Market Trading Forum Update WRAP Board Meeting April 3, 2003 Colleen Delaney and Ira Domsky

Overview 309 SIP components – Model Rule, SIP/TIP Template & MOU Major outstanding issues NOx & PM Report Emissions/Allowance Tracking System

Model Rule & SIP/TIP Template Significant policy decisions were addressed in the Annex Included draft model rule and MOU Supplementary Submittal in May 2001 Several issues cited by EPA and known missing details needed to be addressed WESTAR under contract to WRAP began process in March 2002

WESTAR Working Group Corky Martinkovic, AZ Mary Hilbert, NM Colleen Delaney, Lenore Epstein, UT Tina Jenkins, WY Bob Gruenig, NTEC Lee Alter, WRAP Lily Wong, EPA Region 9 Laurel Dygowski, EPA Region 8 Kristin Gaston, Bob Lebens, WESTAR

WESTAR Working Group Charge Ensure Model Rule/MOU contain all necessary provisions Incorporate ‘Supplement to the Annex’ Incorporate EPA comments Ensure consistency with state and tribal regulatory structures

Tribal Implementation Tribal Authority Rule “reasonably severable” elements Tribal set-side To be undertaken by Tribal Caucus

EPA Participation Important Goal to address implementation issues in the template so that the final product would meet the requirements of the RH rule Benefit of careful review by all interested parties Shared work at regional level will reduce workload for SIP/TIP development States and tribes may change verbiage Will require close coordination with EPA and other states and tribes Regional trading program requires consistency in policy elements and implementation

Education of SIP Writers Rule details and terminology can be difficult to understand Based on federal acid rain program EPA’s Clean Air Market Division expertise State SIP writers need to understand the reasoning behind rule provisions to address questions during State rulemaking process Similar education effort may be needed for future TIPs

Model Rule & SIP/TIP Template WESTAR work group completed draft for broad public review in February 2003 Comment period held in March - comments received from states, EPA and others MTF conducted final review in March Several corrections and clarifications Addressed a number of EPA issues Current WESTAR draft is posted on WRAP web page

Working Group Recommendation: Original documents: Model Rule MOU Revised documents: Model Rule SIP/TIP Template MOU

Memorandum of Agreement WESTAR work group redrafted based on comments MOU is not needed as a legal, enforceable mechanism to tie the regional program together Important for participating states and tribes to work together to implement a common program

Memorandum of Understanding Question has been raised about the need for a document such as an MOU What is important is communication between participating states and tribes WRAP has provided this mechanism so far Process that actually accomplishes this goal may be better than a document Issue will be addressed further

Issues Addressed by Working Group Tracking System Administrator Applicability Pre-trigger emission tracking requirements Triggering mechanism Coordination with existing programs Opt-in provisions Retired sources New Sources

Major Outstanding Issues Reasonably Attributable Visibility Impairment Allocations 2018 Milestone Compliance

Allocations Annex establishes a formula to determine allocations for individual sources Report completed on non-utility “floors” Estimates prepared to help understand how individual sources will be affected Specific issues identified with respect to equity and distributions to states and tribes

Allocations Any revised scheme must provide for: Early reduction bonus credits Renewable energy credits Meetings to be arranged to come to closure SIPs and TIPs must contain at least a coherent allocation scheme

Reasonably Attributable Visibility Impairment (RAVI) Remains as a remedy for source-specific impairment under §309 Issues: Interface with milestones and backstop program – close to resolution Uniform procedures and certainty SIP must contain approvable RAVI program

No discussion of RAVI would be complete without mentioning BART

2018 Milestone Compliance EPA issues related to enforceability Penalty authority Backstop beyond 2018 Penalty authority – alternatives to administrative penalty under review New provisions in SIP/TIP template may resolve backstop problem

Other issues Monitoring protocols for non-acid rain sources need to be completed Clean Air Markets Division review of options Legal authority to implement the program Variety of minor provisions and edits

NOx/PM Report WRAP Contractors working on pieces of the report Visibility modeling Conceptual framework to provide context Identification of major source categories and available emission reduction strategies Final report will include an overview of emission inventory and monitoring data

Tracking System Specifications Contractor will be hired soon to develop specifications System will not be built unless needed (backstop program triggered) Specifications will provide detailed blueprint to ensure that system meets needs of states and tribes Close coordination with EPA experts who developed the acid rain tracking system

We’re up to the challenge, but may need a little help …