Draft Final Annex to the GCVTC Report September 25, 2000

Outline of Presentation 4 Contents of Annex 4 Resolution of Outstanding Issues 4 Ongoing work

The Annex 4 Description of Milestones and Trading Program –Executive Summary –Description of Decisions –Annex Recommendations –Model Rule (Attachment A) –Memorandums of Understanding (Attachments B & C)

The Annex 4 Supporting Documentation –Greater Reasonable Progress than BART demonstration (Attachment D) –List of BART Eligible Sources (Attachment E) –Distribution of Allocations by Industrial Sector and State (Attachment F) –Reallocation of Tribal Set-Aside (Attachment G) –Other support documents (Attachment H)

The Annex 4 Other Supporting Documentation - numerous documents –Emissions Data Refinement –Economic Impact Study –Visibility Analysis –Others...

Resolution of Outstanding Issues 4 Milestones –The Numbers –The Mohave Error –Compliance and Averaging –CEMS Bias 4 Allocations –New Source Set-aside –Individual Source Allocations 4 Opt-in/Opt-out - distribution of set-asides

Resolution of Outstanding Issues 4 Viability of the Market 4 Audit and Reconciliation 4 Greater Reasonable Progress than BART

Milestones - Principles 4 Achieve Steady Continuing Emissions Reductions 4 Provide Flexibility to Sources “Up-Front” for Greater “Back-End” Reductions 4 Policy driven 4 Informed by best available information

2018 Milestone - Revised Basis 4 Baseline emissions projection 622,000 tons –Known reductions –Assumed retirements & tech. changes –New source & utility growth –Operational adjustments 4 Estimated BART reductions-168,000 4 Utility CEM adjustment- 10,000 4 Uncertainty/Headroom+ 35,000 4 Total (rounded to nearest 5,000) 480,000 4 Smelter Set-aside+ 30, Milestone 510,000

SO 2 Milestones 13% Reduction 52% Reduction

Compliance with Milestones (hypothetical case)

Compliance with Milestones thru 2006

Compliance with Milestones thru 2006 The Mohave Problem Solved Milestone Committed Emissions Reductions

Compliance with Milestones thru 2006 The Mohave Problem Solved Milestone

Compliance with Milestones (hypothetical case) 2013 Avg.Milestone 2014 Avg.Milestone 2 yr average 1 yr Check

CEMS Bias 4 Blanket adjustment of milestones would be spurious 4 Protocol to be developed that will revise milestones based upon documented impact of new technology and revised procedures on a source-by-source basis. 4 Adjustment of milestones may require SIP revisions

Allocations 4 New Source Set-aside –Estimated 27,000 tons of growth –9,000 tons per five year period –Available on first-come first-served basis –Unused tons would roll-over to next period –New sources needing to buy credits would be first in line for next five year period

Allocations 4 Individual Source Allocations –Actual allocations not necessary - need to submit allocation method –Estimates prepared - See Appendix F –Final determination of individual source floors for non-utilities needed

Opt-in/Opt-out 4 Existing source allocations 4 Distribution of set-asides –New source growth based on projections developed by ICF and Pechan-Avanti on a state-by-state geographic area basis –Tribal allocation (See Appendix G)

Penalties for Exceeding Allowances 4 $5,000/ton, CPI adjusted from 2000 base year 4 Mitigation - 2 ton credit reduction in allocation for each ton over-emitted

Better Reasonable Progress Than BART 4 Provides both remedy for existing and prevention of future impairment. 4 More sources and total tonnage covered. 4 New source growth capped for the region. 4 Mass-based cap on actual emissions. 4 Greater total tonnage reduction. 4 Regional haze visibility improvement not distinguishable from application of BART.

Other Issues 4 Audit and Reconciliation –Working with EPA to include in program 4 Viability of Market –Majority of reductions in Colorado, Wyoming & Arizona –Hire contractor to evaluate

Continuing Work 4 Allocations 4 Polished Annex for submittal October 2 4 Draft Revisions to § Final resolution of outstanding EPA issues

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