1. Reducing Power Plant Emissions: EPAs New Proposed Rules For Mercury William H. Maxwell Combustion Group U.S. Environmental Protection Agency Office of Air Quality Planning and Standards Research Triangle Park, North Carolina Presentation to the North Carolina DENR/DAQ Mercury/CO 2 Workshop April 20, 2004 Raleigh, NC

2. EPA Proposes to Reduce Utility Emissions through Current CAA Authorities… Interstate Air Quality Rule (IAQR) to address the contribution of transported SO 2 /NO x emissions to ozone (smog) and fine particle (PM 2.5 ) nonattainment problems in the Eastern U.S. Standards to Reduce Mercury Emissions and Deposition –Section 112 standards Maximum achievable control technology (MACT) Command-and-control Take comment on trading options –State-implemented section 111 standards Emissions Guidelines and New Source Performance Standards Market-based, cap-and-trade program

3. Coal-Fired Power Plants There are about 530 power plants with 305 GW of capacity that consist of about 1,300 units, of which 1,150 would be covered. Coal plants generate the vast majority of power sector emissions: -100% Hg -95% SO 2 -90% of NOx -83% of CO 2 EPA uses the Integrated Planning Model (IPM) to consider the emissions, costs, and fuel impacts of controlling pollution from these plants and all other fossil fuel-fired generating units in the lower 48 States. The Agency adapted this commercial capacity planning tool for application to pollution control strategies. It was used in the WRAP process, by FERC for restructuring issues, by environmental groups, and power companies.

4. Power Generation Is a Major Source of Emissions 2000 Sulfur Dioxide 2000 Nitrogen Oxides * Other stationary combustion includes residential and commercial sources. 1999 Mercury Fuel Combustion- electric utilities Other stationary combustion * Industrial Processing Transportation Miscellaneous Utilities (63%) Utilities (40%) Utilities (22%)

5. Nitrogen Oxides (NO x ) contribute to the formation of both particulate matter (PM) and ground-level ozone. Sulfur Dioxide (SO 2 ) contributes to particulate matter. Ozone and PM have been linked with premature death, serious illnesses such as chronic bronchitis and heart attacks, and respiratory illnesses such asthma exacerbations. NO x and SO 2 are also linked with acid rain, eutrophication of water bodies including estuaries such as the Chesapeake Bay, and regional haze. Mercury has been linked to potential reproductive, immune and nervous system effects, with special concerns for pregnant women and young children. Pollutants and Concerns

6. Mercury Contamination in Fish Currently 44 states have issue fish consumption advisories for some or all of their waters due to contamination from mercury.* States with Fish Advisories Due to Mercury *Note: For more information about the relationship between fish advisories and human exposure to mercury, see the EPA Report America's Children and the Environment: Measures of Contaminants, Body Burdens, and Illnesses available at http://yosemite.epa.gov/o chp/ochpweb.nsf/content/ publications.htm Mercury Advisories by Type Advisories for specific waterbodies only Statewide freshwater advisory only Statewide coastal advisory No mercury advisory Statewide freshwater advisory + advisories for specific waterbodi es

7. Proposal to Reduce Mercury Emissions from the Power Sector

8. Proposed Alternatives to Reduce Mercury Emissions from the Power Sector 3 individual approaches outlined in the January 30, 2004 proposal –Propose traditional, command-and-control section 112 MACT requirements for utility units Reduces mercury emissions from 48 to 34 tons by January 2008 –Propose cap-and-trade approach under guidelines outlined in section 112(n)(1)(A) –Propose market-based, cap-and trade approach under section 111 Revises December 20, 2000 finding that it is appropriate and necessary to regulate Utility Units under section 112 Caps mercury emissions at 15 tons in 2018; interim cap for 2010 proposed to encourage early reductions in SO 2 and NO x, generating additional Hg emissions reductions Final approach to be determined following completion of public hearings and close of public comment period –Final rule signed on/before December 15, 2004

9. Section 112 MACT Affected source definition –Electric Utility Steam Generating Unit (Utility Unit) Any fossil fuel-fired combustion unit of more than 25 MWe that serves a generator that produces electricity for sale –Cogeneration Utility Unit – unit that generates steam and electricity and supplies more than one-third of its potential electric output capacity and more than 25 MWe output to any utility power distribution system for sale –Cogeneration is defined as the simultaneous production of power (electricity) and another form of useful thermal energy (usually steam or hot water) from a single fuel-consuming process –Non-Utility Units, not subject to this rule Any unit that meets the above definition, but combusts natural gas >98% of the time Simple- and combined-cycle turbine units Industrial boilers

10. Existing Source MACT Limits SubcategoryHg (lb/TBtu) 1 Hg (10 -6 lb/MWh) 1 Bituminous-fired2.021 Subbituminous-fired5.861 Lignite-fired9.298 IGCC19.0200 Coal refuse-fired0.384.1 1 – Based on a 12-month rolling average SubcategoryNi (lb/TBtu) 2 Ni (lb/MWh) 2 Oil-fired2100.002 2 – Based on a not-to-exceed annual limit NOTE: Output-based standards are referenced to a baseline efficiency (32% for existing units).

11. New Source MACT Limits SubcategoryHg (10 -6 lb/MWh) 1 Bituminous-fired6.0 Subbituminous-fired20 Lignite-fired62 IGCC20 3 Coal refuse-fired1.1 1 – Based on a 12-month rolling average 3 – Based on a 90% reduction for beyond-the-floor control SubcategoryNi (lb / MWh) 2 Oil-Fired0.0008 2 – Based on a not-to-exceed annual limit NOTE: Output-based standards are referenced to a baseline efficiency (35% for new units).

12. Fuel Blending Coal Blending –Unit classified by the predominate coal burned during the compliance period –Unit classified by a weighted emission limit based on the proportion of energy output (in Btu) contributed by each coal rank burned during the compliance period If non-regulated fuels are used (e.g., petroleum coke, Tire-derived Fuel [TDF], etc.), the compliance calculation would include: –Energy output (in Btu) of all fuels –Hg emissions considered would be all measured by the stack monitor –However, the blended emission limitation is based only on the regulated fuels

13. Monitoring and Compliance Hg Testing and Monitoring Requirements –12-month rolling average Hg emission level –Options for Hg monitoring Continuous Emission Monitors (CEM) –Proposed Performance Specification 12A (PS-12A) Carbon Absorption Tube –Proposed Reference Method 324 Manual Stack Test –ASTM Method D6784-02 (Ontario-Hydro) –EPA Reference Method 29 Emissions Averaging Provision for Hg –Demonstrate compliance through averaging Hg emissions from multiple (two or more) affected units located at a common, contiguous facility site –Leads to a single applicable facility-wide emission limit Ni Testing and Monitoring Requirements –Maximum allowable emission limit; not to be exceeded –Options for Ni monitoring EPA Reference Method 29

14. Section 111 Proposal Section 111(b) – New Source Performance Standards (NSPS) –Requires EPA to promulgate standards of performance for emissions of air pollutants from new sources –Monitoring and compliance requirements are similar to the section 112 MACT requirements SubcategoryEmission Limit (lb/MWh) Bituminous-fired6.0 1 Subbituminous-fired20 1 Lignite-fired62 1 IGCC20 1 Coal refuse-fired1.1 1 Oil-fired0.0008 2 1 – Hg emissions 2 – Ni emissions

15. Section 111 Proposal (continued) Section 111(d) – Emission Guidelines (EG) –Requires EPA to prescribe regulations that outline a procedure by which each State shall submit plans which create standards of performance for existing sources for which air quality criteria have not been set but for which NSPS have been established –Cap-and-Trade program reduces the overall amount of emissions by: Requiring sources to hold allowances to cover their emissions on a one-for-one basis Limiting overall allowances so that they cannot exceed specified levels (i.e., the cap level) Reducing the cap to less than the amount of emissions actually emitted, or allowed to be emitted, at the inception of the program Allowing for a declining cap over time Creating market-based incentives for early reductions

16. Section 111 Proposal (continued) Section 111 – Regulatory Approach –Primary goal is to reduce Utility Unit Hg emissions from current levels 2018 cap is permanent –Effectively becoming more stringent as more plants are required to keep their collective emissions below 15 tons Near-term interim cap in 2010 –Level will reflect the maximum level of Hg reductions achievable through FGD and SCR installations (for SO 2 and NO x emission reductions) on units covered under the IAQR –Level is not prescribed in current proposal because of uncertainties associated with the ability of these controls to reduce Hg emissions –EPA seeks comment and technical information on the Phase I cap level –EPA believes that a carefully designed multi-pollutant approach – a program designed to control NO x, SO 2, and Hg at the same time – is the most effective way to reduce emissions from the electric power sector Details of section 111 trading program are outlined in a Supplemental Notice of Proposed Rulemaking (SNPR), which was published on March 16, 2004

17. SNPR: Hg Program Requirements Under Section 111 Each State must submit a plan that demonstrates it will meet its assigned statewide Hg emissions budget –States may join the trading program by adopting or referencing the model trading rule in State regulations; or, adopting regulations that mirror the necessary components of the model trading rule –States can choose not to join the federal trading program and meet their budget through intra-state trading or no trading –States can also choose to implement more stringent Hg emissions requirements EPA has taken comment on a proposal to promulgate, under section 112(n)(1)(A), a cap-and- trade program for Hg from coal-fired utility units –Trading program would be federally implemented with the EPA, instead of states, serving as the permitting authority

18. SNPR: Monitoring Hg Emissions Monitoring of Hg will resemble current monitoring of SO 2 and NO x under the Acid Rain and NO x SIP Call programs A comprehensive QA/QC program ensures the adequacy of emissions data Current monitoring in the Acid Rain and NO x SIP Call programs averages over 98% availability A petition process enables monitoring flexibility and facilitates the resolution of issues Commensurate with the SO 2 and NO x cap-and-trade programs, regulated sources would have the flexibility of using alternative monitoring approaches as long as such approaches meet the performance requirements in the rule

19. Summary Recent proposals are based on 3 major points regarding public health –Science continues to tell us to move aggressively on fine particles –There is growing evidence that ozone may be a larger problem than previously expected –Mounting scientific evidence and public concern/interest indicate that Hg emissions must be controlled Administration strongly prefers the Clear Skies Act legislation instead of controlling NO x, SO 2 and Hg under the existing CAA –EPA will stay with the current package of proposals, absent any movement on the legislation –EPA is committed to action Power sector is not the only industrial sector EPA is looking towards to make significant reductions –Petroleum refining, car/truck/engine manufacturing, and construction equipment industries are making reductions through the Tier II, Heavy Duty Diesel, and Non-road Diesel rules –EPA is also requiring a variety of industries to meet new MACT standards, which will create emission reductions of both criteria and air toxics pollutants

20. Next Steps Supplemental Notice on Mercury RuleMarch 16, 2004 Hold Public HearingsFebruary 25-26, 2004 –Philadelphia, PA –Chicago, IL –Research Triangle Park, NC –Denver, COMarch 30, 2004 Public Comment Periods CloseApril 30, 2004 Supplemental Notice on Interstate Air Quality RuleApril 2004 Finalize Mercury RuleDecember 2004 Finalize Interstate Air Quality RuleDecember 2004