurance provisions. With the inclusion of EPA's alternative calculation method for variability, WVDAQ generally supports the variability and assurance provisions in the proposed Transport Rule. We believe that when properly applied, variability limits help achieve good air quality while still allowing for real-world outages and weather events. However, in a few cases, the proposed variability is so large that it becomes dominant over the state's budget. For example, the proposed one-year S02 variability limits for the District of Columbia and Connecticut, are 504 percent and 56 percent of their respective budgets, and the threeyear variability limits are 291 percent and 32 percent ofthe respective S02 budgets. [EPA-HQ-OAR-2009-0491-2790.1, p. 6]
As proposed, the one-year annual NOx variability limit for the District of Columbia is 2941 percent of its proposed budget, and the proposed three-year variability limit is 1698 percent of the District's proposed budget. The seven areas that would be affected by the use of the alternative calculation methodology for variability for annual NOx, have proposed one-year variability limits ranging from 21 percent to 2941 percent of their budgets, with three-year variability limits ranging from 12 percent to 1698 percent oftheir annual NOx budgets. [EPA-HQ-OAR-2009-0491-2790.1, p. 6]
Response:
EPA has modified the approach to variability limits in the final Transport Rule to align variability limits with historic heat input variability between 2000 - 2010 for all covered states.  In addition, Connecticut, Delaware, and DC are no longer in the Transport Rule region.  For more on variability limits, see section VI.E of the preamble to the final Transport Rule.

IV.F.2. Estimating Year-to-Year Variability/Determination of 1-Year Variability Limits

Organization: Boston Generating
Peabody Municipal Light Plant
Organization: Boston Generating
Comment:
One year's worth of actual emissions data does not account for normal operating variability and therefore EPA should approximate baseline actual emissions using at least a three year look back period, similar to how the MassDEP allocates allowances under Mass CAIR and previous NO, Budget Programs.  [EPA-HQ-OAR-2009-0491-3804.1 p.1]
Response:
Thank you for your comment.
Organization: Peabody Municipal Light Plant
Comment:
One year's worth of actual emissions data does not account for normal operating variability. Unit 2 dispatch is highly dependent on ambient temperatures and sometimes unit outages in the North Eastern Management Area (NEMA). For example, Unit 2 operated less than usual in 2009 because ambient temperatures were lower than normal. EPA should approximate baseline actual emissions using at least a three year period, similar to how the MassDEP allocates allowances under Mass CAIR and previous NOx Budget Programs. The following table summarizes actual NOx emissions for 2008, 2009 and 2010 (estimate through September 2010). [EPA-HQ-OAR-2009-0491-3730.1 p.1; see data table]
Response:
Thank you for your comment.

Organization: National Rural Electric Cooperative Association (NRECA)
Old Dominion Electric Cooperative
Organization: National Rural Electric Cooperative Association (NRECA)
Comment:
Limitations on interstate allowance trading are too stringent. Both the annual and three-year rolling average limitations could be loosened while still meeting North Carolina legal mandates. [EPA-HQ-OAR-2009-0491-2723.1, p.1]
For interstate trading restrictions in the preferred remedy, EPA has proposed a yearly variability of 10 percent of the state budgets, or in the case of states with small budgets, numerical limits; and a three-year variability limit statistically derived by dividing the one year limit by the square root three. EPA requests comment on whether these proposed variances could be relaxed somewhat and still meet the requirements espoused by the court in North Carolina. As stated previously, NRECA believes trading is a vital element in the proposed CATR as a means of reducing costs, thus the more allowed the better so long as Section 110(a)(2)(D)(i) legal mandates are fulfilled. The underlying support for the proposed trading limits is based on statistical analysis of historic heat in-put variability on a state-by-state basis.  This analysis, however, reflects only variances in heat inputs and not emissions reductions. As EPA is well aware, the agency is implementing a "comprehensive strategy" over the next two years to further reduce electric utility air emissions, such as an electric utility hazardous air pollutant (HAPs) regulatory program that will cause emissions addressed in this proposed CATR to be reduced further. With the subsequent implementation of the utility HAPs program, SO2 and NOx emissions will be reduced to levels below that contemplated with the implementation of this proposed CATR alone. Thus, the heat in-put metric for limiting interstate trading will certainly not be as valuable a surrogate in the future as EPA assumes it to be in the present for predicting emissions reductions. Accordingly, NRECA suggests that the proposed variability limits be liberalized to reflect additional reductions that are imminent with the implementation of EPA's "comprehensive strategy." To this end, a 20 percent annual variability with resulting increase the three-year variability limit is appropriate. [EPA-HQ-OAR-2009-0491-2723.1, pp.11-12]
Organization: Old Dominion Electric Cooperative
Comment:
For interstate trading restrictions in the preferred remedy, EPA has proposed a yearly variability of 10% of the state budgets, or in the case of states with small budgets, numerical limits; and a 3 year variability limit statistically derived by dividing the one year limit by the square root 3. EPA requests comment on whether the proposed variability could be relaxed somewhat and still meet the requirements espoused by the court in the North Carolina decisions, ld. a|45,305. As stated previously ODEC believes trading is a vital element in the proposed Transport Rule as a means of reducing costs, thus the more trading allowed the better so long as s 110(a)(2)(D)(i) legal mandates are fulfilled. The underlying support for the proposed trading limits is based on statistical analysis of historic heat in-put variability on a state by state basis. This analysis, however, reflects only variances in heat input and not emissions reductions. As EPA is well aware, the agency is implementing a 'comprehensive strategy' over the next 2 years to further reduce electric utility air emissions such as an electric utility hazardous air pollutant (HAPs) regulatory program that will cause emissions addressed in this proposed Transport Rule to be reduced further, id. at 45,227. With the subsequent implementation of the utility HAPs program SO2 and NOx emissions will be reduced to levels below that contemplated with the implementation of this proposed Transport Rule alone. Thus, the heat in-put metric for limiting interstate trading limits will certainly not be as valuable a surrogate in the future as EPA assumes it to be in the present. Accordingly, ODEC suggests that the proposed variability limits be liberalized to reflect additional reductions that are imminent with the implementation of EPA's 'comprehensive strategy.' To this end a 20% annual variability with a corresponding increase in the 3 year variability limit is appropriate. [EPA-HQ-OAR-2009-0491-2877.1,p.8]
Response:
EPA disagrees with the commenter's characterization of the purpose of the Transport Rule's variability limits.  The variability limits are not designed to accommodate variability in emission control stemming from specific imposition of other environmental requirements.  EPA does not see any technical basis for changing the requirements of the Transport Rule simply because covered units have other environmental obligations, especially where there is no evidence that compliance with those other obligations would impair the sector's ability to comply with the obligations of this rulemaking.  Furthermore, the commenter notes that EPA's "comprehensive strategy" would "further reduce electric utility air emissions."  Under such a scenario, states would find it even easier to meet their Transport Rule obligations; it does not logically follow that EPA should adjust the Transport Rule's variability limits to accommodate that potential lower-emission outcome.  Finally, the commenter incorrectly asserts that EPA is using historic heat input as a "surrogate... for predicting emission reductions," which the commenter then criticizes.  To develop the variability limits under the Transport Rule, EPA analyzed historic heat input as a surrogate for year-to-year variability in EGU emissions while holding emission controls constant.  This analysis is specifically designed to assess annual variability in emissions, not to predict future emission reductions.  See preamble section VI.E and VI.F for more details on variability limits in the final Transport Rule.
Organization: Maryland Department of Environment (MDE)
Comment:
Variability
In the proposed Transport Rule EPA addresses electric reliability by establishing the concept of variability. In doing so, EPA guards against the possibility that specific emissions budgets assigned to individual states will impede a fluid and adequate supply of electricity among EGUs. EPA cites a number of factors that may contribute to difficulty in maintaining electric reliability: fluctuations in demand, maintenance, shutdowns, weather, economics and other unpredictable events. EPA asserts that these factors act independently state by state, and EPA develops a statistical method of creating a variability allowance of emissions additional to the state budgets established under significant contribution. EPA claims that this does not affect assurances that significant contribution to downwind nonattainment and interference with maintenance of NAAQS will be eliminated. EPA gives two reasons: 1) overall emissions will not increase because additional allowances will not be distributed, and 2) because the baseline emissions are variable, emissions after the elimination of all significant contribution and interference are also variable and thus it is appropriate to take this variability into account. EPA asks for comment on a number of aspects of the variability proposal. [EPA-HQ-OAR-2009-0491-2639.2, pp.12-13]
Maryland appreciates the need to address variability and agrees with its inclusion in the Transport Rule. However, we have significant concerns with EPA's proposed variability structure in the proposed rule. Many of the factors EPA cites as reasons for establishing variability do not independently affect the impacted states. Instead, groups of neighboring states may be affected simultaneously, a possibility that EPA does not seem to have properly analyzed when designing its variability concept. [EPA-HQ-OAR-2009-0491-2639.2, p.13]