







53



              UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

  

  

  

               Public Hearing on the Supplemental Proposal

               For NSR Rule for Electric Generating Units

  

  

  

  

  

  

                            Transcript of Meeting

  

  

                          109 T.W. Alexander Drive

                    Research Triangle Park, North Carolina

  

  

  

                            Friday, June 29, 2007

                              9:06 o'clock a.m.

  

  

  

                 ________________________________________               
             

  

                     Atlantic Professional Reporters

                      Winston-Salem, NC  27116-1672

                           ATTENDEES

  

  

         Dave Svendsgaard, Meeting Chair

         Office of Air Quality Planning & Standards

         U.S. Environmental Protection Agency

  

  

         Janet McDonald

         Senior Policy Analyst

         U.S. Environmental Protection Agency

  

  

  

  

  

  

                         ATTACHMENT(S)

  

         Opening Statement of David Svendsgaard

  

         Statement/Testimony of Joshua Zive

         Statement/Testimony of John Paul

         Statement/Testimony of Matt Hanchey

  

         Speaker Schedule

  

                    P R O C E E D I N G

        (9:06 o'clock a.m.)

                     MR. SVENDSGAARD:  Good morning and

  thank you for attending the Environmental Protection

  Agency's public meeting to take comment on the

  proposed New Source Review Rule for Electric

  Generating units.

              My name is David Svendsgaard.  I'm senior

  engineer for the U.S. EPA Air Quality Policy

  Division.  I will be chairing today's hearing.

              Joining me on the panel is Janet McDonald,

  a senior policy analyst for EPA and a project leader

  for the EGU proposed supplemental rule.

              We are here today to listen to your

  comments on EPA's regulation that we proposed on May

  8th.  The proposed rule would revise the regulations

  governing the NSR program mandated -- programs

  mandated by parts C and D of Title I of the Clean Air

  Act.

              This notice follows an action that was

  published on October 20th, 2005, in which we proposed

  to replace the annual emissions test with an hourly

  emissions test for electric utilities that undergo

  modifications.

              The proposed hourly test would be similar

  to the hourly test in the New Source Performance

  Standards program, or NSPS program, but would be used

  to determine whether -- to determine whether planned

  changes at an existing power plant would be subject

  to emission control requirements under the major NSR

  program.

              The May 2007 notice which we refer to as a

  supplemental proposal, builds upon the October 2005

  proposal by, one, refining the originally proposed

  emissions test options, two, proposing a new test

  option, three, analyzing the impacts of the options

  on control device installation, emissions and air

  quality, and four, proposing rule text.

              The supplemental proposal requests comment

  on whether the final regulation should include an

  input-based emissions test, that is one that sets the

  emission limits based on the amount of fuel burned,

  or an output-based test, which would be setting

  emission limits per unit of power produced.  An

  output-based test would encourage fuel efficiency and

  pollution prevention, which are key agency goals.

              More specifically, the October 2005 notice

  proposed three alternatives for the emissions test

  for modifications at existing power plants.  Those

  alternatives included a maximum achievable hourly

  emissions test, a maximum achieved hourly emissions

  test and an input-based hourly emissions test.

              The supplemental proposal recasts these

  proposed alternatives so that the output-based test

  is a way to measure the hourly emissions rate from

  the maximum achievable or the maximum achieved hourly

  tests, rather than being an alternative to those

  tests.

              Also the supplemental proposal includes a

  new option in which the annual emissions increase

  test that is presently used for determining NSR

  applicability is retained and applied in those

  situations where an EGU's hourly emissions would

  increase.

              In other words, under the new option, if a

  physical or operational change would not increase an

  EGU's hourly emissions rate, major NSR would not

  apply.

              However, if an EGU's hourly emissions

  would increase, then it would only be subject to

  major NSR if it projected a significant net emissions

  increase on an annual basis.  This is our preferred

  option.  However, under both options, we have

  proposed several alternatives for measuring hourly

  emissions.

              We have conducted emissions and air

  quality analyses in support of the proposed rule

  options.  The analyses compare expectations for EGU's

  to install pollution control equipment to comply with

  EPA's Clean Air Act Interstate Rule, Clean Air Act

  Mercury Rule and Clean Air Act Visibility Rule, which

  we call CAIR, CAMR and CAVR, in 2020 with the two

  proposed hourly emissions tests.

              The analyses also compare emissions and

  air quality impacts under the two scenarios.  These

  analyses show that by 2020 either of the two options,

  proposed options, would result in, one, more EGU's

  installing emission control equipment than they would

  otherwise to comply with CAIR, CAMR and CAVR, two,

  essentially no changes in national emissions of

  sulfur dioxide and nitrogen oxides, and very little

  impact on local emissions of those two pollutants,

  and three, no changes in air quality compared to what

  EPA projects under CAIR, CAMR and CAVR.

              These proposed options to the New Source

  Review Program would promote the safety, reliability,

  and efficiency of EGU's while maintaining national

  air quality -- local air quality.  We welcome any

  interested persons today to present data, views or

  arguments concerning these proposed rule changes.

              Now I'd like to outline the way we'll run

  this forum today.

              I will call the scheduled speakers to the

  microphone.  Due to our small number of registered

  speakers, we will not restrict speaker testimony to

  five minutes as we've done in the past.  We do,

  however, ask that speakers limit their testimony to

  less than 10 minutes or please let us know in advance

  if you believe you will need more than 10 minutes to

  speak.

              Once a speaker completes his or her oral

  testimony, the panel may ask the speakers clarifying

  questions.  Each speaker's oral testimony will become

  part of the official record.

              Please be sure to give a copy of any

  written comments to our staff at the registration

  table.

              We will continue until one hour after the

  last registered speaker has spoken.  If there is

  anyone in the audience who would like to testify, but

  has not yet registered to do so, please sign up at

  the registration table.

              We will prepare a written transcript of

  today's hearing.  Transcripts will be available as

  part of the official record for this rulemaking

  process.

              We are accepting written comments related

  to this hearing until July 30th, 2007.  We have a

  handout available at the registration table with

  detailed information on submitting written comments

  on this proposed rulemaking and this hearing.

              Again, I thank you again for

  participating, and I do appreciate you folks waiting

  for us to get the lighting proper in the room.

              And just finally, please, as a courtesy,

  turn off cellphones or put them on vibrate and don't

  take any calls in the building -- or in this room.

  And with that, we'll start the testimony portion of

  the hearing.

              Our first registered speaker is from the

  Electric Reliability Coordinating Council, Joshua

  Vive.

                     MR. ZIVE:  Zive.

                     MR. SVENDSGAARD:  I'm sorry.  Zive.

                     MR. ZIVE:  Thanks for the

  opportunity to comment today.

              My name is Joshua Zive.  I'm an attorney

  at Bracewell & Giuliani in Washington, D.C., and I'm

  making this statement on behalf of the Electric

  Reliability Coordinating Council, the ERCC.

              The ERCC is a group of utilities that came

  together over six years ago to support clarification

  of the NSR program.  ERCC member companies provide

  reliable and affordable electricity to millions of

  consumers and we have spent billions of dollars in

  environmental costs -- compliance costs over the past

  decade.

              The ERCC strongly believes that

  clarification of the NSR program can provide our

  nation with both environmental and energy benefits.

  Investments in pollution prevention and in

  maintenance are facilitated when the powerful

  disincentives created by the -- by an inflexible

  approach to NSR is changed.

              The ERCC supports current efforts to

  clarify the NSR program and we believe that reform

  efforts must be undertaken with an eye towards

  encouraging, rather than penalizing, industry efforts

  to make energy production more efficient.

              For this reason the ERCC supports moving

  from an annual test to an hourly emissions test

  because such a move will help enhance the efficiency,

  reliability, and safety of U.S. power plants, without

  having an appreciable impact one way or the other on

  emissions.

              Because of the Acid Rain Program, the NOx

  SIP Call, and most significantly, the Clean Air

  Interstate Rule, or CAIR, U.S. power companies are

  now spending billions of dollars to install pollution

  controls on coal-fired power plants.

               According to the Argus Multipollutant

  Controls database almost 80 gigawatts of new

  scrubbers are under construction and scheduled to be

  in operation by the end of 2010, and another nine

  gigawatts of existing scrubbers are scheduled to be

  upgraded during the same time period.

              For NOx, about 26 gigawatts of new SCR's

  with another six gigawatts of SNCR's are scheduled to

  be up and running by 2010.  And as a result of these

  industry efforts, between 2006 and 2010, U.S. power

  companies will invest more in pollution controls than

  any industry has ever invested in pollution controls

  over any other five-year period to reduce air

  pollution.  And given these undertakings, the NSR

  program should be reformed in a manner that does not

  interfere with these trends.

              Unfortunately, the current emissions test

  scheme produces results that divert resources away

  from these real environmental improvements.  Rather

  than focusing their efforts on efficiency projects

  that would provide real environmental and energy

  benefits, many power companies are currently

  employing teams of lawyers and consultants to ensure

  that they don't accidentally trigger NSR.

              And this misdirection of resources results

  from the need to evaluate whether specific projects

  may be found to increase emissions based upon a test

  currently in place that requires a plant to predict

  what its annual emissions of individual pollutants

  will be in the future, while backing out things like

  demand growth that are unrelated to the projects

  themselves.

              Perversely, the projects that must be

  scrutinized most closely by these companies are those

  that are designed to increase the efficiency,

  reliability and safety of coal-fired power plants.

  Rather than simply undertaking these projects when

  they make the most sense, companies must carefully

  schedule them to ensure that they don't trigger NSR.

              This evaluation takes place in a setting

  in which power companies are concerned that these

  varied evaluations will be second-guessed by

  activists and enforcement officials who may be more

  interested in promoting expensive and prolonged

  litigation than encouraging practical efficiency

  efforts that can provide real short-term and

  long-term environmental benefits.

              Addressing the proper role of an annual

  emissions test is an important step in the effort to

  clarify the NSR program.  Much of the complexity and

  uncertainty that still surrounds the program is

  related to the current emissions test which requires

  a plant, on a pollutant-by-pollutant basis, to

  calculate its emissions baseline and then to estimate

  its highest emissions of that pollutant in any

  12-month period in the future.

              Because planned outages for maintenance

  don't normally take place every year, every 18 months

  being more typical, the disconnect between the

  current 24-month period in the past and the 12-month

  period in the future raises serious complications for

  power plants.  Even more problematic is the need to

  back out demand growth and other factors that are

  unrelated to the project but must be evaluated for

  NSR purposes.

              While we share many of the specific

  concerns expressed by other industry representatives

  commenting here today, the ERCC is supportive of the

  move from an annual to an hourly emission test.  It

  is much more -- it is much more reasonable to simply

  compare hourly emission rates before and after a

  particular project.  This approach will ensure that

  NSR captures the type of projects it was -- it was

  intended to capture -- potential emissions increases

  from new plants and expansions of existing plants

  without discouraging beneficial efficiency projects.

              We appreciate the opportunity to comment

  here today.

              Thank you.

                     MS. McDONALD:  I had a couple

  things.

                     MR. ZIVE:  Yes.

                     MS. McDONALD:  On your statement on

  planned outages, 18 months is a normal time period?

                     MR. ZIVE:  Uh-huh.

                     MS. McDONALD:  In your written

  comments, if you could expand on that to any degree,

  that would be helpful to us -- the comments that you

  submit to the agency.

                     MR. ZIVE:  Yeah.  We will expand on

  that further, obviously, than we have here.

              Did you want me to expand on it more right

  now or do you just want to make sure ---

                     MS. McDONALD:  --- If you'd like to.

                     MR. ZIVE:  Well, I mean, just -- I

  mean, just to the extent that our member companies

  reflect that when they do their -- when they do their

  typical planning, the 18-month period, in terms of

  scheduled outages, is far more consistent.  And that

  -- and that does create -- I mean, that does create a

  functional disconnect with the planning forward into

  the future that they have to do under the NSR

  program.

                     MS. McDONALD:  Okay.  What we would

  particularly be interested in knowing is is that your

  schedule for what -- do you normally have them every

  18 months?

                     MR. ZIVE:  Absolutely.

                     MS. McDONALD:  Is it predictable.

                     MR. ZIVE:  Okay.

                     MS. McDONALD:  Etcetera.

                     MR. ZIVE:  We'd be happy to provide

  more information on that.

                     MS. McDONALD:  Okay.  And then three

  things that I'd like to specifically ask for comment

  on, on the statistical method, do you prefer the heat

  input -- and this can be submitted, written.

                     MR. ZIVE:  Okay.

                     MS. McDONALD:  Heat input or hourly

  emission rate basis for that test.  On the max

  achieved, do you prefer the statistical test or the

  one in five baseline.

                     MR. ZIVE:  Okay.

                     MS. McDONALD:  And on the max

  achieved, would you prefer an input or an output

  basis.

                     MR. ZIVE:  Okay.

                     MS. McDONALD:  That would be helpful

  to us.

                     MR. ZIVE:  We'll be happy to provide

  comment on those matters.  Thank you.

                     MR. SVENDSGAARD:  Thank you, Mr.

  Zive.

              Okay, we actually have a pause between our

  next speaker, but Mr. Paul, are you ready to come on

  board?

                     MR. PAUL:  (Indicated)

                     MR. SVENDSGAARD:  Okay.  Thanks.

              Representing NACAA, the National

  Association of Clean Air Associations, is Mr. John

  Paul, and I think you said you're going to need some

  additional time.

                     MR. PAUL:  I did.  My testimony as

  you have it is seven pages.  I intend to read that.

  It might be longer than 10 minutes if that's

  possible.

              If you get bored, just give me the sign

  and I'll wrap it up.

                     MR. SVENDSGAARD:  Fine.

                     MR. PAUL:  Okay.  Good morning, my

  name is John Paul and I'm the supervisor of the

  Regional Air Pollution Control Agency, a six-county

  local agency centered in Dayton, Ohio.  And I appear

  today on behalf of the National Association of Clean

  Air Agencies, NACAA, formerly STAPPA/ALAPCO, which is

  the national association representing air pollution

  control agencies in 54 states and territories and

  over 165 metropolitan areas across the country.

              I am the immediate past president of

  ALAPCO and co-chair of the New Source Review

  Committee.

              I'm testifying today on EPA's supplemental

  proposed rulemaking that would change the emission

  test for electric generating units under the New

  Source Review program of the Clean Air Act.

              I previously testified in opposition to

  this proposal on behalf of NACAA at EPA's public

  hearing in December of 2005.  Subsequently the

  association submitted written comments opposing this

  proposal in February of 2006.

              In addition, NACAA filed an amicus brief

  opposing a legal or regulatory interpretation of

  modification that would require an hourly test as a

  New Source Review trigger in the Supreme Court case,

  Environmental Defense versus Duke Energy Corporation.

              The supplemental proposal that I now

  address contains nothing that would cause us to

  change our views.  NACAA continues to strongly oppose

  this proposed rule and to support continuation of a

  New Source Review trigger based on actual annual

  increases in emissions measured in tons per year.

  The actual annual test is currently the law and

  should not be changed.

              EGU's are the most significant sources of

  air pollution in this country.  Nationally utilities

  are responsible for 66 percent of annual SO2

  emissions and 22 percent of NOx emissions.

              Furthermore, it's important to note that

  in some areas of the country power plants contribute

  more than these percentages.

              Added to this, no fewer than 67 hazardous

  air pollutants, which power plants also emit in

  substantial quantities, including mercury, for which

  electric utilities account for 33 percent of the

  nation's emissions.  And then, in addition, electric

  utilities are responsible for 40 percent of United

  States carbon dioxide emissions which contribute to

  global warming.

              Emissions from old coal-fired EGU's are

  the single largest contributor to concentrations of

  SO2, NOx, ozone and PM2.5.  A 2005 interim report on

  New Source Review from the National Research Council

  of the National Academy of Sciences found that 71

  percent of the nation's coal-fired capacity is

  between 26 and 56 years old, with emission rates for

  SO2 ranging from more than double to quadruple the

  emission rates of modern coal-fired units built since

  1990.

              It is crucial that, as the primary

  administrators of the Clean Air Act, states and

  localities address these sources when they are

  modified and increase annual emissions.

              Yet, if finalized, the proposed rule would

  essentially remove the Federal New Source Review

  program as a requirement.

              We believe that EPA's proposal, number

  one, contravenes congressional intent, essentially

  eliminating modified EGU's from the requirements for

  the New Source Review program.

              Number two, allows annual emission

  increases without evaluation of the impact on the

  National Ambient Air Quality Standards or

  congressionally set increments.

              Number three, is based on an inappropriate

  set of assumptions.

              Number four, would give an unfair

  advantage to existing poorly controlled EGU's when

  they are undergoing modifications or life-extension

  projects.

              And number five, will forfeit future

  emission reductions similar to those that have been

  realized by recent NSR enforcement actions.

              I'd like to express -- or address each of

  these points in greater detail.

              First, the New Source Review program was

  enacted by congress in 1977 in part because the NSPS

  program had not been up to the task of protecting air

  quality in clean areas.

              Congress recognized that NSPS had failed

  and intended New Source Review to be a new, stronger

  legislative tool.

              As the Supreme Court stated recently in

  the Duke Energy decision, and I quote, NSPS did

  little to achieve the ambitious goals of the 1970

  amendments, and the Clean Air Act amendments of 1977

  included the PSD provisions which aimed at giving

  added protection to air quality in certain parts of

  the country, notwithstanding attainment and

  maintenance of the National Ambient Air Quality

  Standards, end quote.

              The Clean Air Act amendments of 1977 and

  1990 also strengthened the Nonattainment New Source

  Review provisions of the act.

              Thus, congress required NSR permitting,

  installation of modern pollution controls and air

  quality analysis in PSD and nonattainment areas.

  However, the 1977 Clean Air Act exempted existing

  power plants and other facilities from strict air

  pollution control requirements that new sources had

  to meet because congress intended that the older,

  high-emitting sources would gradually be upgraded or

  phased out.  Under the law, the exemption for the

  so-called grandfathered plants ends when a facility

  is physically modified in a way that increases its

  emissions.  At that point NSR is triggered and the

  facility is required to install modern pollution

  controls and evaluate impacts on local air quality.

              If EPA's proposed rule is finalized,

  however, the power plants will not be required to

  comply with New Source Review because they will

  rarely, if ever, increase their hourly emissions

  rate.  Under the rule, when old plants make

  renovations, their emissions will increase.  Units

  will be operated without pollution controls for

  longer hours and emissions will increase.

              EPA's proposal, therefore, nullifies

  congressional intent to provide an end-point for

  grandfathering and, in effect, exempts power plants

  from New Source Review indefinitely.  EGU's that make

  modifications will be allowed to bypass New Source

  Review forever if the proposed rule is promulgated.

              In effectively nullifying the NSR program

  for EGU's, EPA exceeds the bounds of discretion

  afforded to it under Chevron U.S.A., Inc. versus

  Natural Resource Defense Council, that's the D.C.

  Circuit of Appeals stated in its June 2007 opinion in

  South Coast Air Quality Management District versus

  EPA.

              Under Chevron, agency action that does not

  constitute a reasonable interpretation of the statute

  must be vacated.  EPA's substitution of an NSPS

  hourly emission rate test for the NSR actual

  emissions increase test would frustrate congressional

  purpose in enacting the added protection of New

  Source Review and is therefore not a reasonable

  interpretation of the Clean Air Act under Chevron.

  The proposed rule thus is legally flawed.

              I'd also like to point out that Congress

  mandated annual increments, which we feel we will

  need an annual ton per year test in order to measure

  the impact against those annual increments.  I'd also

  like to point out that if this rule truly reflected

  Congressional intent, then Clear Skies would have

  been passed by congress in these past several years.

              All right, secondly, NACAA is troubled the

  EPA's rule will interfere with the ability of state

  and local agencies to develop plans that achieve and

  maintain the National Ambient Air Quality Standards.

  As EPA is fully aware, agencies across the country

  are faced with the daunting challenge of developing

  SIP's for the eight-hour ozone and PM2.5 standards.

              In order for that SIP planning process to

  be successful, our agencies must not only have an

  accurate and complete understanding of all existing

  sources of emissions in their jurisdictions, they

  must also be able to account for and regulate

  increases in emissions occurring from major

  modifications to these facilities.

              When we are unable to appropriately assess

  and regulate increased levels of emissions from

  EGU's, it undermines our efforts to protect the

  public health and welfare.  This will not only

  undercut our SIP efforts, but also will place an

  unfair burden on other sources of pollution,

  including small businesses, who will be forced to

  make up for these unreviewed emission increases with

  far more expensive and considerably less

  cost-effective strategies.

              In addition, EPA has just proposed a

  tightening of the ozone standard that will require

  state and local agencies to impose even more

  stringent requirements on sources emitting NOx and

  VOC's, both of which contribute to ozone formation.

              Also, last year the fine particulate

  ambient air quality was standard -- the standard was

  tightened.  If utility emissions are, in effect,

  exempted from New Source Review, states and

  localities will face an even more daunting task in

  locating and controlling smaller sources in order to

  attain the new ozone and particulate National Ambient

  Air Quality standards.

              Now, many agencies have submitted comments

  to the docket illustrating the difficulty the

  proposed rules will pose if finalized.  We cite two

  examples.  One involves an eastern industrial state

  working to attain the Air Quality Standards.  The

  other involves a western state whose PSD increment

  attainment is apt to be jeopardized by promulgation

  of this rule.

              In New Jersey the state completed a

  process to identify strategies for eight-hour ozone

  and PM2.5 attainment.  The New Jersey Department of

  Environmental Protection focused detailed evaluations

  on about 60 potential emissions reductions measures.

  Aside from controls on EGU's, the four most effective

  measures identified to reduce SO2, which is a major

  contributor to the formation of PM2.5, can achieve a

  combined total statewide reduction of less than

  14,000 tons per year.

              These measures include significantly

  reducing the sulfur content of home heating oil,

  further tightening emission controls at New Jersey's

  refineries, which are already heavily controlled, and

  reducing sulfur and heavy oil used in industrial and

  commercial boilers.  New Jersey plans to include all

  these measures in its PM2.5 SIP.  The emission

  reductions potential for each of the other 60 SO2

  reduction measures identified is far less.

              By contrast, installing scrubbers on

  existing New Jersey coal-fired EGU's that currently

  do not have scrubbers will achieve almost 60,000 tons

  per year of SO2 reductions.  The amount of emissions

  reductions from coal-fired EGU's is unmatched by any

  other SO2 source category or even the combination of

  all other SO2 source categories in New Jersey.

              In North Dakota the Department of Health

  has completed a periodic PSD review, examining the

  impacts of sulfur dioxide emissions on its Class I

  areas.  The review indicated that current actual

  emissions for SO2 were 140,905 tons per year in 2003,

  while allowable or permitted emissions of SO2 are

  275,807 tons per year.

              The state concluded, and I quote, under

  the proposed hourly regulation, virtually no EGU's

  will be subject to PSD review.  The hourly test does

  not take into account emissions increases from

  modifications at an EGU which would have an adverse

  affect on the environment, impact air quality related

  values in North Dakota's Class I areas, or cause a

  violation of the PSD increments.  Actual annual

  emissions would rise dramatically without PSD and New

  Source Review being required on any consideration of

  this rise on PSD increment compliance, end quote.

              Third, we strongly disagree with EPA's

  main rationale for this rule, namely that EGU

  emission reductions are not necessary because other

  programs already result in sufficient reductions of

  pollutants.

              The Clean Air Interstate Rule, CAIR, the

  Best Available Retrofit Technology Rule, BART, the

  Acid Rain Program, the NOx SIP Call will not

  individually or collectively compensate for the loss

  of NSR for EGU's.  Nor can our association dismiss,

  as does EPA's proposal, the increased local impacts

  that will occur as a result of this rule, first, with

  regard to CAIR, BART, the Acid Rain Program and NOx

  SIP Call, not compensating for the loss.

              The Clean Air Interstate Rule will not

  compensate for the loss of NSR for EGU's for several

  reasons.

              First, CAIR does not cover 22 western

  states, nor does it require sources to install best

  available control technology or achieve the lowest

  emission -- achievable emission rate.  In fact, CAIR

  requires no pollution equipment at all for the first

  five years that it is in effect.

              Moreover, CAIR addresses NOx and SO2

  emissions only, while New Source Review addresses all

  pollutants covered under the Clean Air Act, including

  PM, VOC's and CO, all of which can be expected to

  increase when EGU's are no longer required to comply

  with NSR requirements.

              In addition, CAIR controls for utilities

  that do in fact install them are unlikely to be in

  place soon enough to help states achieve the new

  health-based standards for eight-hour ozone and

  PM2.5.

              Finally, EPA has exempted EGU's that

  comply with CAIR from Reasonably Available Control

  Technology, RACT, in its PM2.5 implementation rule

  and in the phase two rulemaking to implement the

  Eight-Hour Ozone National Ambient Air Quality

  Standard.

              Therefore, EGU's that will purchase

  credits from others under CAIR will have no

  obligation whatsoever to curb their NOx or PM2.5

  emissions through CAIR.  If the EGU annual test is

  eliminated as an independent trigger, New Source

  Review will also no longer be effective at

  controlling existing power plant emissions.

              And I would also note that CAIR is being

  litigated, so even its predicted emission reductions

  are subject to change.

              Neither will BART compensate for the loss

  of NSR for EGU's.  In fact, many believe that BART is

  inadequate because it applies only to a limited

  number of units and because there are many exceptions

  to the requirements to install controls.  Many states

  have expressed serious concern that BART would not be

  a sufficient safety net if EGU's are no longer

  subject to NSR.

              For example, in commenting in February

  2006 on the first EGU hourly proposal, the New Mexico

  Environmental Department stated that EGU's in New

  Mexico are not subject to CAIR, nor the NOx SIP call,

  and that, furthermore, and I quote, the BART rule

  only applies to a minor subset of the sources that

  significantly affect New Mexico's air quality, those

  sources brought into operation between 1962 and 1977,

  and reductions from the Acid Rain program are minimal

  compared to reductions that would occur under

  existing BACT or LAER requirements, end quote.

              The comments also stated, and again I

  quote, the other federal programs do not provide New

  Mexico or other states with the same authority to

  effectively manage air quality and assure attainment

  of national ambient air qualities that it has had

  under a strong New Source Review program, end quote.

              In sum, NACAA does not share EPA's

  optimism that the effect of the EGU hourly rule will

  be minimal.  Even a relatively small EGU can still be

  a significant source of air pollution, typically

  emitting tens of thousands of tons of pollution per

  year.  It appears unlikely that CAIR or BART will

  impact the emissions of many EGU's.

              Moreover, a 2003 Public Interest Research

  Group study on the effect of the NOx SIP Call and the

  Acid Rain program indicates that neither of these

  programs can compensate for the loss of NSR for

  EGU's.  The PIRG study concluded that, despite

  national and regional NOx reduction initiatives

  implemented during the 1990's, more power plants

  increased their NOx emissions between 1995 and 2000

  than decreased these emissions.

              Specifically, 263 of the oldest 500 power

  plants increased their NOx emissions, while even

  collectively these 500 power plants decreased their

  total NOx emissions.

              The same report concluded that, although

  the Acid Rain program has clearly reduced aggregate

  SO2 emissions, 300 of the 500 power plants analyzed

  by PIRG actually increased their SO2 emissions

  between 1995 and 2000, resulting in local emissions

  impacts despite overall national advances.

              With regard to the local impacts, NACAA

  does not agree with EPA's approach to local health

  concerns in the proposed rule, namely that local and

  regional increases in pollution are not significant.

  EPA states that its technical support document shows

  that, and I quote, revised NSR applicability tests

  would result in a somewhat different pattern of local

  emissions, with some counties experiencing

  reductions, some experiencing increases and some

  remaining the same when compared to emission

  increases under CAIR/CAMR/CAVR in 2020, end quote.

  EPA concludes -- or continues -- projected emissions

  in EGU PM2.5 VOC, and CO emissions are small -- those

  are increases -- in magnitude and sparse across the

  continental United States, and we would expect these

  increases to cause minimal changes in local ambient

  effect, end quote.

              Because CAIR is a market-based,

  cap-and-trade program, however, there is no way to

  ascertain which power plants will buy credits and

  continue to pollute and which will not, just as there

  is no way to ascertain how many EGU's will make

  modifications in the wake of a final EGU hourly rule.

              When EPA ceases to follow the blueprint of

  New Source Review as specified in the Clean Air ACT,

  leaving decision-making to the regulated pollution

  becomes random and difficult to control.

              Moreover, the national statistics

  contained in EPA's Technical Support Document have no

  bearing on the health and welfare of individuals

  living in communities near power plants that may

  choose to pay to pollute under CAIR and increase

  emissions under the NSR hourly proposal.

              In addition, none of the programs cited by

  EPA requires air quality modeling to determine the

  impacts of increased emissions on either local or

  regional air quality.  Hence, increases in actual

  emissions could exacerbate local air quality problems

  or cause new violations of air quality standards

  without the evaluation of the air quality impacts of

  those increases that ordinarily would be required

  under New Source Review.  This has serious public

  health implications.

              Under EPA's proposal, EGU's could increase

  annual actual emissions without informing the air

  agency or the public, without evaluating air quality

  impacts and without correcting violations of public

  health and welfare standards.

              In the debate on New Source Review, the

  topic is frequently the New Source Review technology

  requirements, BACT and LAER, for upgrading of air

  pollution control of existing equipment.

              Equally important, however, is the New

  Source Review requirement to evaluate local air

  quality impacts of emissions increases.  No other

  Clean Air Act program would fulfill the air quality

  evaluation gap left by an ineffective New Source

  Review program.

              Fourth, under the current NSR/PSD

  applicability test, modified sources have no

  significant advantage over new units.  Under the

  proposed test, however, existing units are likely to

  rebuild and increase their annual tons of emissions,

  deteriorating limited air quality resources and

  placing those who would build new units at a

  competitive disadvantage, since many old units lack

  air pollution control for one or more of the criteria

  pollutants.

              Plant managers are likely to choose to

  rebuild old boilers at existing stations to recapture

  lost capacity without installing Best Available

  Control Technology.  It can be expected that this

  practice will consume available annual increments,

  reduce the number of new installations, thereby

  sacrificing efficiency increases and retard the

  development of new technologies.

              Fifth, the New Source Review utility

  enforcement cases brought by EPA and states that have

  alleged illegal modifications based on increases in

  actual annual emission increases have resulted in

  huge reductions of air pollutants.  The health and

  quality of -- and quality of life of millions of

  people have been improved by the reductions in

  emissions that have been achieved.

              For example, settlement of the Ohio Edison

  case called for annual reductions of 134,000 tons of

  NOx and SOx.  The Illinois Power case led to

  reductions of emissions of 54,000 tons of NOx and

  SOx.  And most recently, decisions favorable to EPA

  in the Cinergy case may also lead to significant

  emission reductions.

              It is highly doubtful, however, that these

  or other cases of similar magnitude could ever be

  brought if the EGU hourly rule is finalized.  As a

  practical matter, if the rule is promulgated,

  identifying and prosecuting violations of hourly

  emissions will be problematic at best.  The dramatic

  improvements in air quality that were previously

  possible through New Source Review enforcement will

  simply not be realized.

              To summarize our views, NACAA believes

  that this proposal contravenes congressional intent

  in enacting NSR, makes our work of achieving healthy

  air and preventing deterioration of clean air

  infinitely more difficult, is based on assumption

  about -- assumptions about CAIR, BART and other

  programs that we do not share, gives unfair

  competitive advantages to existing EGU's who will

  choose to rebuild, and will severely curtail New

  Source Review utility enforcement.

              We believe, rather, as did congress in

  1977, that it makes sense to install state-of-the-art

  controls on EGU's when they are making modifications

  -- that is, when they are renovating boilers to

  recapture lost capacity or when they are conducting

  life-extension projects.  This is a logical junction

  to take steps to protect public health and the

  environment.  This rule eviscerates New Source Review

  for EGU's and should not be finalized.

              Thank you for allowing me the time, and

  I'll be pleased to answer any questions you might

  have.

                     MR. SVENDSGAARD:  Thank you for your

  testimony.

                     MS. McDONALD:  Yes, I have a

  question.

              As you are aware, we created and we have a

  very extensive analysis of local impacts, including

  impacts in every single county for all six criteria

  pollutants.  And when we conducted that analysis we

  found that the emissions increases where there are

  increases are within the recorded amounts that

  actually occurred in 2003 and 2004.  That's the basis

  for our conclusion that the increases are small and

  will have very little impact on local air quality.

              And if you and your state agencies have

  data or an analysis that would lead to a different

  conclusion, it would be very important for us to look

  at that.

                     MR. PAUL:  Okay.

                     MS. McDONALD:  And also our runs and

  our data are all documented in the docket in a lot of

  detail that you have to work with.

                     MR. PAUL:  Okay.

                     MS. McDONALD:  So we would be very

  interested if you see a different conclusion and your

  basis for the conclusion in that aspect.

                     MR. PAUL:  Okay.

                     MS. McDONALD:  I'll just -- I'll let

  you get all that written down.

                     MR. PAUL:  I got it.

                     MS. McDONALD:  Okay.  And then also

  the three things that I asked our previous speaker.

              With regard to the fact -- recognizing the

  fact that you don't prefer our test, it would still

  be helpful to us for you to be very specific about

  which of the options you prefer most, even though you

  don't prefer them, and that's again, on a statistical

  basis, heat input for hourly emissions rate, on the

  achieved, whether you would prefer statistical or one

  in five baseline, and on the achieved approach, an

  input or output basis.

                     MR. PAUL:  Okay.

                     MS. McDONALD:  Thank you.

                     MR. PAUL:  All right.

                     MR. SVENDSGAARD:  Yeah.  I have a

  similar question, Mr. Paul.

              Given the fact that you guys have been --

  well, you're primary implementers of the rules that

  we put out and you have some experience with an

  output basis with the NSPS new rule for EGU's on that

  side, if you can carry forward, explain what some of

  the issues are with an output basis, if there are

  any.  I think that would help us.

              But one thing you -- you said, and I think

  I understood the full point, but you were saying

  there's an unfair advantage that the current

  supplemental proposal provides for a poorly

  controlled facility.

              Is that just compared to new source or is

  it an unfair advantage within a modified source that

  a poorly controlled source is more advantaged than a

  well controlled source that's modified?

              If you can either now or in your written

  comment provide for me.

                     MR. PAUL:  Well, it's primarily

  aimed at if you operate in an older facility which is

  experiencing downtimes and, you know, poor efficiency

  but is still cheap to run, cheap electricity, and

  you're faced with do we shut this down and replace it

  with an entirely new facility.

              Well, if you're -- if you're able to

  completely rebuild that existing facility without

  triggering New Source Review, that's going to be an

  obvious advantage.  And that's -- that's what we're

  fearful of.

              When we look at the 1,196 coal-fired

  utility boilers operating across the United States

  and we look at the age of those, and especially the

  large percentage that are more than 35 years old,

  really our big fear here is that those would be

  rebuilt without upgrading air pollution controls.

              That's -- we're not -- you hear a lot of

  testimony about all the uncertainty, and every time

  we replace a boiler tube -- we're not interested in

  New Source Review every time a utility replaces a

  boiler tube.  But at the same time we don't want

  utility boilers to operate a hundred years without

  controls.

              And we think that somewhere -- somewhere

  in the middle is the answer, and we've proposed a

  number of times that some kind of a birthday

  provision be included in the rules wherein every 35

  years you upgrade to Best Available Control

  Technology and then you just operate beyond that.

              So we're not after New Source Review every

  year being triggered, but we -- we definitely feel

  that this test would exempt all utilities from New

  Source Review.  We don't feel this test will ever

  trigger New Source Review, and we think that EPA's

  data actually shows that.

              I mean, the current test is New Source

  Review when you make a modification which causes an

  increase in emissions, and we tie that especially to

  the national -- to the annual increments, and we see

  that if there is -- if there is an increased

  operation that is caused by a modification -- not

  just increased hours, but caused by a modification

  and that causes increase in annual emissions, then it

  has to be addressed.  We have to review that and we

  have to measure the impact of that.  We feel that

  this test would eliminate the federal requirement

  that we do that.

                     MS. McDONALD:  I have a follow-up

  question to that.

              When we have looked closely at increased

  operation, what we generally find is that there is a

  tendency to add controls, because it becomes cost

  effective to do so. So if you have information

  otherwise, we would like to have that.

                     MR. PAUL:  Actually -- actually,

  when we look at it, we say, then, what's the problem?

  Require the added controls since it's more cost

  effective.

              And then where's the burden that the

  utilities are facing in having that review?  And if

  it's more cost effective when they increase

  efficiency and increase hours of operation, then that

  should support you keeping that in place as opposed

  to somehow, even though it would be more cost

  effective, giving them the incentive not to add

  controls.

              So I would think that the agency would

  look at that and say since -- since increases in

  efficiency will give you more hours and make controls

  more cost effective, we don't feel it's a burden to

  require you to add on controls when you increase your

  hours of operation.

                     MS. McDONALD:  When we look at it,

  we see that that affect is already occurring.

                     MR. PAUL:  Require it.

                     MR. SVENDSGAARD:  Do you have

  another question?

                     MS. McDONALD:  No.  Thank you for

  your testimony.

                     MR. SVENDSGAARD:  Thank you.

                     MR. PAUL:  Thank you very much.  I

  appreciate especially the time.  Thank you.

                     MS. McDONALD:  You're welcome.

                     MR. SVENDSGAARD:  And Mr. Paul was

  representing the National Association of Clean Air

  Agencies.

              All right, we have a speaker signed up for

  10:15.

              Is Mr. Hanchey ---

                     MR. HANCHEY:  --- That's me.

                     MR. SVENDSGAARD:  --- Available?

                     MR. HANCHEY:  Yeah.  I'd be happy

  to.

                     MR. SVENDSGAARD:  All right, do you

  want to go ahead?

              Mr. Hanchey is representing the Utility

  Air Regulatory Group.

                     MR. HANCHEY:  I'd like to go ahead

  and give you copies of my comments, because they have

  a couple figures in the back.

                     MS. McDONALD:  Thank you.

                     MR. HANCHEY:  And my name is Mr.

  Hanchey, actually.

                     MR. SVENDSGAARD:  Hanchey.  I'm

  sorry.

                     MR. HANCHEY:  That's all right.

              My name is Matt Hanchey and I'm making

  this statement on behalf of the Utility Air

  Regulatory Group, UARG.  UARG's public and private

  electric utility company members collectively

  generate the vast majority of electricity in this

  nation.

              UARG continues to support EPA's proposal

  to adopt the maximum hourly emission rate increase

  test to determine whether emissions increases at

  existing electric generating units, EGU's, trigger

  New Source Review requirements.

              UARG's support is reflected in the

  comments we filed on EPA's October 20th, 2005

  proposal and will be further reflected in written

  comments that we will file in this supplemental

  rulemaking.

              The legal basis of EPA's action is

  straightforward.  The single definition that governs

  applicability under the Clean Air Act's New Source

  Performance Standards and the NSR programs is the

  definition of modification in Section 111(a)(4) of

  the Clean Air Act.  It says a modification is an

  increase in emissions that is caused by a change in

  the source.

              As the courts have recognized, though, the

  statute is silent as to what constitutes an increase

  in emissions.  Therefore, EPA has discretion to

  provide further definition regarding rate and

  measurement for the term to have any contextual

  meaning and to balance the aims of the NSR programs.

              As EPA's thorough analysis of the

  potential environmental impact of the proposed rule

  shows, the proposed rule strikes an appropriate

  balance between the need for environmental protection

  and economic growth.  Once finalized, it will promote

  the safety, reliability and efficiency of EGU's

  without resulting in adverse environmental

  consequences.

              EPA solicited comment on several aspects

  of and options for the proposal.  Let me briefly

  respond here to some of EPA's questions regarding the

  rule.

              First, UARG supports EPA's preferred

  option one.

              This would add a unit-level hourly

  emissions increase test as a first step for a change

  to trigger NSR and would leave unchanged the current

  rule's provisions setting forth an annual actual to

  projected actual test and netting.

              UARG believes that eliminating netting is

  unwarranted.  The concept of netting has been in the

  rule for more than 25 years and has been recognized

  as implementing sound policy.  Also, netting is

  required under the D.C. Circuit's longstanding

  precedent of Alabama Power Company versus Costle.

              Second, UARG supports a maximum achievable

  hourly emissions rate test, which is identical to the

  test that has been in effect under the NSPS

  modification rule for over three decades.  This is a

  test that has stood the test of time.  It is a well

  understood and easily implemented by regulated

  entities and regulators alike.  And it is a test that

  is based on a measure of actual emissions as EPA

  explained in the 2005 proposal.

              Third, if EPA were to use a maximum

  achieved test, the agency must carefully consider how

  to account for the statutory causal link requirement

  between a change and an emissions increase for the

  change to be a modification.  EPA has recognized this

  requirement throughout the regulatory history of NSR,

  and indeed it recognizes it again in this rulemaking.

              In the preamble, however, EPA appears to

  focus solely on demand growth as if demand growth is

  the only independent factor out there.

              In fact, there are many factors such as

  the sulfur content of coal or long-term but minor

  changes in the operation of SCR's, or scrubbers, to

  name only a couple that are independent of whether a

  project -- a project causes an emissions increase.

  Thus, if EPA chooses to use the achieved test, then

  to make that test workable, EPA must also include a

  causation determination, for example, holding

  constant operating conditions except those altered by

  the proposed change before and after the change.

              Fourth, EPA's proposed statistical

  approach in alternative one to implement the maximum

  achieved test is both practically and theoretically

  flawed.

              UARG's consultants have undertaken

  analyses of NOx and SO2 emissions data for several

  EGU boilers with various combinations of coals and

  pollution control technologies.  They assumed that

  after a hypothetical physical or operational change

  occurred in a given year, each boiler would operate

  identically, loads, emissions, hours, etcetera, as it

  did during the five years before the change.  That

  is, they assumed that the change undertaken by the

  boiler had no effect whatsoever on the units'

  emissions profile for the entire five-year period

  following the change as compared to the baseline.

              If there would be any occurrences of hours

  where the maximum achieved emissions rate calculated

  based on the upper tolerance level, UTL methodology,

  would be exceeded, that would be a false positive.

  It would trigger NSR even though there had been no

  change in the emissions profile at the boiler.  Any

  such false positives would indicate a flaw in the

  statistical procedure.

              The consultants have determined that the

  UTL process for the majority of utility boilers would

  in fact invariably result in false positives during

  the five years after the change.  Thus EPA's proposed

  statistical procedure is fatally flawed.

              To illustrate this point, we are providing

  an example of the analyses that our consultants have

  done to date.  The two graphs that we gave the panel

  and that are attached to this statement show the

  results of the UTL analysis for NOx and SO2 for one

  boiler, Colstrip 1 in Montana.

              And I -- the graphs are actually -- they

  are reversed, but I'm going to discuss first the NOx

  graph, which is the second graph.

              As that graph shows, using the UTL method

  as proposed by EPA would result in 41 false positives

  for NOx.  That is, instances in which the achieved

  NOx hourly emissions rate would exceed the UTL even

  though we're assuming a change that had no effect

  whatsoever on emissions.

              Similarly, the second graph shows 425

  false positives for SO2.  These results are typical

  of those our consultants are finding for a variety of

  units.  UARG will be submitting analysis results for

  additional units with its comments.

              At this time the consultants have not

  identified a statistical procedure that would ensure

  that the emissions would not exceed the pre-change

  maximum achieved hourly emissions rate simply through

  the random variability of the system.  At the very

  least, though, it would seem that the same statistic

  must be used before and after a project for the

  methodology to have any chance of working.

              EPA also asks for comments to suggest

  alternative statistical or other methods to define a

  unit's pre-change maximum achieved hourly emissions

  rate.  UARG will continue looking at this issue and

  will submit additional comments as appropriate.

              Fifth, UARG prefers an input-based test,

  if only a single test were to be adopted but supports

  an output-based test at the election of the owner or

  the operator.

              We support an output-based test because it

  would encourage efficiency improvement projects,

  which everyone recognizes or should recognize as

  desirable from an energy and environmental point of

  view.

              We note, however, that requiring an

  output-based test as the only option would have the

  unintended and detrimental effect of discouraging

  projects that are essential to maintaining the

  safety, reliability, and productive capacity of EGU's

  and that may result in a small decrease in

  efficiency.

              Sixth, as we have stated in the past, and

  as EPA's technical justifications amply support, the

  geographic applicability of the rule should be

  nationwide.

              Seventh, as we have stated in the past,

  and as EPA's technical justifications amply support,

  the rule should apply to all regulated NSR

  pollutants.

              Finally, UARG believes that the electric

  utilities already have extensive reporting and

  recordkeeping requirements and that additional

  requirements are not warranted.

              Thank you.

                     MR. SVENDSGAARD:  Thank you, Mr.

  Hanchey.

              Do you have any questions?

                     MS. McDONALD:  Yes.

              On the statistical test, are you going to

  provide your complete data set?

                     MR. HANCHEY:  I'm going to have to

  refer these questions to my colleague, Mr. Jaber, who

  prepared the conference and I will ---

                     MS. McDONALD:  --- The more complete

  you can be about your analysis about the statistical

  approach, the more helpful it will be to us.

                     MR. HANCHEY:  Okay.

                     MS. McDONALD:  And I think you

  articulated everything except for -- and this will be

  important.

              If we were to go to an achieved test, it

  would be helpful to us to know whether you prefer one

  in five or statistical approach -- one in five

  baseline or a statistical approach.

                     MR. HANCHEY:  Okay.

                     MS. McDONALD:  Thank you.

                     MR. HANCHEY:  Thank you.

                     MR. SVENDSGAARD:  You mentioned

  towards the end that the output basis would

  discourage activities that help to maintain

  efficiency, reliability, and safety.

              In your written comments or now, can you

  amplify upon that?

                     MR. HANCHEY:  Okay, I'll do that in

  the written comments.

                     MR. SVENDSGAARD:  Okay.

                     MR. HANCHEY:  Thank you.

              Anything further?  No?

                     MR. SVENDSGAARD:  Thank you very

  much.

                     MS. McDONALD:  Thank you.

                     MR. SVENDSGAARD:  Okay, that's all

  of our scheduled speakers, at least originally

  scheduled.  I don't have -- has anyone else signed up

  to speak today?

              Well, they're not in the room if they are.

              What we'll do right now is we'll take a

  15-minute break and we'll resume at 10:25, and at

  that time we'll decide if we have any further

  scheduled speakers.  We'll line those up.

              But otherwise, like we've mentioned

  before, we will allow an hour after the last speaker

  before closing the hearing.

              We'll see you at 10:25.

        (10:07-10:28 a.m. - recess.)

                     MR. SVENDSGAARD:  All right, we

  would like to reopen the public hearing at this time,

  and if there are any folks that haven't registered

  yet but would like to come forward and speak -- it

  appears that everyone in the audience, I think, has

  already spoken or have elected not to.

              I don't think we'll have any speakers

  right now.  What we'll do is, then, we will close the

  hearing right now, and at 11 o'clock we will come

  back.  And if there have been no registered speakers

  at that time we'll close the hearing for good.

              So thank you for staying with us and we'll

  see you at 11.

        (10:29-11:01 a.m. - recess)

                     MR. SVENDSGAARD:  Okay, at this time

  we are going to reopen the hearing.

              We've been told that there are no

  additional speakers signed up for today, so we just

  want to tell people that we appreciate you coming out

  and giving us your testimony or participating

  otherwise in the hearing.

              And like I said, there's currently a

  public comment period that is scheduled to end on

  July 9th, and if there's been an extension or request

  for that to be extended, that's been considered, and

  right now it looks like we're taking action to extend

  that for 30 days.  And that public notice -- sorry --

  the registered notice should be coming out shortly

  for that.

              Comments related to this hearing, written

  comments, again, would need to be submitted by July

  30th, 2007.

              Again, thank you for you comments today,

  and at this time I will close the hearing.

        WHEREUPON,

       at 11:02 o'clock a.m. the hearing was adjourned.

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

                        CERTIFICATION

               I, Cassandra J. Stiles, Notary Public in

   and for the County of Forsyth, State of North

   Carolina at Large, do hereby certify;

               That the transcript of the Public Hearing

   hereon captioned was stenographically recorded by me,

   reduced to typewriting under my supervision and the

   foregoing consecutively numbered pages are a complete

   and accurate record of said Hearing;

               That the undersigned is not prohibited

   from producing the record of said meeting by any

   Federal and/or State rule(s).

               IN WITNESS WHEREOF, I have hereunto set my

   hand and seal, this the 21st day of July, 2007.

                           Cassandra J. Stiles, CVR

                           Certified Court Reporter

                           Atlantic Professional Reporters

                           Post Office Box 11672

                           Winston-Salem, NC 27116-1672

