Regulatory Update An Overview

1. Regulatory Update An Overview Regulatory Overview ARIPPA Gary L. Merritt

2. Regulatory Issues • Air • Water • Waste Management • Advance Energy Resources Portfolio Standard

3. Air • Mercury • Penn Futures Petition • Interstate Transport Rule • ARIPPA’s Comments • DEP Comments • OTC Comments • PM-2.5 Non-Attainment Designations • New Source Review

4. Mercury Rule • EPA’s Proposal • Command and Control –MACT Type Rule • MACT rule coupled with a trading program

5. Proposed Mercury Emissions-Existing Sources • Bituminous Coal 2.0 lbs per trillion Btus or 21 X 10-6 pounds per megawatt hour • Sub-Bituminous Coal 5.8 lbs per trillion Btus or 61 x 10-6 pounds per megawatt hour • Lignite Coal 9.2 lbs per trillion Btus or 98 x 10-6 pounds per megawatt hour • Coal Refuse 0.38 lbs per trillion Btus or 4.1 x 10-6 pounds per megawatt hour • IGCC Units 19 lbs per trillion Btus or 200 X 10-6 pounds per megawatt hour

6. Proposed Mercury Emission – New Sources • Bituminous Coal 6.0 x 10-6 pounds per megawatt hour • Sub-Bituminous Coal 20 x 10-6 pounds per megawatt hour • Lignite Coal 62 x 10-6 pounds per megawatt hour • Coal Refuse 1.1 x 10-6 pounds per megawatt hour

7. Penn Futures File Petition for Rule Making on Mercury • DEP will be make recommendations to the EQB on addressing the petition • Petition proposal, in some respects, is consistent with DEP comments on the proposed EPA Rule.

8. Some Critical Aspects of the Petition • Proposed output based emission rate of 3.0 mg/MW-hr or 6.6 x 10-6 Lbs/MW-hr • Mg/MW-hr means the mercury emission in milligram per megawatt of net electricity generation • Or a 90% reduction based on the mercury input to the boiler, whichever is less.

9. Continued • Requires Emission Stack Test Every Quarter • Requiring 3-valid stack emission test runs per quarter • Averaging stack test per quarter, measuring the net megawatts of generation per quarter and calculating the weighted mercury emission • Requires simultaneous testing of all stacks tied to common generator

10. Continued • However, the major issue is set forth in Section 2D of the proposed rule:

11. Section 2D • “The mercury emissions standard specified in (a)(1) or (2) above are applicable on or after December 15, 2012, for each owner or operator of a coal fired boiler who has entered ito an enforceable agreement with the Department by December 15, 2009, to install and operate air pollution control systems to meet the following standards by December 15, 2012, provide compliance with (a) above is achieved by December 15, 2007 for at least 50 percent of the total coal-fired megawatt capacity of the Company:

12. Section 2D Continued • 1. The emsiions of nitrogen shall not exceed 0.100 pounds per million BTU for dry bottom utility boilers and 0.130 pounds per million BTU for wet bottom utility boilers: • 2. The emissions of sulfur dioxide shall not exceed 0.150 pounds per million BTU; and • 3. The emissions of particulate matter shall not exceed 0.030 pounds per million BTU.

13. Other • The FACT Sheet references Pennsylvania Utilities. • The boilers being cited are “Dry-Bottom utility boiler and Wet-Bottom utility boiler” means “utility boiler “ equipped with ----” • The term “utility” is not defined.

14. The Interstate Transport Rule on SO2, NOx, and PM-2.5 • The proposed rule has resulted in comments multiple rounds of comments by ARIPPA • A critical aspect of the comments by ARIPPA relates to tying emission allocations to the Acid Rain Program, establishing an allocation program based on 1990 emissions, and not addressing the exemption for PURPA related projects from the acid rain program.

15. Continued • DEP is their initial comments rasied the concern about the PURPA related issues by requesting an additional 25,000 tons on SO2 Allowances.

16. PADEP –OTC Combined Comments • In the last round of comments, OTC set forth the following recommendations: The proposal for emission reductions would look like this: By 2008 By 2012 By 2015 SO2 3.0 MT 2.0 MT NOX 1.87 MT 1.28 MT Mercury 15 T 10 T 5T

17. OTC Proposal • The above emission rates were in the comments to EPA • The Reduction and Allocations did not include the 25,000 Tons that PADEP had requested in their original comments on the rule. • The OTC Commissioners have charged a Subcommittee to develop a model rule!!!!

18. PM-2.5 Designations • EPA has proposed designating Counties in Pennsylvania, Ohio, Delaware and New Jersey as Nonattainment Areas • Pennsylvania Counties with ARIPPA Plants and related Plants • Mercer County • Indiana and Cambria Counties

19. New Source Review • PADEP is in the process of developing rules to implement the New Source Review rules promulgated by EPA. • (Note-The EPA rule is adopted by reference in the Pennsylvania Program.) • PADEP will be proposing new rules for NSR and will file amendments to its approved air program.

20. EPA-Baseline Emissions • Defining Baseline Emissions • Source allowed to look back over last 10 years to select any 24-month priod upon which to establish baseline against which emissions increases are measured • May select different 24-month period for each regulated NSR pollutant • Non-utility sources are only required to submit a report to the permitting authority if post-change emissions increase by a significant amount and are in excess of the source’s pre-change projection

21. Defining Baseline Emissions • Averaging actual or allowable emissions, whichever is lower, shall be calculated over a 2 calendar years preceding replacement of a source • 2-year period is not representative of normal operation, the Department may specify a different 2-year period within 5 calendar years. • Select same 2-year period for all regulated pollutants for each period.

22. EPA – NSR Applicability Test • Applicability Test • Allows the use of “actual-to-projected-actual” emissions test to predict emissions 5 years into the future • Expands “demand growth exclusion” to all existing sources

23. NSR Applicability Tests • Significant Emission Increase: • Option 1: Modification to an existing source: Delta allowable emissions of an existing source considering bottlenecks and all limitations with a potential to emit after the modification. Installation of new sources consider PTE • Option 2: Use “actual to projected-actuals” test, but enhance oversight and enforcement tools and eliminate demand growth exclusion Significant Emission increases must be summed with all emission increases and decreases within 5 years of construction

24. NSR Applicability Tests - Continued • Non Significant Emissions Increase: • Propose de minimis emission increases must be summed with all emission increases and decreases since January 1, 1991. Fox NOx, November 15, 1992.

25. EPA – Clean Unit Exclusion • Clean Unit Exclusion • Provides automatic designation as “Clean Unit” for any unit that has installed BACT or met LAER I the last 10 years • Allows sources to receive “Clean Unit” status if they demonstrate other controls are “comparable to BACT” • Ignores any emission increases from any project at a “Clean Unit” (I.e., no NSR at Clean Units) for 10 years • Any source may qualify as a Clean Unit if controls are comparable to BACT. Owner of source must show that emissions limitation is equal o the average of all emissions limitation determined as BACT within the last five years from the RACT/BACT/LAER database.

26. Clean Unit Exclusion • Includes special provisions for “Clean Units”, but does not ignore any emission increases from a project affecting the unit • Clean Unit status – effective for 5 years • Best Available Control Technology/(BACT)/Lowest Achievable Emission Rate (LAER) determinations made within 5 years from date of application

27. Pollution Control Project (PCP) Exclusion • Option 1: • Major Modification definition (25 PACODE Chapter 121) allows pollution control projects to be excluded from NSR review • Determination made case-by-case basis • Requires 1 to 1 offset ratio for emission increases

28. EPA-Pollution Control Project (PCP) Exclusion • Pollution Control Project Exclusion • Expands NSR exemption for PCPs (I.e., projects that result from NSR due to decreases in emissions of another pollutant) to all source categories • Eliminates requirement that “primary purpose” of PCP must be to reduce emissions • Lists PCPs presumptively deemed “environmentally beneficial” and allow othrs to demonstrate that they are “environmentally beneficial”

29. Pollution Control Project (PCP) Exclusion • Option 2: • Retains “primary purpose” test • Provides state agency authority to rebut presumption that a project is “environmentally beneficial” • PCP exclusion is not applicable to replacement or reconstruction of existing emission unit

30. EPA – Plantwide Applicability Limits (PAL) • Plantwide Applicability Limits • Allows facility to take PAL (I.e., source-wide emission cap), under which any changes are exempt from NSR • PAL based on average actual emissios of 24 months over the past 10 years and the potential to meit of new sources added after 24 months • The PAL is 10 years and PAL does not decline • New source allowed to operate under PAL without controls

31. Plantwide Applicability Limits (PAL) • Allows facility to take PAL under which any changes exempt from NSR • PAL based on average actual emissions of 24 months over past 5 years and actual emissions of new sources added after 24 months • The PAL is 10 years and does not decline • New Sources required Best Available Technology (BAT) determination

32. NSR - NOTE • A problem can arise especially if you are proposing a PCP • You may need to obtain DEP approval (a time consuming and frustrating item and may trigger a formal NSR review) • There are cases in PA where the the Regions have treated such project as requiring plan approval and a complete NSR review analysis.

33. Water • State Water Plan

34. Water – STATE WATER PLAN • ACT 220 requires the State and the Department to develop a water plan for the State to address quantity issues as well as having a water quality component. • The Statewide Committee will be developing and recommending Guidelines and Policy to the Regional Committees and the State concerning a variety of issues. • The most critical issue will be the criteria to determine what a critical water planning area is. However, the criteria established to make this determination could impact on prior allocations and release flow criteria used in the past.

35. Continued • Issues under review include “consumptive use of energy sectors, non-consumptive uses of energy sectors, the recognition that a consumptive use in one part of a drainage basin may result in increase flow in another part of a basin” • (Energy-Power Generation, Mining, and oil and gas development)

36. State Water Plan • This is to be an ongoing process. • The Plan and its criteria are to be updated every 5-years. • Part of the process is an analysis of the statutory, regulatory and policy impacting the program and whether there is a need for change.

37. Waste Management • Coal Combustion Byproducts

38. Waste Management (CCBs) • The ongoing issues dealing with the management of coal combustion byproducts continues • EPA and OSM • Tamaqua • National Academy of Science Study

39. National Academy of Science Study • The Study will • Be conducted under the auspices of the Committee on Earth Resources of the Board on Earth Sciences and Resources • Examine the health, safety, and environmental risks associated with using coal combustion wastes (CCW) for reclamation in active and abandoned coal mines • look at the placement in abandoned and active, surface and underground coal mines in all major coal basins

40. NAS - Study • Consider coal mines receiving large quantities coal combustion wastes • Focus its efforts on coal combustion wastes from utility power plants and independent power producers, rather than small business, industries, and institutions • Take into consideration a profile of the utility industry in designing the study to focus on the sources producing the greatest quantities of coal combustion wastes

41. NAS - Study • Determine whether CCW were placed and disposed of in coal mines with inadequate safeguards and whether this activity is degrading water supplies in coal mines in contravention of SMCRA

42. NAS – Study Points • Points to be considered in the study • The adequacy of data collection from surface water and ground water monitoring points established at CCW sites in mines • The impacts of aquatic life in streams draining CCW placement areas and the wetlands, lakes, and rivers receiving these drainage

43. NAS – Study Points • The responses of mine operators and regulators to adverse or unintended impacts such as the contamination of ground water and pollution of surface waters • Whether CCWs and mine(s) in which they are being disposed are adequately characterized for such placement to ensure that monitoring programs are effective and groundwater and surface waters are not degraded.  (This item is not explicitly in the NAS SOT but is there implicitly.)

44. NAS – Study Points • Whether there are clear performance standards set and regularly assessed for projects that use CCW for beneficial purposes in mines • The status of isolation requirements and whether they are needed

45. NAS - Study Points • The adequacy of monitoring programs including: a. The status of long-term monitoring and the need for this monitoring after CCW is placed in abandoned mines and active mines when placement is completed and bonds released. b. Whether monitoring is occurring from enough locations; c. Whether monitoring occurs for relevant constituents in CCW as determined by characterization of the CCW; and d. Whether there are clear, enforceable corrective actions standards regularly required in the monitoring

46. NAS – Study Points • The ability of mines receiving large amounts of CCW to achieve economically-productive post mine land uses; • The need for upgraded bonding or other mechanisms to assure that adequate resources area available for adequate periods to perform monitoring and address impacts after CCW placement or disposal operations are completed in coal mines

47. NAS – Study Points • The provisions for public involvement in these questions at the permitting and policy-making levels and any results of that involvement • Evaluate the risks associated with contamination of water supplies and the environment from the disposal or placement of coal combustion wastes in coal mines in the context of the requirements for protection of those resources by RCRA and SMCRA

48. NAS Study • The outcome of this study will • Determine how EPA decides to regulate the use of ash in mines • If OSMRE has responded appropriately in various allegations relating to water quality problems associated with ash placement and mining • if the states are addressing the issues properly

49. NAS Study • Two additional concerns: • Will the outcome impact EPA’s prior determination to regulate the management of ash under Subtitle D of RCRA not Subtitle C • The “appropriateness of present leaching tests to evaluate ash when being placed in coal mines” or evaluating ash in general.

50. Advanced Energy Resources Portfolio Standards • The Rendell Administration is proposing to develop draft amendments to an existing proposed legislation on Renewable Energy Portfolio Standards