EPA has asked whether its proposed alternative methods of allowance allocations should have any impact on EPA's use of the Transport assurance provision. See 76 Fed. Reg. at 1118. As MMEA stated in its October 2010 Transport Rule comments, EPA's assurance compliance provisions will impose a significant pro-rata penalty on any unit that did not reduce emissions sufficiently in any state that exceeds its emissions budget plus variability margin. However, given that Michigan public power units do not have the ability to cost effectively apply major pollution controls, and instead are maintaining compliance through Michigan hardship allowances, the application of assurance provisions on Michigan would impose major, disproportionate impacts on public power communities. Such disproportionate impacts on small units that rely on allowances for compliance will not change under the 3rd NODA proposal, which still does not allow States to provide initial allowance allocations, and which still takes away the hardship allowance feature established in Michigan. [EPA-HQ-OAR-2009-0491-4020[1].1, pp.6-7]
If the State of Michigan busts its assurance budget, it will not be because of these small utility units, whose emissions represent a small fraction of the State's emissions budget. For instance, the combined total annual NOx tons represented by all of the units owned and operated by the Michigan municipal commenters here represent less than 7 percent of the 62,984 ton annual NOx budget that will be provided to the State of Michigan under the proposed Transport Rule. If the larger entities with far larger and far more units bust the Michigan budget, they will likely have more options for compliance and fleet-wide averaging, yet the brunt of the assurance penalties will fall disproportionately on the small municipal units that depend on obtaining allowances to comply. [EPA-HQ-OAR-2009-0491-4020[1].1, p.7]
Any inequities imposed on small units like MMEA's members under the assurance provisions or through market power abuses could also be addressed through the use of a "Small Entity Compliance Supplement Pool" as suggested above, which could be used to address inequities in the application of assurance penalties. [EPA-HQ-OAR-2009-0491-4020[1].1, p.7]
MMEA urges EPA to delay the Transport Rule to allow states like Michigan to exercise their Clean Air Act right to submit a SIP to control allocations within their borders, and to consider the use of a compliance supplement pool to avoid disproportionate impacts on small municipal units that have complied in good faith with NOx and SO2 laws and regulations thus far. [EPA-HQ-OAR-2009-0491-4020[1].1, p.7]
Response:
With regard to the deadlines for compliance, see section VII.C of the preamble.
With regard to the suggested compliance supplement pool for small entities, the commenter failed to show that such a pool is necessary.   Based on its analysis of the impact of the final rule on small entities, EPA concluded that the Transport Rule will not have a significant impact on a substantial number of small entities.  See section XII.D of the preamble.   Further, the final rule establishes procedures under which state may submit SIP revisions that will replace, for control periods as early as those in 2013, EPA-determined existing-unit allowance allocations by state-determined existing-unit allocations.  See section X of the preamble.
With regard to the assurance provisions, the final rule implements the assurance provisions on a common designated representative basis.  This provides owners and operators of a unit, including a small municipal unit, the flexibility to group the unit with other units and sources in order to eliminate or reduce potential liability for any assurance provision penalty that would be imposed if the state exceeds the state assurance level for a given year.  See section VII.E of the preamble to the final Transport Rule.
Organization: Midwest Ozone Group
Comment:
Midwest Ozone Group
MOG believes that seeking comments on allowance allocations is a classic example of the tail wagging the proverbial dog. [EPA-HQ-OAR-2009-0491-3895[1].1, p.1]
MOG notes that the proposed CATR contains information related to a 2005 base year. EPA published a significant amount of data in the first NODA that MOG suggests does not support the CATR as proposed. NODA II contained additional modifications to data used by EPA in assessing the CATR. In NODA III, EPA is seeking comments on options for allocation of allowances. [EPA-HQ-OAR-2009-0491-3895[1].1, p.1]
Data submitted by MOG in comments responding to the proposed CATR clearly show that, with the exception of two Pittsburgh area monitors that are locally influenced, all of the stated air quality objectives of the CATR will not only be met by 2014, they will be met in 2018 through controls that are already on the books. MOG continues to believe that there is no need for a CATR and especially no need for a CATR focusing on the EGU sector, which constitutes less than ten percent of the precursor current inventory in the states affected by the proposed CATR. [EPA-HQ-OAR-2009-0491-3895[1].1, p.1]
EPA should remodel the CATR, taking into consideration both recent dramatic improvements in air quality since 2005 and updated inventories for all sectors, as well as comments submitted on the CATR and NODAs citing noted flaws in EPA's modeling platform and projection assumptions. [EPA-HQ-OAR-2009-0491-3895[1].1, pp.1-2]
Response:
Thank you for your comment. Please see the response to MOG's previously submitted comment on this topic.
Organization: Mille Lacs Band of Ojibwe
Comment:
Mille Lacs Band of Ojibwe
Repeatedly, the USEPA have stated the primary purpose of the Air Transport Rule is to protect the health of the public and the health of the natural resources we share; it would be only prudent for the USEPA to implement remedy immediately and introduce modifications to the proposed Federal Implementation Plans (FIPs), so that the limits would apply starting in 2012 instead of 2014. [EPA-HQ-OAR-2009-0491-4019[1].1, p.2]
USEPA proposes to set air transport of pollution threshold at 1% of the National Ambient Air Quality Standards (NAAQS) for each of the key air pollutants-SO2 and NOx for PM2.5 and NOx for O3. The Band agrees with this 1% of NAAQS threshold as an initial step, but recommends USEPA to lower the threshold by 0.1% per decade such that in a century, no domestic air pollution would contribute to degradation of air quality through transport. In addition, to ensure protection of air quality to all citizens, the Band recommends USEPA to review the rate of progress every 5 years in the regions affected by the Air Transport Rule, and every 10 years to incorporate additional areas until all US States, Tribes, Protectorates and Territories are covered by the Air Transport Rule. During the same period, we encourage USEPA to coordinate with the US State Department to negotiate with our foreign neighbors and to encourage them to take parallel action to our Air Transport Rules such that neither we contribute to the degradation of their air quality nor they contribute to the degradation of our air quality. [EPA-HQ-OAR-2009-0491-4019[1].1, p.2]
The Band agrees with the USEPA that decoupling the precision of the air quality thresholds with the monitoring reporting requirements, and by using 2-digit values representing 1% of the NAAQS, which for under current PM2.5 NAAQS is 0.15 ug/m3 for the annual standard, and 0.35 ug/m3 for the 24-hour standard. This provides for a consistent approach for the annual and 24-hour standards, while readily making this approach applicable to any current and future NAAQS. [EPA-HQ-OAR-2009-0491-4019[1].1, p.2]
As air pollutant comes from all emission sectors, the Band recommends permitted non-EGU emissions reductions should be required if at the time of Prevention of Significant Deterioration (PSD) permit issuance or reissuance, modeling is conducted to holistically look at its cumulative effects of air pollution, and if the facility meets the Air Transport Rule's NAAQS-based threshold. If the non-EGU does not meet the NAAQS-based threshold, the facility would not be subject to the Air Transport Rule. This provision is of interest to the Band as within 80 miles of the Band are numerous non-EGU sources associated with the mining sector. Though some mining entities are already working towards reduction in NOx, vast majority of the mining sectors are not taking this proactive steps in reducing their NOx contribution; extending the Air Transport Rule to these non-EGU sources will help in improving our air quality. Similarly as another example, within 80 miles of the Band are three petroleum refineries. All three have taken steps to significantly lower their SO2 emissions, with a slight increase in their NOx emissions; repeatedly these three refineries are given as examples of being in the small group of cleaner refineries, but by extending the Air Transport Rule to non-EGUs, if they meet the NAAQS-based threshold, other peoples in the US who may be affected by the majority of not as clean petroleum refineries can receive similar benefits of cleaner air. [EPA-HQ-OAR-2009-0491-4019[1].1, p.2]
A concern for the Band is the availability of and access to affordable energy. Too often swings in market demands for energy have made the energy either physically inaccessible or unaffordable, which places great hardships on economically impoverished population groups, such as many of our Band members who live either on the Mille Lacs Indian Reservation or in Minneapolis' Phillips Communities, a group of four inner-city low-income neighborhoods. Too often energy providers implement temporary rate hikes which its effects disproportionately places our low-income Band members into peril, by loss of ability to feed themselves and their family, inability to go to and from their place of employment, or with sudden loss of a home. When implementing, the Band urges USEPA to ensure such implementation would not encourage EGUs to readily pass the cost of implementation to their customers. [EPA-HQ-OAR-2009-0491-4019[1].1, pp.3-4]
Though we understand USEPA would like comment on electric reliability issues, the Band realizes vast majority of electrical reliability issues stem not from EGUs, but rather from poor or antiquated electrical distribution system across the United States. We instead encourage USEPA to work closely with the US Department of Energy (USDOE) and the US Department of the Interior (USDOI) to develop a plan for the whole nation to better upgrade, maintain and secure our electrical distribution system. [EPA-HQ-OAR-2009-0491-4019[1].1, p.4]
While the Band agrees with USEPA that the proposed rule will generally make energy efficiency investments more competitive, if care is not taken by the USEPA on the treatment of minor sources, the new rule may instead foster a blossoming of many small EGUs across the country where their aggregated total emissions output may outpace the any improvements brought on through efficiency, thus nullifying the intent of the Air Transport Rule. For this reason, we strongly urge USEPA to consider not just the output from major source EGUs, but also take in consideration minor source EGUs by factoring in these minor sources' emissions in relation to density of their presence, and their relation to the major sources, such that we are not merely shifting a major source point source into an area source comprised of many minor source point sources. [EPA-HQ-OAR-2009-0491-4019[1].1, p.4]
The Band recognizes USDOE is the appropriate Federal entity to promote and regulate future energy policies and strategies. However, the Band also recognizes USEPA is the appropriate Federal entity to manage, regulate and reduce or eliminate environmental pollutants. Because of this, the Band strongly urges USDOE and USEPA to cooperatively work together to consider energy efficiency considerations in developing the allowance allocation methodology such that all citizens of the United States may enjoy access to affordable clean energy through a well-developed allowance allocation methodology. We caution, though, too often existing energy development took place on the backs of Tribes with little to no benefits given back to them. For example, the damming of river waters in name of flood control, but also used in managing the volume of waters flowing to hydroelectric generating facilities downstream, such as one located at the outlet of Big Sandy Lake for the Sandy Lake River-a major tributary of the Mississippi River-and several locations on the Mississippi, including dams located at Brainerd, Little Falls, Royalton and Sartell, have all significantly affected the Wild Rice beds, which their access and harvest by the Band are protected by treaties. Though we recognize hydroelectricity is very clean, allocations benefitting them for their production clean energy while our access to these treaty resources are threatened, or in many cases lost through policy taken by others, is a severe breech of Federal Trust responsibilities to the Tribes. No allowance allocation, even if the Band is financially compensated for the loss of this natural resource, is worth the loss of this precious gift from the Gichi-manidoo to all life; our past leaders have negotiated with the representative of the United States to ensure the protection of these resources and guarantee access to it for all future generations. [EPA-HQ-OAR-2009-0491-4019[1].1, p.4]
Response:
EPA thanks Mille Lacs Band of Ojibwe for their comments. However, comments on setting the air transport pollution threshold, permitting non-EGUs, and future work with USDOE fall outside of the scope of NODA3.
With regard to the comment on access to affordable energy, EPA's analysis of the economic impacts of the final Transport Rule can be found in Preamble Section VIII.D.
Organization: Minnesota Power
Comment:
Minnesota Power
Considering MPs high percentage of industrial customers who are high energy users and struggling to compete in a competitive global market economy, we are concerned that any further restrictions applicable to our facilities be implemented with reasonable timeframes and cost to minimize adverse impacts on our customers. [EPA-HQ-OAR-2009-0491-4009[1].1, p.2]
The magnitude of Proposed Transport Rule and NODA data offered by EPA for review is vast and time for review has been limited to 30 days. Consequently, Minnesota Power review has focused on a basic assessment of EPA's proposed budget allocations and matters related to Minnesota sources. As noted in previous comments by Minnesota Power (MP) to this Docket, MP has observed deviations between the initial Transport Rule and NODA/NEEDS data ascribed to Minnesota sources. [EPA-HQ-OAR-2009-0491-4009[1].1, p.3]
Response:
Thank you for your comment.Organization: National Association of Clean of Air Agencies (NACAA)
Comment:
National Association of Clean of Air Agencies (NACAA)
Since NACAA submitted its comments on the Transport Rule proposal, EPA has twice delayed its release of the revised ozone NAAQS. EPA is now scheduled to release the final revised ozone NAAQS by July 31, 2011, a year later than originally announced. Thus, it is unlikely the agency will be able to propose Transport Rule II in the summer 2011 and finalize it by summer 2012, as the agency had planned to do. [EPA-HQ-OAR-2009-0491-3964[1].1, p.2]
This postponement means a delay in critical reductions in air pollutant emissions from power plants. The Transport Rule reductions are designed to eliminate interstate transport of nitrogen oxide (NOx) emissions that interfere with attainment of the 1997 ozone standard of 0.084 parts per million (ppm), which is unprotective of public health. The Bush administration revised this standard to 0.075 ppm in 2008. However, EPA said it was unable to consider the more stringent 2008 standard in crafting the Transport Rule because EPA was reconsidering the standard. Thus the proposed Transport Rule is inadequate to the task of protecting public health. And, because EPA has postponed revising the 2008 standard, a new more protective Transport Rule II is also likely to be deferred until a later date. NACAA urges EPA to proceed as expeditiously as practicable with a Transport Rule II that takes into account a more protective ozone standard and thus includes more stringent NOx reductions. [EPA-HQ-OAR-2009-0491-3964[1].1, pp.2-3]
Response:
EPA thanks NACAA for their comment, but it falls outside of the scope of NODA3. However, a similar comment previously submitted by NACAA has been responded to in RTC Section IV.E.1.
Organization: National Grid
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Oglethorpe Power
South Carolina Department of Health and Environmental Control
State of Louisiana, Department of Environmental Quality
Comment:
National Grid
We appreciate EPA's effort to develop regulations that will provide needed air quality improvements in a manner that addresses the Court's concerns and that can be implemented in a timely manner to ensure that air quality objectives can be realized. As a member of other industry groups, National Grid will be supporting other comments being submitted. [EPA-HQ-OAR-2009-0491-3921[1].1, p.1]
Oglethorpe Power
Federal Implementation Plan, EPA proposes to assume the responsibility of distributing allowances to affected EGUs in the CATR regions. As proposed, allocated allowances are to be based on the annual sulfur dioxide ('SO2'), annual nitrogen oxides ('NOx') and ozone season NOx emission budgets established for that state. Four discrete types of emissions allowances are to be allocated, for four totally separate cap-and-trade programs - SO2 Group 1 allowances, SO2 Group 2 allowances, NOx annual allowances and NOx seasonal allowances - to covered sources.  [EPA-HQ-OAR-2009-0491-3896[1].1, p.2]
Subsequently, on September 1, 2010, EPA published a Notice of Data Availability ('NODA 1') for the proposed CATR, supplementing the proposed rule with new information about EGUs. On October 27, 2010, EPA published a second NODA for the proposed CATR 'NODA 2'), which primarily addressed emission inventory issues for non-EGU source sectors. Recently, on January 7, 2011, EPA supplemented thg proposed CATR docket, with additional relevant information in a new NODA ('NODA 3').' [EPA-HQ-OAR-2009-0491-3896[1].1, p.2]
Oglethorpe Power Corporation ('Oglethorpe Power' or the 'Corporation') submitted comments on the proposed CATR (letter dated October 1, 2010) and on NODA 1 (letter dated October 15, 2010). As an owner, co-owner and/or operator of numerous EGUs in the State of Georgia, Oglethorpe Power has a substantial interest in ensuring that the Agency makes informed and reasonable decisions during this CATR rulemaking, as EPA moves forward to create regional NOx and SO2 emissions control/trading programs for EGUs that will replace those in the CAIR. Thus, Oglethorpe Power has a substantial interest in EPA's NODA 3. [EPA-HQ-OAR-2009-0491-3896[1].1, p.2]
Although Oglethorpe Power does not agree that assurance provisions are appropriate (or that the allowance surrender requirements or other penalty provisions in the proposed CATR are reasonable. [EPA-HQ-OAR-2009-0491-3896[1].1, p.5]
South Carolina Department of Health and Environmental Control
On October 1,2010, DHEC submitted comments on the August 2,2010, Proposal. In this comment letter, DHEC noted, among other things, that the method used to determine allocations in the NOx SIP Call and Clean Air Interstate Rule ('CAIR), heat input, was more transparent and reliable than the method used in the August 2,2010, Proposal, basing projections on the Integrated Planning Model ('IPM). DHEC also noted that the EPA should elaborate on the State Implementation Plan ('SIP') options, and allow states a greater role in implementing the Transport Rule with the EPA. [EPA-HQ-OAR-2009-0491-3961[1].1, p.1]
State of Louisiana, Department of Environmental Quality
LDEQ understands that the unit-level allocations in this NODA are based on state emissions budgets in the proposed Transport Rule. LDEQ understands that final state budgets may differ from the proposed budgets because EPA is still in the process of updating its emissions inventories and modeling in response to public comments, including comments on the Integrated Planning Model (IPM). Furthermore, LDEQ applauds EPA's work toward final budgets based on the updated inventories and modeling. LDEQ works very hard to make certain that the state's emissions inventory is robust and appreciates EPA's effort toward the same goal. [EPA-HQ-OAR-2009-0491-3977[1].1, pp.1-2]
Louisiana, through approved SIPs, managed the allocations for the state's facilities through the. Clean Air Interstate Rule (CAIR). This program was developed by the LDEQ with stakeholder input. Such stakeholders were the Louisiana Public Service Commission and the different electric generating units (EGUs) statewide. This program was very effective and Louisiana has realized a decrease in the emissions of S02 and NOx. [EPA-HQ-OAR-2009-0491-3977[1].1, p.2]
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  EPA has requested comment on alternative unit-level emission allocation methodologies. However, in its January 7 notice, EPA recognizes that its proposed budgets are still a work in progress due to the fact that the agency is continuing the process of updating its emission inventories and modeling due to public comment received on the original July 2010 proposal. [EPA-HQ-OAR-2009-0491-3976[1].1, p.1]
We have made significant investments in reducing NOx and SO2 emissions, and wish to receive equitable allowance allocations. We hope to avoid allocation penalties that could result from not receiving enough allowances to cover our full system of fossil units. Our compliance plan revolves around first making investments at our larger baseload units where controls are most cost effective, and essentially over-controlling at these units to cover higher emission rates at our smaller units, that are more costly to retrofit. [EPA-HQ-OAR-2009-0491-3976[1].1, p.2]
Response:
[No response needed.]
Organization: National Mining Association (NMA)
Comment:
National Mining Association (NMA)
NMA also reiterates the position it has taken in prior comments in this and other rulemakings that EPA must assess the cumulative impact of all of its regulations that affect the use of coal for electric generation and as a commercial and industrial fuel. Cumulative impact analysis is called for in the President's recent Executive Order 13563 and is particularly important here because NODA-3 and the Transport Rule represent one of a series of EPA regulations that may profoundly affect the most dominant fuel this country uses for electric generation. We therefore urge EPA to take a pause in the Transport Rule process until it performs a cumulative impact assessment. [EPA-HQ-OAR-2009-0491-4013[1].1, p.2]
A pause is also warranted because, with each of EPA's three successive NODAs, the nature of the rule that EPA is actually proposing has become increasingly uncertain. As NMA has commented previously, the fact that the public does not at this point know fundamental aspects of EPA's proposal impairs the public's right to notice and comment in the rulemaking process. Moreover, with the January 1, 2012 compliance date rapidly approaching, the utility industry does not have sufficient time to prepare to comply with whatever requirements ultimately are adopted. [EPA-HQ-OAR-2009-0491-4013[1].1, p.2]
A pause at this point for EPA to package up all of the changes it wishes to make to the proposed rule as a result of the three NODA processes and to issue a new proposed rule for public comment would not impair air quality. The Clean Air Interstate Rule remains in place. EPA can, and at this point must, delay the start of the CATR program in order to do the rulemaking process correctly and in accordance with law. [EPA-HQ-OAR-2009-0491-4013[1].1, p.2]
:: All of this increase comes at the expense of coal units. EPA set state budgets based on reported or projected emissions and used those values to determine unit level allocations. Thus, the PTR Method allocations to coal-fired electric generating units (EGUs) represent EPA's approximation of emissions from coal-fired EGUs after elimination of significant contribution and interference with maintenance. [EPA-HQ-OAR-2009-0491-4013[1].1, p.4]
To be sure, the interest in accuracy in the first factor above could be a legitimate reason for selecting a particular allocation methodology. EPA, however, was satisfied enough with using historical and projected unit emissions in determining state budgets; indeed, the state budgets were determined by first determining and then adding up historical and projected emissions from units within the state. Thus, if historical and projected unit emissions data were sufficiently reliable for use in determining state budgets, they must be reliable enough for determining unit allowance allocations. This conclusion has even more force in that, as EPA would have to concede, the Agency has less discretion and therefore more need for accuracy in determining state budgets than it does in determining allowance allocations to individual units. [EPA-HQ-OAR-2009-0491-4013[1].1, p.8]
Furthermore, contrary to the implication that the emission-based methodology should be rejected because it is not "neutral" as to fuel and emissions controls, such methodology, in fact, is indifferent as to both factors. Under the emissions-based methodology, units are allocated allowances based on their reducing emissions down to the level necessary to eliminate their individual contribution to the state's overall significant contribution (their "contribution to significant contribution"). In other words (simplifying), if a unit emits 1000 tons, and EPA determines through its Integrated Planning Model ("IPM") that such unit can cost-effectively reduce emissions to 100 tons, then the unit gets 100 allowances, and that result is obtained regardless of the fuel the unit burns or the controls the unit has. [EPA-HQ-OAR-2009-0491-4013[1].1, p.9]
The rule, as proposed, ensures that higher-emission-rate units will reduce their emissions to the extent they can do so cost-effectively. The whole premise of the rule, and EPA's basic interpretation of CAA section 110(a)(2)(D)(i)(I) going back to the NOX SIP Call, is that a state's significant contribution is defined by the amount of emission reductions that a state can be make cost-effectively. The emissions-based methodology is designed to carry out this premise at both the state budget level and at the unit level. Thus, under the emissions methodology, units that can cost-effectively reduce will be required, in EPA's phrase, "to reduce emissions or purchase additional allowances" because their allowance allocations will match the amount of their emissions after they make cost-effective emission reductions. As EPA's projections show, precisely because it is more cost-effective in general to reduce emissions at higher-emission-rate units than lower-emission-rate units, the burden of reducing emissions will be borne to the greatest extent by the higher-emission rate units. [EPA-HQ-OAR-2009-0491-4013[1].1, p.10]
NMA has previously commented to EPA that NODA-1 and NODA-2 fundamentally impaired the public's right to comment on the proposed rule because the public no longer knows specifically what rule EPA is proposing. [EPA-HQ-OAR-2009-0491-4013[1].1, p.11]
Each of the three NODAs provides new information, revises critical underlying data, explains new modeling assumptions, or presents new methods. In many cases these changes are likely to impact literally every aspect of a final regulatory program. Yet with each NODA, EPA fails to provide the data needed to determine how the various NODA changes would impact the final rule. [EPA-HQ-OAR-2009-0491-4013[1].1, p.11]
At this point, the public does not know: (i) how significant contribution and interference with maintenance will be defined (including what cost-per-ton breakpoints EPA will select based on its multifactor analysis); (ii) which areas will qualify as downwind receptors triggering evaluation of upwind emission impacts; (iii) which states will be included in which programs; (iv) whether the rule will include interstate trading  -  and if so to what extent; (v) whether the rule will include trading at all; (vi) what the state budgets are, if trading programs are adopted; and (vii) what individual unit allocations will be. Without this information, the public cannot determine how it is affected by the proposed rule and therefore what its objections may be. [EPA-HQ-OAR-2009-0491-4013[1].1, p.11]
In the first place, even the proposed Transport Rule allocations are obsolete at this point. EPA has acknowledged that the state budgets  -  and thus the unit allocations  -  are subject to change. More significantly, before the close of the comment period on the proposed rule, EPA's first NODA proposed revisions to the critical NEEDS database and the IPM that were the basis for a significant number of state budgets and unit allocations. Many state budgets and unit allocations are based almost exclusively on unit level projections from the now outdated IPM. Yet with the first NODA, EPA did not provide the information needed to know how various unit allocations or state budgets would change. [EPA-HQ-OAR-2009-0491-4013[1].1, pp.11-12]
Additionally, EPA provided revised fuel price assumptions that would likely have a profound impact on how units are modeled to run  -  and thus, on what their projected emissions would be. Because of these changes, not to mention the initial data errors contained in the technical support documents for the proposed rule, the proposed Transport Rule allocations are obsolete and do not form a basis for comparing how units would be affected by the two new methods proposed. [EPA-HQ-OAR-2009-0491-4013[1].1, p.12]
In sum, the public does not know what EPA's regulation is and therefore does not have proper notice and opportunity to comment. [EPA-HQ-OAR-2009-0491-4013[1].1, p.12]
III. EPA Must Afford the Regulated Community an Opportunity to Develop Compliance Plans.
The problem created for the regulated community by EPA's failure to set forth the rule it is actually proposing goes beyond notice-and-comment requirements. The regulated entities do not have enough information or time to develop meaningful compliance strategies. NODA-3 compounds that problem. Now, in addition to not knowing what programs will apply to a given state or what the state budgets will be, regulated entities are left guessing at the widely divergent potential allowance positions that result from the three proposed allocation methods. [EPA-HQ-OAR-2009-0491-4013[1].1, p.12]
The compliance period for the rule is proposed to commence in January 2012, less than eleven months from today. EPA has stated that it intends to issue the final rule this "summer," which seems optimistic given the fundamental questions that EPA must address in response to public comments on the three NODAs. But even if EPA meets the summer deadline, regulated entities will have only as much as six months (and maybe only three depending when in the summer the rule is issued) to adjust to their final allowance positions [EPA-HQ-OAR-2009-0491-4013[1].1, pp.12-13]
This compressed timeframe exacerbates the problems owners and operators will face if the final rule under-allocates allowances to their units (which as demonstrated above is a real possibility under the NODA-3 allocation methods). Under-allocated owners or operators will not have time to develop compliance strategies other than to buy allowances or curtail operations  -  with only six months notice. Six months is not enough time to adequately assure that replacement generation (holding sufficient allowances) will be available. And six months is not enough time for stable allowance markets to develop. And these problems will be further compounded if EPA proposes additional limits on trading  -  e.g., intrastate trading only or a reduction in the size of Group 1 or Group 2. [EPA-HQ-OAR-2009-0491-4013[1].1, p.13]
Such a compressed compliance timeline is unprecedented, inappropriate and unnecessary. In CAIR, EPA issued the final rule three and a half years before the initial compliance period for NOx and four and a half years before the initial compliance period for SO2. Yet EPA intends here to allow at most six months notice from final rule to compliance period for all programs. There is simply too much uncertainty at this point for EPA to hold fast to its initial proposed ambitious timeline. To allow for the possibility of ordered, planned and efficient compliance, EPA must put aside its haste and allow, at a minimum, sufficient time for regulated entities to develop attainable compliance strategies. [EPA-HQ-OAR-2009-0491-4013[1].1, p.13]
As noted in our and numerous other comments on the proposed Transport Rule, the opportunity for states to develop a SIP precedes a FIP; not the other way around. EPA cannot impose a FIP without allowing the states an opportunity to develop a SIP. [EPA-HQ-OAR-2009-0491-4013[1].1, p.13]
V. This Rulemaking and EPA's Continued Issuance of Adjustments to the Proposed Rule Do Not Meet the Spirit or Letter of the New Executive Order 13563.
On January 18, 2011, the President signed Executive Order 13563, Improving Regulation and Regulatory Review. Executive Order 13563 supplements and reaffirms Executive Order 12866. Executive Order 13563 requires that regulations be based on the "open exchange of information," and that EPA afford "a meaningful opportunity to comment, with a comment period that should generally be at least 60 days." [EPA-HQ-OAR-2009-0491-4013[1].1, p.14]
The continuing release of NODAs that propose fundamental reworkings of the proposed rule with 30-day comment periods does not meet these requirements. The material provided in the NODAs is highly complex and cannot be adequately examined in only 30 days. [EPA-HQ-OAR-2009-0491-4013[1].1, p.14]
And most fundamentally, until EPA sets forth specifically what its regulatory proposal is, the public, in the words of the Executive Order, has not been afforded "a meaningful opportunity to comment." There is, to again quote the Executive Order, no "open exchange of information" between EPA and the public when the public is not informed as to how the various methodological changes it has under consideration affect its basic regulatory proposal. [EPA-HQ-OAR-2009-0491-4013[1].1, p.14]
NMA has commented to EPA several times that EPA needs to assess the impacts of the Transport Rule cumulatively with the many other rules that EPA has promulgated and is considering that affect the use of coal for electric generation and in industrial and commercial boilers. Without reiterating those comments here, NMA notes that Executive Order 13563 is further support for NMA's comment.
Executive Order 13563 states that it "is supplement [EPA-HQ-OAR-2009-0491-4013[1].1, p.15]al to and reaffirms the principles, structures, and definitions governing contemporary regulatory review that were established in Executive Order 12866 of September 30, 1993," which is one of the authorities on which NMA relied for its argument that EPA must do cumulative impact analysis. Executive Order 13563 explicitly quotes the cumulative impact requirement from Executive Order 12866: "As stated in that Executive Order and to the extent permitted by law, each agency must, among other things...tailor its regulations to impose the least burden on society, consistent with obtaining regulatory objectives, taking into account, among other things, and to the extent practicable, the costs of cumulative regulations...." NMA therefore reiterates that the Transport Rule is flawed unless EPA undertakes the necessary cumulative impact analysis. [EPA-HQ-OAR-2009-0491-4013[1].1, p.15]
NMA continues to urge EPA to re-propose the rule for further comment, to perform a cumulative impact assessment, and to delay the date for implementation of the rule. [EPA-HQ-OAR-2009-0491-4013[1].1, p.15]
Our analysis in Part II below (comparing allocations under the three allocation methods based on technology class/plant type) relies chiefly on the following three databases provided by EPA in this rule making:
-  The National Electric Energy Data System (or "NEEDS") database Version 4.10 provided with the first NODA (September 1, 2010) ("NEEDS Database");
- The Budgets and Allocations  -  Detailed Unit-Level Data (Excel) data file provided with the proposed Transport Rule ("PTR Database"); and
- The Alternative Allocation Tables and Underlying Data (Excel File) data file provided with NODA-3 ("NODA-3 Database"). [EPA-HQ-OAR-2009-0491-4013[1].2, p.2]
Unfortunately, EPA did not provide fuel type or technology class information in the PTR Database. To determine that information, we used the unique unit identifiers in the NEEDS Database and PTR Database (i.e., "UniqueID_Final" and "NEEDS ID," respectively) to pull "plant type" and "modeled fuels" data values for each unit from NEEDS Database into the PTR Database. This then allowed us to group the PTR Database data according to "plant type." Once that was completed, we were able to group the units based on "plant type." The plant type and technology class designations correlate, and we were therefore able to perform analysis/comparisons of data (e.g., allocations) under the PTR Method and the two NODA-3 Methods  -  Option 1 Method and Option 2 Method. [EPA-HQ-OAR-2009-0491-4013[1].2, pp.2-3]
Response:
With regard to deadlines for compliance and EPA's authority to promulgate the Transport Rule FIPs, see sections IV.C and VII.C of the preamble to the final Transport Rule.
With regard to the methodology for existing-unit allowance allocations, see section VII.D of the preamble.  EPA provided -- through the proposed rule and the NODAs -- notice and opportunity for comment on the allocation methodology and the resulting unit-by-unit allocations.  The allocation methodology and unit-by-unit allocations are a logical outgrowth of the proposed rule and NODAs.  See section VII.D of the preamble.
EPA complied with Executive Order 13563 in developing the final Transport Rule as discussed in section XII.A of the preamble.
Organization: National Rural Electric Cooperative Association (NRECA)
Comment:
National Rural Electric Cooperative Association (NRECA)
The compressed timeline of 2012 for the CATR first compliance period, however, presents insufficient time to allow states the opportunity to distribute allowances under a SIP to reflect individual state needs and concerns.  [EPA-HQ-OAR-2009-0491-3943[1].2, p.1]
A significant portion of cooperative fossil-fuel electric generation is located within the 32 state regions addressed in the proposed CATR and would be affected by its mandates.  The proposal is complex, utilizes several atmospheric and economic models and extensive, although many times erroneous, electric utility unit operational and emissions control information to produce four separate electric utility cap-and-limited trading programs.   Utilizing this extensive modeling, the final rule dictates essentially permanent unit compliance obligations through limiting unit emissions allowances, while providing only extremely limited opportunities for any allowance reconciliations and no criteria for doing so.   [EPA-HQ-OAR-2009-0491-3943[1].2, p.3]
NRECA is disappointed, however, that the timelines EPA has proposed for CATR implementation, beginning in 2012, do not allow adequate time for states to submit and obtain SIP approvals incorporating allowance allocation methodologies better suited to meeting state or local concerns as compared to the chosen methodology in the generic FIP.   EPA's hurry-up compliance timeline of 2012 presents yet another problem with the CATR, that of the ability of a state to craft its own allowance policies to best suit its needs during the first two years of CATR implementation.  As we have commented previously, Section 110 of the Clean Air Act is constructed to provide states the opportunity to develop their own plans to meet state air act obligations, including addressing interstate transport of air pollution.  EPA's CATR proposal thus far has failed to provide states the opportunity to do this at least for two years after CATR's compliance provisions are to take effect. [EPA-HQ-OAR-2009-0491-3943[1].2, p.3]
NRECA is disappointed, however, that the agency has not addressed the problematic timing of the CATR 2012 and 2014 compliance periods, as NRECA and others have identified in earlier comments to the August 2, 2010, CATR.  EPA's failure to extend the CAIR beyond 2011 and its proposed imposition of the 2012 and the 2014 timelines continues to plague this rulemaking.   [EPA-HQ-OAR-2009-0491-3943[1].2, p.4]
As NRECA has noted in our earlier comments, there is no legal prohibition in the North Carolina decision against keeping CAIR in effect beyond 2011, and EPA's failure to do so would create yet another problem in so far as effectively prohibiting states from implementing SIPs addressing Clean Air Act Section 110(a)(2)(D)(i) deficiencies during the early stages of CATR implementation.  [EPA-HQ-OAR-2009-0491-3943[1].2, p.5]
Moreover, as NRECA has commented previously, the proposed compressed compliance timelines afford, at best, limited, and in most cases, no opportunity for units to alter their emission characteristics by 2012, even for those units that could cost-effectively reduce their emissions further.   [EPA-HQ-OAR-2009-0491-3943[1].2, p.5]
Response:
Thank you for your comment.Organization: National Tribal Air Association (NTAA)
Comment:
National Tribal Air Association (NTAA)
Opt-In of Non-Covered Sources
Apart from issue regarding the construction of new sources on Tribal lands, the NTAA also feels that the EPA has wholeheartedly failed to address a matter very relevant to the NODA, one which our organization put forth in its October 1, 2010 comment letter to the Agency. The issue specifically concerns the opt-in of non-covered sources on Tribal lands, something for which we now take this opportunity to copy our previous comments below: [EPA-HQ-OAR-2009-0491-3993[1].1, p. 3]
The Transport Rule also provides for non-covered sources (e.g., operating boiler,  combustion turbine, or other stationary combustion device) to voluntarily enter trade  programs with allowance allocations given to them based on their historical emissions3  While the expectation of EPA is that these sources might be better able to make lower  cost emissions reductions than EGUs within a state, thereby reducing the program's  overall costs, this approach offers a more important benefit in advancing the Rule's  larger purpose of limiting the "interstate transport of emissions of nitrogen oxides (NOx) and sulfur dioxide (SO2)."4 As such, the Agency should be utilizing every  opportunity to further this purpose which should include non-covered sources on  Tribal lands that lie contiguous or near to those states covered by the Rule. These  sources, like those located on the lands of states, are not otherwise obligated to  reduce their NOx and/or SO2 emissions unless covered by the Rule. With coverage,  however, the EPA could seize a valuable opportunity to further the Rule's purpose,  and ultimately help improve the health and welfare of all people and lands in the  Eastern U.S. [EPA-HQ-OAR-2009-0491-3993[1].1, pp. 3-4]
The NTAA therefore recommends that the EPA allow non-covered sources on  Tribal lands beyond EGUs to be covered under the Transport Rule but only on a  voluntary basis as is true for similar sources on state lands. [EPA-HQ-OAR-2009-0491-3993[1].1, p. 4]
Response:
Please see the response to the previously submitted comment.
Organization: Nebraska Public Power District
Comment:
Nebraska Public Power District
NPPD submitted comments on the proposed TR on October 1, 2010 stating that the EPA overestimated the contribution from Nebraska sources and that the EPA should remodel using more realistic emissions data. NPPD believes that this would show that Nebraska does not qualify to be included in the TR. NPPD has attached our original comments for your reconsideration and to restate our belief that Nebraska should not be included in the TR. [EPA-HQ-OAR-2009-0491-3886[1].1, p.1] [[See Docket Number EPA-HQ-OAR-2009-0491-3886[1].2 for NPPD's original comments.]]
Response:
Regarding the inclusion of Nebraska under the Transport Rule, please see Preamble Section V.
Organization: Nelson Industrial Steam Company (NISCO)
Comment:
Nelson Industrial Steam Company (NISCO)
It should also be noted that the EPA incorrectly identified these two units in the September 1, 2010 NODA and in the other Technical Support Documents underlying CATR as belonging to the Entergy owned RS Nelson facility in Calcasieu Parish. The correct facility name for the two NISCO units is 'Nelson Industrial Steam' and the correct ORlSPL identification number for this facility is 50030. [EPA-HQ-OAR-2009-0491-4026, p.1]
EPA should not include Louisiana sources under CATR for purposes of annual sulfur dioxide (S02) and annual nitrogen oxide (NOx) reductions because Louisiana's sources do not adversely impact PM2.5 levels in Texas. As indicated in NISCO's original comments, the IPM Base Case, whether premised on v. 3.02, v. 4.10 or some future version, should only be a screening tool for indications of potential 'significant contribution' or 'interference with maintenance'. The !PM is simply not accurate enough and is dependent upon too many uncertain assumptions and imprecise inputs to make binding decisions of 'significant contribution' or 'interference with maintenance.' EPA should always place great weight on empirical data to modify projected model conclusions when making these determinations. [EPA-HQ-OAR-2009-0491-4026, p.2]
EPA's original modeling, using the IPM version 3.02 for the Base Case, projected that Louisiana emissions may interfere with maintenance of the annual PM2.5 NAAQS in 2012, by contributing only 0.34 ug/m3 to the annual PM2.5 values at the Clinton Drive monitor in Houston, Hartis Co., TX. Of that total, EPA projected that nearly all of it, 0.33 ug/m3 is from sulfate emissions and only 0.004 ug/m3 from nitrate emissions. The projected design value for the Clinton Drive monitor in 2012 was 14.74 ug/m3 average and 15.14 ug/m3 maximum compared to the 15.0 NAAQS ug/m3. [EPA-HQ-OAR-2009-0491-4026, p.2]
In reality, the annual average PM2.5 in 2009 was only 12.8 ug/m3, and from January 1 through August 29, 2010, the average was 12.72 ug/m3. The design value dropped to 14.4 ug/m3 for the 2007-2009 period and is expected to drop to a value of only approximately 13.2 ug/m3 due to 2007 dropping out of the 3-year average. So, it is clear that current Louisiana emissions are not interfering with maintenance of the NAAQS in any way. These Louisiana emissions are projected by EPA to drop even further without the CATR/FIP. [EPA-HQ-OAR-2009-0491-4026, p.3]
NISCO anticipates that EPA's current remodeling with corrected data and inputs will show that there is no projection for interference with maintenance of the PM2.5 standard at the Clinton Dr. monitor in Houston, Texas. NISCO urges EPA to complete its assessment and conclude in the final rulemaking that Louisiana sources should not be included under CATR because such sources do not interfere with maintenance of the PM2.5 NAAQS. [EPA-HQ-OAR-2009-0491-4026, p.3]
EPA should not include Louisiana sources under CATR for purposes of ozone season NOx reductions because Louisiana's sources do not adversely impact the ability of the Houston or Dallas areas of Texas to comply with the 1997 8-hr. ozone NAAQS. EPA also projected, under the IPM version 3.02 Base Case, that Louisiana emissions will significantly contribute to nonattainment with the 1997 8-hour ozone NAAQS at certain monitoring sites in the Houston-Galveston-Brazoria ('HGB') and the Dallas-Ft. Worth ('DFW') Areas of Texas in 2012. EPA has projected that Louisiana emissions will interfere with maintenance of that NAAQS at other monitoring sites in the HGB and the DFW Areas of Texas in 2012. But, again, real data cast doubt on these projections. All monitors in the HGB Area are currently in attainment with the 1997 8-hour ozone NAAQS and have been for two years. AU of the DFW monitors that EPA projected were adversely impacted by Louisiana emissions, save one, are also currently in attainment with that NAAQS. The design value at that one monitor at issue in DFW is 86 ppb, just 2 ppb above the standard and available information indicate that local sources are the contributing factors to its attainment status. [EPA-HQ-OAR-2009-0491-4026, p.3]
On September 1, 2010, EPA published the NODA indicating that EPA intends to use the IPM version 4.10 modeling, including a revised TR Base Case 2012 scenario, for revising the determinations of significant impact and interference with maintenance. Under the revised IPM TR v. 4.10 2012 model results show significant reductions in projected S02 and NOx emissions that will occur even without implementation of the CATR/FlP (or CAIR). If these values are used in revised air quality modeling, it is virtually certain that the conclusion will be that Louisiana emissions do not impact the 1997 8-hour ozone standards in Texas. [EPA-HQ-OAR-2009-0491-4026, p.3]
As discussed in NISCO's comments on CATR and the September 2010 NODA, even without a revised air quality analysis, NISCO believes that use of the TR Base Case v. 4.10 data supports the conclusion that Louisiana should not be included in the CATR/FIP. The original CATR/FIP determined that a certain level of emission reductions from EGUs would remove 'significant contribution' and 'interference with maintenance.' The revised IPM v. 4.10 Base Case shows that emission reductions greater than that level will occur by 2012, even without CATR. These results demonstrate on their face that because the quantity of S02 and NOx emissions that were required to be removed to prevent 'significant contribution' 'interference with maintenance' are now projected to be removed by 2012 through factors other than the CATR/FIP, there is no legal basis for a CATR/FIP for annual S02 or annual or ozone season NOx control for Louisiana EGUs. [EPA-HQ-OAR-2009-0491-4026, pp.3-4]
Response:
Thank you for your comment.Organization: New Jersey Department of Environmental Protection (NJDEP)
Comment:
New Jersey Department of Environmental Protection (NJDEP)
In closing, the Department urges the USEP A to craft a rule that adequately reduces the transport of air pollution sufficiently to enable states to attain the 1997 and 2006 fine particulate health standards and the 1997 ozone health standard. More importantly, the USEP A needs to adopt similar rules which address the 2008 and future ozone health standards, the 2010 S02 health standard, and other new health standards to come. Staff at the Department are available to discuss the details of how the New Jersey NOx Budget Program and the CAIR NOx Trading Programs work. [EPA-HQ-OAR-2009-0491-3891[1].1, p.3]
Response:
EPA thanks NJDEP for their comment , but finds it is outside of the scope of the NODA3. EPA is not taking any action in this rule to address the 2008 ozone standard under reconsideration or any future standards.

Organization: New York State Department of Environmental Conservation
Comment:
New York State Department of Environmental Conservation
The NODA proposes a modified allocation scheme based upon the budgets contained in the original proposed transport rule of August 2, 2010.  While EPA is considering alternate ways to allocate at the unit level, it continues to rely on the flawed state budgets that were established in the proposal.  Even though EPA has said that it is not interested in comments on the overall state budgets in response to this NODA, the Department believes that this NODA, as well as the recently posted 2010 emission data on EPA's CAMD site, further illustrate the discrepancies contained in the state budgets.  The 2010 data is more representative of "normal" operations because of more representative meteorology and a start to the economic recovery in 2010.  When the 2010 statewide NOx emission data is sorted on a pound per million Btu basis and then compared to the reductions (Base Case minus proposed budgets) that would be required under the proposal, four of the six largest reductions on the state level are required from the four states with the lowest emission rates (at least a 25% reduction for each of those states).  Comparing this with the eleven (11) states with 2010 emission rates over 0.15 lb/MM Btu (the nominal rate promulgated in the 1998 NOx SIP Call), only four are required to lower their emissions by more than ten percent.   [EPA-HQ-OAR-2009-0491-3937[1].1, p.1]
The Department renews its objection to EPA's continued reliance on the IPM model in establishing the budgets for this trading program.  IPM has proven unreliable in its prediction of unit operations, shutdowns and projection of new units.  [EPA-HQ-OAR-2009-0491-3937[1].1, p.1]
The Department fully supports EPA in its mission to develop programs to remedy the transport of emissions and would like to work closely with you as this rule is finalized and the next rule is developed. [EPA-HQ-OAR-2009-0491-3937[1].1, p.2]
Response:
Regarding how state budgets were determined, please see Preamble Section VI.
Regarding unit allocations, please see Preamble Section VII.D.
Organization: NextEra Energy, Inc.
Comment:
NextEra Energy, Inc.
As stated in our October 1, 2010 comments, NextEra Energy generally supports the proposed Transport Rule. The proposed rule will achieve important air quality, health, and economic benefits utilizing EPA's current authority. It is critical that EPA implement the rule as expeditiously as practicable to ensure realization of these benefits. We are committed to working with EPA to ensure the Agency can implement the Transport Rule by January 1, 2012, and to that end, we offer these comments on the January 7th NODA. [EPA-HQ-OAR-2009-0491-3962[1].1, p.1]
As we noted in our comments on the proposed Transport Rule, the language of the Clean Air Act provides EPA with broad authority to implement allowance allocation methodologies, and there is no strong policy or legal reason that the methodology for determining state budgets and the methodology for distributing allowances to units need to be the same. By maintaining the proposed methodology for determining the state budgets, EPA is consistent with the D.C. Circuit's decision requiring that state budgets be based on each state's significant contribution. [EPA-HQ-OAR-2009-0491-3962[1].1, p.2]
As we explained in our comments on the proposed rule, the Integrated Planning Model (IPM) used to project emissions under the originally proposed allocation approach does not consider a range of non-economic factors that may influence a company's decision to operate particular types of units or for the respective Independent System Operator (ISO) to call upon specific units. As a result, the modeling can create unrealistic scenarios for some individual units, such as ignoring dispatch requirements of EGUs subject to power purchase agreements, running natural gas combined-cycle units at higher utilization than can be accommodated by the local natural gas pipeline network and not running oil-fired units that are required to operate to meet load requirements. While these distortions of the electricity market are masked when data are aggregated at the state level for setting state budgets, the modeling results in unrealistic or infeasible outcomes when used at the unit level to allocate allowances. By contrast, a historic basis for allocating the state budgets avoids these problems and strengthens the legal basis for the rule. [EPA-HQ-OAR-2009-0491-3962[1].1, p.2-3]
Under the compliance assurance provisions contained in the August 2, 2010 proposed Transport Rule, if the emissions from affected units in a covered state in any year exceed the state's 'assurance level' (i.e., the state budget plus the state's variability level), certain owners of affected units would be required to surrender allowances. The surrender requirement would be imposed on the owners and operators of units whose share of the state's total covered-unit emissions was greater than their share of the state's assurance level - i.e., the units that can be considered partially responsible for the exceedance. The allowances the owners would be required to surrender would also be proportionate to their responsibility for the state's exceedance. [EPA-HQ-OAR-2009-0491-3962[1].1, p.3]
Response:
Thank you for your comment.Organization: Northern Indiana Public Service Company (NIPSCO)
Comment:
Northern Indiana Public Service Company (NIPSCO)
As NIPSCO stated in its comments on the proposed Transport Rule dated October 1, 2010, NIPSCO believes that developing the appropriate allocation methodology is a task best suited to states. However EPA seems determined to proceed directly with federal implementation plans(FIPS). [EPA-HQ-OAR-2009-0491-3995[1].1, p. 2]
NIPSCO continues to believe that there are better allocation methodologies that could be developed and would likely be developed by the State of Indiana. [EPA-HQ-OAR-2009-0491-3995[1].1, p. 2]
NIPSCO notes that just as the use of projected emissions for Indiana EGUs as the basis for allocating allowances is, in NIPSCO's view, an inappropriate allocation methodology for individual EGUs, it is also an inappropriate basis for the statewide bUdgets. The statewide budgets, like the originally proposed allocations, reward states where emission controls have not occurred to the degree that they have in other states. The method for establishing the statewide budgets places the states on an uneven playing field at the outset. While Option II is definitely an improvement over the allocation methodology originally proposed, the problem of how the statewide budget was determined in the first place remains. Just as EPA proposes an alternative allocation methodology based on historic heat input, a more equitable means for determining the statewide budgets would be historic heat input, as well, with the budgets reduced by the amount necessary to address each state's downwind contributions to nonattainment or interference with maintenance of the air quality standards. Although EPA says that the statewide budgets are not subject to comment under the January 2011 NODA, the correction to the allocation methodology that EPA proposes in the January 2011 NODA should naturally be extended to the statewide budgets. [EPA-HQ-OAR-2009-0491-3995[1].1, p. 2]
USE OF FIPs TO IMPLEMENT THE PROPOSED TRANSPORT RULE
In the January 2011 NODA, EPA stated that states can submit full or abbreviated state implementation plans ('SIPs'), following promulgation of the Transport Rule. 76 Fed.Reg. 1109, 1119-1120. NIPSCO believes that EPA has ignored or misunderstood the thrust of comments regarding the submission of Transport Rule SIPs. The Clean Air Act places initial responsibility for compliance with federal requirements on the states. Proposing in a rule to allow states to submit SIPs to address the transport requirements of Section 110(a)(2)(D) of the Clean Air Act does not satisfy that basic delegation of responsibility to the states. [EPA-HQ-OAR-2009-0491-3995[1].1, pp. 2-3]
NIPSCO appreciates that EPA is making an effort to recognize that states may submit SIPs to address the Transport Rule. However, what EPA offers in the January 2011 NODA is not substantially different from what it discussed in the original proposal and still ignores the directive in the Clean Air Act that states have first responsibility to develop regulatory programs. EPA's drastic departure from the state-federal partnerships of the NOx SIP Call and the CAIR are unnecessary and contrary to the Clean Air Act. [EPA-HQ-OAR-2009-0491-3995[1].1, p. 23
NIPSCO recommends that EPA recognize that states have the responsibility to determine how they will comply with the statewide budgets imposed by the Transport Rule and that states must have a reasonable period of time, up to three years, following promulgation to develop and submit their Transport Rule SIPs. The CAIR will remain in place and applicable during the time that states are developing their Transport Rule SIPs. Current air quality demonstrates that the CAIR has been effective; therefore, the environment would not be negatively impacted by EPA's compliance with the Clean Air Act. [EPA-HQ-OAR-2009-0491-3995[1].1, p. 3]
Response:
Thank you for your comment.Organization: Northshore Mining Company
Comment:
Northshore Mining Company
As an initial matter, we understand that EPA has received significant comments on the proposed CATR and the subsequent NODAs and the agency is considering significant changes to the proposed rule.  Corrected data will necessitate a re-analysis of states' contributions to downwind areas. As you are aware, there has been some uncertainty regarding the nature and extent of the contribution of Minnesota sources to downwind areas.  The State of Minnesota and its affected sources deserve a full and fair opportunity to review the results of EPA's re-analysis and comment on any proposed changes.  EPA should re-propose the CATR to offer affected entities a complete opportunity to consider and comment on the corrected state applicability determinations and on EPA's preferred allowance allocation option. EPA seeks comment in NODA III on the implications of the allocation methodology options that EPA is still considering.  One of the most significant implications is the compressed schedule between EPA's final decision and the 2012 initial compliance year. The final rule in mid-2011 should not be the first time that affected sources understand what will be required of them in the 2012 CATR.  [EPA-HQ-OAR-2009-0491-3957[1].1, p.1]
Northshore's cogeneration system is unique in many respects. It is the only cogeneration system in the taconite industry subject to the CATR.  In fact, Northshore understands that it is the only non-utility, industrial boiler system in Minnesota that would be subject to the CATR.  As discussed in greater detail below, extending the cogeneration exemption to industrial cogeneration units in Minnesota (Northshore) would have no discernable effect on the goals of the CATR to alleviate downwind impacts.  Failing to provide relief, however, could be catastrophic for Northshore and the Northeastern Minnesota economy. [EPA-HQ-OAR-2009-0491-3957[1].1], p.4
Based on the allowance allocation systems proposed in the NODA III, even with the corrections described in a separate section of these comments, the Northshore Units would face annual compliance costs estimated as high as $30 million depending on the price of allowances. These costs cannot be passed on in the price of taconite pellets for the iron and steel industry because Northshore's competitors will not have CATR compliance costs.  The utility sector, by comparison, will absorb the full cost of CATR in the marginal increase of the price of electricity shared by all of the electricity customers in the region.  This marginal increase in the price of electricity will provide a small benefit for Northshore as it will be able to sell its cogenerated electricity at a slightly higher price to the grid.  However, that benefit is a drop in the bucket compared to the significant annual cost of the CATR program for Northshore.  The bulk of the cost burden will be a direct hit on the company's profitability.  Northshore cannot absorb these costs and remain a viable taconite mining business.   [EPA-HQ-OAR-2009-0491-3957[1].1, p.4]
As indicated in the Northshore comments from October 1, 2010, Northshore's demise will be a significant blow to the economy of Northeastern Minnesota.  Northshore's mining operations provide 640 direct jobs and 1150 additional indirect jobs in support of these operations.  Northshore contributes approximately $110 million each year to the local economy through its purchase of services and supplies and it pays approximately $11 million in state and local taxes.  These economic consequences are significant in this area of Minnesota and they are entirely avoidable with a minor clarification to the cogeneration exemption.  There is no indication that EPA considered these costs and the potential impacts on this facility when it proposed the CATR.  EPA was focused instead on the consequences for the utility sector, which are more measured and more evenly distributed.  EPA needs to take the time to properly consider the potentially severe economic consequences of its proposed approach to closing a loophole in the cogeneration exemption.  Excusing historic cogeneration units from the CATR would make that economic analysis unnecessary and mitigate an unintended and disproportionate economic consequence on Northshore that will eliminate jobs unnecessarily.  [EPA-HQ-OAR-2009-0491-3957[1].1, p.4]
Removing the Northshore Units from CATR is consistent with the environmental objectives of the rule.
EPA has designed the CATR to limit the interstate transport of NOX and SO2 that affect downwind states' ability to attain and maintain compliance with the PM2.5 and ozone National Ambient Air Quality Standard (NAAQS).  Minnesota is excluded from the ozone season portion of the CATR because EPA has determined that sources within the state do not significantly contribute to downwind problems attaining or maintaining the eight-hour ozone NAAQS.  For the PM2.5 NAAQS, EPA has determined that the EGUs in Minnesota have some downwind effect on certain areas of Illinois, Iowa and Wisconsin.  Northshore is in the upper Northeast portion of Minnesota, much farther from these downwind areas than most of the Minnesota utilities that would remain subject to CATR if the historic industrial cogeneration units were excluded from the trading program. [EPA-HQ-OAR-2009-0491-3957[1].1, p.5]
Also, the air quality is improving more quickly than EPA projected when the CATR was being developed.   The most recent air quality data indicate substantially fewer nonattainment and maintenance areas than EPA's modeling results originally projected. According to an ENVIRON study using 2006-2008 and 2007-2009 DVs, over 80% of EPA predicted ozone and PM2.5 nonattainment sites in 2012 are already in attainment as of 2009, over 80% of PM2.5 2012 maintenance sites and 1/3 of the ozone 2012 maintenance sites are no longer maintenance as of 2009. The air quality further improved in 2010 and is trending downward.  These improvements suggest that EPA's model may be over-predicting the effect of upwind sources on downwind monitors.  Until EPA properly calibrates its air models to predict the actual monitored ambient air quality values, EPA should move cautiously and incrementally with its rules to protect against imposing more economic harm than is justified by the targeted environmental objective.  By imposing CATR only on the utility sector, EPA would help ensure that legitimate industrial cogeneration units do not face severe economic consequences that are unnecessary to meet the downwind environmental objectives of the CATR.    [EPA-HQ-OAR-2009-0491-3957[1].1,p .5]
Alternatively, EPA should delay implementation of CATR for industrial cogeneration units.
If EPA insists on using the PURPA efficiency criteria for pre-1980 cogeneration units, EPA should place the affected industrial cogeneration units on a different time schedule for CATR compliance.  Based on the air quality trends, applying the CATR only to the utility sector in Minnesota should be more than sufficient to meet the downwind objectives for the PM2.5 NAAQS.  If, however, EPA later determines after the CATR is implemented for the utility sector that additional reductions are necessary to mitigate actual downwind impacts from Minnesota, EPA could then bring the industrial cogeneration units like Northshore into the rule.  This phased approach to implementation is well within EPA's discretion and would ensure that the initial costs of the CATR are imposed only on the utility units that can easily spread those costs among electricity customers. This will also alleviate the severe time pressure on Northshore to prepare to meet the CATR and absorb its initial economic impact in 2012.  [EPA-HQ-OAR-2009-0491-3957[1].1, pp.5-6]
If EPA adopts either of the allocation methodologies outlined in the January 7, 2011 NODA, the Northshore Units will face substantial allocation deficit starting in 2012.  Northshore needs more than eight months to evaluate and implement emission control options to mitigate this deficit.  Without relief, Northshore will need to purchase significant numbers of allowances which will create material financial impact on the economic viability of the Northshore facility.  Adequate advance notice is necessary to accommodate the planning necessary to implement emission reductions, including engineering, environmental permitting, procurement, installation and shakedown.  It is unreasonable to expect a facility to implement a CATR compliance program with less than eight months lead time after the allocation methodology is finalized.    [EPA-HQ-OAR-2009-0491-3957[1].1, p.6]
EPA should wait until the emission reductions already in the pipeline have been implemented before extending the CATR to industrial cogeneration units.   For instance, Northshore is already subject to rules that will require NOX and SO2 emission reductions, though on a far more reasonable timeline than the CATR.  The Northshore Units are subject to the Best Available Retrofit Technology (BART) requirements under the Regional Haze rule, which target fine particle, NOX and SO2 emission reductions to help Class 1 areas meet visibility standards.  These are the same pollutants that contribute to PM2.5 formation.  The Regional Haze program timeline allows for a more deliberate process to evaluate cost effective technology for emission reductions.  BART will also be applied consistently across the entire taconite industry, ensuring that the regulatory requirements do not have a disproportionate impact on a single company.  By contrast, the CATR would apply to one taconite company, Northshore, and impose costs on this company years ahead of the emission control obligations for the rest of the industry sector.  Treating one taconite facility differently is an arbitrary exercise of EPA discretion.  Doing so because they had the foresight to install a cogeneration system in the 1950s and 1960s is unreasonable.   [EPA-HQ-OAR-2009-0491-3957[1].1, p.6]
With a phased approach, EPA has the ability to evaluate each incremental step to determine if the next step is cost effective and consistent with current job retention and job growth priorities.  EPA should take this time to consider carefully whether it is necessary or prudent to penalize historic cogeneration units to close a cogeneration loophole in CATR applicability.  Ironically, if Northshore had not built a cogeneration system, its industrial boilers would not be subject to CATR, as EPA has excluded the Non-EGU industrial boilers formerly included in the NOX Budget Trading Program from this utility-focused trading rule.  EPA should not treat these cogeneration units more stringently than their less-efficient industrial boiler counterparts.   [EPA-HQ-OAR-2009-0491-3957[1].1, p.6]
A trading program works best when the allocation methodology is transparent and predictable.  This starts with a clear list of the affected sources subject to CATR, which should exclude historic cogeneration units.  Then, the allocation methodology should be set and the allowance allocations established with enough advance notice to allow affected entities to implement a strategy for achieving the highly cost effective emission reductions available for their units.  The CATR affected sources do not have enough time to evaluate and implement emission reductions before the 2012 compliance year. This undercuts the value of a trading system as a means of achieving cost-effective emission reductions and merely shifts wealth from the buyers to the sellers in the allowance market.    Northshore encourages EPA to re-propose the CATR and allow industrial sources more time to implement emission reductions before their first compliance year.   [EPA-HQ-OAR-2009-0491-3957[1].1, p.7]
Response:
A description of how the Transport Rule is applicable to certain cogeneration units can be found in Preamble Section VII.B.
Organization: NRG Energy
Comment:
NRG Energy
 We support only a carefully designed trading program that takes into account the primary objective of the CAA and CATR objectives (air quality improvement and transport reduction) as well as the needs of each state and each state's individual fuel mix.    [EPA-HQ-OAR-2009-0491-3933[1].1, p.2]
 We support only a carefully designed trading program that takes into account the primary objective of the CAA and CATR objectives (air quality improvement) as well as the needs of each state and each state's individual fuel mix. [EPA-HQ-OAR-2009-0491-3933[1].1, pp.4-5]
Response:
Regarding the development of state budgets, please see Preamble Section VI.D.
Organization: Occidental Chemical Corporation (OCC)
Comment:
Occidental Chemical Corporation (OCC)
OCC reiterates and incorporates by reference our comments submitted to EPA on the proposed CATR on October 1, 2010, and October 15, 2010. Fundamentally, we object to including Louisiana and Texas in a final CATR. Furthermore, we object to including any cogeneration facilities in the CATR trading scheme, given that the primary purpose of the Public Utility Regulatory Policies Act is to encourage the development of cogeneration facilities. In addition, we endorse and adopt by reference the comments submitted by the Louisiana Chemical Association ('LCA') on the proposed rule on October 1, 2010, and October 15, 2010, and LCA's comments submitted today regarding the NODA. [EPA-HQ-OAR-2009-0491-3951[1].1, p.2]
In our previous comments, we expressed our disapproval of EPA's use of the Integrated Planning Model ('IPM') for developing emissions allowance allocations. We continue to believe that the IPM is an economic model that cannot account for the complex and realistic operations of power generating facilities and transmission grids. For example, the IPM apparently does not take into account electric load or steam demand by a co-located power/steam host. Thus, the operation of a facility like our Taft cogeneration plant, which provides both a significant amount of steam and electricity to the co-located OCC-owned manufacturing facility, is not modeled correctly. EPA's failure to recognize, model and allocate allowances to cover non-discretionary emissions generated in connection with the permitted operation of a manufacturing facility constitutes a fundamental flaw in EPA's allocation of emissions allowances and the CATR. Furthermore, the model does not take into account legally-binding power contracts or other supply mechanisms that exist now and into the future, or state and federal regulations governing electricity pricing and cost recovery. [EPA-HQ-OAR-2009-0491-3951[1].1, p.2]
Response:
OCC's previously submitted comments are responded to elsewhere in the RTC document.
Organization: Ohio Utility Group (OUG)
Comment:
Ohio Utility Group (OUG)
The Utilities have stressed the importance of accuracy throughout this rulemaking process and, in particular, have tried to illustrate the near-impossibility of issuing an appropriate number of SO2 and NOx allowances - at the unit-level- without accurate information and without utilizing the most appropriate implementation method. Allocating SO2 and NOx based on historical heat input data is a step toward remedying each of these deficiencies, highlighted by the Utilities in previous comments, that currently plague the proposed Transport Rule. Therefore, the Utilities urge EPA to, at the very least, implement either of the two Options proposed in NODA 3 rather than engaging in an allocation guessing game based on projected source emissions. [EPA-HQ-OAR-2009-0491-4005[1].1, p.2]
One of the most significant flaws of the proposed Transport Rule is that unit-level allocation - regardless of the 'method' - is a state responsibility under Section 110 of the Clean Air Act. The Utilities have commented extensively on EPA's unlawful Federal Implementation Plan ('FIP') proposal under the Transport Rule. Most notably, the states have more unit-specific regulatory experience and are more knowledgeable of the facilities within their own jurisdictions. As such, the states are in the best position to meet the required state reduction levels and, by working as individuals in a concerted effort, are more likely to achieve the reduction of interstate transport. Therefore, the imposition of a FIP, even with provisions for an 'abbreviated SIP' granting the states limited allocation authority, not only exceeds EPA's authority under the Clean Air Act, but will also result in a rule that is less effective and makes compliance more difficult. [EPA-HQ-OAR-2009-0491-4005[1].1, p.3]
Finally, EPA's piecemeal rulemaking is a flaw in itself which has effectively denied the Utilities the opportunity to submit complete and meaningful comments. Supplementing the docket on three separate occasions with little time to review substantial amounts of information is only part of the challenge. Furthermore, EPA has repeatedly made statements to the tune of: 'could impact the final rule in a number of ways' and ' ... could be used to implement the final rule' and 'final state budgets may differ from the proposed rule.' These statements continue to mask the true 'identity' of the final Transport Rule such that the Utilities cannot completely, or accurately, evaluate the issues presented in NODAs 1-3. Therefore, the Utilities respectfully request the Transport Rule in its entirety - reflecting all 'final' decisions resulting in any modification of the proposal - be resubmitted for public comment. [EPA-HQ-OAR-2009-0491-4005[1].1, pp.3-4]
Response:
Thank you for your comment.Organization: Ohio Valley Electric Corporation and Indiana-Kentucky Electric Corporation
Comment:
Ohio Valley Electric Corporation and Indiana-Kentucky Electric Corporation
No allocation methodology can change the fact that there is not enough pollution control equipment built or able to be built by 2012 and 2014 in Ohio and Indiana to achieve the drastic and overly stringent reductions called for in the PTR. [EPA-HQ-OAR-2009-0491-4010[1].1, p.2]
As OVEC explained in its original comments, it has spent almost $2 billion dollars to retrofit its units with state-of-the-art SO2 and NOx emission control equipment, and to allow its units to burn a blend of lower sulfur coals. While OVEC would receive more allowances under both NODA allocation methodologies than it would under the original PTR, its ability to comply with the overly stringent emission reductions is still seriously in question. OVEC has spent over a billion dollars installing scrubbers on its two plants, but the Clifty Creek Plant's scrubber is not scheduled to come online until mid-2013 - a date that would allow OVEC to achieve compliance with CAIR, but a date that will cause it to be out of compliance with the PTR from the outset. And once again, EPA has not considered the fact that the OVEC boilers are wet-bottom boilers which have an inherently higher baseline NOx emission rate than other types of boilers. [EPA-HQ-OAR-2009-0491-4010[1].1, p.2]
EPA has failed to demonstrate that such stringent emissions limitations on such an aggressive schedule will produce any greater demonstrable benefit to the downwind states than CAIR reductions - or CAIR's more reasonable schedule - would achieve. Nor has EPA provided a legal justification for the undue local economic and employment disruptions that the PTR will cause. Further, the proposed overly broad ban on interstate allowance trading after 2013 aggravates the mismatch of costs and benefits of the PTR compared to CAIR. [EPA-HQ-OAR-2009-0491-4010[1].1, p.2]
Where the facts are that controls cannot be timely installed and operated to achieve emission levels below PTR unit allocations, and there are not assurances (or even a likelihood) of sufficient allowances available for purchase and use for a unit's shortfall of PTR allocated allowances, the PTR effectively mandates confiscatory production curtailment. EPA rules that force production curtailments in one state for unverifiable air quality benefits in another state require the clearest and most convincing justification and demonstrated lack of more reasonable alternatives. The PTR lacks such justifications and more reasonable alternatives are available. [EPA-HQ-OAR-2009-0491-4010[1].1, p.3]
EPA's modeling and allocations are based on the premise that pollutants are transported from one geographic area to another geographic area. However, the allowances and reductions required of utility operators in upwind geographic areas are allocated based on the political boundaries of the states at issue. This is not a trivial difference given the strict limitations EPA is proposing on allowance trading. [EPA-HQ-OAR-2009-0491-4010[1].1, p.3]
Before 2014, EPA's proposal allows unlimited interstate trading, similar to the CAIR program currently administered by the agency. However, in 2014 and thereafter, EPA's proposal would limit the ability to trade allowances to the political boundaries of the state in which a source resides (with a very limited additional margin), without any regard to the geographic relationship between the two sources wishing to trade the allowances. The result is that operators such as OVEC - with just two plants located in two adjacent states - are unable to take advantage of the inherent flexibility in an emissions-trading program, while trying to comply with the extremely stringent emission limitations that take effect in 2014, even though OVEC's two plants are in closer geographic proximity than plants within the same state that are permitted to trade allowances. [EPA-HQ-OAR-2009-0491-4010[1].1, p.3]
By way of example: If the NOx control equipment at the Kyger Creek Plant (Ohio) achieves maximum removal efficiency throughout 2014 and is able to generate enough annual NOx allowances to cover a shortfall at the Clifty Creek Plant (Indiana), OVEC would not be able to achieve compliance if emissions at the Clifty Creek Plant exceed the assurance provisions, regardless of how large a margin of compliance is achieved at the Kyger Creek Plant. Instead, OVEC would have to locate and purchase allowances from another source in Indiana (if such allowances exist) and attempt to sell the excess allowances from Kyger Creek to a source located in Ohio (assuming that an Ohio source needs those allowances). Even then, if other multi-state operators in Indiana also purchase allowances (because they too installed more cost-effective controls in other states), OVEC will be penalized for actions over which it had no control, even though it has reduced emissions on its units collectively below the levels required by the PTR. The same result occurs when considering SO2 allowances While it may be able to use allowances generated by its operation of the Kyger Creek scrubber to cover an SO2 shortfall in part in 2012 and 2013, if there is any unforeseen delay in Clifty Creek's scrubber schedule, its available options for allowance trading are arbitrarily cut off at the borders of each state - assuming it can find any allowances available for trade in 2014 after the tightening of the SO2 budgets in Indiana. [EPA-HQ-OAR-2009-0491-4010[1].1, pp.3-4]
Similar situations exist for numerous operators along many major river systems covered by the PTR. In many cases, a person can actually stand at a plant in Ohio and see another plant owned by the same utility across the Ohio River in Kentucky or West Virginia. Under the PTR - whether using the original or newly proposed allocation methods .... the plant in Ohio could trade credits with a source hundreds of miles away (within the same state), but not with one within its own system just a few kilometers away. [EPA-HQ-OAR-2009-0491-4010[1].1, p.4]
The geographic modeling that EPA uses to estimate the impacts of transported air pollutants and justify its rulemaking in the PTR uses a grid system that has no relationship to state political boundaries. Indiana and Ohio are within the section of that grid that uses twelve kilometer squares. Emissions within each square of the grid are not distinguished from one another by state of origin. Given the granularity of the grid, emissions from sources in northern Ohio follow a different path and have a different effect than emissions from southern Ohio over 300 miles away. However, the allocation and trading provisions in the PTR NODA treat those emissions as completely interchangeable. The same provisions treat two sources within the same square of the grid as fundamentally different and not interchangeable under any circumstances. In short, the trading provisions treat such emissions in the opposite way from the modeling that allegedly supports them. This is irrational, arbitrary, and harmful to OVEC. [EPA-HQ-OAR-2009-0491-4010[1].1, p.4]
OVEC understands that the court in North Carolina v. EPA, 531 F.3d 896, 907 (D.C.Cir, 2008) vacated CAIR in part based on its unrestricted interstate trading provisions in the context of a pinpointed, specific source-receptor relationship. Id. at 907 ('Theoretically, sources in Alabama could purchase enough NOx and SO2 allowances to cover all their current emissions, resulting in no change in Alabama's contribution to Davidson County, North Carolina's non-attainment.'). OVEC also understands that the state boundaries are significant for many aspects of any attempted rulemaking - not the least of which is the development of State Implementation Plans, discussed below. OVEC is not proposing that EPA return to the completely open trading provisions of CAIR, or that the proposal completely disregard state borders. Rather, EPA's assurance provisions would achieve both the air quality and cost-effectiveness goals of the PTR if there were more rational requirements that balanced the virtues of the emissions trading scheme with assurance provisions that reflect the geographic and operational realities of the utility industry. [EPA-HQ-OAR-2009-0491-4010[1].1, p.5]
OVEC suggests that EPA allow trading between sources in adjacent states that have the same designated representative, subject to the same limitations as the current state assurance provisions. These assurance provisions would alleviate the D.C. Circuit's concern about entire states failing to make reductions because there is no one representative who acts for all of the EGUs in multiple states, and each state's budget reflects the required reductions on a regional basis. Requiring that the sources be in adjacent states creates a logical and rational geographic relationship between traded credits. The assurance provisions would help both large and small systems achieve compliance with any final rules consistent with traditional utility planning principles, as illustrated by the fact that OVEC - a two-plant system - would get actual, meaningful relief from such an exception. [EPA-HQ-OAR-2009-0491-4010[1].1, p.5]
While such limited trading may help companies craft rational compliance plans, it cannot be stressed enough that under current state budgets, trading as a compliance option may be illusory at best. Under EPA's current proposed state budgets for 2012, even units controlled with state-of-the-art pollution controls may not be able to achieve compliance with their allotted allowances. Kyger Creek has five units and every single unit is equipped with selective catalytic reduction (SCR) and overfire air (OFA). Even with the best possible pollution control equipment in place, under the original allocation method EPA proposed Kyger Creek could not comply with its proposed NOx emission limitations. Under the current allocation methodology, Kyger Creek may be able to comply, but much of its compliance ability turns on the absence of equipment problems and continuously optimizing performance of its pollution control equipment. [EPA-HQ-OAR-2009-0491-4010[1].1, p.5]
Thus, even fully controlled units are unlikely to generate significant SO2 or NOx credits for trading. After 2014, the SO2 budgets are even more stringent, which means even fewer allowances will be available for sale, regardless of the trading restriction placed upon them. Through its proposed state budgets and trading provisions, EPA is essentially forcing the curtailment or retirement of otherwise viable economic assets. The almost-immediate proposed compliance deadlines mean that coal-fired units that do not already have every available state-of-the-art pollution control cannot install such controls before 2014. The proposed state budgets in Indiana and Ohio are so stringent that it is unlikely there will be any meaningful allowance market, and trading restrictions make those allowances even less obtainable after 2014. Such units, then, will be forced to shut down or curtail production. In a state such as Ohio, where approximately 80% of electric generation comes from coal-fired units, EPA's proposed PTR would cause economic mayhem - the effects of which EPA does not analyze or justify in any of its rulemaking. There is simply no air quality or other justification for allowing unfettered trading up until 2014, and then needlessly restricting it based on political boundaries when there are more rational and reasonable options that EPA has not considered. [EPA-HQ-OAR-2009-0491-4010[1].1, pp.5-6]
While OVEC again reiterates these concerns about the overly stringent emission limitations and time frames proposed in the PTR, a more rational approach to the assurance provisions would alleviate some of the burden of complying with such reductions in the time frame proposed, and on a going forward basis. [EPA-HQ-OAR-2009-0491-4010[1].1, p.6]
EPA has demonstrated through its third NODA and its two prior NODAs, that it has the ability to take such basic unit characteristics into account, but continues to fail to do so. EPA is still underestimating the number of allowances that should be allocated to the OVEC units due to the OVEC boilers' inherent characteristics. [EPA-HQ-OAR-2009-0491-4010[1].1, p.6]
II. The SIP Procedures in the NODA Do Not Cure EPA's Attempt to Improperly Impose a Federal Implementation Plan (FIP)
OVEC now turns to the abbreviated and full SIP provisions in the NODA. EPA continues to ignore the fundamental legal flaw in the PTR of improperly using a FIP. OVEC's previous comments show that EPA has not complied with the Clean Air Act requiring that the Administrator make a finding that a SIP is substantially inadequate, and give a state an opportunity to correct the deficiency before imposing a FIP. §110(k)(5). Indeed, a FIP may not be imposed prior to two years after the Administrator finds that a state plan is deficient or disapproves a state plan that is submitted for approval. §110(c). [EPA-HQ-OAR-2009-0491-4010[1].1, pp.6-7]
Both Ohio (as to the Kyger Creek plant) and Indiana (as to the Clifty Creek plant) currently have approved interstate transport implementation plans for which there have been no subsequent notices of deficiency by the Administrator. 73 Fed. Reg. 6,034 (Feb. 1,2008) (Ohio partial approval), 74 Fed. Reg. 48,857 (Sept. 25, 2009) (Ohio full approval), 72 Fed. Reg. 59,480 (Oct. 27, 2007) (Indiana). Accordingly, all remain in place and effective in these states, and still apply to the Kyger Creek and Clifty Creek plants. As to the 2006 NAAQS establishing a 24-hour standard for fine particulates, both Ohio and Indiana submitted transport plans that are under review, and thus have not been found to be deficient by the Administrator. [EPA-HQ-OAR-2009-0491-4010[1].1, p.7]
The usurpation of State prerogatives as a result of the PTR will have shocking impacts to electric systems beginning in 2012. If EPA followed the rational option of retaining the CAIR benefits in place in 2012 and 2013, there would be ample time to follow the procedures required by the Clean Air Act and allow the states to revise their SIPs with appropriate SO2 and NOx emission reductions beyond the CAIR caps. Compliance with the Clean Air Act procedures also achieves efficiency in that the states are already engaged in SIP planning in response to the new ozone and PM2.5 NAAQS. The PTR is based on the 1997 and 2006 versions of the NAAQS. According to the PTR, EPA plans to revise both the ozone NAAQS (following reconsideration of 2008 revision) and the PM2.5 NAAQS in 2011. Delaying any compliance deadlines until 2014 allows EPA to consider the effect of the new NAAQS and allows the states to incorporate PTR reductions at the same time they are addressing the new NAAQS. Leaving CAIR in place until 2014 avoids burdening the states with multiple SIP planning exercises, and burdening electric generating unit owners with moving targets and inefficient resource allocations. [EPA-HQ-OAR-2009-0491-4010[1].1, p.7]
III. EPA's Artificially Expedited and Fragmented Rulemaking is Precluding Required Procedural Safeguards [EPA-HQ-OAR-2009-0491-4010[1].1, p.7]
Finally, EPA's continued issuances of NODAs and equivocation on when and whether state emissions budgets will change continue to prejudice the rulemaking process, and demonstrates that the original proposal was premature. The continued uncertainty as to the PTR's provisions, proposed state budgets, and allocation methodologies is robbing those most likely to be affected by the PTR of the opportunity to participate in the regulatory process. By not providing critical information until the last possible moment, EPA is destroying the open exchange of information and opportunity for the industry and public as a whole to meaningfully comment. [EPA-HQ-OAR-2009-0491-4010[1].1, pp.7-8]
We are now less than 11 months from the initial compliance deadline, and there are no final emission budgets, modeling, or revised unit characteristic assumptions. OVEC has nothing concrete on which to rely for compliance planning purposes, and is prejudiced by having to submit their comments on the PTR in pieces and parts as EPA issues continued NODAs. OVEC objects to EPA's piecemeal and limited opportunity to comment. [EPA-HQ-OAR-2009-0491-4010[1].1, p.8]
IV. Conclusion
In conclusion, CAIR is working, and a reasonable Transport Rule would similarly work to further minimize interstate transport of S02 and NOx emissions. But the proposed PTR start date of January 1, 2012 leaves insufficient time to install additional FGD or SCR controls, and for the states to revise their transport SIPs in accordance with the process required by the Clean Air Act. And absent a narrowly-crafted exception to the restriction on allowance trading between plants in adjacent states having the same designated representative and common control, the PTR will in effect dictate production curtailments and related economic disruptions, with no discernable additional benefits to downwind state air quality. [EPA-HQ-OAR-2009-0491-4010[1].1, p.8]
EPA's objectives in proposing the PTR are the same as when it instituted CAIR. CAIR is achieving those environmentally beneficial performance objectives while promoting economic growth, innovation, and preventing the job loss and other economic disruption that the PTR would create. EPA has made no real or reasonable calculation of the enormous cost and burden that the PTR will create, and even more significantly has not articulated or shown even the smallest additional benefit to be gained over the existing - and legally implemented - regulatory structure. [EPA-HQ-OAR-2009-0491-4010[1].1, p.8]
OVEC strongly encourages EPA to stop its piecemeal efforts to fully consider the direct and indirect costs and effects of its Proposed Transport Rule. Once that process is complete, the public should have a meaningful opportunity to comment on the entire proposed regulation before any changes are made to the existing regulatory approach. [EPA-HQ-OAR-2009-0491-4010[1].1, p.8]
Response:
With regard to comparing the Transport Rule to CAIR, EPA notes that CAIR was remanded by the courts to be replaced by EPA with a rule that satisfies the statutory mandate of section 110(a)(2)(D).  As CAIR was found unlawful, EPA does not find a comparison of CAIR and the Transport Rule to be useful or relevant to the significant contribution analysis done for this rule.
The commenter suggests that EPA should administer the assurance provisions based on the geographic boundaries of a company's assets instead of on the geographic boundaries of the states.  However, the commenter offers no legal basis that EPA could use to disregard state boundaries in administering the assurance provisions, particularly with regard to the statutory language in CAA section 110(a)(2)(D) requiring the elimination of significant contribution to nonattainment and interference with maintenance in each upwind state.  The commenter's advocacy for "regional" regulatory treatment is also inconsistent with the commenter's demands that EPA defer the Transport Rule FIPs in favor of individual state SIPs, which would by definition apply separately to the commenter's units in each state.  Indeed, units on either side of state borders are already subject to distinct oversight and regulations from different states' utility commissions.  It is therefore not unreasonable or unprecedented in regulatory treatment of EGUs for EPA to administer the Transport Rule assurance provisions at the state level, notwithstanding the geographic proximity of facilities under common ownership in adjoining states.
Organization: Old Dominion Electric Cooperative
Comment:
Old Dominion Electric Cooperative
As a not-for-profit utility, ODEC will be forced to pass along all costs of meeting any new requirements that may result from the Transport Rule to its Member Systems, and through them, to the member-consumers they serve. [EPA-HQ-OAR-2009-0491-4004[1].1, p.2]
EPA's hastened compliance timeline of 2012 again presents another problem with the CATR, that of the ability of a state to craft its own allowance policies to best suit its needs during the first two years of CATR implementation. [EPA-HQ-OAR-2009-0491-4004[1].1, p.2]
ODEC is disappointed, however, that the agency has not addressed the problematic timing of the CATR 2012 and 2014 compliance periods as ODEC and others have indentified in earlier comments to the August 2, 2010 CATR. EPA's failure to extend the CAIR beyond 2011 and its proposed imposition of the 2012 and the 2014 timelines continue to plague this rulemaking. Regarding the proposed SIP options, as EPA notes in the NODA III proposal, considering the time to submit and approved a SIP and record allowances, a SIP could not be applicable before the 2014 compliance period. As ODEC has noted in our earlier comments, there is no legal prohibition in the North Carolina decision against keeping CAIR in effect beyond 2011, and EPA's failure to do so would create yet another problem in so far as effectively prohibiting states from implementing SIPs addressing Clean Air Act Section 110(a)(2)(0)(i) deficiencies during the early stages of CATR implementation. [EPA-HQ-OAR-2009-0491-4004[1].1, pp.2-3]
Moreover, as OOEC has commented previously, the proposed compressed compliance timelines afford, at best, limited and, in most cases, no opportunity for units to alter their emission characteristics by 2012 even for those units that could cost-effectively reduce their emissions further. Additionally, a compressed timeline is in practice more detrimental to smaller utilities such as cooperatives due to the fact that a smaller generation fleet does not afford many cooperatives with the purchasing power that can compete with investor owned utilities to leverage swift acquisition and installation of control equipment. [EPA-HQ-OAR-2009-0491-4004[1].1, p.3]
Response:
Thank you for your comment.Organization: Omaha Public Power District
Comment:
Omaha Public Power District
In the way of background information, according to EPA's TR proposal, Nebraska is not a significant contributor to downwind ozone or to annual average fine particulate matter (PM2,s) concentrations, but only to 24-hour average PM2.5 concentrations [Federal Register, Aug. 2, 2010, page 45215]. OPPD previously provided comments to EPA on EPA's Proposed Federal Implementation Plans to Reduce Interstate Transport of Fine Particulate Matter and Ozone ('Transport Rule'), 75 Fed. Reg. 45,210 (Aug. 2,2010), Docket ID No. EPA-HQ-OAR-2009-0491. In this previous comment submittal, OPPD questioned a number of the assumptions and data that went into the modeling used to determine whether Nebraska would be included in the Transport Rule and we believe that if some of these comments are accounted for, there is a good chance that Nebraska will not be included in the final Transport Rule. With this understanding, OPPD has the following comments on the information provided in the January 7, 2011 NODA. [EPA-HQ-OAR-2009-0491-3905[1].1, p.1]
In setting the S02 emissions budget, the actual emissions from the last quarter of 2008 and the first three quarters of 2009 were used as a basis. Four continuous quarters of operation is simply a snapshot of the actual operation of a utility boiler. This snapshot does not account for the variability in individual utility unit operation and utility operation throughout the state. This was recognized by EPA in their development of the Clean Air Interstate Rule (CAIR), where four years of operating data were used as a basis to establish state budgets and allowance allocations. The fact that a single four quarter period is inadequate to establish state budgets or unit allowance allocations was also recognized to some extent in the methodology used to establish the Transport Rule proposed NOx state budgets. On page 9 of the Technical Support Document for the Transport Rule titled 'State Budgets, Unit Allocations, and Emission Rates' it is indicated that in setting the NOx budgets and unit allowance allocations, reported annual and ozone season NOx emissions were adjusted to account for unusually low utilization in 2009. Therefore, EPA based NOx budgets and unit allowance allocations on 2008 heat input data, presumably because it was considered more representative of typical operations. However, the same data set that EPA deemed inappropriate for use in setting the NOx budgets and unit allowance allocations was used to set the S02 budgets and unit allowance allocations, with no apparent reason given for using this data that represents 'unusually low utilization'. [EPA-HQ-OAR-2009-0491-3905[1].1, p.2]
EPA needs to correct this deficiency in their rule development prior to finalizing the rule. It is not appropriate to indicate in the proposed rule documentation that Nebraska's state budget is based on no additional controls, while at the same time establishing state S02 and NOx budgets that are well below typical actual emissions. We suggest that EPA reevaluate state budgets to reflect actual emissions as intended by the proposed rule. A good approach would be to use the actual emissions in the five year data set provided in the January 7, 2011 NODA. [EPA-HQ-OAR-2009-0491-3905[1].1, p.2]
Further, when complying with the Transport Rule, it seems in general that it will be more difficult for units with already low emission levels to make cuts in emissions to meet the requirements of the Transport Rule as compared to more significant emission reductions available to units that have historically operated at higher emission levels. [EPA-HQ-OAR-2009-0491-3905[1].1, p.3]
Response:
Regarding the inclusion of Nebraska under the final Transport Rule,  please see Preamble Section V.
Regarding the calculation of unit-level allocations, please see Preamble Section VII.D.
Organization: PowerSouth Energy Cooperative
Comment:
PowerSouth Energy Cooperative
PowerSouth commented in October 2010 on the proposed "Federal Implementation Plans to Reduce Interstate Transport of Fine Particulate Matter and Ozone," published in the Federal Register on August 2, 2010, at 75 Fed. Reg. 45210 ("Proposal").  In those comments PowerSouth stated that the Proposal, as written, fails to provide equitable treatment and the regulatory and economic certainty and flexibility that PowerSouth must have to meet our goal of providing reliable, affordable, low cost energy to our member owners.  Many of our comments addressed issues with the proposed allowance allocation methodology.   [EPA-HQ-OAR-2009-0491-3956[1].1, p.1]
PowerSouth re-states its recommendation that EPA abandon the allowance allocation methodology as detailed in the Proposal.  [EPA-HQ-OAR-2009-0491-3956[1].1, p.2]
1. The Proposal's allowance allocation methodology is unfair and punitive to PowerSouth and other utilities that made significant capital improvements to comply with CAIR and should be abandoned.  PowerSouth responded to CAIR by undertaking a multi-pollutant assessment, which included a myriad of control options, including the purchase of allowances.  PowerSouth's decision to retrofit the Lowman Plant in 2007 with an additional SO2 scrubber to allow 100% scrubbing of all three units and selective catalytic reduction (SCR) equipment for NOx emission reductions on two units in 2007 and 2008 at a cost of $300 million was based solely on compliance with CAIR and the economics of creating excess allowances to offset capital expenditures.  Allowance allocations to the Lowman Plant assigned in the Proposal  invalidate the rationale that led to the retrofits by only allocating enough allowances to meet compliance obligations at the manufacturer's guarantee level with no margin.  In fact, it will be very difficult to operate the control equipment continuously at the SO2 and NOx removal rates contemplated by the Proposal.  The cost of the capital project is not recoverable, PowerSouth has lost the opportunity to evaluate strategy based on true compliance options, and our flagship power plant is burdened with additional operational and cost constraints.   EPA should not now punish PowerSouth for investing capital to comply with CAIR.  [EPA-HQ-OAR-2009-0491-3956[1].1, p.2]
2. The Proposal as written penalizes early movers and encourages utilities to resist and delay investing capital in environmental improvements.  The drastic changes in the compliance "playing field" from CAIR to the Proposal teaches regulated entities to be recalcitrant and rewards utilities for not making capital investment to comply with EPA's rules.  The Proposal's allowance allocations and regulatory schemes incentivize regulated parties to resist capital improvements that benefit the environment and delay decisions as long as possible to see if regulatory conditions change.  Allowance allocations adopted in the final FIP should recognize and reward regulated entities that have retrofitted units in a good faith effort to comply with CAIR, or, at the very least, not punish them.  [EPA-HQ-OAR-2009-0491-3956[1].1, p.2]
3. Similarly situated facilities are disparately treated under the emissions-based allocation methodology in the Proposal.  A look at various coal-fired units and their relative compliance position for SO2 in the Proposal illustrates how taking no action is the best compliance option to environmental regulations.   Those units, who chose to "do nothing" under CAIR are in many cases in a much better position than utilities like PowerSouth who invested capital dollars in expensive control equipment.  For instance, coal-fired units in Mississippi within one hundred miles of our Alabama plant chose not to make any capital improvements in response to CAIR and now are entirely omitted from SO2 compliance requirements under the current Proposal.   Arbitrary state lines should not be the determining factor in setting compliance requirements.  [EPA-HQ-OAR-2009-0491-3956[1].1, p.2]
4. The Proposal's allowance methodology is unconscionable in that EPA rewards plants for being "dirty."   Units with no SO2 controls would be assigned allowances equivalent to their un-scrubbed emission rates in the Proposal.  In fact, some units in Alabama were assigned equivalent SO2 emission rates over 2.50 lb/MMBTU in the Proposal (for example, Alabama Power Company's Gorgas and Gaston units).  PowerSouth's Lowman Unit 1 flue gas can be directed through an uncontrolled by-pass yielding an emission rate of over 3 lb/MMBTU per hour.  In 2008-2009, the period EPA chose to use as the basis for allocations under the Proposal without our knowledge or input, PowerSouth was voluntarily directing flue gas from Unit 1 through a new scrubber for a portion of the period and therefore was assigned an equivalent SO2 emission rate of 0.478 lb/MMBTU.  Based on EPA's methodology, PowerSouth should not have built and operated the scrubbers or should have bypassed the scrubber on Unit 1.  PowerSouth emitting more would have resulted in a much more favorable compliance picture under the current Proposal.  PowerSouth is being penalized for voluntarily controlling its emissions.  It is unfathomable that utilities that responded proactively to EPA rules and installed and operated control equipment are disadvantaged and mistreated this way.  The Proposal's allocation methodology is not equitable, preferable, nor defensible.    [EPA-HQ-OAR-2009-0491-3956[1].1, p.3]
5. Using the equipment manufacturer's emissions removal rates without regard to ambient conditions, fuel parameters, and the plant's operating mode (startup, shutdown, load change, upset, etc.) is unrealistic.  Controlled emission rates assumed in IPM modeling and the resulting state budgets and unit-level allocations need to include realistic estimates for control device performance.  EPA's emission rate assumptions for units with existing FGD or SCR control are based on removal rates that are equivalent to continuous operation at manufacturer's guaranteed removal rates.  This tact is unfair and punitive as noted previously.  Further, it is unrealistic.  No pollution control device can be operated continuously to such low levels.  Such guarantees are typically established for specific operating conditions (such as steady state load conditions) or are specified for certain ambient conditions or specific fuel parameters.  In actual operating practice, units typically experience a range of load points, ambient conditions change dramatically from season to season, and coal sources change over time.  PowerSouth has been operating FGDs at Lowman since 1979 and knows from experience that this equipment will malfunction during the course of normal operation despite a utility's best efforts.  PowerSouth's recent experience with forced outages due to air heater plugging problems after installation of SCRs further illustrates that guarantee levels should not be used to model expected emissions or set allocations.  EPA should recognize that operating conditions on air quality control equipment will necessitate certain understandings about reasonable ranges of operation and adjust the Proposal accordingly.   [EPA-HQ-OAR-2009-0491-3956[1].1, p.3]
6. The data period used to develop the Proposal is too short to fairly represent each plant's range of operations and penalizes units for planned and unplanned outages that occurred during the extremely brief data period.  The Proposal uses only four strategically selected quarters of data to determine heat inputs and emission rates.  While this tact may have made it easier for EPA to design its regulatory remedy, it is inappropriate for such an important part of the Proposal.  EPA must use more data.  An alternative EPA has successfully used in the past is the highest three of five year methodology for heat inputs in the NOx SIP Call.   A larger data period more representative of plant operations is absolutely vital if the Proposal is enacted. [EPA-HQ-OAR-2009-0491-3956[1].1, pp.3-4]
7. The Proposal arbitrarily "cherry picks" data to allocate emissions.   There is no rational basis for assigning emission rates based solely on four quarters of data.  Further, the methodology used in the Proposal to determine which four quarters to use is not adequately explained and documented.  Adding or deleting a single quarter to the data set can change the resulting emission rate dramatically.  PowerSouth's review of the SO2 allocations to the Lowman Plant illustrates that the methodology used is arbitrary, unfair, and results in highly variable emission rates.  The Proposal as written indicates that for all three Lowman units, 3Q2009, 2Q2009, 1Q2009, and 4Q2008 should have been used.  Instead, EPA used what appears to be a "cherry picking" method, resulting in lower assigned SO2 allowance allocations.  For example, compare PowerSouth's equivalent SO2 emission rates from the EPA database.  In the Proposal, Unit 1 calculations are based on data from 1Q2009, 4Q2008, 3Q2008, and 2Q2008, passing over two more recent valid operating quarters.  Similarly, Lowman Unit 2 was assigned an equivalent SO2 emission rate in the Proposal based on data from 1Q2009, 4Q2008, 3Q2008, and 2Q2008, again passing over two quarters of more recent data.  The resulting equivalent emission rates are dramatically different as shown in the table below.  The method appears to have been applied, as written in the Proposal, to Unit 3.  Interestingly, if the same four quarters of data had been applied to Unit 3 as were applied to the other two Lowman units, the equivalent SO2 emission rate for Unit 3 would have been 0.321 lb/MMBTU! [EPA-HQ-OAR-2009-0491-3956[1].1, p.4] [[See Docket number EPA-HQ-OAR-2009-0491-3956[1].1, p.5 for table.]]
State regulatory participation is necessary for successful implementation of any CAIR replacement rule.  EPA has unfairly and unnecessarily usurped the State of Alabama's role in assigning unit allocations.  Alabama and other states have successfully administered state emissions budgets for the NOx State Implementation Plan (SIP) Call and the Clean Air Interstate Rule (CAIR) program and should be allowed to set and administer unit allocations based on the state budget.  EPA should relinquish control of program implementation back to the states.  PowerSouth supports including regulatory mechanisms and options to allow Alabama to take over the allowance allocation methodology in 2014. [EPA-HQ-OAR-2009-0491-3956[1].1, p.7]
Response:
Thank you for your comment.Organization: PPG Industries, Inc.
Comment:
PPG Industries, Inc.
PPG reiterates and incorporates herein by reference prior comments PPG made on the proposed CATR/FIP that were filed on October 1, 2010 and on the September 1, 2010 NODA on October 15, 2010. PPG specifically reiterates that Louisiana emission sources should not be subject to the proposed CATR/FIP because Louisiana emissions of S02 and NOx are not interfering with the attainment or maintenance of the annual or 24-hour PM2.S National Ambient Air Quality Standards ('NAAQS') in Texas and Louisiana emissions of NOx during the ozone season are not interfering with the attainment or maintenance of the 1997 8-hour ozone NAAQS in Texas. The justification for Louisiana's exclusion from the CATR/FIP is found in the prior comments of PPG and of the Louisiana Chemical Association in this docket. [EPA-HQ-OAR-2009-0491-3911[1].1, p.4]
Response:
PPG's previously submitted comments have been responded to elsewhere in the RTC document.
Organization: PPL Corporation
Comment:
PPL Corporation
Our initial major concern of was EPA's proposed, preferred approach for allocating allowances to individual generating units within each state. That approach assigns unit-specific allocations that are closely tied to unit-specific emission rates that EPA's Integrated Planning Model (IPM) forecasts are attainable in 2012 (nitrogen oxides and sulfur dioxide) and 2014 (sulfur dioxide in Group 1 states) at threshold control costs. This is an unfair approach because it allocates more allowances to units that have not invested in controls or that IPM projects will not attain emission rates as low as those of cleaner units. This is not only inequitable but also is inconsistent with a market-based approach that is intended to encourage dispatch of cleaner units by requiring dirtier units to purchase allowances to offset their higher emissions levels. [EPA-HQ-OAR-2009-0491-3935[1].1, p.3]
Additionally, allocating allowances based on future unit-specific emission rates modeled by IPM penalizes units whose future operation and emission rates are inaccurately characterized by a model that may form a basis for forecasting statewide conditions, but realistically cannot be expected to accurately characterize each unit individually. [EPA-HQ-OAR-2009-0491-3935[1].1, p.3]
PPL PA Generation requests U.S. EPA delay issuance of a final rule until they consider all comments on the original proposed rule and notices of data availability, correct all databases, remodel as necessary and issue a supplemental proposal for public comment and incorporate a timeline in the final rule that reflects the time needed to install any needed controls. [EPA-HQ-OAR-2009-0491-3935[1].1, p.5]
Response:
Thank you for your comment.Organization: Prairie State Generating Company, LLC
Comment:
Prairie State Generating Company, LLC
PSGC has one existing unit as defined in the proposed Transport Rule and one 'planned unit' as described in footnote 85 of the proposed Transport Rule at 75 Fed. Reg. 45309 (August 2, 2010), which are well under construction. Unit 1 is scheduled to commence commercial operation, as defined in the proposed Transport Rule in mid-July 2011 with Unit 2 following shortly thereafter in early 2012. Therefore, PSGC has a vital interest in the form of the final Transport Rule, as well as the details offered in subsequent Notices of Data Availability including this latest NODA issued on January 7, 2011. [EPA-HQ-OAR-2009-0491-3897[1].1, p.2]
PSGC appreciates the EPA considering, proposing, and allowing comment on alternative allocation methodologies and the additional topics related to allocation issues but is disappointed the underlying technical flaws in the air quality and modeling analysis are not acknowledged, let alone addressed. Since the analysis provides the basis for the statewide budgets, in failing to address the technical flaws, the proposed Transport Rule will continue to result in large and erroneous overestimation of emissions reductions necessary to eliminate significant contribution to downwind non-attainment of many states. PSGC and many others noted these serious concerns in earlier comments to EPA. PSGC offers the following comments on specific aspects of this NODA to aid EPA in its final decisions in this rulemaking. [EPA-HQ-OAR-2009-0491-3897[1].1, p.2]
Changing the allocation methodology on an individual unit basis does nothing to address the very legitimate concern that emissions reductions for existing units as a whole are proposed to be implemented too quickly to allow air pollution control equipment on existing units to be designed, permitted, procured, constructed and brought into full operation in accordance with model output, thereby precluding the development of a robust emissions trading market in which to purchase allowances. In a September 2, 2009 letter discussing the recommendations for the EPA to consider for the Clean Air Interstate Transport Rule ('CAIR') replacement rule, seventeen states in the eastern half of the U.S. recommended mechanisms to optimize existing NOx and S02 controls in 2014, low capital cost NOx controls in 2015, and emission caps which begin no later than 2017, a schedule which is much more conducive to allowing air pollution control equipment to be installed on existing units while addressing ambient air quality concerns. Slicing the same pie budget differently does not address the shortage of allowances in Illinois' new unit set aside ('NUSA') budget and it also does not remedy the problem with a state budget allotment which over estimates emissions reductions necessary to eliminate significant contribution to downwind nonattainment states.[EPA-HQ-OAR-2009-0491-3897[1].1, p.3]
EPA states they ' ... would hold back, for the new unit set aside for a state, 3 percent of the state budget. Three percent was established based on the total amount of new unit emissions projected for all the covered states. In this way, new units could be allocated some allowances for their emissions, which are part of the state's contribution to downwind nonattainment or interference with maintenance ... ' (75 Fed. Reg. 45310, 2nd column) (emphasis added). Allocating allowances to new units in this fashion creates an environmental regulation which forever discriminates against new units and assures the continued operation of older, less efficient plants. This proposed policy is antithetical to the objectives of the Clean Air Act by actually increasing the amount of emissions from power plants on a per kwh metric. New units have been constructed under strict New Source Review Program requirements which utilize best available technology (at a minimum) to protect downwind air quality and will be unfairly forever penalized by being forced to compete for allowances with other new units although the new units likely have lower emission profiles and are more efficient than existing units. New units should be allocated more than just 'some allowances'. They should be given the same proportional number of allowances as existing units, if not more, by virtue of the fact they are cleaner operating than existing ones. [EPA-HQ-OAR-2009-0491-3897[1].1, p.4]
The proposed Transport Rule continues to encourage discrimination against new units when allowances are not allowed to accumulate in the NUSA budget but instead are distributed back at the end of each control period to existing units which have been granted permanent allocations. Allowing NUSA pool allowances to accumulate at least offers some offset to this disservice to new units. [EPA-HQ-OAR-2009-0491-3897[1].1, p.4]
An even larger onerous concern for new units is that because the proposed Transport Rule has drastically underestimated the amount of time for air pollution control equipment to be designed, permitted, constructed and brought on-line for existing units to meet the model output, a robust emissions allowance trading market will not develop until several years after the rule goes into effect, thus precluding new units the opportunity to purchase the allowances needed to operate. If allowances cannot be purchased, then PSEC will be able to operate at only the capacity factor allowed by the number of allowances distributed from the NUSA, that is 33% - 38% under this NODA, a significantly lower operational level than the original 93% capacity factor which provided the basis for the business model for the facility. [EPA-HQ-OAR-2009-0491-3897[1].1, p.5]
States should be allowed to establish the allocation methodology most appropriate for their constituency, including determining the appropriate size of the NUSA budget to encourage new generation and to ensure new generation is accommodated sufficiently. Moreover, because ensuring that new, more efficient generation is allocated sufficient allowances is so important, states should be allowed to develop allocation methodologies and their state implementation plans ('SIPs') should be approved before the Transport Rule is applicable in those states. Recent air quality results demonstrate that the CAIR is addressing transported non-attainment concerns, and continuing that program until Transport Rule SIPs are approved will not negatively impact the environment. States are in the best position to know the new projects for which permits have been applied and which new projects are most likely to succeed. [EPA-HQ-OAR-2009-0491-3897[1].1, p.5]
Having said that, PSGC does not believe the variability limits established for Illinois have been set appropriately. The variability limits in Illinois do not accommodate known new generation units currently under construction or future potential new generation, and they do not appear to reflect the fact that Illinois has a significant amount of nuclear generation that provides base-loaded capacity for millions of users. When these base-loaded nuclear units are in outages for various reasons, that generation must be made up and, because Illinois is a net exporter of electricity, would likely be done so through increased fossil fueled generation. [EPA-HQ-OAR-2009-0491-3897[1].1, p.6]
Implementing the Transport Rule beginning in 2014, as recommended by the seventeen states in the eastern U.S.' September 2, 2009 letter, would allow the states sufficient time to develop SIPs and EP A to approve them. Furthermore, it would allow existing emission sources sufficient time to plan and optimize control measures. The Illinois EPA's September 30, 2010 comments on the proposed Transport Rule reiterates this recommended approach. Allowing states the time needed to develop their own SIP is consistent with the Clean Air Act requirements and the required SIP planning process while the current proposal usurps the role of the states to be afforded the first opportunity to develop a SIP which provides for attainment, maintenance and enforcement of the National Ambient Air Quality Standards. Allowing adequate time to develop, submit, and receive EPA approval of a SIP is not prohibited by and in no way undermines the court's decision in North Carolina v. EPA. [EPA-HQ-OAR-2009-0491-3897[1].1, pp.6-7]
PSGC supports the goals of the Clean Air Act but cannot support the proposed Transport Rule and its subsequent NODAs which create a long-term discriminatory environmental regulation against a new state of the art power plant which is highly-controlled and highly efficient by utilizing allowance allocation methodologies and assurance levels which do not put new units on a footing at least equal with, preferably more favorable than, existing plants. PSGC urges EP A to make changes to the proposed Transport Rule which affords new plants at least parity with existing ones, thereby encouraging the operation of new, more efficient generation.[EPA-HQ-OAR-2009-0491-3897[1].1, p.7]
Response:
Thank you for your comment.Organization: Progress Energy Service Company
Comment:
Progress Energy Service Company