The Environmental Regulatory Landscape; Tomorrow is Here! John J. Fumero Lewis, Longman, and Walker ASQ-EED Conference Orlando, FL September 12-15, 2004

Albany Analytical, Inc Clean Air Act Initiatives Clean Air Act of 1977 CAA amendments of 1990 brought significant revisions designed to curb three major threats –acid rain –urban air pollution –toxic air emissions

Albany Analytical, Inc Clean Air Act Initiatives CAA amendments of 1990 Set national ambient air quality standards Established tighter emissions for cars and trucks Included list of 189 toxic air pollutants that had to be reduced

Albany Analytical, Inc Clean Air Act Initiatives Clean Air Rules of 2004 Designed to dramatically improve the air quality Interstate Air Rule Mercury Rule

Albany Analytical, Inc Clean Air Act Initiatives Clean Air Rules encompasses the following: Interstate Air Rule – provides states with a solution to the problem of power plant pollution that drifts from one state to another. The rule uses a cap and trade system to reduce the target pollutants by 70%.

Albany Analytical, Inc Clean Air Act Initiatives Clean Air Rules encompasses the following: Mercury Rule – will regulate the mercury from power plants; the largest domestic source of mercury emissions. First time power plant mercury emission will be regulated.

Albany Analytical, Inc Clean Air Act Initiatives Mercury Rule EPA proposed two alternatives for controlling mercury: Maximum achievable control technology (MACT)- under 112-would reduce mercury by 14 tons or about 30% by 2008 Market-based “cap and trade” program – when fully implemented would reduce mercury by 33 tons. S S

Albany Analytical, Inc Mercury Rule MACT MACT standards generally require industries to meet limits that are currently being demonstrated by a number of existing facilities. Currently there are no adequately demonstrated control technologies specifically designed to reduce mercury emissions. EPA has data that indicate controls for SO 2 and NO x emissions also reduce mercury emissions.

Albany Analytical, Inc Mercury Rule States may choose to adopt the cap and trade program to maintain the necessary emissions. EPA has already acted to substantially cut emissions of mercury by more than 90 percent form large industrial sources including municipal waste combustors and medical waste incinerators. Coal-fired plants are the largest remaining source of human-generated mercury emissions.

Albany Analytical, Inc More Clear Air Rules Nonroad Diesel Rule – change the way diesel engines function to remove emissions and the way diesel fuel is refined to remove sulfur. Ozone Rule – will designate those areas whose air does not meet the health-based standards for ground-level ozone. Will classify the seriousness of the problem and require states to submit plans for reducing the levels of ozone in areas where the ozone standards are not met.

Albany Analytical, Inc More Clear Air Rules Fine Particle Rule – will designate those areas whose air does not meet the health-based standards for fine- particulate pollution. This will require states to submit plans for reducing the levels of particulate pollution in areas where the fine-particulate standards are not met.

Albany Analytical, Inc Clean Water Act Growing public awareness and concern for controlling water pollution led to enactment of the Federal Water Pollution Control Act Amendments of As amended in 1977, this law became commonly known as the Clean Water Act. The Act established the basic structure for regulating discharges of pollutants into the waters of the United States.

Albany Analytical, Inc Clean Water Act It gave EPA the authority to implement pollution control programs such as setting wastewater standards for industry. The Clean Water Act also continued requirements to set water quality standards for all contaminants in surface waters. The Act made it unlawful for any person to discharge any pollutant from a point source into navigable water, unless a permit was obtained under it provisions.

Albany Analytical, Inc Clean Water Act Revisions in 1981 streamlined the municipal construction grants process, improving the capabilities of treatment plants built under the program. Changes in 1987 phased our the construction grants program, replacing it with the State Water Pollution Control Revolving Fund, more commonly known as the Clean Water State Revolving Fund. This new funding strategy addressed water quality needs by building on EPA-State partnerships.

Albany Analytical, Inc Clean Water Act Over the years, many other laws have changed parts of he Clean Water Act. Title I of the Great Lakes Critical Programs Act of 1990, for example put into place parts of the Great Lakes Water Quality Agreement of 1978, singed by the U.S. and Canada, where the two nations agreed to reduce certain toxic pollutants in the Great Lakes.

Albany Analytical, Inc Clean Water Act Law required EPA to establish water quality criteria for the Great Lakes addressing 29 toxic pollutants with maximum levels that are safe for humans, wildlife, and aquatic life.

Albany Analytical, Inc Clean Water Act CWA Elements Water quality standards – established standard for named pollutants with water body monitoring to determine whether WQS is met. Aimed at translating broad goals of the CWA into water-body specific objectives Apply to water of the U.S. which include: –Interstate waters –Intrastate waters used in interstate or foreign trade –Tributaries of the above –Territorial seas –Wetlands adjacent to all of the above

Albany Analytical, Inc Clean Water Act NPDES-covers point source discharging into a surface waterbody Effluent limitation guidelines and standards are established for different non-municipal categories Guidelines developed based on the degree of pollutant reduction attainable by an industrial category through the application of pollutant control technologies

Albany Analytical, Inc Clean Water Act Best Conventional Pollutant Control Technology (BCT) – for conventional pollutants and applicable to existing discharges. Best Practicable Control Technology Currently Available (BPT) – for conventional, toxic and non- conventional pollutants and applicable to existing discharges. New Source Performance Standards (NSPS) – for conventional pollutants and applicable to new sources.

Albany Analytical, Inc Clean Water Act § 319 – covers non-point sources of pollution such as farming and forestry operations § 404 – regulates the placement of dredge and fill material into wetlands and other waters § 401 – requires federal agencies to obtain certification from the state or territory before issuing permits that would result in increased pollutant loads to a waterbody State Revolving Funds – provides large amounts of money in the form of loans for municipal point sources, non-point sources, and other activities

Albany Analytical, Inc Balance of Regulation and Reliability of Power Balance of Economics and the Environment What does this mean to the energy business? What does this mean for the cost of energy?

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Yesterday’s Power Resource Technology Meeting Tomorrow’s Environmental Demands Karen A. Branick Albany Analytical, Inc ASQ-EED Conference Orlando, FL September 12-15, 2004

Albany Analytical, Inc Power Resource Technology ~811,000 MW of total power installed in the US. ~314,700 MW (nearly 40%) are supplied by coal plants. Nearly all of these coal plants are over 30 years old. A few new plants utilize new CFB technology resulting in almost negligible SO 2 and NO x emissions. Today’s resources are really Yesterday’s Technology!

Albany Analytical, Inc Current Situation Between 1970 and 2002, GDP increased 164 %, vehicle miles traveled increased 155 %, energy consumption increased 42 %, and U.S. population increased 38 %. At the same time, total emissions of the six principal air pollutants decreased 48 %.

Albany Analytical, Inc Current Situation cont. We’re doing pretty good, aren’t we? What’s the problem?

Albany Analytical, Inc The Sheriff's back in town, and things are about to change! EPA

Albany Analytical, Inc What’s Driving the Change? Public demands cleaner Air and Water Health implications –Respiratory Problems –Abnormal Fetal Development

Albany Analytical, Inc Proposed Rules Clean Air Rule of 2004 – addresses ozone and fine particle pollution, nonroad diesel emissions, and power plant emissions of sulfur dioxide and nitrogen oxides and mercury. Clean Air Rule includes: –Interstate Air Quality Rule –Utility Mercury Reduction Rule EPA

Albany Analytical, Inc Interstate Air Quality Rule Focuses on 29 states in eastern US and DC. Addresses the natural occurrence of pollutants drifting downwind across state lines. Proposes to use a cap and trade system to reduce the target pollutants by 40% in 2010 and 70% when fully implemented. EPA

Albany Analytical, Inc Utility Mercury Reduction Rule Control mercury emissions from coal-fired power plants FIRST time ever that power plants would be regulated for mercury. Reduce mercury emissions by nearly 70 % when fully implemented. EPA

Albany Analytical, Inc How do we Measure up? According to EPA’s 1999 National Emissions Inventory, coal-fired power plants are the largest source of human- caused mercury air emissions in the U.S. Power plants account for about 40% of total U.S. manmade mercury emissions. EPA

Albany Analytical, Inc Why Mercury and Why Power Plants? Mercury concentrations in the air are usually low and of little direct concern. It is when mercury enters water, either directly or through deposition from the air, biological processes transform it into methyl mercury, a highly toxic form of mercury.

Albany Analytical, Inc Why Mercury and Why Power Plants? Methyl mercury bioaccumulates in fish and other animals that eat fish. Bioaccumulation - concentration as it moves through the food chain.

Albany Analytical, Inc The Debate? Bush Admin. and energy industry – moving too aggressively to reduce mercury emissions from power plants would cost jobs while having little impact on the environment. EPA staff proposal called for 90% reduction in mercury emissions at coal- fired power plants by 2012 vs. 70% by Source: Energy Daily News – Monday, August 9, 2004 – a report on the CBS evening news

Albany Analytical, Inc The Debate? EPA Administrator Mike Leavitt – “We don’t have technology available to do it faster. That’s at the heart of this whole debate.” Dale Heydlauff of AEP, Gavin plant in Ohio – It’s gonna take billions of dollars to be able to retrofit these plants to meet the same type of emissions performance that this plant enjoys today. Source: Energy Daily News – Monday, August 9, 2004 – a report on the CBS evening news

Albany Analytical, Inc The Debate? Power companies have said that the billions in spending that would be required to meet the proposed standards may have little effect. Power companies have argued that much of the mercury contamination in the U.S. waterways comes from Asian sources. Source: Energy Daily News – Monday, August 9, 2004 – a report on the CBS evening news

Albany Analytical, Inc What’s next? Analyze the potential solutions! Economic vs. Environmental Prioritize Plan Final Rule expected in March Outcome of 2004 election will influence Rule emission reduction goals.

Albany Analytical, Inc How do we get there? Shut down all of the old polluting coal-fired power plants. Knock them down and start over. Install the necessary pollution control equipment on all of the old polluting power plants. Stop burning coal.

Albany Analytical, Inc Practical? Shut down all of the old polluting coal-fired power plants. Knock them down and start over. No way! Remember, nearly half of our power is generated by coal-fired plants. Install the necessary pollution control equipment on all of the old polluting power plants. What pollution control equipment? It doesn’t exist! Stop burning coal. There were about 75,500 mining employees in the U.S. in 2002.

Albany Analytical, Inc Power Company Options Fuel Switching Burner Technology and Controls Pollution Control Equipment

Albany Analytical, Inc Fuel Switching May or may not be feasible – only a partial solution. Long-Term fuel contracts may limit ability to switch. Long-Term fuel contracts may include large $ penalties for reducing take and/or switching to another supplier.

Albany Analytical, Inc Fuel Switching Switch from Bituminous coal to Powder River Basin Coal Impact on Boiler configuration and operation Results: Will lower NO x and SO 2, but minimal impact on mercury Still not enough to meet Interstate Utility Rule for NO x, SO 2, Ozone and PM.

Albany Analytical, Inc Burner Technology and Controls Nearly all of the incremental gains from burner optimization, controls and operation have been realized. Low NO x burners lower NO x, but no tangible effect on SO 2 or mercury.

Albany Analytical, Inc Pollution Control Technology Selective Catalytic Reduction – controls NOx and Ozone. Up to 98% effective. Scrubber – controls SO2. >90% effective. Electrostatic Precipitators – controls particulate matter. ~95%effective. Baghouse – controls particulate matter. Up to 99% effective.

Albany Analytical, Inc Conclusions: Multi Billions of $ required for investment in existing plants to meet the Rule requirements. Who will pay? RATEPAYERS Close down old plants and build new, cleaner plants?

Albany Analytical, Inc Conclusions: The analysis becomes… …an Economic Analysis: Retrofit vs. New Clean Coal Technology

Albany Analytical, Inc How do they go about doing this? With these uncertainties, but at the same time, the expectations of the Rules, the power companies need: –a structured, well defined process –consideration all of the outside influences, and internal and external customers –balance between corporate economic goals and objectives and the environment.

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The BeeLineResults™ Approach to Six Sigma Deployment Penny Mondani Albany Analytical, Inc ASQ-EED Conference Orlando, FL September 12-15, 2004

Albany Analytical, Inc Challenges Facing the Energy Business Public Pressure for Cleaner Air and Water continue to grow Reduction in Pollutants is Certain; to what level is unknown Regulations and Rules are driving large $ expenditures Interpretations and Enforcement varies across locations and time Time & Resources Constrained

Albany Analytical, Inc The Challenge It is a HIGH $$ Stakes Game The Rules of the Game are unclear The Goals are moving targets The only certainty is that both the Game and the Goals will change We need an Agile, Proactive method to Stay Ahead in the Game

Albany Analytical, Inc One Approach: Six Sigma Disciplined Method for Problem Solving, evolved from the Scientific Method Considers –Internal and External Customers –Outside Influences Balances External (Government) and Internal (Corporate) Goals But will it work for us?

Albany Analytical, Inc Ten Myths of Six Sigma 1.Interested only in the bottom line: Ignores the Customer 2.Creates a parallel organization 3.Is an added effort to existing Quality efforts 4.Requires massive training 5.Requires large teams and large organizations 6.Creates bureaucracy that bogs down results 7.Just another [quality] program 8.Uses complicated statistics; is difficult to understand 9.Six Sigma process performance is not cost effective 10. Only an elite few can learn and use it

Albany Analytical, Inc Myths and Challenges: BeeLineResults™ addresses both A new approach to implementation of a proven methodology – not a new methodology A response to tighter resources, less time, and a rapidly changing environment

Albany Analytical, Inc Myth 1: Ignores the Customer Project Selection considers both Business and Customer needs Project Goals almost always include “Reduce Defects” (Customer Focus) Policy Deployment Ensures Customer and Business Focus Note: Design for Six Sigma is highly Customer focused

Albany Analytical, Inc Myth 2: Parallel Organization BeeLineResults™ keeps Six Sigma efforts inside the day to day operations BeeLineResults™ is highly interactive with local personnel BeeLineResults™ Six Sigma organizations can not field a baseball team 

Albany Analytical, Inc Myth 3: Added Effort to existing… BeeLineResults™ builds on the existing skills of personnel BeeLineResults™ Six Sigma takes place on real projects – not in training exercises – progress is made with little extra effort

Albany Analytical, Inc Myth 4: Requires Massive Training BeeLineResults™ provides bites of training in pieces that can be swallowed without choking BeeLineResults™ “training” is effective, so less is required

Albany Analytical, Inc Myth 5: Large teams, Organizations All teams should be manageable in size BeeLineResults™ optimizes team efforts; the size of the organization is not a critical factor BeeLineResults™ does not require enough people to “fill the class”

Albany Analytical, Inc Myth 6: Creates Bureaucracy Rigorous attention to the Six Sigma problem solving process does NOT slow down results The road is littered with “obvious solutions” that didn’t work BeeLineResults™ gives results before everyone loses patience and interest When are we going to see some results?

Albany Analytical, Inc Myth 7: Just Another Program Anything that works will stay around BeeLineResults™ works!

Albany Analytical, Inc Myth 8: Complicated; Difficult Most projects achieve great results with basic tools BeeLineResults™ introduces “complicated statistics” only when they are valuable r2r2 xixi df IV f(x) 2  E=mc 2    

Albany Analytical, Inc Myth 9: 6  not cost effective Not all processes need to have 6  performance for Six Sigma to be useful – BeeLineResults™ tells you which processes are critical and do need to be 6  BeeLineResults™ yields positive results quickly, so “cash” inflows soon overtake cash outflows USL

Albany Analytical, Inc Myth 10: Only for the Elite Few Because BeeLineResults™ relies heavily on teams, more people are exposed to methods, tools, and good results BeeLineResults™ coaching and non-classroom training at the project site removes the fear and rumors, uncertainty and resistance

Albany Analytical, Inc The Traditional Approach Training and Project Work are Batch Processed Set-Up (between Training and Project Work) Effort is HIGH L – E – A – R – N, D - OSlow Feedback loop: L – E – A – R – N, D - O Participants removed from Workplace, diminished local Buy-In and Support Typical: Improvements Realized and Second Project Launched at 6-7 months Month 1Month 2Month 3Month 4Month 5Month 6Month 7Month 8 1st Project Launched 2nd Project Launched $$$ TrainingProject WorkSet-Up Coaching

Albany Analytical, Inc Traditional Approach Shortcomings Requires large numbers of personnel to optimize training classes Enormous front-end costs of training Significant resources removed from productive activity for first four months Inefficient learning curve – application of tools not in sync with training Training resources often take priority over Coaching resources

Albany Analytical, Inc The BeeLineResults™ Approach Intensive Coaching Reduces False Starts and Project Rework LEARN,DO, LEARN,DO…Alignment of Project and Tools; Rapid Feedback loop: LEARN,DO, LEARN,DO… Eliminates Training Overload Learning takes place in Real Environment – Everyone sees Progress Increased Buy-In and Commitment TrainingProject WorkSet-Up Coaching Month 1Month 2Month 3Month 4Month 5Month 6Month 7Month 8 1st Project Launched 2nd Project Launched 3rd Project Launched $$$

Albany Analytical, Inc Coaching is the Difference BeeLineResults™ replaces “Fire Hose” Training with Intensive Coaching BeeLineResults™ Coaching is –Specific –Real-time –Relevant “Training” is given in palatable doses during coaching and short duration sessions

Albany Analytical, Inc Coaching is NOT…  Doing the project  Telling the team what to do  Reviewing what has already been done

Albany Analytical, Inc Coaching IS… Guiding the project in the right direction Mentoring the team members Transferring knowledge to the team An approach that has been employed successfully for centuries. The Master trains an Apprentice until the Apprentice becomes a Master. The cycle is repeated, and the integrity of the knowledge is maintained from generation to generation.

Albany Analytical, Inc The Beginning and End: Often Forgotten Policy Deployment – The Beginning –Aligning Project Selection with Customer and Business Needs Process Management – The End –Sustaining the Gains of each project –Closely aligned with ISO efforts Coaching enables resources to be spent on these critical anchors of any Six Sigma deployment Coaches are familiar with ALL efforts – across the organization – which ensures efficient efforts Coaches guide Management in project selection, as well as Teams in project execution

Albany Analytical, Inc Tools When You Need Them When building a house, you don’t buy and store the wallpaper and carpet until the foundation, walls, and roof are complete. Focusing your money and storage space on what you need NOW is a fundamental Lean Production concept. 12 First, Build… Then, Decorate

Albany Analytical, Inc More Tools are Not Better Simple Tools Solve Complex Problems – the Pareto Principle applies Rigorous Process (DMAIC) is critical to success Focus on tools reduces focus on Process, resulting in longer and less successful projects BeeLineResults™ applies tools in context - where they’re needed, when they’re needed.

Albany Analytical, Inc The $avings are Clear… Traditional: BeeLineResults™: 1st Project Launched 2nd Project Launched $$$ 1st Project Launched 2nd Project Launched 3rd Project Launched $$$ Month 1Month 2Month 3Month 4Month 5Month 6Month 7Month 8

Albany Analytical, Inc What is Gained Cash Flow Improvement - $ gained sooner, less paid out up front Buy-in – Positive results evident early Fast Learning Cycles – Can adapt tools, timing, roles, resources to organizational needs Learning Takes Place – Learn-Do-Learn-Do leads to Retention of concepts and tools Wrong Turns Unlikely – Coaching keeps projects on track Involvement – Management Responsible and Interactive throughout the process Flexibility – Can adapt as environment changes. Coaching is Robust; Training is not

Albany Analytical, Inc What is NOT lost Depth of knowledge – Participants learn a broader scope of tools and more in-depth knowledge AFTER experience of a project or two, when they have a better appreciation and can absorb the information Efficiency of Group Training – For widely-used tools, employ short workshops, topic discussions, lunch sessions… Full Time dedication when desired or able to provide that level of resource dedication

Albany Analytical, Inc BeeLineResults™ : The Lean Approach to Six Sigma Deployment Lean Production Systems Six Sigma += Traditional Six Sigma with Lean Tools BeeLineResults™ uses Lean Thinking to put Six Sigma in place Including Lean Tools in Six Sigma training does not alter the approach or accelerate the results of traditional Six Sigma deployment which is training-intensive; It is Just More Tools! No More Tools!

Albany Analytical, Inc Six Sigma: Yes! Yes! It will work for us! BeeLineResults™ answers the Challenges facing the Energy Business…

Albany Analytical, Inc Challenge: Public Pressure  BeeLineResults™ gets you to solutions that don’t just meet regulations, but solutions that will render regulations inconsequential.

Albany Analytical, Inc Challenge: Reduction Goals ? BeeLineResults™ affords short learning cycles so you can adjust efforts and focus to the changing priorities of the environmental calendar – can you really commit to four weeks of training?

Albany Analytical, Inc Challenge: Rules & Regs = $$ BeeLineResults™ gives you the statistical tools you need… –Environmental Compliance –Energy Production –Energy Delivery …Not the tools everyone else might need Money not wasted on unusable training

Albany Analytical, Inc Challenge: Interpretation ? BeeLineResults™ allows you to react quickly or be ahead of the curve.

Albany Analytical, Inc Challenge: Time, Resources  BeeLineResults™ requires very few people (one team will do) to achieve success BeeLineResults™ puts money in the bank in less than 6 months BeeLineResults™ keeps vital personnel “on the job”

Albany Analytical, Inc BeeLineResults™ allows those Affected by Environmental Legislation and Constrained by Energy Technology to find Cost Saving Solutions to Seemingly Unsolvable Problems.