One commenter ( OAR 2002 0056 2634) stated that the three phase approach provides greater certainty to the utilities as it accurately addresses the true level of " co benefits" and it provides sufficient time, between 2008 ( when monitoring would begin) and 2015 for utilities to plan for installation of mercury specific controls. The commenter added it is also environmentally beneficial in that it would reduce the total mercury emissions between 2010 and 2018, and would result in actual 2018 emissions being very close to 15 tons through reduced banking.

One commenter ( OAR 2002 0056 2861) stated that the three phase approach would achieve several objectives: First, it would eliminate the guesswork that would be involved in setting a co benefit cap in 2010. Second, it would eliminate the potential that the lack of demonstrated mercury specific removal technology, combined with the difficulty in installing all of the SO 2 and NO x controls that would be required under CAIR by 2010, could make it impossible for the industry either to meet a specific mercury emissions cap in 2010 or to have an effective mercury trading program in 2010. The commenter submitted that while concerns remain that the 2015 and 2018 targets are still ahead of technology development, the approach would provide more time for the technologies that will be needed to reduce emissions beyond co benefits to be developed, demonstrated and deployed. The commenter concluded that last, the proposal to move the first cap to 2015 would address concerns that have been expressed that too much banking may occur if utilities are allowed to start banking any reductions below their 2010 allocations. The commenter stated a 2015 cap that sets an emissions cap below co benefits would make it more difficult to bank reductions for the period from 2015 to 2018. However, the commenter recommended that limited banking be allowed prior to 2015 if the utility can demonstrate that controls have been installed to reduce mercury beyond co benefits, for example, if a company installs a demonstration technology to specifically remove mercury. The commenter suggested that will promote early reductions and help development of technologies needed to meet both the 2015 and 2018 caps.

One commenter ( OAR 2002 0056 2867) applauded EPA's recognition that mercury specific control technologies will not be commercially ready for application in the 2010 time frame. The commenter noted that several technologies are in various stages of pilot testing, but none have been demonstrated on a commercial scale for any extended periods of time. The commenter stated that those that have pilot tested have shown a substantial degree of variability. It was anticipated by the commenter that in the post 2010 period and by the 2018 Phase 2 compliance deadline, the performance of existing technologies would be well demonstrated, and innovative mercury specific technologies would have matured and be ripe for commercial use. The commenter submitted that the commitment to advance mercury control technology for readiness in the future is demonstrated by the pace of industry research activities and demonstration plans. Active commitment of funds by EPRI, DOE, and several utility companies including AEP, further attest to the commitment of the industry to further development and demonstration. 5 40 Response:

EPA is finalizing a cap and trade program under section 111, and establishing a first phase cap of 38 tons and a second phase cap of 15 tons. EPA examined a three phase approach but conclude its two phase approach was appropriate. See preamble for further rationale and Chapter 7 of Final CAMR Regulatory Impact Analysis.

Comment:

Commenter OAR 2002 0056 2867 cited the following advantages of the recommended three phase approach:

° Would provide assurances ( through the required monitoring programs) that emission reductions are being steadily phased in toward successful achievement of the ultimate 15 ton cap ° Monitoring capabilities and technologies would have attained the needed level of performance improvement to provide consistent demonstrations of compliance and accurate future allowance allocations under the cap and trade program.

° Banking would be limited in the earlier phase, thus ensuring that the 2018 emissions would closely track the ultimate 15 Ton cap. The 3 phase plan would achieve greater mercury reductions in the 2010 2018 period compared to EPA's proposed two phase plan ( a cumulative total of 242 Tons of allowances under a 3 phase plan, versus a cumulative total of 272 Tons of allowances under the 2 phase plan as proposed)

° The interim compliance date would more closely approximate the schedule for implementing demonstrated mercury specific newer technologies that would be elemental mercury specific ( the predominant form of mercury expected after the co benefits based reductions that principally remove the ionic form).

Consistent with the 3 phased approach recommended by commenter OAR 2002 0056 2922 as described above, one commenter ( OAR 2002 0056 2876) proposed that a phased, national cap and trade program ( under section 112 of the CM) be implemented to reduce power plant mercury emissions. The commenter favored a phased approach because it would not be possible to predict with adequate confidence the co benefit reductions that would be achieved through the industry's actions to meet CAIR requirements. In addition, the commenter believed a phased approach would allow for the time that is required for the commercialization of mercury specific control technologies that will be needed for future reductions. However, a key distinction between the commenter's proposed alternatives and the 3 phased approach described above is that the commenter did not believe that EPA has data that are sufficient to support setting an interim ( 2015) cap, or emissions allocation factors at this time. As noted above, EPA should determine emissions allocation factors by coal type and set an interim cap in 2012; this interim cap should become effective in 2015. The commenter stated the cap and associated factors should be based on a co benefits analysis of the monitoring data collected in the 5 41 2008 2012 period, and an assessment of commercial availability and performance characteristics of mercury control technologies for different coal types. The analysis performed during this period would allow for the implementation of an interim cap that would be achievable ( and thus would not promote fuel switching  to natural gas, for example), and avoid emissions allocations among coal ranks that would place certain coal ranks at a market disadvantage.

Response:

EPA is finalizing a cap and trade program under section 111, and establishing a first phase cap of 38 tons and a second phase cap of 15 tons. EPA examined a three phase approach but conclude its two phase approach was appropriate. EPA believes it is important to establish the cap levels in the final rulemaking to provide affected sources with certainty and time for compliance planning. See preamble for further rationale and Chapter 7 of Final CAMR Regulatory Impact Analysis.

Comment:

One commenter ( OAR 2002 0056 4894) provided a memo that summarized the results of an EPMM model run simulating the impacts of the EEl's proposed alternative Mercury Cap and Trade program ( Alt Hg Option). Under this option, there would be no hard mercury cap until 2015. However, early reduction credits could be earned and banked during the period 2010 2014 if mercury emissions were to be consciously reduced through early application of control technology. Phase I of the mercury cap would start in 2015 and be set to 24 tons. Phase II would start in 2018 when the cap is lowered to 15 tons.

The commenter attached the standard summary tables for this case as an Excel file. This memo highlighted the key results, primarily though comparison with results from EPA's proposed Mercury Cap and Trade Rule ( Hg Rule), which has a cap of 34 tons starting in 2010, reduced to 15 tons in 2018. The commenter ran both scenarios with identical assumptions except for the timing and level of the mercury caps.

The Alt Hg Option and the Hg Rule results presented by the commenter both were simulated with an assumption that there would be gradual improvement in activated carbon injection ( ACI) mercury control technology: a 2.5 percent annual reduction in the current estimate of the variable costs only of ACI based technology. The summary tables for this specific version of the Hg Rule scenario were also attached to the memo.

Response:

EPA is finalizing a cap and trade program under section 111, and establishing a first phase cap of 38 tons and a second phase cap of 15 tons. EPA believes it is important to establish a firm cap of 38 tons in 2010 based on EPA's modeling of projected CAIR Hg co benefits. See final preamble for further rationale. As discussed in comment responses below, section 5.8.3, EPA is not including early reduction credits for Hg in the final rulemaking. 5 42 Comment:

Several commenters ( OAR 2002 0056 2880,  2889) urged EPA to adopt the mercury cap levels and reduction timeframes in the Multi Pollutant Strategy Position of the Ozone Transport Commission ( January 27, 2004) and STAPPA/ ALAPCO's Principles for a Multi pollutant Strategy for Power Plants ( May 7, 2002 with March 12, 2004 analysis of those principles). The OTC calls for stepwise reductions in mercury emissions: 15 tons/ yr in 2008, 10 tons/ yr in 2012, 5 tons/ yr in 2015 and performance standards for individual units by 2012. These reductions are technically and economically feasible in that timeframe.

Response:

EPA is finalizing a cap and trade program under section 111, and establishing a first phase cap of 38 tons and a second phase cap of 15 tons. See final preamble for further rationale.

Comment:

One commenter ( OAR 2002 0056 3546) was generally supportive of the proposed targets and compliance deadlines for reducing mercury proposed under the cap and trade options. However, the commenter urged EPA to further examine these targets and deadlines   which are very ambitious   to ensure that the proposed two phased mercury control program is technically and economically feasible and consistent with the objectives to ensure adequate supplies of reasonably priced power. Moreover, the commenter submitted that given the stringency of the proposed reduction requirements, the adoption of an emissions trading program is essential to ensure these objectives are realized and that mercury reduction obligations can be achieved at the lowest possible cost.

Response:

EPA is finalizing a cap and trade program under section 111, and establishing a first phase cap of 38 tons and a second phase cap of 15 tons. See final preamble for further rationale.

Comment:

One commenter ( OAR 2002 0056 2359) stated EPA's weak proposals do not provide incentive for advancing mercury removal technology in conjunction with SO x, NO x, and PM. The commenter pointed out that DOE is expected to have cost effective mercury control technology available by 2010; EPA's mercury rules should at least be consistent with that timing.

Response: 5 43 EPA is finalizing a cap and trade program under section 111, and establishing a first phase cap of 38 tons and a second phase cap of 15 tons. EPA believes this cap levels and timing encourage technology development. See final preamble for further rationale.

Comment: One commenter ( OAR 2002 0056 3210) opposed EPA's rationale in the supplemental notice for 6 years to adequately conduct a commercial demonstration of mercury controls. The commenter claimed EPA is attempting to selectively develop time lines to justify cap and trade. The commenter noted the 6 year time line includes a pre award period greater than 12 months, each full scale demonstration taking another 12 months and inflates the operating and reporting timeline by including the time to prepare a report on the project. The commenter believes a realistic time line is 3 4 years, especially in light of all the full scale demonstration projects already completed or underway. The commenter stated the goal of the DOE/ NETL Mercury Control Technology Research Program is for technology for bituminous coal to be available by 2005 and lignite and sub bitumihnous coal by 2007 and advanced mercury controls for all coal types by 2010. Widespread commercial deployment could begin in 2008 for bituminous and 2011 for lignite and sub bituminous coal.

Response:

EPA is finalizing a cap and trade program under section 111, and establishing a first phase cap of 38 tons and a second phase cap of 15 tons. EPA believes this cap levels and timing are consistent with its understanding of technology development. See final preamble for further rationale and see Control of Emissions from Coal Fired Electric Utility Boilers: An Update, EPA/ Office of Research and Development, March 2005, in docket.

Comment: Several commenters ( OAR 2002 0056 2054,  2422,  2718,  2922,  3198,  3469) recommended that EPA should implement a phased in approach to the mercury cap and trade program that recognizes the differences in available technology solutions between the various fuel subcategories. Several of the commenters ( OAR 2002 0056 2054,  2422,  3198) claimed adequate technical data do not exist at this time to provide a reasoned basis for the allocation of allowances among coal types for purposes of an initial reduction in 2010.

One commenter ( OAR 2002 0056 2054) believed the mercury data collected as part of EPA's 1999 Information Collection Request ( ICR) is inadequate and inherently flawed. The commenter proposed that EPA acknowledge these data problems and implement mercury regulations that are designed to rectify the situation, while maintaining a reasonable level of environmental control over mercury emissions. Several commenters ( OAR 2002 0056 2054,  2422) encouraged initial reliance on the " co benefit" mercury reductions achieved by the sulfur and nitrogen oxides reductions required by EPA's proposed Interstate Air Quality Rule ( IAQR). One commenter ( OAR 2002 0056 2422) noted that EPA's mercury co benefit reduction estimates associated with the IAQR are comparable to those resulting from implementation of the agency's MACT proposal. The commenter noted EPA estimates that compliance with the IAQR will result in an overall level of 34 tons of mercury emissions from the electric generating sector in 2010, due to the installation of 49 Gigawatts ( GW) of scrubbers and 24 GW of SCR capacity by 2010. 5 44 Several commenters ( OAR 2002 0056 2054,  2422,  3198) stated EPA should implement a phased approach to the determination of mercury emission allowance allocations under any form of an emissions trading rule. The commenters submitted a phased approach should be designed with the following milestones:

° 2008 Require installation and initial testing and operation of mercury emission monitoring equipment on affected units;

° 2009 11 Collect and analyze monitor data to determine mercury emissions and reductions achieved by IAQR emission reductions in 2010;

° 2012 Determine prospective emission allocations by coal type for an interim 2015 emissions cap, based on results of the 2009 11 co benefits analysis, and an assessment of the expected future commercial availability and performance characteristics of mercury control technologies for different coal types;

° 2015 Affected plants meet an interim emissions cap determined by EPA in 2012; banking and trading of allowances commences;

° 2018 Final emissions cap of 15 tons is imposed.

Several commenters ( OAR 2002 0056 2054,  2422) recognized that the development of mercury specific control technologies may, or may not, reduce the need for specific emission allowance allocations by coal type at some point in time. The commenters stated the proposed 2009 2011 analysis of the efficacy of co benefit control reductions, coupled with an assessment of mercury specific control technologies, would facilitate a determination of the appropriateness of coal specific emission allowance allocations to meet an interim 2015 and a final 2018 cap.

Under the commenters' ( OAR 2002 0056 2054,  2422,  3198) phased approach, no mercury allowances would be assigned until 2015, for purposes of meeting an interim cap, and no banking or trading of allowances could occur prior to that date. One commenter ( OAR 2002 0056 2244) strongly opposed use of the agency's proposed MACT floor values for any allocation of mercury emission allowances. The commenter asserted these floor values were not statistically defensible, and were inappropriate for any regulatory purpose. One commenter ( OAR 2002 0056 2054) believed that with this proposal, the total mercury emissions would decrease and be equal to or less than the emission levels under the currently proposed regulatory alternatives. The commenter stated in addition, the additional data collection would insure a just and verifiable regulatory program based on sound science. The commenter also stated that finally, the limited time for banking allowances ( 3 years) would insure that the maximum mercury reductions would be achieved in a relatively short time.

Another commenter ( OAR 2002 0056 2922) also recommended that a mercury cap and trade program be implemented in three phases. This commenter's recommendation as described in the following paragraphs was identical to the recommendation of the above commenters ( OAR 2002 0056 2054,  2422,  3198) with the exception of the Phase 2 ( interim) 5 45 cap. The commenter submitted that in Phase 1, there should not be a numeric cap on mercury emissions. Instead, mercury emission reductions would be those resulting from coal fired power plants' installing new control equipment to comply with the requirements of EPA's proposed Clean Air Interstate Rule ( CAIR), assuming that EPA promulgates that rule. Mercury trading would not occur during Phase 1. The commenter stated mercury allowances would not be issued and banking of mercury allowances would not occur.

Under the commenter's ( OAR 2002 0056 2922) approach, coal fired units would install and certify mercury monitors in 2008 and begin to monitor mercury emissions in 2009. The commenter stated the main reason a numeric cap should not be established in Phase 1 is because there is no way to predict the level of mercury reductions that would be a result from utilities' efforts to meet the CAIR requirements. The commenter believed not setting a numeric limit would avoid excess banking of allowances if the cap were set too high, and conversely, compliance problems if the cap were set below the level of mercury reductions actually achieved from complying with the CAIR. Phase 2 would begin in 2015 with a cap of 24 tons of mercury emissions per year. The commenter submitted that in Phase 2, mercury allowances would be allocated and mercury trading could occur. According to the commenter, allowances should be allocated on the basis of heat input. The commenter suggested heat input multipliers of 1.0 for bituminous units, 1.5 for sub bituminous units and 3.0 for lignite units. Phase 3 would begin in 2018 with a cap of 15 tons per year. The commenter asserted that the main problems with EPA's cap and trade proposal center on the overly stringent limits on new units and the emissions monitoring and compliance requirements.

One commenter ( OAR 2002 0056 2718) supported the consensus industry position that EPA implement a three Phase trading program and proposed a variation of the approaches described above. According to the commenter, EPA should initially set a Phase I nationwide cap to begin in 2010 at 34 tpy but, based on monitoring data collected in 2008, reevaluate whether the cap appropriately captures the Agency's intent to require co benefits reductions only in the first phase. The commenter noted that several different studies of co benefits have indicated a Phase I range of removal from 34 tpy to 42 tpy   a significant range of uncertainty that could be addressed through a monitoring program in 2008. The commenter proposed an interim Phase II cap of 24 tpy in 2015 and a Phase III cap of 15 tpy in 2018. The commenter urged EPA to implement flexible cap and trade mechanisms that would enable affected sources to achieve the proposed reductions as cost effectively as possible.

Response:

EPA is finalizing a cap and trade program under section 111, and establishing a first phase cap of 38 tons and a second phase cap of 15 tons. EPA is establishing a firm cap of 38 tons based on EPA's modeling of projected CAIR Hg co benefits. EPA believes it is important to establish the cap levels in the final rulemaking to provide affected sources with certainty and time for compliance planning. EPA examined a three phase approach but conclude its two phase approach was appropriate. See final preamble for further rationale and Chapter 7 of Final CAMR Regulatory Impact Analysis. For discussion of coal adjustment factors used in determining allocations see responses in section 5.6.1 below. 5 46 Comment:

One commenter ( OAR 2002 0056 2243) believed that in general, the grandfathering of elevated NO x and SO 2 emissions should be eliminated. The commenter viewed this as an unfair competitive advantage to existing generators in a supposedly competitive electric market.

Response:

EPA is finalizing a cap and trade program under section 111, and establishing a first phase cap of 38 tons and a second phase cap of 15 tons. See final preamble for further rationale.

Comment:

One commenters council ( OAR 2002 0056 2906) reminded EPA that it is much more cost effective to reduce emissions from large utility units than from smaller industrial size steam boilers. The Council supported the EPA approach of focusing on the more cost effective larger units as in the proposed Clean Air Interstate Rule ( CAIR), formerly known as the Interstate Air Quality Rule ( 69 FR 4566, January 30, 2004 and 69 FR 32684, June 10, 2004) to achieve the required emissions reductions rather than on higher cost industrial size units.

Response:

The final CAMR will require Hg reductions from coal fired power plants. See final preamble for further rationale.

Comment:

One commenter ( OAR 2002 0056 3469) noted that EPA's determination of the necessity to regulate Mercury emissions from EGU's is based in part on a report by the National Academy of Sciences ( NAS). However this report stated that " based on estimates of methylmercury exposures in the U. S. populations... the risk of adverse effects from current methylmercury exposures in the majority of the population is low." Methylmercury is typically found in fish. The commenter further noted that EPA itself has acknowledged that concentrations of methylmercury in fish come from a variety of sources including global natural and manmade sources. According to the Electric Power Research Institute, of the 5,500 tons of mercury emissions estimated to occur globally, only 150 tons originate in the U. S. In the 1997 Mercury Study Report to Congress, the EPA estimated that U. S. EGU's " account for roughly 1 percent of total global emissions" ( approximately 48 tons) and emissions of mercury from lignite fired plants is less than 10 percent of that 1 percent. The report went on to say that " the relationship between mercury emissions reductions from Utility Units and methylmercury concentrations cannot be calculated with confidence." The commenter submitted that computer models run by U. S. EPA and EPRI predict that cutting mercury emissions from power plants by 50 percent will only reduce mercury levels in U. S. waters by an average of 3 percent and this level of reduction will translate into a reduction of less than 1 percent in exposure to mercury via fish consumption. 5 47 The commenter believed the EPA is faced with a dilemma. On the one hand the science does not yet point to a direct link between U. S. EGU mercury emissions and methylmercury concentrations in fish nor does science show how reductions in EGU mercury emissions will alter these concentrations and lower health risks. On the other hand, the public has been led to believe that mothers and unborn children are at risk to exposure of damaging levels of mercury due to consuming fish and that this mercury emanates from U. S. power plants. It is asking for action to be taken to control mercury emissions from power plants.

The commenter stated that given the state of the available information, it would thus appear prudent on the part of EPA to proceed slowly, implementing cost effective regulations that do not destabilize energy markets, such as forcing fuel switching or inhibiting the construction of new coal fired generation, or imposing unintended social or economic costs, such as raising energy prices and closing mines and power plants in rural areas. ( These consequences are discussed in detail in the comments submitted by CEED and are incorporated in the commenter's comments by reference). The commenter submitted that a measured approach will allow the EPA to evaluate the effectiveness of the regulations in reducing health risks and to modify future regulations in light of these results. To demonstrate it is a good steward of the public's health and resources, EPA must be able to conclusively demonstrate that the regulations have resulted in lower health risks. The commenter concluded that as such a phased approach to regulation is called for.

Response:

EPA is finalizing a cap and trade program under section 111, and establishing a first phase cap of 38 tons and a second phase cap of 15 tons. See final preamble for further rationale.

Comment:

One commenter ( OAR 2002 0056 1842) offered the following " mercury escalating payment proposal." According to the commenter, the high mercury emitters would pay the low mercury emitters' amounts which would rise each year. The commenter submitted that if 90 percent of the mercury could be removed for a rate increase of one percent, the vast majority would support the expenditure. If a modest rate increase would achieve 80 percent reduction while a huge increase would be needed for 90 percent reduction then the vast majority would support the 80 percent removal. So there would be relatively little controversy over how much should be spent. The commenter believed the controversy would be over cost vs. performance. The commenter noted environmentalists say 90 percent of the mercury can be eliminated at a cost of a few thousand dollars/ lb. Utilities say that even at $ 35,000/ lb you may not be able to remove 90 percent.

The commenter stated that at the end of the year each utility who emits mercury at greater than the average rate pays into a fund and each utility under the average receives those payments. The amount per pound would rise each year. The commenter submitted it would likely start low, 5 48 e. g., $ 5,000 lb in 2007 and rise at $ 10,000/ lb per year until industry wide emissions are reduced to 5 tons/ yr.

The commenter submitted that if the environmentalists are right and most mercury can be removed for a few thousand dollars/ lb, then utilities would soon invest in removal technology rather than pay into the fund. To ensure that this does happen the rule could contain a proviso that if mercury is not reduced to some level ( e. g. 25 tons in 2010 and 5 tons in 2015) then a tax would kick in. The commenter suggested this tax/ lb would be greater for those with higher than average emissions. The funds from this tax would be earmarked for mercury development.

The commenter believed setting the cost/ lb would be critical. The commenter noted that interestingly both sides in the argument would have to contradict themselves. Environmentalists would say that instead of a few thousand dollars/ lb it could be very costly. Utilities would say that the payment costs should be set lower and will have to base this on the claim that mercury can be removed cheaply.

The commenter admitted that the truth of the matter is that setting the costs would be tricky. At $ 19,000/ lb average cost it would appear that a $ 25,000/ lb top payment would be sufficient. But the commenter submits that given the incremental cost structure above, utilities would stop at 75 percent efficiency. The commenter suggested it might be best to set $ 85,000/ lb as the payment in 2015. According to the commenter, this would result in more than 80 percent removal.

The commenter explained the steep escalation for the final percent is based on increasing carbon usage from 2 Lbs/ MMacf to 10 lbs/ MMacf to 30 lbs/ MMacf. The commenter did not believe carbon would be used at the high usage rates. The commenter believed this escalating payment system will stimulate all sorts of developments. The commenter submitted one of the main attractions of this approach would be the accelerated use of better technology. The commenter pointed to chloride pre scrubbers, biomass gasification including PVC for injection as a reburn fuel, additives other than carbon, acid condensation, etc. The commenter stated all would promise to remove 90 percent of the mercury at less than $ 10,000/ lb.

Escalating Payment Scenario Would Also Solve Monitoring Problem. The commenter submitted the EPA proposal to ignore particulate mercury was not a good idea. The commenter noted that three percent error is maybe acceptable for emission reporting but if you are trading allowances at $ 35,000 or as per above $ 85,000/ lb ( NOTE: The $ 85,000/ lb figure is based on an example application of the mercury escalating payment proposal given in the comment), you are talking about a variance of $ 100 million to $ 200 million. Furthermore, there is no assurance that three percent is the right number. The commenter pointed out the RJM concept is to condense acid mist on fine particulate in order to create acid deposition sites. Under the EPA scheme all the mercury could then be discharged and not counted. The commenter also pointed out there is a 10 times differential between fine particulate emissions from old precipitators and new ones.

According to the commenter, no trading system will stand for this amount of inaccuracy. So the commenter proposed an " audit system." EPA can protect against abuses but put the 5 49 burden on the utilities to report accurately. The commenter submitted that because of the financial consequences utilities will demand a measurement system which provides the highest possible accuracy. EPA has already proposed allowing better QC/ QA rather than mandating specific instrumentation. The commenter believed this is the route to take.

Investors Will Supply the Capital and Take the Risks. The commenter stated most experts agree that mercury technology lacks the certainty of SO 2 removal. But they would also agree that there are many probable routes to economic mercury removal. The commenter submitted the problem is that utilities do not have the mind set of traders. So why not pass the risk to the investment community. The commenter pointed out the maximum cost per pound in any future year is now known. The investor would agree to receive some percentage of this amount. In return he would finance the control technology used to make the reductions.

The commenter believes there is a big upside profit potential and a limit on downside risk. In a worst case scenario the investor would lose his investment but does not face additional penalties. The investor says that if the system works he wants the lion share of the cost difference. If it doesn't work the utility just makes the payments they would have made without the investment.

The commenter raised the question, How does a proposal such as this meet the criteria of individual action by each state? One way would be to add a clause that each state that volunteers to enter this plan would have the option to drop out when mercury limits reach the budgeted amount in the state. The commenter believes in practice no state would do so.

The commenter submitted the reason would be if the state reached this threshold, utilities in the state would be net recipients rather than payers. So opting out would increase electricity rates.

The commenter stated another reason no state would drop out is that this plan would encourage cost effective mercury reductions beyond the 90 percent. The commenter stated, e. g., the national average drops to five tons in 2015. At that time the payment price of $ 85,000/ lb would no longer escalate, but the payment would continue at that price. The commenter submitted that in future years, new technology that costs less than $ 85,000/ lb would be implemented. The commenter believed that eventually mercury might be reduced by 95 percent instead of 90 percent. The beauty is that the cost would be a maximum of $ 85,000/ lb for the last increment and on the average only a fraction of that. The commenter stated that their analysis showed that the cost for very high mercury reduction will be only 1 to 2 mils/ kWh.

The commenter ( OAR 2002 0056 1842) stated that the Particulate Inter Utility escalating payment plan would provide a cost effective solution to the particulate and toxic metal problems. The commenter submitted that higher emitting utilities would pay lower emitting utilities an amount starting at $ 400/ ton in 2007 and amounts in future years which escalate at $ 400/ ton until national averages drop below 0.05 lbs/ MM/ btu. According to the commenter, an analysis showed that within a few years, payments would be more than the annual cost of efficient particulate 5 50 control equipment. The analysis also showed the substantial reduction in toxic metals which would accompany the particulate reduction.

Response:

EPA is finalizing a cap and trade program under section 111 that it believes is appropriate and cost effective.

5.4 HOT SPOTS Comment:

A trading scheme would allow dirty plants to continue to emit high levels of mercury by purchasing credits from cleaner plants and not installing controls, which would further endanger the health of surrounding communities. with hot spots. For example, one commenter ( OAR 2002 0056 2355) stated that low income immigrant populations who eat fish from local waters are at risk as are Boston residents who suffer from asthma. The commenters believed this approach is inappropriate for such a toxic pollutant and is inconsistent with EPA's own findings as well as other Federal agencies such as FDA and NAS. Another commenter ( OAR 2002 0056 4139) submitted information suggesting that localized deposition impacts do occur. The commenter attached a copy of the USGS briefing. The commenter stated that the data suggest that monitored mercury wet deposition is directly related to the quantity of mercury emissions within 50 km.

One commenter ( OAR 2002 0056 4177) opposed a cap and trade approach under section 111 or 112. The commenter submitted that State ambient monitoring shows that mercury emissions create hot spots downwind of sources. The commenter believed a national trading program would doom certain areas of the country to unacceptably high concentrations. Given the current concentrations in the Northeast, the commenter felt Maine would likely continue to be located in a hot spot.

The commenter ( OAR 2002 0056 3449) stated mercury emissions remaining after compliance with a cap and trade program would cause unacceptable adverse health effects; hot spots would remain. The commenter noted that EPA's rationale stressed that the health risks associated with mercury emissions from power plants are uniquely global, rather than local . According to the commenter, this dismisses the importance of local impacts from heightened deposition near power plants and the regional impacts from overlapping deposition pattern. The commenter submitted that in general, regions with the highest deposition are the same regions where local and regional sources make significant contributions to the total mercury load. It was clear to the commenter that mercury emitted from coal burning power plants is deposited much more in some areas than other. The commenter submitted that a cap and trade approach would exacerbate the regional impacts. The commenter noted that about 30 percent of generating capacity has shorter stacks that tend to result in more local deposition. These are typically smaller, older plants that would not likely be controlled under a cap and trade program. The commenter believed regional and local impacts could increase in regions where these plants are 5 51 prevalent. The commenter stated large hot spots exist now across areas too big to be called " spots." These include entire regions, especially in the Northeast and Great Lakes. The commenter claimed this is confirmed by deposition monitoring data collected by states and the by widespread fish advisories. The commenter concluded that marginal regional decreases would not solve the regional or local problems. In some cases, emissions may increase if plants increase coal use.

One commenter ( OAR 2002 0056 3435) stated EPA should abandon cap and trade because of its weakness in control of a HAP and concern for possible hot spot problems. The commenter submitted that recent studies ( New Jersey Mercury Task Force Reports, Mercury Emissions from Coal fired Power Plants by NESCAUM, and Integrating Atmospheric Mercury Deposition with Aquatic Cycling in South Florida have shown that mercury is deposited much closer to the source of emissions than NO x or SO 2 emissions and poses a much greater health and environmental impact. The commenter noted that Georgia already has areas of high mercury concentrations in the southern part of the state where physical and chemical conditions favor metethylation and bioaccumulation of mercury. The commenter believed utility units within these airsheds must reduce emissions to the maximum extent possible. The commenter asserted that any aspect of a program that would allow less than maximum control is unacceptable.

Several commenters ( OAR 2002 0056 2817,  2819) supported MACT standards under CAA section 112( d) to address mercury hot spots associated with emissions of oxidized mercury from coal fired boilers. One of the commenters ( OAR 2002 0056 2817) contended that while science may not be conclusive on some aspects, EPA should err on the side of public health and adopt more stringent limits. The commenter cited potential legal concerns, the hazardous nature of mercury and the potential for hot spots as reasons EPA should abandon the cap and trade approach. The commenter believed cap and trade may be appropriate for regional pollutants such as SO 2 and NO x, but not for HAP.

One commenter ( OAR 2002 0056 3210) stated that EPA's conclusions about the benefits of a cap and trade program for mercury do not reflect current science, environmental considerations, engineering, or economics. The commenter noted the Utility RTC concluded that the Great Lakes, Ohio River Valley, the Northeast, and scattered areas in the South are predicted to have the highest annual deposition rates. The commenter also noted that recent studies show that US sources are the main contributors. The commenter believed the cap and trade program would promote hot spots and allow continuation of regional concentrations. The commenter stated that regional concentrations could be reduced much sooner through appropriate MACT standards.

One commenter ( OAR 2002 0056 2878) opposed cap and trade and cited several scientific and policy concerns including lack of safeguards to protect the public health and secure additional needed reductions, toxicity of mercury and tendency to bioaccumulate in the food chain, potential for hot spots, and environmental justice. According to the commenter, an initial analysis showed that the top 33 percent of the largest plants have stack heights about twice as tall as the bottom 33 percent lowest emitters. Short stacks could contribute to more local deposition. 5 52 The commenter submitted that to the extent that trading shifts emissions from larger to smaller plants, the maximum local deposition would be about 4 times higher for each pound of mercury.

Several commenters ( OAR 2002 0056 2219,  3526) opposed the cap and trade approach because it would have disproportionate impacts on the Great Waters, including the Great Lakes region and worsen existing hot spots and may cause new ones. One commenter ( OAR 2002 0056 2219) stated that not requiring controls on all facilities would further contaminate important food supplies for sensitive populations already impacted by the largest concentration of coal fired power plants in the U. S. According to the commenter, except for the Everglades, the Great Lakes have the highest mercury deposition rate in the world. According to an EPA mass balance study, 86 percent of mercury deposited to Lake Michigan comes from atmospheric sources   30 percent of these emissions are from local sources near Chicago and the number of potential local sources of mercury is increasing. The commenter claimed that the health of women, children, and other sensitive populations will be at further risk. The other commenter ( OAR 2002 0056 3526) stated that cap and trade is inconsistent with EPA's prior determination that it would protect the Great Waters through faithful enactment of section 112 without a cap and trade approach ( 63 FR 14090, March 24, 1998). The commenter noted that a cap and trade approach would not guarantee that units responsible for mercury and other HAP pollution to the Great Waters would have to adopt mercury controls. section 112( m) of the CAA prohibits EPA from adopting a program to control HAP that does not assure adequate safeguards for the Great Waters. The commenter asserted the cap and trade program can not address the adverse impacts that units currently have on the Great Waters and could result in even more harm. The commenter stated that if EPA does adopt a cap and trade program, it must explain how this approach fulfills its nondiscretionary duties to protect the Great Waters.

One commenter ( OAR 2002 0056 2219) opposed the cap and trade approach because scientific understanding of the percentage of mercury that is converted to methylmercury ( the form that most readily enters the food chain) is limited. The commenter noted that results of the Florida Everglades study showed that reducing emissions on a regional basis, facility by facility, would achieve reductions in the ecosystem, but it is not a one to one correlation. In this study, a 99 percent reduction in emissions from incinerators yielded a 60 percent reduction of mercury in fish tissues. The commenter stated it is not clear that a cap and trade program would achieve the significant local reductions needed to improve the ecosystem. The commenter believed if all facilities reduced emissions, then local and national emissions would also be reduced. The commenter also stated that mercury emissions must be addressed on a facility by facility approach since the most toxic form of mercury ( reactive gas phase mercury or RGM) is deposited locally. According to the commenter, trading schemes would create regional areas of higher mercury releases that would further damage food sources and human health   particularly in the Great Lakes area where there is a high percentage of subsistence fishing.

According to the commenter ( OAR 2002 0056 3437), The 2003 results of the EPA Office of Water study, " Draft Mercury REMSAD Deposition Modeling Results" reinforced their concerns. This modeling showed that at mercury hot spots, local emission sources within a state can be the dominant source of deposition, commonly accounting for 50 80 percent of the mercury deposition. According to the commenter, in state sources contributed more than 50 percent of 5 53 the pollution to sites in the top 8 worst hot spot states ( Michigan, Maryland, Florida, Illinois, South Carolina, North Carolina, Pennsylvania, and Texas).

Response:

EPA has addressed the hot spots issue in the revision Federal Register notice and in the Effectiveness TSD.

Comment:

Many commenters ( OAR 2002 0056 1625,  1627,  1673,  1790,  1859,  1969,  2251,  2332,  2431,  2547,  2560,  2578,  2725,  2830,  2833,  2835,  2841,  2850,  2861,  2862,  2897,  2900,  2907,  2915,  2918,  2922,  2929,  2948,  3353,  3444,  3463,  3478,  3513,  3530,  3537,  3539,  3546,  4891) believed that a mercury cap and trade program will not create hot spots. Many of these commenters ( OAR 2002 0056 1625,  1790,  2251,  2547,  2560,  2725,  2833,  2835,  2897,  2900,  2915,  2922,  2948,  3353,  3463,  3513,  3539) cited review of recent studies as directly refuting that claim.

Several commenters ( OAR 2002 0056 1625,  2915) stated there are several facts that suggest that localized effects will not occur with a mercury emissions trading program. The commenters pointed out that mercury emissions from utilities in the U. S. represent only a portion of emissions   less than 10 percent of total North American emissions and about one percent of total global mercury emissions. Regulations or legislation will make this small contribution even smaller. According to the commenters, a recent study by EPRI found that reducing power plant generation mercury emissions will produce minimal benefits   a 47 percent cut would yield less than a one percent drop in exposure. The commenters submitted that even drastic reductions in utility mercury emissions will have a minimal effect on state fish advisories. Furthermore, most power plant mercury emissions are of the elemental form soon after release and therefore enter the global pool instead of depositing nearby. The commenters cited a recent study by Brookhaven National Laboratory that found only 4 to 7 percent of mercury is deposited locally. Another fact presented by the commenters is that regulations to control SO 2 and NO x will require the installation of pollution controls that will also capture the forms of mercury that tend to deposit nearby. This is because the species of mercury that are deposited locally oxidized and particulate mercury are controlled by the same equipment that controls fine particles, SO 2 and NO x.

Another commenter ( OAR 2002 0056 3478) stated that current research indicates that North American anthropogenic sources were calculated to contribute only from 25 to 32 percent of the total mercury deposition over the continental U. S. The commenter stated that the amount of local deposition of mercury is in part a function of the speciation of the mercury emitted from the source. The commenter further stated that mercury is typically emitted both in its elemental form and as oxidized mercury. According to the commenter, elemental mercury tends to enter the global mercury cycle, and may be retained in the atmosphere for up to one year before deposition, creating the possibility that it will travel around the earth several times before deposition. Similarly, one commenter ( OAR 2002 0056 1859) agreed that no hot spots should occur, 5 54 particularly as it pertains to units in the west and to facilities that burn sub bituminous coals. The commenter noted that sub bituminous coals are typically low in SO 2 and mercury and when combusted, produce primarily elemental mercury which tends to not deposit near the source.

One commenter ( OAR 2002 0056 2431) cited modeling by EPA, DOE, the Brookhaven National Laboratory, and EPRI and concluded that emissions trading would not create hot spots. The commenter claimed that studies of the acid rain program trading program demonstrated that trading did not significantly change where emissions actually occurred when compared to a command and control approach. The commenter stated trading would not cause local impacts because most emissions become elemental soon after release and enter the global pool instead of depositing nearby. Also new SO 2 and NO x rules will require controls that also capture the forms of mercury that tend to deposit nearby. The commenter further submitted that overall emissions would still decline even if some utilities did not install controls because of the cap. The commenter stated that emissions trading also creates economic incentives which bring about the greatest reduction from the highest emitting sources. The commenter concluded thus, hot spots would not occur.

One commenter ( OAR 2002 0056 3513) pointed out that EPRI modeling has indicated that mercury should be studied on a global scale   not a local or even national one. EPRI's analysis showed that the majority of mercury emitted from coal fired units is in the elemental form which does not deposit locally, but enters the global pool and circulates in the atmosphere for six months to a year on average. The soluble forms of mercury are more likely to deposit nearby. The commenter submitted however, if the proposed rule is enacted along the same timeline as the Interstate Air Quality Rule, most units will be required to install SCR's and/ or scrubbers which will capture most soluble forms of mercury.

One commenter ( OAR 2002 0056 2835) stated that the acid rain program has cost effectively achieved a 41 percent reduction in SO 2 emissions from 1980 through 2002 ( despite a significant increase in electric generation) and done so without any evidence of local " hot spots" occurring. The commenter also pointed out that the NO x SIP Call rule has adopted an interstate cap and trade program that has achieved significant reductions in NO x emissions from the power sector.

Several commenters ( OAR 2002 0056 2251,  2833,  2948,  3530) submitted that as " proof" of the " hot spot" theory, some groups have cited a study of mercury in the Florida Everglades. According to the commenters, many claims about this study contain erroneous, unsubstantiated assertions that it " proves" controls on local sources would result in a fairly rapid decline of mercury in the regional environment. The commenters asserted the study does not prove such assertion because:

° The mercury reductions in south Florida were from municipal and medical waste incinerators, not from power plants. The mercury emissions from these incinerators are generally in a water soluble form. 5 55 ° Many studies have shown that the characteristics of the water body, not the amount of atmospheric deposition, dictate the eventual levels of mercury in fish. The Everglades is a unique ecological and climatological system, strikingly different from other U. S. waterbodies; it should not be considered representative of water bodies in other states, or even of other parts of Florida. Before states decide to take action beyond the federal mercury rules, they should assess their state's actual situation.

° The claim that changes in mercury emissions will result in rapid changes in the amount of methylmercury found in fish is not supported by the study's data or findings. Despite decreases in mercury emissions from incinerators, data measurements and long range transport modeling indicate that the amount of mercury being deposited in the Everglades overall has changed little. Modeling of mercury transport conducted by EPA and EPRI has led to the conclusion that over 60 percent of mercury deposited in Florida originates outside the state.

° Extensive measurements around power plants have failed to show local increase in mercury at ground level or in nearby waterways. EPA reached this conclusion in its 1997 Mercury Study Report to Congress, and this finding has been supported by recent studies at a large power plant in Maryland.

The commenters concluded that clearly, the Florida Everglades study does not support applying the " hot spot" theory to other states, or even other parts of Florida.

Regarding the South Florida Report, another commenter ( OAR 2002 0056 3444) had several comments. The commenter referenced several commenters that suggested that this Report demonstrated the existence of " hot spots" and further demonstrated that limiting mercury releases from coal fired power plants ( CFPPs) would cause rapid decreases in mercury concentrations in the local/ regional environment. The commenter submitted that neither conclusion followed from the Florida report. While the commenter acknowledged an extensive and valuable body of research has been conducted in south Florida, the commenter found two major problems with how the results have been interpreted ( both in the report itself and by others). First, to what degree has the relationship between local mercury emissions reductions ( known to have decreased dramatically between the late 1980s and the early 1990s) and decreasing levels of mercury in biota ( documented to have occurred between the early 1990s and the present, but not to the same degree everywhere in south Florida) been established, or put another way, how much of the latter was caused by the former? Second, to the extent we know this relationship, to what degree does it apply to CFPPs in other parts of the country?

The commenter stated that relative to the first issue, while there is an evolving weight of evidence that there is some relationship between local mercury emissions reductions and local biotic response, the degree of the relationship has not been, nor can it be, definitively quantified for the time period addressed by the Florida study. First, the commenter noted there is no deposition record spanning the time before and after the emission reductions. Inferences from sediment cores are, at best suggestive, and at worst inconsistent. Second, the commenter submitted that while aquatic model hindcasting ( currently being conducted) suggests a link 5 56 between deposition and response in aquatic biota, it cannot allocate the share of deposition changes coming from other source changes and the share of the biotic response coming from non depositional ecosystem changes ( e. g., hydrological, sulfate, phosphorous, DOC, etc.). To the extent that U. S. emissions reductions, European emissions reductions, and other worldwide emissions changes were affecting the changes in deposition at the same time ( also a study in progress), it would moderate the degree that local emissions changes were having on deposition changes. The commenter also stated that similarly, to the extent hydrological and other ecosystem changes were also affecting biotic mercury levels, it would moderate the role of deposition changes. Finally, the commenter believed atmospheric modeling conducted as part of the Florida Study was flawed in several ways. The modeling erroneously assumed that mercury deposition in waterways comes only from local sources. The commenter noted that modeling by EPA and EPRI has shown that more than 90 percent of the mercury that currently deposits in south Florida originates outside the United States. The commenter conceded that in the late 1980s it is likely that the local contribution was somewhat higher than today, it could not have been 100 percent. The commenter summarized, the magnitude of the connection between local mercury emissions reductions in south Florida and local biotic response is tempered by the contributions from other mercury emissions changes worldwide and other ecosystem changes affecting the biotic response.

Relative to the issue of extrapolation, the commenter stated there are numerous arguments why the results cannot be extrapolated to CFPPs in other areas of the country. The commenter submitted that whatever relationship that may exist is unique to the type of emissions, the climatology, and the type of ecosystem that exists in south Florida. First, as demonstrated above, we don't know the magnitude of the connection between local mercury emissions and local biotic responses. Second, municipal and medical waste incinerators   not power plants   are the source of industrial mercury emissions in south Florida that are referenced in the Florida report. Incinerators produce far higher percentages of ionic mercury   the form of mercury that is water soluble and more readily deposited   than coal fired power plants and have far shorter stack heights resulting in the potential for higher amounts of mercury being deposited near these sources. Third, there is evidence that ionic mercury emissions from CFPPs rapidly converts to elemental mercury   the form of mercury having a long atmospheric residence time   a phenomena not observed in incinerators, which suggest that the link between emissions and local deposition would be even less for CFPPs. Fourth, the climatology of south Florida is unique to the U. S. with daily, deep convective thunderstorms that converge over the Everglades in the summer. Fifth, the Everglades are not representative of U. S. waterways because they are in a subtropical zone with no distinct seasons and high rainfall in the summer, contain shallow water with very low flow rates, and with bottom sediments that differ from those in other locations. Other waterbodies also have different levels of acidity, biological activity, dissolved oxygen, and turbidity. The commenter asserted that all of these differences could dramatically affect mercury cycling and uptake by biological organisms and make extrapolation of the Florida results to other areas of the country inappropriate. The commenter pointed out that in Minnesota, for example, mercury emissions also have declined dramatically from 1990 to 2000 ( about 68 percent   Minnesota Pollution Control Agency, March 2004), yet mercury in fish of that area has not changed significantly in the last 15 years. The commenter summarized, the extrapolation of the Florida 5 57 mercury emissions to deposition or deposition to biotic response relationships, to other sources and areas of the country is inappropriate.

The commenter stated, accordingly, the Report cannot justify a conclusion by EPA that coal fired power plants create local " hot spots" nor can the results be extrapolated to CFPPs in other parts of the country. The commenter added that the Report itself recognizes its limited focus and is replete with assumptions, caveats, cautions and recommendations for further work, none of which is mentioned in the references or citations above. More detailed comments regarding the Report are summarized as follows:

° The analysis upon which the Report relies is a work in progress, and therefore the conclusions are at least premature. The Report expressly recommends that further information be obtained and provides seven specific cautions when interpreting the results.

° Any claim that cost effective control strategies have substantially reduced mercury concentrations in south Florida's fish and wading birds is premature. A research project in excess of $ 300,000 has been designed specifically to shed light on this assertion, that is, to elucidate between competing hypotheses for explaining the observed reduction of mercury in south Florida's biota.

° Not all ecosystems are created equal. Mercury may be accumulated up the food chain differently in other ecosystems than in the Everglades. To the extent decreases in local reactive mercury emissions result in local declines in concentrations in fish and wildlife might be true in the area of study ( central Everglades), there are substantial differences in responses even across the Everglades ecosystem. There is also evidence of a general decline in mercury in biota in areas that are remote from local sources.

° While it may be true that total quantities of mercury emitted from CFPPs are substantially larger than that of incinerators on a world wide basis, the form of mercury emitted from coal plants is more in a form ( non reactive) not readily deposited on a local scale. In addition, recent research indicates that any reactive mercury that is emitted from coal fired power plants is largely transformed to the non reactive form before deposition can occur. Furthermore, a press release from the Resources Committee, US Congress, states that U. S. coal fired power plants emit only 1 percent of the total global mercury emissions, citing peer reviewed research published in Atmospheric Environment, 2003. In addition, emissions measurements analyses show that the data quality varies widely between different sources and geographically.

° The Report describes impressive reductions in mercury emissions achieved by municipal waste incinerators and by the closing of numerous small medical waste incinerators. These reductions and the implied reductions in mercury inputs to the Everglades ecosystem must be considered in the context of the high percentage of reactive mercury emitted from these facilities, 75 percent and 95 percent, respectively. 5 58 ° The Report does not support the idea that the Lake Annie ( sediment core) data shows a peak in deposition coinciding with the peak in emissions, followed by a rapid decline consistent with emission reductions from the Dade and Broward County incinerators 150 miles away. The implication that emissions from the Dade and Broward County incinerators affected mercury accumulation in the Lake Annie cores is not supported. Researchers have postulated that mercury reduction effects can be seen 60 miles from an emission source. However, prevailing winds from Dade and Broward counties are unlikely to cause consistent depositional impacts in an area northwest of Lake Okeechobee. In addition, the magnitude of decrease ( assuming it has been corrected for focusing and rainfall) was small and should have been noted as evidence for local sources not playing much of a role.

° A modern and retrospective study of mercury in feathers from wading birds is cited as following the pattern of mercury emissions from 1920 to 2002. However, a modern and retrospective study of mercury content in hair of raccoons ( Porcella et al., 2004) failed to demonstrate a significant difference over the last 50 years in south Florida. However, a large difference existed between sites ( up to a factor of 20) for raccoon hair mercury in both modern and historic samples. The difference between the wading bird data and the raccoon data may be due to a broader sampling area for raccoons ( across the entire south Florida peninsula), compared to feather collections from specific rookeries.

° The idea that reductions in mercury deposition will be more dramatic closer to Broward and Dade counties where the majority of emissions reductions from incinerators occurred is also not supported. Specifically, the Florida Atmospheric Mercury Study ( referred to in comment g) results do not bear this out.

° Finally, the South Florida Report characterizes mercury as a " now well understood neurotoxin." This is certainly arguable since major studies of neurological effects of prenatal mercury exposure in children are not in agreement. No one seriously disputes the fact that, at high levels of exposure and in laboratory settings, mercury is toxic to the brain. However, setting an exposure limit for regulatory purposes should use the best data available from the most realistic and broadly generalisable studies.

One commenter ( OAR 2002 0056 2251) claimed that new research from Michigan, a state with significant coal based electricity generation, further discredits the " hot spot" theory. A March 2004 study conducted for the EPRI by Atmospheric and Environmental Research, Inc. found that " Mercury emissions from Michigan coal fired power plants are calculated to contribute between 0.5 and 1.5 percent to total mercury deposition over each of the Great Lakes and about 2 percent statewide". The commenter enclosed a copy of this study, Modeling Deposition of Atmospheric Mercury in Michigan and the Great Lakes Region.

Several commenters ( OAR 2002 0056 2251,  2833,  3530) also noted that according to the rule's preamble, EPA " does not expect any local or regional hot spots" if it selects the cap and trade approach and will consider using trading ratios to address regional differences if they occur. The preamble also made it clear that states will have the ability to address any remaining local 5 59 health based concerns if the EPA selects the section 111 cap and trade option. The commenters pointed out that indeed, the Clean Air Act provides states with discretion to enact more stringent air quality regulations than required by the Act, with the exception of certain limitations for automotive emissions. States would be free to develop specific mercury control strategies to supplement the final federal rule, regardless of its form or level of stringency.

Several commenters ( OAR 2002 0056 2830,  3463) believed that mercury allowance trading will not cause adverse local environmental or health impacts because most power plant mercury emissions become elemental mercury soon after release and enter the global pool instead of depositing near the power plant from which it originates. Commenter OAR 2002 0056 3463 stated that elemental mercury is not as likely to be deposited locally as is particulate and oxidized mercury. According to the commenter, a comparison of " Wet Deposition" data to " Total Mercury Concentration" data from the National Atmospheric Deposition Program/ Mercury Deposition Network documents strongly supports the conclusion that deposition is more a function of precipitation than proximity to emission sources. The commenter also pointed out that the proposed IAQR rules to control SO 2 and NO x will require the installation of pollution controls that also will capture the forms of mercury that tend to deposit nearby.

One commenter ( OAR 2002 0056 3353) stated that based on the known science of mercury transport, transformation, and health effects, the Agency proposal to control mercury by a cap and trade program is appropriate and health protective. The commenter presented extensive information on the science of mercury ( see section 6 of e docket item OAR 2002 0056 3353) supporting the commenter's belief that a cap and trade approach will not endanger public health or result in hot spots of mercury health risk. The commenter stated that it will, on the other hand, encourage the continuing development of low cost mercury controls. As the program proceeds and experience is gained with various control options, the commenter believed the cost of control will be explicitly identified.

One commenter ( OAR 2002 0056 2431) supported the cap and trade approach because mercury exposure does not present a public health concern warranting stricter regulation under a MACT standard. According to the commenter, recent research by the CDC indicated that people are not being exposed to unsafe mercury levels and the recent Seychelles Child Development Study assessments at 9 years of age show no detectable adverse effects. The commenter also pointed out that in the December 2000 regulatory finding, EPA was unable to quantify the connection between utility mercury emissions and mercury in fish, citing only a " plausible link."

One commenter ( OAR 2002 0056 2578) claimed to have performed an extensive modeling exercise with state of the art tools and data to explore projected deposition patterns under both regulatory proposals. The commenter's analysis showed that:

° The highest levels of mercury deposition anywhere in the continental United States are brought about primarily by non utility sources ( even after accounting for MACT rules on those non utility sources). 5 60 ° The Cap & Trade proposal would produce larger and more widespread reductions in mercury deposition compared to current emissions than would the MACT proposal, particularly in regions with the highest deposition currently.

The commenter also cited increasing evidence from laboratory, pilot scale, and full scale measurements that the divalent form of mercury may convert to the far less soluble elemental form within power plant plumes and that this apparently rapid and complete conversion would reduce local scale deposition from power plants significantly, if it is found to hold for a wide range of such sources. To verify these preliminary results, the commenter undertook a field program at two power plants using a combination of aircraft measurements, surface observations, in plant measurements, and coal sampling. At both power plants from the stack to downwind sampling locations, the commenter reported a significant increase in the elemental mercury concentration and a corresponding decrease in the divalent mercury concentration. According to the commenter, these initial demonstrations of the significance of a potential reduction reaction may imply that utility power plant mercury emissions contribute less to downwind wet deposition than has been assumed previously.

One commenter ( OAR 2002 0056 2862) stated that while there is evidence in the literature regarding apparent linkages between incinerator mercury emissions and enhanced mercury deposition near these sources, extensive modeling work, as well as detailed flue gas chemistry measurements, did not support a similar linkage for coal fired power plants. Indeed, preliminary results from the EPRI I U. S. DOE  funded plume chemistry work that is currently underway and discussed in EPRI's comments on these proposed rules, strongly reinforced EPA's assertion that the cap and trade program is unlikely to produce so called areas of enhanced mercury deposition near coal fired power plants. Based on these conclusions, the commenter asserted that EPA should not require units in " sensitive" areas to surrender more allowances than units in other areas deemed less sensitive ( e. g., requiring some units to surrender two allowances for an ounce of mercury emissions rather than the standard one allowance). Commenter OAR 2002 0056 2948 also stated that EPA should not require units in " sensitive" areas to surrender more allowances than other areas deemed less sensitive because this would significantly and unnecessarily complicate the trading program and would lower the cap. The commenter added that EPA's proposal did not describe how such " sensitive" areas would be defined, and only a very small portion of mercury emissions from coal fired power plants deposit within 50 kilometers in any event. The commenter stated that adoption of this proposal will only add a great deal of complexity to the program.

Similarly, one commenter ( OAR 2002 0056 2861) stated there is no basis for any provision in EPA's mercury rule to require the surrender of more than one allowance per ounce of mercury emissions related to the alleged issue of mercury sensitive areas or " hot spots." The commenter submitted neither EPA nor anyone else has made any demonstration of a linkage between power plants in a given area and elevated mercury deposition or exposure in that area. The commenter added that by nature of the cap and trade program and by nature of how power plants operate, there is no concern that the mercury cap and trade program would create such " hot spots." The commenter noted the cap and trade program at the proposed levels would achieve a significant overall reduction in mercury emissions across the nation. The commenter 5 61 believed the larger, higher emitting sources are the sources that will be controlled. Requiring the surrender of more than one allowance in certain areas would greatly complicate and confuse the trading program and would result in a lowering of the emissions cap. The commenter stated this also would affect the cost of compliance that was used to establish the performance standard that is the basis of EPA's cap and trade program. The commenter believed such a provision should not be allowed without a clearly demonstrated need and that demonstration would be extremely subjective as it relates to the definition and identification of " sensitive" areas and the sources whose emissions would be deemed to impact those areas and therefore required to surrender additional allowances. The commenter concluded that there is simply no credible way to make such determinations, and in fact EPRI studies of mercury deposition and exposure suggest that such a program would not be justified.

One commenter ( OAR 2002 0056 3537) submitted that a mercury cap and trade program would not increase local mercury deposition in waterbodies close to regulated Utility Units and create hot spots. The commenter stated in fact, EPA's analysis showed that, if anything, a cap and trade program would help to protect against potential hot spots rather than aggravate them. The commenter noted that EPA's modeling suggested that large coal fired Utility Units, which are those units that tend to have relatively high mercury emissions, are likely to have larger local deposition footprints than medium and smaller sized coal fired Utility Units. However, the commenter submitted that the trading of allowances will probably lead to the over control of mercury emissions at the larger Utility Units and the selling of allowances to smaller Utility Units. Why? According to the commenter it would make more economic sense ( due to economies of scale) for a utility to allocate pollution prevention capital expenditures to its larger, generally more efficient facilities than to smaller, generally less efficient plants. Several other commenters ( OAR 2002 0056 1969,  2841,  2861) stated that the most cost effective reductions will be made first at the larger, higher emitting sources.

The commenter ( OAR 2002 0056 3537) submitted second, the types of mercury that are deposited locally   ionic and particulate mercury   are controlled somewhat by the same type of equipment that will be used to comply with the CAIR ( i. e., FGD and SCR). These types of mercury are more likely to be deposited locally than elemental mercury, which is emitted in a gaseous form, is not soluble in water, has a relatively long life in the atmosphere and which remains uncontrolled by FGD and SCR. The commenter stated that as utilities invest in equipment to comply with not only the CAIR but also with new national ambient air quality standards for PM 2.5 and ozone, a co benefit in mercury control will be achieved. Those co benefits will be the increased control of ionic and particulate mercury, decreasing even further the extremely small amount of mercury now deposited locally by Utility Units. The commenter claimed, therefore, a mercury cap and trade program would lead to increased control on the forms of mercury most likely to be involved in potential hot spots.

The commenter pointed out that modeling conducted by the Electric Power Research Institute ( EPRI) has demonstrated that mercury must be studied and understood on a global scale rather than a national one. The commenter stated that U. S. utility mercury emissions account for only 1 percent of total yearly mercury emissions worldwide. A recent report indicated that the amount of mercury released to the air from the earth's surface each year is estimated to be 5 62 between 2700 6000 tons, with another 2,000 3,000 tons emitted by human activities, yielding a total amount of mercury that enters the atmosphere each year of 4700 9000 tons. The non anthropogenic fraction is due to volcanic action, natural weathering and re entrainment of crustal material and the re emission of mercury associated with past man made emissions since the Industrial Revolution. The commenter noted that by comparison, a number of sources estimate current emissions of mercury from U. S. utilities to be approximately 48 tons per year, which is less than 8 percent of the mercury deposited in the U. S. The commenter stated that a 2003 study by EPRI indicated that if ionic mercury emissions from coal fired power plants were reduced by 10 percent, mercury deposition in the U. S. would decrease by only 0.75 percent. If elemental mercury emissions from coal fired power plants were reduced by 10 percent, the resultant drop in mercury deposition in the U. S. would only be 0.03 percent.

Finally, the commenter stated EPA noted that States retain the power under the CAA to adopt stricter regulations to address any local hot spots or other problems. Given the 70 percent emission reduction proposed in EPA's cap and trade systems, the Agency noted that it expects no local regional hot spots. The commenter noted however, it also stated that it plans to continue monitoring mercury emissions and the operation of the trading system through its administration of the MATS, to ensure that localized hot spots do not materialize. Accordingly, the commenter believed it is clear that EPA imposition of a mercury cap and trade program, would, if anything, reduce the potential for localized hot spots around affected Utility Units. EPRI provides an extensive discussion on the hotspot issue in their comments and the commenter respectfully referred EPA to this discussion as further evidence that hot spots will not be a concern under a mercury cap and trade program.

One commenter ( OAR 2002 0056 3546) submitted that EPRI's most recent research has shown that the highest level of mercury deposition anywhere in the continental United States are brought about by non utility sources. According to the commenter, EPRI's analysis further demonstrated that the Cap and Trade proposal would produce larger and more widespread reduction in mercury deposition than would the MACT proposal.

The commenter stated that it is well understood that mercury is a global pollutant. According to the commenter, EPRI model results showed that approximately 75 percent of the mercury that deposits in the United States originates from sources outside the U. S. For areas in the west, the contribution of global emissions to mercury deposition may be as high as 100 percent. The commenter stated that mercury emissions from coal fired power plants mercury deposition will not increase in any area as a result of a cap and trade program. The commenter noted that modeling work performed by the Electric Power Research Institute predicts that reducing total mercury emissions from coal fired power plants from present day levels to 15 tons annually will reduce mercury deposition in the United States by 6.9 percent   from 165.4 tons to 153.9 tons per year. The reduction in deposition in western states would be substantially less since mercury deposition from global sources can be as high as 100 percent.

The commenter claimed that cap and trade programs promote economically efficient decisions to reduce emissions from power plants. According to the commenter, Units with the highest mercury emissions would be among the first to be controlled since the cost per pound of 5 63 mercury controlled would the lowest at these units. The commenter noted that this economic behavior has previously been demonstrated in utilities compliance with EPA's Acid Rain requirements and the NO x SIP call. On a source by source basis, the opportunity to trade has led many of the largest SO 2 and NO x emitters to clean up the most, such that trading has had an effect of cooling potential hot spots, not creating them.

Response:

EPA has addressed the hot spots issue in the revision Federal Register notice and in the Effectiveness TSD.

Comment:

Several commenters ( OAR 2002 0056 2560,  2897) stated that if hot spots did occur, focused local investigations and some simple constraints would be the best available practice for the accurate identification of contributing localized mercury deposition sources. Commenter OAR 2002 0056 2560 offered as an example, based on the presentation by Opto Forensics Technologies at the 2004 Electric Utility Environmental Conference in Tucson, Arizona the solution to fish tissue mercury level reductions may well lie in the monitoring and control of mercury emission from municipal landfill vents and not in the reduction of local EGU emissions.

Commenter OAR 2002 0056 2897 offered as another example, EGUs in the immediate vicinity of vulnerable ecosystems could be prohibited from trading, or minimal levels of mercury reductions at all facilities could be required. The commenter stated this would still allow trading to achieve the greatest reductions where it is cheapest and to incentivize the development of control technology. The commenter asserts that in the unlikely event that hot spots are a serious concern, they can be readily addressed and should not be a basis for giving up the significant benefits offered by a cap and trade approach to mercury regulation on a national basis.

Response:

EPA has addressed the hot spots issue in the revision Federal Register notice and in the Effectiveness TSD.

Comment:

One commenter ( OAR 2002 0056 2922) stated that EPA should not require units in " sensitive" areas to surrender more allowances than units in other areas deemed less " sensitive" ( e. g., requiring some units to surrender two allowances for each ounce of mercury emissions rather than the standard one allowance per ounce). The commenter submitted that hot spots have not resulted in the Title IV Acid Rain Program, and, as discussed above, no reason exists to believe they will occur in this program. Moreover, requiring different areas to surrender different numbers of allowances would complicate the trading program and result in a lowering of the cap, contrary to EPA's regulatory determinations. 5 64 Response:

EPA has addressed the hot spots issue in the revision Federal Register notice and in the Effectiveness TSD.

Comment:

Several commenters ( OAR 2002 0056 1625,  1673,  2547,  2725,  2850,  2929,  3478) pointed out that under a cap and trade program, the larger emitters will be the first to be controlled. For example, several commenters ( OAR 2002 0056 1625,  2929,  3478) stated that the economics of trading will help to minimize local deposition. The trading of allowances almost always involves large coal based power plants controlling their emissions more than required and selling allowances to smaller plants. Thus, economies of scale of pollution control investment will favor investment at the larger plants and will produce reductions in emissions at the plants of greatest interest. One commenter ( OAR 2002 0056 2725) stated that this is doubly true with mercury; because ionic mercury, the form of mercury that is most likely to be deposited near the plant, is also the easiest and least expensive to control, a mercury trading program would result in emissions reductions at exactly those plants most likely to be responsible for " hot spots. One commenter ( 2929) noted that the CAIR proposal and other pending state and federal regulations would require the installation of pollution controls that also would capture the forms of mercury that tend to deposit nearby.

Response:

EPA has addressed the hot spots issue in the revision Federal Register notice and in the Effectiveness TSD.

Comment:

One commenter ( OAR 2002 0056 1627) stated that what has emerged from monitoring actual mercury deposition is a far different picture than predicted by many of the early computer models which predicted the presence of hot spots. The commenter submitted that actual data demonstrates that power plants do not significantly affect deposition. The commenter believed hot spots should now be seen to simply be artifacts of the first generation of computer models rather than real occurrences.

Response:

EPA has addressed the hot spots issue in the revision Federal Register notice and in the Effectiveness TSD.

Comment:

Many commenters ( OAR 2002 0056 2173,  2227,  2380,  2415,  2575,  2660,  2817,  2838,  2871,  2880,  2887,  2889,  2878,  2924,  3202,  3413  3448,  3452,  4177) believed 5 65 mercury trading may lead to hot spots. One commenter ( OAR 2002 0056 2173) noted that concerns about trading are recognized in the regulatory finding, including that the lakes regions of the Upper Midwest may be more sensitive to mercury deposition. The commenter submitted that a recent New Hampshire study suggested that local deposition is very much a concern. However, EPA then claims in the preamble that it does not expect any local or regional hot spots and provides no support or anecdotal arguments in support. The commenter states that hot sports are a real concern in the midwest because of the use of western sub bituminous coal. It is more difficult and costly to reduce mercury emissions from this coal type than from eastern bituminous coal. Thus, the commenter believed that utilities would be more likely to purchase emission credits from utilities burning eastern coal that have installed controls. The commenter asserted that the result would be that Tribal lands and the entire lakes area of the upper midwest ( which is particularly sensitive to mercury deposition and most needing of reductions) may experience little or no benefit. Another commenter ( OAR 2002 0056 2227) also noted that EPA's own data show that mercury hot spots exist and are associated with local sources of air pollution.

An alliance of many commenters ( OAR 2002 0056 2575) stated that data collected by the North American Commission for Environmental Cooperation show that there are 244 locations in North American where the amount of mercury contamination is greater than that which occurs naturally in the environment. The commenter also provided several examples of the impact of local sources on mercury deposition. and the resulting effects on wildlilfe. The commenter claimed a cap and trade program would only continue and exacerbate mercury deposition and increase the number of hot spots. The result would be concentration of pollution in certain areas and merely a reallocation of pollution rather than reduction or even an increase.

One commenter ( OAR 2002 0056 2838) submitted that in state and regional sources of mercury in the Southeast contribute to high levels of deposition; four of the top 10 most severe hot spots are in Southeastern states. The commenter believed the cap and trade program has great potential to exacerbate mercury contamination at many sites by allowing large plants to continue emitting; studies show that this mercury would be deposited in state or within the Southeast region. The commenter stated that according to EPA's Mercury REMSAP Deposition Modeling Results, coastal regions along the Gulf of Mexico and southern Atlantic will require more than 75 percent reduction in air deposition rates to meet EPA's CWA requirements for methyl mercury.

Another commenter ( OAR 2002 0056 2878) stated that recent modeling suggests that at mercury hot spots, pollution sources within a state can account for large portions of that deposition. The commenter claimed that at hot spots across the US, local sources often account for 50 to 80 percent of the mercury deposition. The commenter also submitted that in state sources contribute more than 50 percent of the pollution to sites in the top 8 worst hot spot states ( Draft Mercury Deposition Modeling Results, EPA: OW, 2003). The commenter stated that data from the Florida Everglades study showed that local reductions of mercury yielded reductions in mercury pollution. The mercury deposition research in the Florida Everglades, Wisconsin, and southern Ontario also indicated that the majority of mercury converted into methylmercury is from recent deposition, rather than cycling from the sediment, suggesting that reducing mercury 5 66 emissions from all coal fired plants is a critical need for reducing exposure and improving damaged ecosystems.

One commenter ( OAR 2002 0056 2380,  3413) also stated that earlier modeling showed that local hot spots are the primary sources of mercury deposition within a state, contributing more than 50 percent of the pollution to sites in the top 8 worst hot spot states. The commenter submitted that EPA should include provisions in the rule to address hot spots before they occur.

Many of the commenters ( OAR 2002 0056 2660,  2817,  2871,  2880,  2887,  2889,  2924,  3202,  3448,  3452,  4177) referred to the recent Florida study ( Integrating Atmospheric Mercury Deposition with Aquatic Cycling in South Florida, November 2003), which showed that sources of mercury can have significant local impacts. This report stated that the drastic reductions in mercury concentrations in fish and birds in the Everglades were directly linked to installation of mercury controls by industries in South Flordia. One commenter ( OAR 2002 0056 2819) noted that EPA has already reported that deposition of oxidized mercury can be expected to occur within 50 kilometers of the source; evidence of the existence of hot spots has already been documented in the Evers report ( Assessing the Potential Impacts of Methymercury on the Common Loon in Southern New Hampshire) and the Florida Everglades report. The commenter stated that additional evidence of the existence of mercury hot spots can be found on the University of Michigan website at http:// www. personal. umich. edu/~ kalwali/ mich+ ohio. html . This website shows color coded maps that distinguish the relative hot spots associated with mercury emissions from local sources from mercury emissions due to longer range transport ( regional sources). The commenter asserted that EPA cannot dismiss these concerns.

One commenter ( OAR 2002 0056 2819) submitted recent stack test data showing that 72 94 percent of the mercury emitted by coal fired boilers is emitted as oxidized mercury. These tests ( 2003) used the Ontario Hydro method to determine the amount of total mercury and the total amount by species. According to the test data, 2003 annual emissions of oxidized mercury from Merrimack Station units 1 and 2 were 32 pounds and 77 pounds, respectively. Annual emissions of oxidized mercury from Schiller Station units 4, 5, and 6 were 7 pounds. The commenter believed that emissions of this magnitude have the potential to cause local hot spots which can not be remedied solely with a cap and trade program. The commenter submitted that stringent plant specific MACT limits are needed to address local hot spots. Also, the commenter pointed out that EPA's prediction that small and mid size units like Schiller and Merrimack Station would likely purchase credits rather than install controls ( see 69 FR 4702) confirmed that the cap and trade would not address localized deposition in their state. The commenter believed that the only sure method for addressing hot spots would be to reduce emissions at their source through strict MACT standards. The commenter concluded that it was also a good reason that more stringent limits should apply to all units regardless of size.

One commenter ( OAR 2002 0056 2887) contended that EPA has not considered local deposition that can disproportionately affect sensitive ecosystems. The commenter claimed sources that purchase allowances in effect emit uncontrolled levels of all three species of mercury  gaseous elemental, reactive gaseous ( RGM), and particulate. The commenter stated trading can 5 67 worsen existing hot spots and may create new ones near powerplants because the RGM ( which can be as high as 70 percent of the total mercury emitted from a bituminuous plant) has relatively short travel distances ( up to 50 100 kilometers) and short residence times in the atmosphere ( 1 2 days), tending to deposit locally near the source. The commenter also noted that recent field studies showed that mercury newly deposited to a zone of methylation in a waterbody is more readily converted to methylmercury. The commenter claimed that, in addition to local impacts, the Northeast is affected by long range transport of elemental mercury because areas with high ozone levels oxidize elemental mercury and therefore increase mercury deposition throughout the airshed. Further, the commenter cited a report by the New Jersey Mercury Task force which examined local emissions, models, and results, and stated that about half of the mercury deposited in New Jersey comes from relatively nearby sources. One commenter ( OAR 2002 0056 4177) cited the NESCAUM Deposition Study which concluded that 47 percent of mercury deposition in the Northeast came from sources within the region, 30 percent from sources outside the region, and 23 percent from the global reservoir. One commenter ( OAR 2002 0056 3202) asked EPA to establish more rigorous national standards so downwind states can meet Clean Water Act requirements. One commenter ( OAR 2002 0056 3452) submitted a REMAP assessment of mercury in sediments of selected lakes in New Hampshire and Vermont which showed the disproportionate impact of airborne mercury from a power plant and municipal waste combustor.

Response:

EPA has addressed the hot spots issue in the revision Federal Register notice and in the Effectiveness TSD.

Comment:

Several commenters ( OAR 2002 0056 1596,  2330,  2819,  2823,  2871,  2889,  3449,  3499) noted that in the proposal, EPA indicated that hot spots could be addressed through the adoption of more stringent state or local standards. The commenters disagreed and cited their recent survey that showed about half of the state agencies have restrictions on their ability to adopt programs more stringent that those of the federal government. In addition, hot spots can be created across state lines, so that a downwind state is dependent on stricter controls that may be installed by utilities in an upwind state. One commenter ( OAR 2002 0056 2819) added that their state relies upon adoption of a strict federal standard under section 112 to establish state limits to meet an annual cap and relying on states to adopt meaningful controls creates an economic disadvantage compared to lax states. One commenter ( OAR 2002 0056 3449) asked what these related Federal and State programs are that are supposed to address local risks?

Response:

EPA has addressed the hot spots issue in the revision Federal Register notice and in the Effectiveness TSD.

Comment: 5 68 Many U. S. Congressmen ( OAR 2002 0056 3293) felt that the rule could be strengthened by addressing hot spots now rather than later. The commenters suggested that adding regional emissions trading areas for States with high mercury or setting a level of emissions above which no plant could emit would help protect the public health.

Many state legislators, governors, and local officials called on EPA to strengthen the proposed standards as they are not protective of public health and do not adequately address hot spots. The commenters pointed out that available technology can achieve reductions of 80 or 90 percent. The commenters also pointed out that the emission reductions fall well short of the cuts that could be achieved by 2007 under section 112. One Texas representative stated that no state emits more mercury pollution from its power plants than Texas and no state faces a greater risk from cap and trade than Texas, which could see no emission reduction at all.

Response:

EPA has addressed the hot spots issue in the revision Federal Register notice and in the Effectiveness TSD.

Comment:

One commenter ( OAR 2002 0056 3543) supported the cap and trade program but pointed out that data on hot spots appears scant. The commenter stated that while EPA states it intends to collect data and study the effectiveness of the rule in Phase I and II in order to make any necessary adjustments, it presented no clear strategy for collecting and analyzing information, no solid data on which to formulate a baseline for this analysis, and no strategy for changing the regulatory approach if it aggravates hot spots.

Similarly, one commenter ( OAR 2002 0056 2219) disagreed with EPA's suggestion to evaluate mercury hot spots formed as a result of the cap and trade program. As described in the preamble, EPA would evaluate whether emissions remaining after compliance with the cap and trade program cause a health program. The commenter believed this would be problematic because conducting an evaluation in 2018 after the implementation of the program would be too late; the mercury accumulation would have already occurred and people would be exposed then on. In addition, EPA does not have a good " on time" track record.

Response:

EPA has addressed the hot spots issue in the revision Federal Register notice and in the Effectiveness TSD.

Comment:

One commenter ( OAR 2002 0056 3210) disputed EPA's rationale that the economics of a cap and trade program would lead to better control of bituminous coal sources since these sources emit more oxidized mercury and may deposit mercury locally. The commenter noted that 5 69 EPA believes reducing oxidized mercury would reduce local hot spots. The commenter asserted that this rationale ignores current science on the atmospheric chemistry of mercury and the regional concentration component of the mercury deposition problem. The commenter submitted that uncontrolled sources of elemental mercury will continue to contribute to regional mercury deposition, especially in the summer during high ozone season. The commenter cited several studies and reports indicating that areas with elevated ozone levels can expect increased mercury deposition. The commenter concluded that mercury deposition is a year round local hot spot issue and a seasonal widespread regional deposition issue.

Similarly, one commenter ( OAR 2002 0056 3437) submitted information confirming that mercury deposition of local waterbodies will continue as emissions actually increase under the lenient MACT limits or a cap and trade approach. While the commenter was generally supportive of a cap and trade approach , the commenter believed it must be designed to assure no hot spots. The commenter provided evidence from deposition monitoring that showed a correspondence between mercury deposition values and mercury emissions from sources within a 50 km radius; mercury deposition rates were highest at the monitor where nearby emissions were the highest. Given the concern about mercury deposition in the Great Lakes and the Grand Calumet watershed, the current mercury load in the region, and the potential for hot spots, the commenter was very concerned about any approach that would allow emissions to increase above 1999 levels.

Response:

EPA has addressed the hot spots issue in the revision Federal Register notice and in the Effectiveness TSD.

5.4.1 Trading Constraints to Address Hot Spots Comment:

Several commenters ( OAR 2002 0056 2911,  3556) stated that mercury deposition is an issue that is global in scale and that U. S. EGUs represent about 1 percent of the global emissions. The commenters stated that EPA acknowledges that it cannot determine what the contribution of EGU mercury emissions is to concentrations in fish. The commenters further stated that EPA also acknowledges that it cannot determine how much the concentrations in fish will decrease, if at all, once EGU mercury emissions are reduced. The commenters noted that the concentration of mercury in fish is the pathway of exposure to humans. The commenters also pointed out that EPRI has submitted detailed comments addressing the issue of mercury " hot spots" and the lack of relevance to EGU mercury emissions. Consequently, the commenters could see no scientific justification to regional allocations and trading. In order to have a viable and robust trading program, the commenter 3556 believed it must be national in scope.

One commenter ( OAR 2002 0056 4139) stated that any cap and trade program should be contained to a geographic area. 5 70 Response:

EPA has addressed the hot spots issue in the revision Federal Register notice and in the Effectiveness TSD.

Comment:

One commenter ( OAR 2002 0056 2064) opposed trading under CAA section 111 on a national scale. The commenter believes if trading is allowed under section 111, it should be limited to a regional or contiguous basis because of interstate deposition problems with mercury. Similarly, one commenter ( OAR 2002 0056 3437) suggested that EPA should consider if geographic or other constraints on trading are needed to prevent hot spots. The commenter recommended establishing reduction targests to assure that all plants reduce emissions to some degree. The commenter submitted a cap and trade program must contain a backstop to ensure that no individual plant could emit more mercury than in 1999. The commenter believed the rule also must assure that states retain the ability to address local hot spots.

Response:

EPA has addressed the hot spots issue in the revision Federal Register notice and in the Effectiveness TSD.

Comment:

Several commenters ( OAR 2002 0056 3437,  3443) responded to EPA's request for comments on whether it would be appropriate to adjust the geographic scope of the trading program by introducing trading ratios to address regional differences. ( See Fed. Reg. 4651, 4701.) One commenter ( OAR 2002 0056 3437) understood that geographical constraints would be one possible approach to prevent hot spots. But the commenter believed this approach could add much complexity to the trading program and might not provide the desired result. The commenter stated a preferable approach would be a stringent limit to allocate allowances and the flexibility to impose more stringent local requirements. The commenter cautioned that EPA should be very clear about trading ratios so that industry will have clear direction to plan for compliance and states will be aware of any responsibilities that will be imposed on them.

One commenter ( OAR 2002 0056 3443) did not support such adjustments to the geographic scope because they would hamper the effectiveness of the trading program by interfering with the market. More importantly, the commenter saw no need for such adjustments because EPA's analysis in the preamble leads to the conclusion that " hot spots" would not be a problem under a cap and trade program. ( See 69 Fed. Reg. 4,651, 4,702 03.)

The commenter presumed that the main reason for making such geographic adjustments would be to address the potential for localized impacts. In regard to the issue of localized impacts, the commenter has been monitoring mercury in sediments and fish in the reservoirs on the Tennessee River and its tributaries for over 30 years. The commenter stated that these studies 5 71 show that mercury levels in the sediment for both mainstream and tributary reservoirs in the entire Tennessee Valley region have declined substantially since 1973. Likewise, the commenter stated that although mercury levels in fish tissue in the reservoirs along the Tennessee River have varied, these levels indicate a constant or declining trend despite an increase in coal fired generation on the commenter's system during this period. ( The commenter attached a letter dated November 19, 2003, from the commenter to EPA on Mercury in Sediment and Fish in the TVA Reservoirs.) The commenter submitted that although the study identified areas with elevated mercury, none of these elevated levels were attributable to emissions from the commenter's coal fired units. Rather, the elevated levels were the result of industrial activity, such as waste water discharges form the chlor alkoli industry.

Response:

EPA has addressed the hot spots issue in the revision Federal Register notice and in the Effectiveness TSD.

Comment:

One commenter ( OAR 2002 0056 2247) stated that while they viewed a cap and trade program as the preferred policy approach, the cap must be lower and the trading properly constrained. The commenter suggested an additional control option. To insure reductions from western coal users and to prevent drift of emissions from eastern to western states, the commenter submitted that EPA should combine a lower cap with some form of a zonal trading plan that would achieve reductions in both the eastern and western areas of the U. S.

The commenter claimed that up to 90 percent of the mercury entering their waters comes from atmospheric sources outside the state. Their TMDL studies showed that a reduction in the range of 50 percent in atmospheric deposition would be needed to meet their projected water quality standard. EPA's deposition modeling predicted only a 5 percent reduction in certain areas of the state. The commenter believed the proposed cap of 15 tons is so loose that utility boilers in the commenter's state and those to the sourth and west would do little to control mercury emissions. The IPM modeling showed that utility boilers in the commenter's state and similar boilers west of the Mississippi burning Powder River Basis or lignite coal would reduce emissions by only 35 percent as a co benefit of controlling SO 2 and NO x. These states, including utilities in the commenter's state, are predicted to purchase credits from eastern utilities rather than control releases. Even the 5 percent reduction EPA predicted for the commenter's state may not occur because modeling did not account for banking or the cost based safety valve. The commenter believed the 15 ton final cap would not address the commenter's problem   it seemed to shift the cost of SO 2 and NO x controls at eastern boilers to western states burning PRB coal. Their analysis showed that tighter MACT standards or a lower cap are justified.

The commenter submitted that the drawback of a cap and trade program is that it reduces mercury where it is most cost effective, but does not address specific geographic needs. The commenter needs reductions from coal fired plants to the south and west of the state. The commenter suggested trading zones with separate mercury caps and limiting trading between the 5 72 zones. The commenter believed this would avoid relying on bituminous coal fired boilers for nearly all the reductions.

Response:

EPA has addressed the hot spots issue in the revision Federal Register notice and in the Effectiveness TSD.

Comment:

One commenter ( OAR 2002 0056 2860) recommended a maximum allowable emission rate to address hot spots. The commenter asserted that EPA should provide options and support for identifying and mitigating potential hot spots.

Response:

EPA has addressed the hot spots issue in the revision Federal Register notice and in the Effectiveness TSD.

Comment:

One commenter ( OAR 2002 0056 1825) objected to a provision in the cap and trade program that would allow utilities in a State to avoid any additional mercury reduction even if studies confirm that hot spots are the result of emissions from local utilities.

Response:

EPA has addressed the hot spots issue in the revision Federal Register notice and in the Effectiveness TSD.

Comment:

One commenter ( OAR 2002 0056 3448) stated that delaying 70 percent of the emission reduction until about 2030 in the proposed CAA section 111 rule would perpetuate local and regional hot spots for 25 years and forever for the many areas affected by plants that will not install controls at all under a cap and trade system. The commenter believed proposals to adjust trading to attempt to address hot spots are likely to fail based on perceptions they would complicate and reduce the efficiency of a cap and trade program.

Response:

EPA has addressed the hot spots issue in the revision Federal Register notice and in the Effectiveness TSD.

Comment: 5 73 One commenter ( OAR 2002 0056 4139) stated that budgets need to be lowered to protect certain areas.

Response:

EPA has addressed the hot spots issue in the revision Federal Register notice and in the Effectiveness TSD.

Comment:

One commenter ( OAR 2002 0056 2173) stated that given the serious concern about hot spots, if EPA adopts a cap and trade approach, it must take all appropriate actions to ensure they do not result. The commenter recommended the following actions: ( 1) require excess " offsets" ( the offset ratio should be adjusted based on the ability of mercury reductions at one source to reduce deposition in the area of the other source to ensure that any reductions at units generating credits would have an equivalent environmental effect in the area of the unit purchasing the unit); ( 2) limit trades to a regional or basin wide area; ( 3) limit amount of credits that can be purchased to meet limits; and ( 4) create a natural resources damage fund to compensate tribes, states, and other resource trustees for damage caused by hot spots by assessing a surcharge on credits that are traded.

Response:

EPA has addressed the hot spots issue in the revision Federal Register notice and in the Effectiveness TSD.

Comment:

Several commenters ( OAR 2002 0056 1671,  2108) stated that if EPA retains the cap and trade program, credits should be available only to plants that demonstrate through modeling that deposition is not occurring in local watersheds or land ( i. e., hot spots).

Response:

EPA has addressed the hot spots issue in the revision Federal Register notice and in the Effectiveness TSD.

Comment:

One commenter ( OAR 2002 0056 2160) suggested that maximum emission limits should be established for individual plants to avoid hot spots. The commenter noted that capping maximum emissions from a given plant has ample precedent in existing SO 2 and NO x rules.

Response: 5 74 EPA has addressed the hot spots issue in the revision Federal Register notice and in the Effectiveness TSD.

Comment:

Several commenters ( OAR 2002 0056 2835,  2878) addressed the evaluation of control requirements after implementation of the cap and trade program. One commenter ( OAR 2002 0056 2835) agreed with the EPA proposal to evaluate after the implementation of the control requirements in 2010 and 2018 whether the mercury cap adequately protects public health and, if necessary, take further regulatory actions to address any health risks not fully addressed by the cap and trade regulatory program.

The second commenter ( OAR 2002 0056 2878) cited several scientific and policy concerns including lack of safeguards to protect the public health and secure additional needed reductions, toxicity of mercury and tendency to bioaccumulate in the food chain, potential for hot spots, and environmental justice. The commenter asserted that EPA's response to these concerns ( reevaluate effects of cap and trade on local hot spots after implementation in 2018) would leave communities at risk for another 14 years or longer.

Response:

EPA has addressed the hot spots issue in the revision Federal Register notice and in the Effectiveness TSD.

Comment:

If EPA pursues regulation under CAA section 111, one commenter ( OAR 2002 0056 2430) recommended that it include some type of risk and environmental health assessment including an evaluation of the effects of mercury deposition. The commenter noted that residual risk requirements under CAA section 112 address risk to public health and the environment, while CAA section 111 does not. The commenter asserts that the disassociation of CAA regulations from public health and the environment is unacceptable public policy and sets a bad precedent.

Response:

EPA has addressed the hot spots issue in the revision Federal Register notice and in the Effectiveness TSD.

5.5 APPLICABILITY 5.5.1 Affected Units Comment: 5 75 One commenter ( OAR 2002 0056 2862) stated the program threshold should be based on size of unit ( m 25 MW). The commenter noted the current program threshold is consistent with the m 25 MW level set for EPA's Acid Rain program. The commenter believes this is an appropriate threshold. Including units based a size definition creates a fair and consistent regulatory program.

One commenter ( OAR 2002 0056 2721) supported the proposed minimum level of generation of a fossil fuel fired combustion unit that serves a generator of 25 MW that produces electricity for sale would be affected by the proposed mercury regulations.

A second commenter ( OAR 2002 0056 2913) stated the proposed CAA section 111 cap and trade provisions of the proposal expand upon the CAA section 112 definition of electric utility steam generating unit by including combustion units less than 25 MW if they serve a generator greater than 25 MW. The commenter stated that CAA section 112 defines an electric utility steam generating unit as a 25 MW combustion units, but the proposed CAA section 111 cap and trade rule presumably would apply to combustion units, regardless of size, serving 25 MW generators ( see 60.4104 ( a)). It appeared to the commenter as though the Agency is attempting to expand the number of electric utility units to which this rule would apply beyond that authorized by statute. Furthermore, the potential exists for some electric utility units to be regulated by two different and conflicting regulations ( i. e. the industrial/ commercial/ institutional boilers and process heater MACT standards which are nearing final promulgation and these electric utility steam generating unit MACT standards). The commenter believed this is contrary to both statutory intent and expressed EPA policy. The commenter did not believe that this is the Agency's intent and this " inconsistency" between CAA section 112 definition and CAA section 111 applicability is merely an oversight on EPA's part.

The commenter recommended that, if the Agency ultimately decides that the best way to adopt a cap and trade rule is under CAA section 111, then this situation can be rectified in one of two ways: 1) Rewrite 40 CFR 60.4104( a) as applying to " Any fossil fuel fired combustion unit of more than 25 megawatts that serves a generator that produces electricity for sale."; or 2) state, in the applicability section, that any unit covered in 40 CFR Part 63, Subpart DDDDD ( i. e. the industrial/ commercial/ institutional boilers and process heater MACT standards), is not covered under this subpart.

Response:

For purposes of model trading rule, an affected unit is defined as a coal fire boiler or IGCC that serves a generator with nameplate capacity of more than 25 MWe producing electricity for sale ( see regulatory text of final rule, § 60.4104, for full definition). The definition also provides an exception for cogeneration units serving at any time a generator with nameplate capacity of more than 25 MWe and supplying in any calendar year more than one third of the unit's potential electric output capacity or 219,000 MWh, whichever is greater, to any utility power distribution system for sale ( see regulatory text of final rule, § 60.4104, for full definition). 5 76 As discussed in the final rule preamble ( section IV. D. 3), the approach of using a 25 MWe cut off is consistent with existing SO 2 and NO x cap and trade programs like the NO x SIP call and the Acid Rain Program and the final Clean Air Interstate Rule. In addition, the Agency's historical interpretation of the subpart Da definition has been that a boiler meeting the capacity definition ( i. e., greater than 250 million Btu/ hr) but connected to an electrical generator with a generation capacity of 25 MWe or less would still be classified as an " electric utility steam generating unit" under subpart Da. EPA acknowledges that there are differences in definitions between the NSPS program and the Acid Rain and other trading programs ( e. g., CAIR) that result from the underlying statutory mandates. From implementation standpoint, EPA maintains that is important for the applicability definition under the Hg modeling trading rule to be consistent with other cap and trade rules, especially the recently finalized CAIR.

Comment:

One commenter ( OAR 2002 0056 2066) stated that combined heat and power ( CHP) units currently represent only about 3 percent of the electric generating capacity covered by Agency's proposal. According to the commenter, CHP units are generally twice as efficient when compared to their utility counterparts, and about 2/ 3 of all CHP units burn natural gas and have extremely low NO x emission rates. The commenter stated that while individual CHP emission rates will vary, the average gas fired CHP emission rates are only 15 25 percent of that emitted by a typical utility. The commenter added that even CHP units using coal or oil as a fuel source are still much more efficient than a utility using the same fuels. The commenter further stated that CHP units are usually only a small part of a much larger industrial facility or complex. The commenter asserted that including these units into this rulemaking would layer another set of regulations on the entire facility, thus further complicating on going compliance efforts. For these reasons, the commenter believed that CHP units should be exempted from inclusion in this rulemaking. According to the commenter, inclusion of traditional CHP facilities would provide negligible environment benefit while discouraging application of these ultra efficient power and steam generators both now and in the future.

The commenter ( OAR 2002 0056 2206) noted that EPA is proposing to establish a cap and trade program for regulated utility units that is similar to the current cap and trade for this sector under the Title IV program and the Agency's proposed rule relating to interstate air quality ( 69 FR 4652). The commenter further noted that as part of EPA's proposal, EPA would include some cogeneration units as electric utility units and make them subject to the rule. The commenter did not support this approach toward cogeneration units. Instead, the commenter suggested that EPA should exclude all cogeneration units. The commenter offered that EPA could include them in its planned study to see if unregulated units are causing adverse health effects.

Response:

As discussed in the final rule preamble ( section IV. D. 3), EPA believes it is important to include in the CAMR program all units, including congeration units, that are substantially in the business of selling electricity. As discussed above, the applicability definition under the Hg 5 77 modeling trading rule is consistent with other cap and trade rules, especially the recently finalized CAIR.

Comment:

For CHP units, the commenter ( OAR 2002 0056 3525) believed that EPA should define a " utility unit" as only those units that meet the definition on a net annual basis. The commenter pointed out that in the preamble, EPA, absent rationale, states that any CHP unit that meets the definition of a utility unit during any portion of the year would become subject to the rule. The commenter stated that requiring a CHP unit to stay below the utility unit definition on an instantaneous basis provides a disincentive for facilities to invest in new CHP capacity or to maximize the output and efficiency of their current CHP and energy producing network of units.

The commenter encouraged EPA to confirm that for purposes of its proposed definitions of " EGU" and " cogeneration unit," all sales of electricity will be measured on a " net" basis, as is done in the acid rain program. The commenter stated that in determining that " net" basis, EPA's accounting should take account of the specific situation of major facilities with a number of cogeneration units. The commenter stated that at such plants, some units may be over the size threshold, while others may be below it. Yet, according to the commenter, the electricity from all those units will be pooled before it is either used in the plant or sold to the grid. In that case, the commenter believed EPA's accounting rules should provide for determining when the threshold conditions have been met by looking at all the electricity generated by all the cogeneration units, whether they were subject to the SIP call or not. The commenter asserted that no other approach would be administratively feasible.

The commenter stated an annual average should be used to determine whether cogeneration units sold more than one third of their potential electric output to the grid and more than 25 MW on a net annual average basis and thus were defined as EGUs. According to the commenter, a shorter averaging time could often result in classifying units as EGUs based on a short and unrepresentative operating history for example, if power was generally used exclusively at the plant at which it was generated, but was sold to the grid when the production facility was down for maintenance.

The commenter pointed out in addition, in some cases, contractual arrangements may exist between the cogeneration facility and the local electric utility wherein all generated power is considered sold to the utility and all electricity used on the site is purchased from the utility. According to the commenter, in reality, only a small portion of the generated power really enters the grid from the cogeneration facility, and only that " net" sales of power should be considered when determining applicability with the EGU definition.

Subject to these qualifications, the commenter supported the cogeneration unit threshold being used for consideration as an EGU, specifically, a unit serving a generator with a nameplate capacity of > 25 MW and supplying more than 1/ 3 of its potential electric output capacity and more than 25 MW to any utility power distribution system for sale. The commenter stated however, it would provide additional clarity and prevent confusion if it was specifically stated that 5 78 units associated with generators of 25 MWe capacity or less were not affected sources under this subpart; and any cogeneration units not supplying both more than one third of their potential electric output capacity and more than 25 MWe to any utility power distribution system for sale were not affected sources under this subpart. The commenter recommended that EPA include this additional clarifying language in the final rule.

Another commenter ( OAR 2002 0056 2906) stated that for cogeneration units, EPA should define as an electric utility steam generating unit ( utility unit) only those units that meet the definition of a utility unit on a net annualized basis. The commenter noted that in the preamble, EPA states that any cogeneration unit that meets the definition of a Utility Unit during any portion of the year would become subject to the rule ( 69 FR 4657). The commenter stated that EPA provides no rationale for this requirement. The commenter further stated that this requirement stands in contrast to EPA's proposed CAIR, where the definition for a Utility Unit is based on a historical annual average ( 69 FR 4610).

The commenter stated that requiring a cogeneration unit to stay below the Utility Unit definition on an instantaneous basis would create a large disincentive for facilities to invest in new CHP capacity, or to maximize the output and efficiency of their current cogeneration and energy producing network of units. According to the commenter, cogeneration units are inherently more efficient than traditional Utility Units ( in many cases twice as efficient), and often provide distributed key power to the grid during transient or short term periods of peak power demand. The commenter stated that in order to prevent being included within the Utility Unit definition, many cogeneration units will likely establish tight restrictions on exporting excess power to the grid, or eliminate export all together. According to the commenter, this would have the perverse effect of reduced cogeneration unit power output, reduced overall grid efficiency and reduced industrial steam and electricity generation efficiency.

The commenter stated that to prevent these undesirable consequences, and to prevent conflicts and confusion with the definition of a Utility Unit in the CAIR under which some of these units may choose to opt into the CAIR regulation, EPA should base the Utility Unit definition on a net annualized average and not " during any portion of the year."

Response:

As discussed in the final rule preamble ( section IV. D. 3), EPA confirms that, for purposes of applying the one third potential electric output criteria in the CAMR program and the model cap and trade rules, the only electricity that counts as a sale is electricity produced by a unit that actually flows to a utility power distribution system from the unit. Electricity that is produced by the unit and used on site by the electricity consuming component of the facility will not count, including cogenerated electricity that is simultaneously purchased by the utility and sold back to such facility under purchase and sale agreements under the Public Utilities Regulatory Policy Act of 1978 ( PURPA). However, electric purchases and sales that are not simultaneous will not be netted; the one third potential electric output criteria will be applied on a gross basis, except for simultaneous purchase and sales. This is consistent with the approach taken in the Acid Rain Program. 5 79 Comment:

One commenter ( OAR 2002 0056 2906) requested that EPA confirm that, for purposes of its proposed definitions of " Utility Unit" and " cogeneration unit," all sales of electricity will be measured on a " net" basis, as is done in the acid rain program. According to the commenter, in determining that " net" basis, EPA's accounting rules should take into account the specific situation of major facilities with a number of cogeneration units. The commenter pointed out that at such plants, some units may be over the size threshold for inclusion in the rule, while others may be below it. The commenter added that, yet, the electricity from all those units will be pooled together before it is either used in the plant, or sold to the grid. The commenter stated that, in other words, there will be no way to determine the particular use of the electricity generated by the large units subject to the rule. The commenter believed that in that case, EPA's accounting rules should provide for determining when the threshold conditions have been met by looking at all the electricity generated by all the cogeneration units. According to the commenter, no other approach would be administratively feasible.

The commenter pointed out that in many cases contractual arrangements may exist between the cogeneration facility and the local electric utility wherein all generated power is considered sold to the utility and all electricity used on the site is purchased from the utility. According to the commenter, in reality, only a small portion of generated power really enters the grid from the cogeneration facility, and only that " net" sales of power should be considered when determining applicability with the Utility Unit definition.