OTC Regional Attainment Strategy Danny Wong OTC November

OTC Regional Attainment Strategy Danny Wong OTC November 2005 Meeting Wilmington, DE 1

Clean Air Interstate Rule • Final on 5/12/05 • Controls SO 2 and NOx with emissions caps • EGU’s & Cogens (1/3 electric output or 219, 000 MWh) > 25 MWe • Model rules for cap and trade programs - annual SO 2 and NOx and ozone season NOx • OTC’s attainment strategy - CAIR Plus 2

Federal Implementation Plan • Proposed on 8/24/05 with comments due on 10/24/05 • EPA’s answer to NC’s 126 petition and backstop to CAIR • CAIR with a different cover page • Allows for an abbreviated SIP instead of full CAIR SIP • Will be promulgated by March 15, 2006 • FIP will apply to states until they have an approved CAIR SIP (full or abbreviated) 3

Compliance with CAIR/FIP • CAIR SIP • FIP • Abbreviated FIP SIP 4

CAIR SIP • Due September 11, 2006 • More work • Gives more control to states, i. e. , states can make more changes than the abbr. SIP, including additional SO 2 reduction (but not guaranteed to be allowed in the EPA trading programs) 5

FIP • • • To be promulgated on March 15, 2006 Minimal SIP work EPA will run program, like the ARP Have to take CAIR as is with no changes Any additional reduction would have to be separate from CAIR/FIP 6

FIP With Abbreviated SIP • • Due March 31, 2007 Not a full SIP Almost automatic approval from EPA Flexibility – NOx allocation, including additional reduction by the traditional method (allocate less than budgeted) – CSP allocation – Non-EGUs – Opt-In • Additional reduction by the CT method (add’l retirement) for NOx would have to be separate from CAIR/FIP • Additional reduction for SO 2 would have to be separate from CAIR/FIP by using the CT method 7

Traditional Vs. CT • Traditional – Not allocating all of the allowances – Only works for NOx allocation – Easier to implement • CT – – – Require additional retirement after CAIR Better method for additional NOx reduction Equalizes the worth of allowances within and outside of OTC Only method for additional SO 2 reduction Variation of this scheme is to set emissions limit (lbs/MMBtu) and allow the source to comply with either control installation or additional allowance retirement at an increased ratio (i. e. , reduce worth of allowances) 8

Options To Be More Stringent Than CAIR • Option A - FIP (Go to Slide #10) • Option B - FIP w/abbr. SIP (Go to Slide #12) • Option C - Full CAIR SIP (Go to Slide #15) 9

FIP • CT method - NOx & SO 2 – Additional retirement requirement – Separate rulemaking from CAIR 10

FIP With Abbreviated SIP • NOx Allocation – Budget – Method (output, input, rolling update, static, setaside, etc. ) • • CSP Allocation Non-EGUs for only ozone season Opt-In Units CAIR Plus – Traditional Method - NOx – CT Method - SO 2 and/or NOx 11

CAIR SIP (Full) • Due 6 months earlier than abbreviated FIP SIP • Same issues as abbreviated FIP SIP • Plus any additional modifications to CAIR model rules 12

Key Decisions • How to be more stringent than CAIR? – CAIR SIP, FIP SIP, or FIP only? – CT or Traditional method? – Do we want to be in the CAIR cap and trade programs or separate? 13