NOx Budget Trading Program aka NOx SIP Call

NOx Budget Trading Program aka “NOx SIP Call” EPRI CEMS User Group Meeting May 4, 2004 Mary Shellabarger, EPA

Background of NOx SIP Call u Issued in 1998: required 22 States & DC to submit State Implementation Plans (SIPs) providing NOx emission reductions to mitigate ozone transport in eastern U. S u Assigns a total NOx emissions “budget” for each identified State u Permits States to choose what NOx measures to adopt to meet the State-wide emission budget

Background, cont. u EPA encouraged the use of an emissions trading program to achieve reductions from large electric generating units and industrial boilers u Requires compliance with Part 75 monitoring ã u Requires measurement and reporting of all emissions Sets goals and control requirements in terms of allowable emissions ã Reduce and cap total emissions ã Sources must hold allowances equal to emissions

Participants u “Core” units affected by the NOx Budget Trading Program include ã fossil fuel fired electric generators >25 MW ã industrial boilers and turbines >250 mm. Btu/hr u Some Northeast states include sources between 15 and 25 MW u NY added source category: cement kilns u All states include opt-in provisions

Timing u Phase I: 19 states & DC submitted SIPs with trading programs (Phase I) ã ã 9 northeastern states m CT, MA, RI, NY, NJ, PA, MD, DE, DC m required to: monitor in 2002, comply in 2003 11 additional states (or portions) m VA, WV, NC, SC, KY, TN, AL, IN, MI, OH m required to: monitor in 2003, comply in 2004

2003 Compliance u 8 states & DC participating u Budget: 165 K allowances 140 K basic allocations ã 25 K compliance supplement pool u Emissions: ã 140 K tons (compare to 185 K in 2002 for same group) u Bank: 25 K allowances

2004 Implementation u 19 states and DC participating u Budget: 665 K allowances ã 500 K basic allocations ã 140 K compliance supplement pool ã 25 K bank from 2003 u Emissions: u Bank: ? ?

About 2004 Emissions u Shortened compliance season for “new” 11 states ã ozone season emissions reported: 5/1 to 9/30 ã emissions counted towards compliance: 5/31 to 9/30 u Regular compliance season for northeast states ã emissions reported and counted: 5/1 - 9/30

Reporting 2004 Emissions u All sources report hourly and cumulative (both ozone season and annual) data for the entire ozone season as indicated in the EDR instructions u ETS will calculate and present in the feedback an EPA Accepted value for NOx mass based upon the State-specific compliance period u EPA strongly encourages sources with shortened compliance period to verify total NOx mass by using MDC hourly with the date filter set for May 31 - September 30

2004 Dates u May 1: all monitors installed and certified u May 1 or 31: 1 st day of compliance period u July 1 -30: reporting period for 2 Q EDR u Sept. u Oct 30: last day of compliance period 1 -30: reporting period for 3 Q EDR u Nov. 30: compliance reports due u Nov. 30: allowance transfer deadline

New Unit Allocations u Reminder for new units that receive an allocation from a new unit set-aside u Check your state’s allocation rule for the end-of-ozone season “take-back” procedure u Make sure that it’s understood by allowance managers before allowance transfer deadline

New Units, cont. u Allocation adjusted “to account for actual utilization” ã allocation based on lowest permitted emissions rate times maximum design heat input ã units only allowed to keep allowances equivalent to lowest permitted emissions rate times actual utilization ã excess allowances deducted as part of compliance

Compliance 2004 u Ozone u EDRs season ends Sept. 30 due Oct. 30 u Allowance transfer deadline Nov. 30 ã eligible allowances: 2003, 2004 ã no flow control u Compliance certification due Nov. 30

Compliance Certification u Electronic submission through CBS or paper submission ã ID each affected unit ã compliance certification statement ã signature of AAR u Optional: ã common stack apportionment ã identification of allowance serial numbers

Compliance process at EPA u Before the allowance transfer deadline, EPA will compare preliminary emissions data with allowance account holdings ã EPA makes courtesy calls to alert AAR of potential problem u Allowance transfers received and processed u Emissions data received and quality assured u Allowances are deducted to account for emissions ã (and for new units, to account for actual utilization)

Allowance Deduction Process u One unit at a time, in numerical order u Fulfill obligations of first unit before moving on to next unit u ã AAR-specified allowances first ã other allowances by FIFO (first in, first out) m current year allowances m banked allowances If a unit doesn’t have enough allowances, go to overdraft account

Excess Emissions u When there are not enough allowances to cover emissions in the unit account or overdraft account u Allowances are deducted from following year’s allocation at 3: 1 rate ã 3 allowances for each ton of excess u Other enforcement action possible

Future Reference: Flow Control u No flow control for 2004 compliance, possible for 2005 compliance u Compare number of banked allowances to regional budget u If total number of banked allowances exceeds 10 % of regional budget, PFC is calculated for following year

Remember in 2004: u Monitors should have been installed and certified by May 1 u When ã does your compliance season start? May 1 or May 31 u Allowance transfer deadline Nov. 30: ã Will you have a new unit take back? ã Flexibility of overdraft accounts u Use the CAMD Business System!