CPY Document

BEFORE THE ILLINOIS POLLUTION CONTROL BOARD
NOTICE OF FILING
BEFORE THE ILLINOIS POLLUTION CONTROL BOARD
POST-HEARING COMMENTS OF JASON M. GOODWIN

BEFORE THE ILLINOIS POLLUTION CONTROL BOARD

IN THE MATTER OF:

PROPOSED NEW CAIR SO2, CAIR NOx

)

ANNUAL AND CAIR NOx OZONE SEASON

)

R06-26

TRADING PROGRAMS, 35 ILL. ADM.

(Rulemaking- Air)

CODE 225, CONTROL OF EMISSIONS

FROM LARGE COMBUSTION SOURCES,

)

SUBPARTS A, C, D and E

)

NOTICE OF FILING

To:

See Attached Certificate of Service

PLEASE TAKE NOTICE that on December 2 1,2006, we filed with the Clerk of the

Illinois Pollution Control Board the attached Post-Hearing Comments of Jason M.

Goodwin, a

copy of which is attached hereto and hereby served upon you.

Dated: December 2 1,2006

Steven

J. Murawski

Sasha M. Reyes

BAKER

MCKENZIE LLP

One Prudential Plaza, Suite 3500

130 East Randolph Drive

Chicago, IL 60601

+1 312 861 8000

ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, DECEMBER 21, 2006

* * * * * PC #3 * * * * *

BEFORE THE ILLINOIS POLLUTION CONTROL BOARD

IN THE MATTER OF:

)

PROPOSED NEW CAIR SO2, CAIR NOx

)

ANNUAL AND CAIR NOx OZONE SEASON

)

R06-26

TRADING PROGRAMS, 35 ILL. ADM.

)

(Rulemaking- Air)

CODE 225, CONTROL OF EMISSIONS

FROM LARGE COMBUSTION SOURCES,

SUBPARTS A, C, D and E

)

POST-HEARING COMMENTS OF JASON M. GOODWIN

My name is Jason M. Goodwin and I previously filed written comments in the above-

cited rulemaking on behalf of Zion Energy LLC (Zion) on November 10,2006. Zion owns and

operates a peaking power electric generating facility called the Zion Energy Center located at

5701 West

Street, Zion, Illinois (Facility). On November 28,2006, I also testified before the

Illinois Pollution Control Board (Board) to better describe Zion's positions and answer questions

regarding the Illinois Environmental Protection Agency's (Illinois EPA) proposal for a

state-

based Clean Air Interstate Rule (CAIR), 35 IAC Part 225 (Proposed Rule). During the

November 28,2006 hearing,

I was asked by various members of the Board, Illinois EPA and the

public to clarify Zion's positions on fuel

weightindfuel neutrality and the proposed Clean Air

Set Aside (CASA), including, in some cases, my thoughts on potential compromise solutions.

As a follow-up to my prior written comments and testimony, I offer the following additional

information in an effort to respond to some of those questions raised during my testimony.

In this filing, I have attempted to avoid reiterating any of the points I previously made in

detail during this public comment process. Instead, I have attempted to describe additional facts

and other thoughts that could potentially provide a bridge between the seemingly divergent

views expressed throughout the public comment period regarding fuel

weightindfuel neutrality

ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, DECEMBER 21, 2006

* * * * * PC #3 * * * * *

and the proposed CASA. It is important to note that, while I have not reiterated my earlier

points, Zion contends that those initial points reflect its primary position on the issues.

Fuel- WeinhtindFuel Neutrality

During my testimony at the November 28,2006 hearing, Board Member and Senior

Environmental Scientist

Anand Rao asked me whether there is an alternative (e.g., a compromise

weighting factor) that Zion would be willing to support. Hearing Transcript, November 28,

2006,

93:23

94:4. In response, I made it clear that Zion preferred a fuel-neutral allocation

mechanism, but that it was willing to consider and discuss a more balanced alternative as a

compromise. Id. at

94:5

94:lO.

Since the November 28,2006 hearing, I have conducted an evaluation of potential

alternatives between the Illinois

EPA's proposed fuel weighting factors and Zion's proposed fuel

neutrality position and offer the following recommendation and reasoning. While Zion's first

preference remains fuel neutrality, we recognize the diverse positions surrounding this issue and

appreciate the reasoning behind them.

As a result of its evaluation, Zion is willing to consider a compromise alternative fuel

weighting factor that closes the gap between the fuel neutral option and the Illinois

EPA's

current proposal. Specifically, Zion suggests a compromise factor of 0.7 for both gas-fired and

oil-fired units. This

number represents the mid-point between 1.0 for coal-fired units and 0.4 for

gas-fired units and is a minimal increase from the 0.6 factor for oil-fired

unitsfoperating modes.

As we see it,

a revised oil-fired factor that is consistent with the proposed gas-fired factor is

necessary to streamline the process for determining the quantity of allowance allocations. It also

provides additional consideration for reliability (through enhanced allocation treatment) for units

ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, DECEMBER 21, 2006

* * * * * PC #3 * * * * *

operating in gas-curtailed situations when (a) natural gas is unavailable, (b) power demand is

potentially very high or (c) reliability of the electric power supply is critical.

In considering Zion's proposed compromise alternative fuel weighting factor, it is

essential for the Board to place this recommendation into context with what other states are

currently doing. As described below, we believe that Zion's recommended position on

fuel-

weighting is entirely consistent with the majority of fuel-weighting concepts being used in other

states where Calpine Operating Services Company,

Inc.(COSCI)

has been involved:

Alabama

fuel-neutral

Arkansas

fuel-neutral

Florida

0.4 gasl0.6 oil11 .O coal (consistent with federal model)

Louisiana

0.4 gasl0.6 oil11 .O coal (consistent with federal model)

Minnesota

0.4 gasl0.6 oil11 .O coal (consistent with federal model)

South Carolina

0.6 gasl0.6 oil11 .O coal (state-based custom approach)

Wisconsin

fuel-neutral

11.

CASA

In response to my comments and testimony on November 28,2006 about the Illinois

EPA's proposed CASA size, Mr. Stephen J. Bonebrake suggested that I offer a view as what the

appropriate percentage for a CASA set-aside should be. Hearing Transcript, November 28,

2006,

52:9

52:lO. At the time, I did not have a specific recommendation, but I do now based

an evaluation of the set-aside concepts accepted in other states where COSCI has been

involved. Id. at 52:

52: 13; see also id. at 90:4

90:9.

As shown below, the Illinois EPA's proposed 25% CASA is far out of line with the

proposed set-aside pools in many other CAIR states:

Alabama

no provision for renewable sources or energy efficiency

projects; clean coal projects are considered through new

sourcelmain pool

allocations

See November 10,2006 Testimony of Jason M. Goodwin, p. 1-2 for details about the relationship between COSCI

and Zion.

ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, DECEMBER 21, 2006

* * * * * PC #3 * * * * *

Arkansas

no provision for renewable sources; energy efficiency

projects (made by generators) are accounted for through output-based

allocations; clean coal projects are considered through new sourcelmain pool

allocations

Florida

no provision for renewable sources or energy efficiency

projects; clean coal projects are considered through new sourcelmain pool

allocations

Louisiana

no provision for renewable sources or energy efficiency

projects; clean coal projects are considered through new sourcelmain pool

allocations

Minnesota

no provision for renewables, energy efficiency projects or

other special projects (will follow federal model); original stakeholder

concept (since cancelled) proposed

15% for renewable generating sources

South Carolina

no provision for renewable sources or energy efficiency

projects; clean coal projects are considered through new sourcelmain pool

allocations

Wisconsin

new renewable facilities may apply for allocations fiom the

main pool once an operating baseline is established; energy efficiency

projects (made by generators) are accounted for through output-based

allocations; no allocations for non-generators; clean coal projects are

considered through new sourcelmain pool allocations

Consequently, Zion believes that the CASA in the Proposed Rule should be revised based

on two factors. First, a smaller proportion of the total allowance budget should be made

available for non-emitting sources. We suggest a CASA set-aside percentage in the

5-1 0%

range, rather than the proposed

25%,

because setting aside such a large portion of the allowance

pool

(i.e.,

25%)

unjustifiably increases the compliance burden on facilities that already face

significant emission reduction obligations though an artificial reduction in allowances available

for allocations. Second, we suggest that CASA applicants be restricted to electric generating

sources and that non-generating sources

(e.g., energy efficiency project, demand-side

management, etc.) be eliminated from consideration in the Proposed Rule.

ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, DECEMBER 21, 2006

* * * * * PC #3 * * * * *

111.

Conclusion

For the above-described reasons, Zion asks that the Board adopt a rule that reasonably

incorporates and considers Zion's comments above, as well as Zion's earlier written comments

and testimony.

ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, DECEMBER 21, 2006

* * * * * PC #3 * * * * *

CERTIFICATE OF SERVICE

The undersigned certifies that a copy of the foregoing Post-Hearing Comments of Jason M.

Goodwin was

served on this 21" day of December, 2006,

Upon the following electronically:

Dorothy Gunn

John J. Kim

Clerk of the Board

Rachel L. Doctors

Illinois Pollution Control Board

Illinois Environmental Protection Agency

100 West Randolph Street

102 1 North Grand Avenue East

Suite 11-500

P.O. Box 19276

Chicago, IL 6060 1

Springfield, IL 62794-9276

And upon the following by U.S. First Class Mail:

John C.

Knittle

Hearing Officer

Illinois Pollution Control

Board

100 W. Randolph, Suite

11-

500

Chicago, IL 60601

Matthew J. Dunn

Office of the Illinois Attorney

General

Environmental Bureau

188 West Randolph St.,

20'

Floor

Chicago, IL 6060 1

Virginia Yang

Illinois Department of

Natural Resources

One Natural Resources Way

Springfield, IL 6270 1- 127 1

David Rieser

James T.

Harrington

Jeremy R. Hojnicki

McGuire Woods LLP

77 W. Wacker Dr., Suite

4100

Chicago, IL 60601

Katherine D. Hodge

N. LaDonna Driver

Hodge

Dwyer Zeman

3 1 50 Roland Ave.

P.O. Box 5776

Springfield, IL

62705-5776

Bill S. Forcade

Katherine M. Rahill

Jenner

Block

One IBM Plaza

Chicago, IL 6061 1

William A. Murray

Office of Public Utilities

800 E. Monroe

Springfield, IL 62757

Keith Harley

Chicago Legal Clinic, Inc.

205 W. Monroe St.,

4th Floor

Chicago, IL 60606

S. David

Farris

Office of Public Utilities

201 E. Lake Shore Dr.

Springfield, IL 62757

Faith E. Bugel

Environmental Law and

Policy Center

35 East Wacker Drive, Suite

1300

Chicago, IL 60601

Daniel D.

McDevitt

Assistant General Counsel

Midwest Generation, LLC

440 South

LaSalle St., Suite

3500

Chicago, IL 60605

Bruce

E. Nilles

Sierra Club

122 W. Washington Ave.,

Suite 830

Madison,

WI 53703

James H. Russell

Winston

Strawn LLP

35 W. Wacker Drive,

4oth

Floor

Chicago, IL 6060 1

ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, DECEMBER 21, 2006

* * * * * PC #3 * * * * *