American Public Power Association Washington, DC April 27, 2010 Leslie Sue Ritts, RITTS LAW GROUP, PLLC 1

 PSD & BACT Framework ◦ 1987 Top-Down BACT Guidance for Traditional Pollutants ◦ State and EPA Review  EPA’s BACT Workgroup ◦ February Report ◦ February CAAAC Recommendations ◦ Phase 2 Workgroup?  Recent BACT Determinations 2

◦ Best Available Control Technology means an emission limitation based on the maximum degree of reduction of each pollutant subject to regulation under this Act emitted from or which results from any major emitting facility, which the permitting authority, on a case-by-case basis, taking into account energy, environmental and economic impacts and other costs, determines is achievable for such facility through application of production processes and available methods, systems and techniques, including fuel cleaning, clean fuels, or treatment or innovative fuel combustion techniques for control of each such pollutant. CAA, Section 169; 42 USC

 BACT is a “ case-by-case determination ”  BACT is an enforceable & continuous “emission limit (i.e., an emissions rate or percent reduction achieved) ”  BACT does not change the “source” that the applicant proposes to build or modify: See, e.g., In re: Desert Rock Energy Company, LLC, PSD Appeal No et aI, slip op. at (EAB, September 24, 2009).  BACT only applies to the emission units that are being physically or operationally changed (i.e., not “debottlenecked units”)  A BACT/LAER determination is not set until the final permit is issued 4

1. Identify All Control Technologies for Similar Sources ( 2. Eliminate Technically Infeasible Options Based on Physical, Chemical and Other Engineering Principles Technically Infeasible for Your Source 3. Rank Remaining Control Technologies by Control- Effectiveness 4. Evaluate Most Effective Controls (case by case consideration of energy, environmental and economic impacts ( 5. SELECT BACT 5

 BWG Charge – to identify and discuss major issues and potential barriers to implementing the PSD Program under the CAA for GHGs.  Focus on the BACT requirement, including information and guidance that would be useful for EPA to provide concerning the technical, economic, and environmental performance characteristics of potential BACT options  Identify and discuss approaches to enable state and local permitting authorities to apply the BACT criteria in a consistent, practical and efficient manner  Explore new and innovative approaches that can be incorporated in the BACT analysis within the framework of the current Clean Air Act.” ◦ BWG Feb. Phase I Report and Work Products are posted at: 6

 Scope of Analysis & Defining the Source  Criteria for Determining When a Technology is Feasible  Criteria for Eliminating Technologies  Stakeholder Needs: States and Applicants 7

 BWG agreed that BACT only should be applied to the units at an existing facility that are being physically or operationally changed  However, to utilize energy efficiency as BACT, BWG agreed it might be necessary to broaden the definition of a “source, ” but disagreed on how;  Environmental groups and vendors staked out legal arguments that the Clean Air Act’s definition of BACT required consideration of different processes that inherently could change the definition of source to allow different fuels and project designs. Industry countered that that concept allowed BACT to fundamentally change nature of their businesses. 8

 BWG concurred that the technical feasibility element of BACT review could “chill” pollution control innovation and disagreed that whether that policy should be changed for GHG BACT  BWG agreed that EPA needed to do a better job in updating the RBL Clearinghouse and incentivizing pollution control innovation, but DISAGREED WHETHER CCS, energy efficiency, and “clean fuels” should be considered in a GHG BACT analysis.  BWG disagreed when a technology becomes “available” in a production setting, the value or lack of value conferred by vendor guarantees, and what commercial scale means for purposes of eliminating certain BACT options from further review. 9

 Agreed CCS could be BACT if feasibility of both capture and sequestration systems could be demonstrated.  Agreed “feasibility” of sequestration had to consider general technical feasibility and site-specific feasibility, including physical and legal availability of sequestration capacity  Agreed that lack of sequestration on or near a proposed site would be insufficient justification from eliminating CCS from consideration as a technically feasible option & piping had to be considered in the economic, environmental and energy portion of a BACT analysis  Disagreed how availability of existing CO2 pipelines should be considered and whether a project should be relocated as part of the BACT analysis.  Disagreed on how many CCS systems must be in use to be considered demonstrated or available or how to dissect the issue of what flue gas characteristics established similarity for purposes BACT technology transfer. 10

 Agreed that energy efficiency was important for BACT as a factor in evaluating BACT alternatives and setting emission limits, so long as it was agreed that the source remained the same for purposes of applying BACT.  Agreed energy efficiency deteriorated with age, but no consensus could be reached on the scope of energy efficiency analysis.  Agreed EPA should develop a BACT policy for considering energy efficiency. 11

 Agreed “clean fuels” were included in the Act and charged EPA with providing guidance on the issue  Disagreed on whether biomass was fuel neutral, and concern expressed about using clean fuels to redesign a project  Disagreed how broad the application of gas and other clean fuels should be 12

 Agreed parasitic load increase should be considered and important to give full consideration to beneficial or adverse impacts on the environment, most particularly water resources.  Disagreed whether energy-related considerations were those around a facility or limited to those within a source owner’s control.  Disagreed about the role of in a BACT analysis the use of over-fired air and regular boiler tune-ups for reducing fuel use and GHG 13

 Disagreed whether acceptable index of GHG BACT costs should of $3-$15 (Industry) or CO2e effectiveness values were acceptable in the range of $30- $150 for coal-fired CCS (States and Environmental Groups). 14

 BWG Directed EPA To Provide Guidance on Specific Industry-Specific Approaches/ Technologies for GHG reductions, including: ◦ Pollution prevention measures; ◦ Efficiency improving technologies for new and existing industry sectors ◦ Emission factors so common baselines can be used in assessing technologies ◦ Fugitive emission factors and controls ◦ Bio-fuel effects on GHG emissions monitoring requirements, averaging times, and compliance test methods ◦ Accepted control techniques for GHGs other than Co2, and ◦ Ranking GHGs such that pollutant substitution/tradeoffs can be considered. 15

 Calpine BACT Determination – Energy Efficiency for Gas-Fired IGCC Unit  Sithe Global Power has reportedly has replaced plans to burn natural gas instead of coal and use photovoltaic solar cells for 50 to 100 megawatts' worth of electricity from its Toquop operation  Cash Creek, KY – State & Applicant Must Redo BACT Analysis (IGCC application based on Process to Use Coal to produce syngas as primary fuel and natural gas is secondary fuel -12/6/2009 EAB).  DISCUSSION of OTHERS??? 16

Leslie Sue Ritts RITTS LAW GROUP, PLLC