1. Emissions Reduction Market System (ERMS) Account Officer Training 2012 Version

2. Basics

3. Purpose of ERMS u Contribute to attainment u Minimize costs of further reduction by using a market based approach providing flexibility and allowing sources to determine the best way to reduce emissions u Maintain the status-quo for current control programs 3

4. Past: Command and Control u Rules developed based on industry type (e.g., printing, coating, chemical manufacturing) u All companies required to implement the same reduction percentage Cost not considered per company Sometimes had a threshold for implementation Usually not one size fits all 4

5. ERMS: Market Based u Overall reduction mandated u Allotments (emissions) given to the companies based on a baseline u Up to the companies to determine how/if reductions are made Make reductions and have allotments to sell May be cheaper to buy allotments rather than reduce 5

6. Possible Approaches u Upgrade control measures on existing units where it can be done most economically and effectively u Enhance control measures when existing units are replaced u Switch production out of the trading season u Purchase ATUs 6

7. Affected Sources u Stationary sources located in the Chicago ozone nonattainment area Cook, DuPage, Kane, Lake, McHenry and Will counties Aux Sable Township, Goose Lake Township in Grundy county and Oswego Township in Kendall county 7

8. Affected Sources - continued u Required to obtain a Clean Air Act Permit Program (CAAPP) permit OR Federally Enforceable State Operating Permit (FESOP) u VOM emissions of at least 10 tons per season (May 1 - September 30) 8

9. Affected Sources - Exemptions u Can accept a limit of 15 tons/season 10 tons/season is the threshold for identifying you as a participating source, but accepting a limit of 15 tons/season will keep you out of being a participating source in ERMS u Make a reduction of 18% from your baseline Participating sources make a 12% reduction 9

10. Types of ERMS Sources

11. u Participating Source u New Participating Source u General Participant u Special Participant 11

12. Participating Source u Operating prior to May 1, 1999 u Located in the Chicago nonattainment area u Potential to emit >=25 tons/year of VOM u Required to obtain a Title V (CAAPP) or FESOP (Federally Enforceable State Operating Permit) permit u VOM emissions >=10 tons/season 12

13. New Participating Source u Not operating prior to May 1, 1999 u Located in the Chicago nonattainment area u Potential to emit >=25 tons/year of VOM u Required to obtain a Title V (CAAPP) permit u VOM emissions >=10 tons/season u Do not get an annual allotment 13

14. General Participant u Not a Participating Source u Not a New Participating Source u Any person/entity that obtains a Transaction Account Can think of this as a broker u Can buy and sell ATUs u Need to have a trained account officer 14

15. Special Participant u Any person/entity that registers with the Agency u Cannot sell ATUs u Can buy ATUs Any purchased ATUs are immediately retired u No account officer training needed 15

16. Baselines, Allotments & Reconciliation

17. Allotment Trading Unit (ATU) u The currency of the ERMS u Equivalent of 200 pounds VOM emissions u Each ATU is valid for the season of issuance and the following season Unless used for emission compensation 17

18. Baseline Emissions u Based on historical emission data Adjusted upward for over-compliance Adjusted downward for non-compliance Can substitute years u Allotment of ATUs will be set from the baseline emissions generally reduced by 12% Allotment amount included in your permit 18

19. Exclusion from Further Reductions u Insignificant emission units u Emission units complying with NESHAP or MACT u Fuel combustion units (e.g., boilers and engines) u Emission units where a LAER demonstration was approved 19

20. Baseline Years u Average of the two highest years of 1994, 1995 or 1996 No justification needed u Can substitute any year from 1990-1993 or 1997 if that year is more representative Requires justification Substitute one whole year 20

21. Emission Calculation Methodology u The methodology used to calculate baseline emissions will be included in your permit Must be used to calculate emissions for the season – no deviations Changes to calculation methodologies require a permit revision –Baseline and allotment will be recalculated based on the new methodology 21

22. Annual Allotment u Each year the number of ATUs in your permit will be deposited in your account automatically Historically done in March/April No notification List will appear under the Allocation Reports menu option of the web page 22

23. Reconciliation Period u The three months (October – December) following seasonal allotment period u Time to compile actual seasonal emission data u Submit seasonal component of annual emission report 23

24. Reconciliation Period - continued u Conduct end of year trades Can trade throughout the whole year u Only trades agreed to by December 31 st can be counted towards the seasonal emissions for that year We dont close the books at midnight December 31 st, but wait a few days for paper trades to come in 24

25. Seasonal Emission Reports

26. u Applies to Participating sources New Participating sources 18% reduction sources 15 ton/season limit sources u Due date October 31 for < 10 emission units November 30 for >= 10 emission units 26

27. Seasonal Reports – Content u Actual VOM emissions from May 1 – September 30 u Adjustments due to variance, consent order, emergency condition and so forth u Number of ATUs that equate to the seasonal emissions u HAP emissions for the season 27

28. Seasonal Report – HAPs u HAPS = Hazardous Air Pollutants u Report VOM HAPs if Major for HAPs –>= 10 tons/year for any individual HAP –>= 25 tons/year for all HAPs combined Subject to NESHAP/MACT –Report only those units subject to NESHAP/MACT Report to TRI 28

29. Seasonal Reports – Checking u Signature u All emission units are reported u Emission calculations performed correctly We find many math errors Calculation methodology needs to be the same as in the permit Production rate is used as a reasonableness check 29

30. Compensation and Excursions

31. Emission Compensation u This is the IEPA retiring (subtracting) the amount of ATUs, reported on your seasonal report, from your transaction account u Timing Sometime in mid-January of each year when all previous year transactions have been entered and seasonal report has been accepted Never before January 1 31

32. Excursion u Occurs when your account does not hold enough ATUs to cover your seasonal emissions u If an excursion occurs, you are not in violation u The ERMS rule gives a mechanism for resolving an excursion 32

33. Excursion Penalty u First excursion Owe 1.2 times the amount of excursion u Second (or more) excursion in a row Owe 1.5 times the amount of excursion u When multiplying by 1.2 or 1.5, if there is a fractional ATU, the value is always rounded up to the next higher ATU 33

34. Excursion Resolution u Will send an excursion compensation notice u Only two choices for resolution Purchase from ACMA (default) Take from next years allotment –Notify us within 15 days u Choice is yours If choosing ACMA, you will be sent a bill 34

35. Annual Flow of ERMS u April: Allotment u May – September: Emissions u October – December : Reconciliation Submit seasonal report Trade as necessary (throughout the year) u January: Compensation and Excursion 35

36. Other Facets of ERMS

37. ACMA u Alternative Compliance Market Account u Reserve of ATUs managed by IEPA u Receives ATUs equivalent to 1% of each years allotment (about 1000 ATUs) u ACMA available during reconciliation period u Cost is lesser of 1.5 times the average market price or $10,000/ton 37

38. Shutdowns u All operations at a source shut down and the permit is withdrawn (or is revoked or terminated) u 80% of allotted ATUs go to source and 20% to ACMA unless… u Source makes arrangement to trade whole allotment to a general participant before shutting down 38

39. Emission Reduction Generators u ATUs created for creditable reductions at permitted sources that are not participating sources u Source needs to become a general participant or have a partner in ERMS who gets the ATUs u Reductions must be real, actual and surplus (cant be shifted elsewhere in the area) 39

40. Inter-Sector u Receive ATUs for making reductions in area source or mobile source categories Cars – Cash for clunkers Switch from gas to electric lawnmowers Reformulate coatings purchased by the public (only Intersector to date) Etc. u Request reviewed by the Agency 40

41. Quick Facts

42. u About 140 participating sources u About 5 new participating sources u About 90 sources with 15 ton/season exemption u About 75 general participants u About 7 special participants 42

43. More Quick Facts u About 104,000 ATUs allotted each season 100,000 from baseline 2700 from Emission Reduction Generators 1000 to ACMA u Around 40,000 ATUs retired each year u Around 59,000 ATUs expire each year 43

44. Buyers/Sellers u Around 20 sources need to buy ATUs each year u Remaining sources (around 120) are possible sellers u A few (1-3) sources go into excursion each year Mainly due to inaction on their part to buy ATUs 44

45. ATU Prices ($/ATU) u 2011 = u 2010 = $20.10 u 2009 = $19.32 u 2008 = $18.22 u 2007 = $14.86 u 2006 = $17.01 45

46. Transaction Account and Account Officers

47. Transaction Account u Database where ATUs are kept Has a unique identification number for the entity All allocations, trades, retirements and expirations occur in the database Trade is not accepted until it is enacted in the database u Think of it as your bank account 47

48. Account Officer u A person who has been approved by the Agency who is responsible for one or more transaction accounts u Transaction account Must have at least one account officer Can have multiple account officers u An account officer may be associated with more than one transaction account 48

49. Account Officers u Remember… An account officer can freely trade ATUs in and out of the transaction account as long as he is associated with the account If an account officer leaves a company, it is best to notify the Agency of that fact and that you wish to have him removed from the account –Account officer can still represent other accounts 49

50. Expedited Approval of Account Officer u Used when an account officer unexpectedly leaves that position Requested by the company With expedited approval, the account officer can perform trades without training Must take the account officer training within one year of request 50

51. Trades

52. Types of Trades u Trade One-time only transaction u Transfer agreement Multi-year transactions (specify years) Will be performed once per year (can specify date) Can be open-ended 52

53. Trades u Agency does not get involved Up to the two parties to agree on price and any other issues u Must be submitted and approved by IEPA to be official u Confirmation of the trade will be sent to both parties 53

54. Trade Options u Trade oldest first default u Specify number and expiration date e.g., 50 ATUs expiring in 2013 u Specify by ATU id Not really necessary with option of specifying by expiration date 54

55. Submitting Trades u Mail u FAX Must follow up with hard copy submittal u Via ERMS web page Cant do transfer agreements Will execute over night 55

56. ERMS Forms

57. Transaction Account u 113-ERMS u Use this form to Establish a new account for –Participating source –New participating source –General participant Update information for an account 57

58. Special Participant u 114-ERMS u Use this form to Establish a new account for –Special participant Update account information for a special participant 58

59. Account Officer u 111-ERMS u Use this form to Establish a new account officer Update account officer information Allows an account officer to remove himself from an account Request training/expedited approval 59

60. Account Officer Designation u 112-ERMS u Use this form to Link an account officer to a transaction account Remove an account officer from a transaction account 60

61. Transaction Request u 116-ERMS u Use this form to Submit a trade request to the Agency Must be signed by both parties Can come in two parts (buyer and seller) but we prefer them to be together 61

62. Transfer Request u 118-ERMS u Use this form to Submit a transfer request to the Agency Must be signed by both parties Can come in two parts (buyer and seller) but we prefer them to be together 62

63. Cancel Transfer Agreement u 122-ERMS u Use this form to Stop the processing of a transfer agreement Must be signed by both parties Can come in two parts (buyer and seller) but we prefer them to be together 63

64. Emergency Conditions u 110-ERMS u Use this form to Submit an initial emergency conditions report Submit the final emergency conditions report 64

65. Regular Access to ACMA u 119-ERMS u Use this form to Request a purchase of ATUs from ACMA 65

66. Special Access to ACMA u 120-ERMS u Use this form to Request a purchase of ATUs from ACMA u Unlikely to occur u Happens only if there are not enough ATUs in ACMA 66

67. Request Buy/Sell Notice u 121-ERMS u Use this form to Have the Agency create a buy or sell posting for you u This information can also be entered through the web page 67

68. Balance Correction Request u 115-ERMS u Use this form to Request the Agency to look at any ATU balance issues you may have u Or you can just e-mail 68

69. Seasonal Report Forms

70. Emission Summary u 100-ERMS u Required u Use this form to Summarize emissions from other seasonal report forms Certify the report 70

71. Actual Seasonal Emissions u 100A-ERMS u Required u Use this form to Report the seasonal emissions for each VOM emission unit at the source u Include all emissions Adjustments will be made on other forms 71

72. Units Constructed Prior to 1/1/1998 u 100B-ERMS u Shouldnt really be occurring now u Use this form to Report the seasonal emissions for emission units that had a construction permit prior to 1/1/1998 that dont have three years of emission data 72

73. Major Modifications u 100C-ERMS u Use this form to Report the seasonal emissions for emission units that had a construction permit prior to 1/1/1998 that dont have three years of emission data 73

74. Emergencies u 100D-ERMS u Use this form to Report the emissions for emission units that had an emergency u We will check to make sure you have submitted an initial and final emergency conditions report 74

75. Variance, Consent Order, Compliance Schedule u 100E-ERMS u Use this form to Report the emissions for emission units that are subject to –A variance –A consent order –A CAAPP compliance schedule 75

76. HAP Emissions u 100F-ERMS u Required for participating and new participating sources u Use this form to Report the HAP emissions for the source u Report only VOM HAPs 76

77. ERMS Web Page

78. Web Page u www.epa.state.il.us/air/erms 78

79. Web Page u Mainly HTML u Online Transaction Requests Requires download of Jinitiator –A java product from the Oracle Corporation –Safe to load on your computer Doesnt work with Windows Vista or Windows 7 79

80. Contents u Various reports u Allocation reports u Historical Annual Performance Review Reports u News and Items of Interest u Overview u FAQ 80

81. Contents – continued u Agency contact information u Average ATU prices u ERMS Forms u Online Transaction Requests 81

82. Reports u Various reports available u Click on appropriate report u Some reports require selection criteria to be entered Some can be entered in either/or –Starting/end account number and/or –Starting/ending date 82

83. Average ATU Prices u Lists Last month and last four week average prices Previous and current ACMA average price u ACMA average price calculated at the end of October, November, December and January 83

84. Online Transaction Requests u Options Log In u View buy/sell postings Dont need to be logged in u View current account balance Dont need to be logged in Can view any account 84

85. View Buy/Sell Postings u The screen allows you to select criteria to filter your selection u Usually there are very few buy/sell postings so it is better to leave the selection criteria as is and run the query. Doing so will select all active buy/sell postings 85

86. View Current Account Balance u Enter the account number you wish to view u Balance will be reported by ATU expiration date 86

87. Log In u Enter your account officer id and PIN u Will have additional options once logged in Create/update buy/sell posting Create/update seller transactions Confirm buyer transactions Change PIN 87

88. Create/Update Buy/Sell Posting u Do not use to make a trade Used for the purpose of identifying people who want to buy or sell Not used by the Agency in performing trades u Enter information as appropriate u Can always come back and change an active posting 88

89. Create/Update Seller Transaction u Used to perform an on-line trade u Must be initiated by the seller Confirmed by buyer in a later step u Can be done in two parts (on-line and paper) but that is not the preferred method u Enter information as appropriate u Will get opportunity to review before saving 89

90. Seller Transaction u Can update the information on the transaction up until it is accepted by the buyer u Make sure information is correct and save u Notify the buyer that the transaction is available 90

91. Confirm Buyer Transactions u Once selected, a list of transactions available to approve will be displayed The transactions you see are based on your account officer id when the seller created the transaction u Click on the Transaction ID field to view the transaction 91

92. Buyer Transactions u Review the information to ensure it is correct It is both partys responsibility to ensure the information is what they agreed to u If transaction is ok, accept it u Otherwise inform the seller the information is not correct Buyer cannot change the information presented 92

93. On-line Transaction u Once accepted by the seller… Cannot be revoked or updated by the seller Cannot be revoked by the buyer u Transaction will be performed overnight Can notify Agency if it is needed to be processed sooner No confirmation letter sent (can get data from Reports option) 93

94. PIN u Best to change the PIN you are given u Never expires u Up to 8 characters/numbers u Case sensitive u No requirement in length, number of numbers, case, etc. u Contact the Agency if you forget your PIN 94

95. Bureau of Air Air Quality Planning Section u Contact information Buzz Asselmeier buzz.asselmeier@illinois.gov phone: (217) 524-4343 Web: www.epa.state.il.us/air/erms 95

96. Training Completed u Send an e-mail to buzz.asselmeier@illinois.gov buzz.asselmeier@illinois.gov u Include Your name and phone number The fact that you have read through the training slides (you can always e-mail me for any questions you may have) u I will sent a certificate back to you 96