CAIR Replacement Rule

Discussions between SESARM and EPA

April 13, 2009

I.  Introduction

	On Monday, April 13, 2009, EPA held a call with the southeastern states
and some of the local agencies comprising Southeastern States Air
Resource Managers (SESARM) and Metro 4 respectively to discuss the CAIR
replacement rule.  The summary that follows covers the key issues
discussed during the call.  More detailed notes, including a list of all
participants in the call, are being prepared.  

II.  EPA Opening Comments

	Sam Napolitano, CAMD, began with a short introduction, explaining that
EPA was beginning the process of creating a replacement rule for CAIR. 
The Agency is reviewing all options, setting up analyses, and preparing
technical models.  The goal is to finalize a replacement rule within two
years.  

	The primary objectives are to help states comply with the NAAQS and to
reduce interstate transport.  Therefore, EPA has decided that it would
be best to start working with states and other stakeholders immediately.
 EPA would like to hear from the states about what type of replacement
rule would most help them meet air quality requirements.  Sam stressed
that this is the beginning of a dialogue process, and that EPA intends
to continue these types of discussions throughout the rule development
process.  

	This is a chance for the states to talk to the key EPA staff that will
actually develop and write the rules, as well as the OGC attorneys
assigned to the rule development.  Sam stressed that EPA is interested
in hearing the states' thoughts and concerns.  Everything is on the
table as EPA puts together ideas for the new Assistant Administrator for
Air and Radiation, who should arrive within the next couple of weeks.  

Tim Smith, OAQPS, asked that speakers identify themselves as notes of
the meeting are being prepared and will be distributed to all
participants on the call.  Sam noted that should any of the participants
have additional points to make following the discussion they should
attach an addendum to the notes of the call.  Sonja Rodman, OGC, added
that the notes and any addenda would eventually be placed in the docket
for the new rule.

III.  Discussion of Core Issues

John Hornback, SESARM, noted that SESARM had no predetermined points to
make and suggested the Topic Guide that EPA provided.

1.  Baseline

Sam Napolitano first established how EPA determined the baseline for
2010 for CAIR.  EPA modeled who would be out of attainment of the 1997
NAAQS before considering CAIR controls, and then determined which states
from upwind areas were contributing above defined thresholds.  Those
states became the CAIR region.  2010 aligned with SIP compliance dates
and was far enough out to allow for installation of controls.  As part
of the baseline, EPA considered NSR settlements, the NOx Budget Program,
and state control initiatives such as the North Carolina Clean
Smokestacks program and other northeastern state laws.  In addition, EPA
accounted for the phase-in of mobile source controls.  Sam said EPA
recognizes this is not the only way to establish a baseline and is
contemplating which year it should choose and the rationale for doing
so.  At this juncture EPA is also seeking input from states.

Tim Smith said that some participants in previous calls had requested
that EPA use the most recent year 2007-08 as the baseline, indicating
that they are wary of uncertainties in choosing a future year.  However,
others suggested a future year because of anticipated developments.  

John Hornback asked if there were implications of a set baseline year
that would require states to be obligated to rework inventories for
their SIPs, or would they be able to proceed to meet their obligations
while recognizing CAIR as a tool toward this end.  Tim thought the
latter would more likely be the case.  John then noted that there had
been considerable repeat modeling and inventory for regional haze and
ozone/fine particle purposes, and that states will not have the luxury
of funding to do additional runs in the next phase of SIP work.  He
indicated that he would like to understand what implications any CAIR
replacement rule might have for what inventories to run and model
assumptions to make.  John also said that he wanted to be sure that EPA
had the most recent available data so that all parties are on the same
page.  He noted that SESARM has some of the most current and best
information they have ever had, with regional inventories up to 2012
which they would share with EPA.  

Chris Howard, Alabama DEM, noted that CAIR had been equal to BART and
RACT for SO2 and NOx and suggested the same for the replacement program
because those programs were already on the ground.  Tim noted that there
are two questions with regard to BART and RACT:  (1) When doing baseline
future projections in absence of the CAIR replacement rule, what should
EPA assume is in place for BART or RACT?  (2) Once requirements are
developed based on section 110(a)(2)(D), should EPA attempt to evaluate
whether this satisfies BART or RACT?  

Sam indicated that one idea is to use a year that has already occurred
based on inventory for the projection.  Tom Ballou, Virginia DEQ, and
Jimmy Johnston, Georgia EPD, raised the EIA growth projections and the
simplified method used by the eastern U.S. state collaborative based on
state-by-state growth.  They noted that this was very transparent for
future projections, and that it did not necessarily capture all
controls.  Sam noted that this had not been presented to EPA as an
option, but that LADCO had indicated to EPA that this is how they are
proceeding.

Larry George, Florida DEP, said that Florida had committed CAIR controls
into its SIP through the use of permits.  He noted some states have SIP
rules, while others use permits, and they should be given credit in any
baseline for those reductions on the ground.

Sheila Holman, North Carolina DENR, asked that when EPA selects the
baseline it use nothing earlier than the earliest downwind attainment
date.  For example, 2012 would be the evaluation year under the 1997
NAAQS.  

2.  Significant Contribution

Sonja Rodman said that significant contribution was a big area to
address, with many options for the replacement rule.  For CAIR, EPA
established significant contribution through a two step process.  EPA
first conducted air quality modeling to determine which states should be
included in the region and then looked at the cost-effectiveness of
controls to determine significant contribution.  EPA established
regional caps and developed the state budgets for each pollutant
involved.  The D.C. Circuit Court ruled that EPA had failed to quantify
individual state significant contributions and thus also did not require
the specific state to eliminate its significant contribution.  As EPA
develops the new rule it is considering alternate ways to define
significant contribution.  The Agency welcomes suggestions.

Sheila Holman recommended that cost not play a role given the court's
ruling.  She and Sonja discussed issues and technical difficulties
relating to one possible approach -- establishing a threshold,
identifying states that contribute above that threshold, and then
defining their significant contribution as all emissions above that
threshold.  Sheila noted that going beyond what was needed would help
states achieve more stringent standards.  Sonja replied that EPA cannot
legally require states to do more than what is established as necessary
to eliminate their significant contribution.

Jimmy Johnston commented that the court upheld the thresholds based on
one percent of NAAQS and he was curious as to how those were developed. 
He said the numbers were critical to the entire process.  Sonja replied
that, in CAIR, these thresholds were not used to define what portion of
the contribution was significant.  In other words, EPA did not say that
all emissions above the threshold constitute the state’s significant
contribution.  Instead, EPA determined the level of control achievable
by the application of highly-cost-effective controls and developed state
budgets.  The court questioned this part of EPA’s analysis.  EPA must
now find a way to quantify individual state contributions and must
decide on a full or partial remedy.

John Hornback emphasized that there must be a sound basis for what is
contained in the SIPs.  The solution also must be legally sustainable. 
John stressed that EPA should not seek to reduce emissions just for the
sake of doing so, but must do so based on concrete analysis.  

Joe Kahn, Florida DEP, proposed controlling the level floor, like BART
expanded, so there is some minimum level of control.  He proposed a
reduced geographic scope for the program, as large cross-border impacts
were poorly controlled.  He suggested mandating controls on a state
level.  He thought a state like Florida might possibly be excluded from
CAIR as it may have sufficient controls.  Sonja replied, however, that
even states with reduced emissions will not necessarily be excluded.

John suggested that CAIR not become multiple programs, but be one
program that covers everything and in a timely manner.  It would help
SIP development if EPA were to address all standards and not just the
1997 NAAQS.  He also noted that it would be less costly to do so in one
phase, rather than going back after setting narrowly constructed CAIR
controls based just on the 1997 standards.  Chris Howard recommended
addressing any standard finalized at this point and also to allow time
for implementation programs to work, as CAIR would have eventually fixed
most of their attainment problems.

The Mississippi DEQ representative agreed with considering the 2006 and
2008 NAAQS.  Sheila Holman said that with regard to new standards EPA
should focus on developing a rule expeditiously that can hold up in
litigation.

3.  Remedies

Tim Smith explained that under section 110(a)(2)(D) there was a three
year deadline from when the standard is published.  He noted that for a
state to address that issue in isolation is very difficult, although the
Clean Air Act suggests that should be done and the state should have
knowledge of what the upwind solution is going to be.  If a state has
not submitted under the 2006 NAAQS, EPA can approach it with a SIP call
or a FIP.  He said there was a lot to piece together and EPA cannot
address every attainment date standard, and therefore must first
establish what is most rational.  Once an appropriate framework is
developed for significant contribution, the next step is to find a way
to remedy that significant contribution.  Tim noted that there was some
desire for a strictly performance-based standard, while others suggest
incorporating emissions trading as part of the solution.  He asked
participants how EPA might structure the remedy.  He noted that there
were benefits to trading, given the lowest common denominator effect,
and that trading provides an economic incentive.  He indicated that a
minimum performance standard with some trading was an option.

Sheila Holman supported unrestricted intrastate trading.  She also
suggested for interstate trading that a downwind state could request a
source-specific limitation if it dramatically affected attainment.  She
noted that the main concern with interstate trading is that it is
difficult to know where controls would be added, and she suggested an
evaluation of every trade.  Chris Howard indicated that Alabama
preferred unrestricted interstate trading.

Sonja Rodman said that participants should look at the modeling done
after CAIR began.  The predictions about where reductions would occur
were very accurate.  Sam Napolitano noted that in fact the predictions
were better than could have been imagined.  He said that he would
distribute maps EPA has developed that show these results.  Sheila
replied that when trying to predict attainment, sources were not willing
to state where controls would go.  She asked for some sort of compliance
plan to help states if interstate trading is to be allowed.

Tom Ballou suggested a combination of the two, with a minimum
performance standard with certain size sources, and an underlying
trading program for sources that outperform, or for those below, the
unit threshold.  He advised that there be some leeway in limits.  He
also raised the question of how to redesignate an area with increasing
emissions.

4.  Coverage and Timing

Sam opened the discussion on coverage and timing by asking the opinion
of participants as to seasonal versus year-round controls.  John
Hornback replied that it seemed simpler to have only year round
controls, although it was more expensive.  He asked if there were any
legalities involved, whether it was justified state-by-state or
season-by-season.

Sonja replied that there were a variety of Clean Air Act authorities. 
Under section 110(a)(2)(D) EPA has the authority to define what states
need to do to control significant contribution for each NAAQS and to
decide which pollutants contribute to downwind air quality problems. 
John said he was not sure it was that simple.  He noted that if there
was no attainment problem and no source of emissions that needs
year-round controls, they had no authority to implement year-round. 

Sam noted that it should be assumed that what EPA requires is necessary,
and that it does so not simply because benefits outweigh the costs -- it
must be tied to the statute.  However, when CAIR was first being
developed, EPA proposed only a year-round NOx program.  OTC was worried
that the economics of control could lead to seasonal concerns, and asked
EPA to put the summer season in place.  Sam also noted that many ozone
problems are in July and August, triggered by high electric demand in
the daytime.  He asked if there should be an additional remedy for high
electric demand days.  He noted that New Jersey had special controls in
place, and questioned whether EPA should also address the issue.  The
Northeast states have noticed that the power sector in their region
often responds to increased demand by turning to peaking plants that use
high-emitting diesel jet engines.  Tom Ballou stated that the D.C. area
was also experiencing this.  Small turbines, labeled emergency
generators, have been operated during high demand, resulting in a small
sector of combustion sources not covered by CAIR.

Jimmy Johnston noted that whatever the compliance deadlines, states need
sufficient time for construction and outages in order to install
controls. 

5.  Other

Tim Smith noted the concerns with maintenance areas and what it means to
interfere with maintenance.  The court has asked EPA to define this. 
John Hornback replied that although the state collaborative is
attempting to address this there currently is no consensus.  Sheila
Holman said she would like to see maintenance determined using a
regional historic variability test, or a site-specific criterion. 
Sheila also raised the question of funding for a trading program.  Sam
responded that this issue was outside the rulemaking process, and would
be a grant discussion.

V.  Conclusion

Sam Napolitano thanked everyone for participating in the call and said
that once the notes of the call were transcribed they would be
distributed to all participants.  He stressed that this was the
beginning of a dialogue.  When this series has concluded, EPA will meet
again with the states to report on what EPA has heard from all of the
groups.  This will allow them to react and respond, and to continue the
general dialogue.

John Hornback thanked EPA for the opportunity to share ideas and
expressed appreciation that EPA was keeping SESARM informed as it moves
forward in developing the CAIR replacement rule.



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