BEFORE THE ILLINOIS POLLUTION CONTROL BOARD

RECEIVED

CLERK

IN THE MATTER OF :

JUL

2 C 2CCS

)

PROPOSED

NEW 35 ILL

. ADM. CODE 225

POllution

STATE

Or

ILLINO

It o, t

IS

)

R06-25

Ontro tlr

.i+m

CONTROL OF EMISSIONS FROM

)

(Rulemaking Air)

LARGE COMBUSTION SOURCES

)

35 Ill . Adm

. Code 225 .100, 200

)

NOTICE OF FILING

TO

: Those Individuals as Listed on attached Certificate of Service

Please take notice that on July 28, 2006, the undersigned caused to be filed with

the Clerk of the Illinois Pollution Control Board the attached Testimony of Anne Smith

and the Testimony of Michael Menne, a copy of which is herewith served upon you

.

Dated this 28th

day of July, 2006 .

Respectfully submitted,

AMEREN ENERGY GENERATING COMPANY

AMERENENERGY RESOURCES GENERATING

COMPANY

ELECTRIC ENERGY, INC .

James T

. Harrington

David L . Rieser

Attorneys for Petitioners

McGuireWoods LLP

77 West Wacker, Suite 4100

Chicago, Illinois 60601

Telephone

: 312/849-8100

---

CERTIFICATE OF SERVICE

The undersigned, one of the attorneys for Petitioners, hereby certifies that I served a copy

of the attached Testimony of Anne Smith and Testimony of Michael Menne upon those listed

below on July 28, 2006 via First Class United States Mail, postage prepaid

.

To

:

John J . Kim, Managing Attorney

Charles E . Matoesian, Assistant Counsel

Gina Roccaforte, Assistant Counsel

Illinois Environmental Protection Agency

Division of Legal Counsel

1021 North Grand Avenue East

Post Office Box 19276

Springfield, IL 62794-9276

John

.Kim@ena .state .il .us

Marie E . Tipsord, Hearing Officer

Illinois Pollution Control Board

100 West Randolph, Suite 11-500

Chicago, IL 60601

tipsordm(ri pcb .state

.il

.u s

Bill S . Forcade

Katherine Rahill

Jenner & Block LLP

One IBM Plaza

Chicago, IL 60611

b forcade@ienner .com

Bruce Nilles

Sierra Club

214 N . Henry Street, Suite 203

Madison, WI 53703

bruce .nilles@sierraclub.org

William A . Murray

Special Assistant Corporation Counsel

Office of Public Utilities

800 East Monroe

Springfield, IL 62757

bmurravnacwlv .co m

Faith E. Bugel

Howard A . Learner

Meleah Geertsma

Environmental Law and Policy Center

35 East Wacker Drive, Suite 1300

Chicago, IL 60601

fbugel@clpc

.org

Ms . Dorothy Gunn, Clerk

Illinois Pollution Control Board

James R. Thompson Center

100 West Randolph Street

Suite 11-500

Chicago, IL 60601

Mr . Keith Harley

Chicago Legal Clinic, Inc .

205 West Monroe, 4" Floor

Chicago, IL 60606

k harley@kentlaw .ed u

Kathleen C . Bassi

Sheldon A . Zabel

Stephen J. Bonebrake

Joshua R. More

Glenna L . Gilbert

Schiff Hardin LLP

6600 Sears Tower

233 South Wacker Drive

Chicago, IL 60606

kbassi@schiffhardin .com

Christopher W. Newcomb

Karaganis, White & Mage, Ltd .

414 North Orleans St., Suite 810

Chicago, IL 60610

c

newcomb@k-w .co m

N . LaDonna Driver

Katherine D . Hodge

Hodge Dwyer Zeman

3150 Roland Ave ., P .O . Box 5776

Springfield, IL 62705-5776

nldriver(a hdzlaw .co m

---

#4088051 (v .

1 )

.doc

S. David Farris

Manager, Environmental, Health and Safety

Office of Public Utilities, City of Springfield

201 East Lake Shore Drive

Springfield, IL 62757

dfarris acwln

.com

Dianna Tickner

Prairie State Generating Co

., LLC

701 Market Street, Suite 781

St

. Louis, MO 63101

DTickner@PeabodvEnergy

.com

James T . Harrington

David L . Rieser

Jeremy R. Hojnicki

McGuireWoods LLP

77 West Wacker, Suite 4100

Chicago, Illinois 60601

Telephone : 312/849-8 100

James W

. Ingram

Senior Corporate Counsel

Dynegy Midwest Generation, Inc

.

1000 Louisiana, Suite 5800

Houston, Texas 77002

jim .ingram(iDdvnegy .com

N'

~~ `

ne of the Atto , or

itioners

---

TESTIMONY OF ANNE E . SMITH, Ph .D.

RECEIVED

CLERK'S OFFICE

JUL Z 8 2023

Pollution

STATE OF

Control

ILLINOIS

Board

I, Anne E

. Smith, am testifying on behalf of Ameren Corporation ("Ameren") as

an expert on the costs and benefits of policies to control emissions of air pollutants from

the electric generating sector

The Illinois Environmental Protection Agency ("IEPA") has proposed a rule to

effectively reduce mercury emissions from Illinois coal-fired generating units by 90% by

2009

. Ameren supports a multi-pollutant control strategy as an alternative option for

meeting the requirements of IEPA's proposed mercury rule

. My testimony addresses the

financial, operational, and environmental advantages of such a multi-pollutant control

strategy ("MCS")

provision

. In presenting this testimony, I am speaking solely on behalf

of Ameren and not on behalf of the IEPA

.

I.

BACKGROUND AND QUALIFICATIONS

I am an economist and decision analyst who has specialized for the past thirty

years in environmental risk assessment, cost and economic impact assessment, and

integrated assessment to support environmental policy decisions

. In my career, I have

worked for government and private sector clients on a global basis

. From 1977 to 1979, I

served as an economist in the Office of Policy Planning and Evaluation of the U

.S .

Environmental Protection Agency ("U.S

. EPA")

. From 1979 through 1985, I consulted

on risk assessment and risk management for environmental policy to the U

.S. EPA, to

governments in Europe, and on United Nations expert committees convened in Geneva,

Rome, and Thailand

. From 1985 through 1998, I was employed by Decision Focus

International (later named Talus Solutions, Incorporated), which was a risk analysis

consulting firm that had substantial practices supporting electric utility operating and

business decisions, and supporting policy assessment for the U

.S. EPA. From 1988 to

1990, I advised the Director of the National Acid Precipitation Assessment Program

("NAPAP") on integrated assessment of the costs and benefits of policies to control SO2

and NOx .

Since 1998, I have been a Vice President of CRA International, a global

1

---

economics consulting firm with a substantial practice on issues related to energy and the

environment .

I have also served as a member of several committees of the National Academy of

Sciences focusing on risk assessment and risk-based decision making

. I have testified

several times before committees of the U .S. Senate on risks from fine particulate matter,

on costs and benefits associated with regional haze policies, and on costs of climate

change policies .

I have been analyzing multi-pollutant policies for the U .S . utility sector, including

mercury, SO2, NOx, and other emissions limitations, for the past six years

. Under

funding from the Edison Electric Institute, and with technical support on data from the

Electric Power Institute ("EPRI"),

I led a team that developed the leading alternative

model to the IPM model that U.S

. EPA uses for all of its electric-sector multi-pollutant

policy modeling . I supported the utility industry in assessing impacts of alternative

mercury MACT controls under Section 112 of the Clean Air Act, and I also prepared an

expert report on the costs and effectiveness of the proposed Clean Air Mercury Rule

("CAMR") that was used in comments submitted by EPRI on the proposed CAMR rule,

and later also on the Notice of Data Availability ("NODA") regarding the proposed

CAMR. My projections of speciated mercury emissions were used as a key input to the

mercury deposition modeling that EPRI has also documented in comments on the

proposed CAMR rule, in response to the mercury NODA, and in comments on the

reconsideration of the CAMR rule

. I also developed a cost-effectiveness framework for

evaluating mercury control policies that was published as an EPRI report in 2003

. The

latter study demonstrated how to integrate projections of cost, deposition, exposure, and

health risks for alterative mercury control approaches .

I received my Ph.D. (1984) in economics with a Ph .D

. minor in engineering-

economic systems from Stanford University . My M.A

. (1981) in economics was also

from Stanford University . I received my B .A

. (1977) in economics from Duke

2

---

University, summa cum laude

. I

am attaching my CV to this testimony, which lists my

major publications .

IL DESCRIPTION OF ANALYSIS PERFORMED

In this testimony, I report on my projections of the costs and emissions of

SO2,

NOx and mercury for IEPA's proposed mercury rule, with and without an MCS

provision . These projections were developed using CRA International's National

Electricity and Environment Model ("NEEM"), which is described in greater detail in

Section III.

As a starting point for purposes of comparison, I used NEEM to prepare a least-

cost simulation of attainment of the CAMR rule when implemented in combination with

the SO2 and NOx caps of the Clean Air Interstate Rule ("CAR")

rule ("CAIR/CAMR" ).t

I next used NEEM to simulate the effects of Illinois imposing [EPA's proposed mercury

rule while the rest of the nation would continue to implement CAIR/CAMR ("IL Rule")

.2

Third, I prepared a simulation of the IL Rule that includes an MCS provision

. My

testimony focuses on how my projections of the costs, emissions, and business impacts of

the proposed IL Rule compare to those of the proposed IL Rule amended to include an

MCS provision. My conclusion is that the MCS provision would increase the benefits

that would otherwise be obtained under the IL Rule by providing a broader set of

emissions reductions. I also conclude that the MCS provision would provide greater

financial and operational stability to at least one of Illinois's electricity generation and

services providers .

To simulate the IL Rule with the MCS, I assumed that only Ameren would make

use of the MCS provision . I did not attempt to evaluate whether other companies would

also find the MCS provision to be a preferred alternative

. I started with the NEEM model

run for the IL Rule, with no change to any of its input assumptions

. However, for the

MCS simulation, I modeled a multi-pollutant set of controls that could be expected of

'This scenario also accounts for the provisions of the Clean Air Visibility Rule

("CAVR"), which affect

mainly electricity generating units in the West .

2

Note that the scenario that I call "IL Rule" in my testimony also accounts for the provisions of CAIR

nationally (including in Illinois), as well as the provisions of CAMR in all states other than Illinois .

3

---

Ameren if it were to meet the MCS provision's requirements . All other Illinois

generators in the simulation then took the control actions that are least-cost to meet the

proposed IL Rule provisions, just as in the original IL Rule model run

.

III. DESCRIPTION OF NEEM MODEL

My simulations have been conducted using CRA's North American Electricity

and Environment Model ("NEEM"). NEEM is a linear programming model that

simulates a competitive electricity market for the continental United States by

minimizing the present value of incremental costs to the electric sector while meeting

electricity demand and complying with relevant environmental limits . NEEM was

designed specifically to be able to simultaneously model least-cost compliance with all

state, regional and national, seasonal and annual emissions caps for S02

, NOx and Hg.

The least-cost outcome is the expected result in a competitive wholesale electricity

market.

NEEM is a process-based model of U.S . electricity markets and portions of the

Canadian system. U.S

. electricity markets are divided into 24 individual demand regions

(based on NERC sub-regions) and interconnected by limited transmission capabilities

(also based on NERC data) . Coal units in particular are represented in detail as these are

most affected by environmental regulation. All coal units greater than 200 MW in size

are individually represented in the simulation .3

All non-coal generating units in the

United States are also represented in the model with some level of unit aggregation

.

Units are dispatched to load duration curves within each region

. There are 20 load

segments spread over three different seasons

.

NEEM produces forecasts of short-term and long-term decisions such as coal

choices, investments in pollution control equipment, new capacity additions, unit

utilization, unit retirements, and unit emissions . NEEM also produces associated

projections of wholesale electricity prices and capacity values by region, and allowance

prices for all emissions categories that are subject to a cap.

3 For this analysis, even the smallest coal units in Illinois were individually represented in NEEM to

provide greater accuracy .

4

---

CRA International has used NEEM extensively to assess electric sector responses

to many different types of national, regional and state environmental policies in analyses

for EPRI, the Edison Electric Institute, the National Rural Electric Cooperatives

Association, and for a number of individual utilities and other companies

. NEEM has

also been licensed to clients for their in-house modeling purposes .

NEEM is a similar model to the IPM model that is used extensively by the U .S

.

EPA, and also has been used by the IEPA in this proceeding . Both models are dynamic,

linear programming models of the U .S

. electricity sector. Both models minimize the

present value of incremental costs subject to a set of operational constraints

. The primary

difference between NEEM and IPM is in the exogenous assumptions used in the

respective models, such as cost and effectiveness of control technologies, fuel prices, and

future electricity demand levels

.

This type of model is particularly well suited to evaluate environmental policies

that affect the electric sector, as it has a long-term focus necessary to assess major capital

investments like retrofit decisions and a national scope necessary to simulate emissions

markets that affect compliance planning

. This type of model is usually used to compare

between alternative scenarios, thus providing a "controlled experiment" regarding the

relative impacts of two possible future policy paths

. This comparative format is useful

because it mitigates much of the uncertainty that is associated with any single projection

.

The appropriateness of this type of model is reflected in the fact that it has been used to

evaluate every major electricity sector emissions policy in the last twenty years

. The

extensive use of these models has also made them well understood in the modeling

community, and implies that their internal computations have withstood repeated scrutiny

and critique. The primary concern when evaluating new simulations from NEEM or IPM

should be focused on the quality of their input assumptions .

5

---

IV

. RESULTS OF ANALYSES REGARDING EFFECTIVENESS AND

FINANCIAL IMPACTS

A. SOz

, NOx, and Mercury Emissions Projections

The MCS provision is projected to produce much lower SO

2 emissions in Illinois,

moderately lower NOx emissions, and very similar mercury emissions

. Almost all of the

differences are due to changes in control measures at Ameren's units

.

Ameren's use of the proposed MCS provision would cause SO

2 emissions to fall

gradually to substantially lower levels than under CAIR combined with the IL Rule

without the MCS (Figure 1)

. By 2015, Illinois SO2 emissions are projected to be about

50,000 tons, or 17 percent, lower with the MCS provision than without it

. S02 emissions

are a major contributor (or "precursor") to ambient concentrations of fine particulate

matter ("PM 2.5"),

and the additional reductions of Illinois SO2 emissions would be helpful

to Illinois in achieving attainment with the PM2

.5 National Ambient Air Quality Standards

("NAAQS")

. The sulfate particles that form from SO2 emissions also block light, and

decrease visual ranges over long distances

. Thus, the extra SO2 reductions due to the

MCS will also help improve regional haze in the state, and meeting the requirements of

the Regional Haze Program under the Illinois state implementation plan

("SIP") for

visibility.

Some of these SO2 reductions would be very unlikely to occur under

CAIR/CAMR alone, or under CAIR/CAMR in conjunction with the IL Rule

. I estimate

that five of the FGD projects assumed under the MCS scenario would cost between

$3,600/ton and $4,800/ton SO2

removed, which is four to five times higher than the range

of SO2 allowance prices that is projected by EPA and others

.

6

---

Figure 1 : Comparison of SO2 Emissions by Existing Coal Plants

in Illinois

450,000400,000 -~`

.

350,000

C

300,000

T

250,000

a 200,000

F

0

150,000

100,000

50,000

0

2006

-+ IL Rule w/ MCS

- ∎- IL Rule w/o MCS

2008

2010

2012

2014

2016

2018

2020

Year

Ameren's use of the proposed MCS provision would also cause NO

x

emissions to

be lower than under the IL Rule without the MCS

. NOx

emissions are progressively

lower over time, until 2015 when they are about 3,000 tons, or 5 percent, lower than

projected for the IL Rule without the MCS provision (Figure 2)

. NOx emissions can be a

major contributor to the formation of ambient ozone in the troposphere, and these

reductions would be helpful to Illinois in its efforts to attain the ozone NAAQS

. NOx

emissions also can form into nitrate particles in the air, which impair regional haze

.

Thus, the extra NOx

emissions reductions may also contribute to reduced regional haze in

the state, and help meet the requirements of the Regional Haze Program under the Illinois

visibility SIP.

Some of these NOx reductions would be very unlikely to occur under

CAIR/CAMR alone, or under CAIR/CAMR in

conjunction

with the IL Rule . I estimate

that the two SCR projects at Newton assumed under the MCS scenario would cost

7

---

between $20,000/ton and $26,000/ton NOx removed, which is about ten times higher

than the range of NOx

allowance prices that is projected by EPA and others.

Figure 2

: Comparison of NOx Emissions by Existing Coal Plants in Illinois

100,000 -

90,000 *

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0

t IL Rule w/MCS - ∎- IL Rule /o MCS

2006

2008

2010

2012

2014

2016

2018

2020

Year

Ameren's use of the MCS results in slightly less mercury reduction in the years

2009-2014, after which the Illinois mercury emissions of the two scenarios become

essentially identical (Figure 3) . Projected Illinois mercury emissions with the MCS

provision still achieve 83 percent of the reduction that would occur under the IL Rule

without the MCS in 2009, rising to 87 percent of the IL Rule's reduction in 2010, and 94

percent by 2013 . Then, from 2015 onwards, Illinois mercury emissions are at the same

level as under the IL Rule alone

. Thus, large reductions in mercury emissions occur even

by 2009 under the MCS provision, and the small difference in emissions of mercury lasts

only a few years

. The mercury deposition for the years 2009 through 2014 with the MCS

provision would therefore be only slightly different than the expected deposition change

described in Dr. Vijayaraghavan's testimony

.

8

---

Figure

3

: Comparison of Mercury Emissions by Existing Coal Plants in Illinois

6,000

5,000

x

4,000

3,000

a

p; 2,000

1,000

0

2004

2006

2008

2010

2012

Year

2014

2016 2018

2020

In summary, there are widely accepted linkages between SO2 and NOx reductions

and lowered levels of criteria pollutants and regional haze, all of which pose attainment

challenges to Illinois in the coming decade . It is therefore reasonable to view the MCS

provision's incremental reductions in these emissions as having a meaningful chance of

producing real benefits to Illinois . I find that the small differences in the amount by

which mercury emissions fall during 2009 through 2014 are, in comparison, non-

meaningful

.

B . Costs and Financial Burdens

There are several ways to measure the financial impacts of a policy . The measure

of cost alone, such as the NEEM and IPM models provide, has some relevance for

determining the economic efficiency of a policy, but it can be very misleading as a

measure of the financial burden or economic impact to a particular region, such as the

state of Illinois . This problem is especially true when a policy is imposed in a single

9

-+-IL Rule w/MCS - U- IL Rule w/o MCS

I

I

---

state, while surrounding states take a less onerous policy that gives their generators a

potential competitive edge

. The problem is that these models' estimates of "cost"

include costs of generation as

well as costs of controlling emissions

. According to these

models, cost

falls

if the state's generators lose market share to generators in surrounding

states when their variable costs rise due to their greater requirements for emissions

controls

. In other words, measures of costs from a least-cost model would suggest that

Illinois is better off

(has "lower costs") when its generators are harmed competitively by

the regulation

. Thus a single state could seriously mislead itself about the impacts to its

state if it were to rely on the standard cost output of models such as IPM and NEEM

.

Additional calculations after the model run are necessary to obtain measures of state-

specific cost and financial burden that are appropriate for decision making

.

One step to obtaining a more meaningful measure is to use the model's projected

choices of additional control equipment to estimate actual expenditures on control

equipment, including both the capital cost and the costs of running the control equipment

when generating

. To the extent that control actions include changing to a cleaner fuel,

then the cost estimate should include the higher cost of the fuel as well as

the cost of

control equipment

. This step provides a measure of the true control costs caused by the

IL Rule, after removing the offsetting "cost reductions" that actually reflect lost ability to

compete .

The MCS provision is more costly, and those added costs are borne by Ameren

.

However, there would be other important financial and operational benefits to Ameren in

making use of the MCS provision

. The IL Rule, with or without the MCS, will require

Ameren (and the other Illinois generators) to make major new capital investments in

control equipment

. The investment requirements of the CAIR/CAMR rule alone present

financing challenges to electricity generating companies nationwide, and the IL Rule

adds yet a larger burden, and in a foreshortened period of time

. There are substantial

benefits to companies if they can spread the capital investment costs over a longer period

of time

. (There are perhaps equally important benefits if companies can spread out the

associated demands on construction project management

. Overburdening of construction

10

---

management resources can lead to inefficiencies and bottlenecks that can create cost

escalation beyond the levels estimated in this testimony.)

Figures 4 and 5 show the amount of capital that my analysis has estimated

Ameren needs raise in each year from now until 2020 under the CAIR/CAMR, the IL

Rule without the MCS, and the IL Rule with Ameren using the MCS

. Both figures show

the present value (in 2006) of capital expenditures in each future year

. They are stated as

annualized capital charges in the case of Figure 4 and stated

as "overnight investment" in

the case of Figure 5

. Figure 5 shows that the IL Rule not only implies a much greater

amount of capital expenditure overall than CAIR/CAMR, but also that most of the

increased expenditure is condensed into the near-term --

by 2009. I estimate that the total

capital that Ameren must raise by 2010 under CAIR/CAMR is almost $200 million (in

2006 present value)

. In contrast, I estimate that Ameren must raise over three times that

amount by 2009 under the IL Rule --

nearly $650 million in 2006 present value . The

MCS substantially mitigates Ameren's surge of demand for capital in 2009 by taking on

more total investment but spreading it more gradually over time

.

Although the total capital expenditures are larger under the MCS than under the

IL Rule without the MCS, they are greatly smoothed out, in a manner that should be far

more feasible to finance, and with a far more manageable rate of increase in demands on

cash flow

. Additionally, the control requirements under the MCS give the company the

opportunity to take advantage of technological improvements that are likely to occur in

the later years

. This suggests that my estimates of higher costs in the later years may be

overstated, while the savings estimated for the MCS provision in the first few years are

not so likely to be overstated

. Hence, the estimated increment to Ameren's costs if it

were to make use of the MCS provision may not be as large as these figures indicate

. The

smoothing out of the capital expenditures also indicates a more operationally manageable

rate of development of large construction projects over the Ameren system

.

11

---

Figure 4 . Annualized Capital Expense for Ameren Projected Using NEEM under

CAIR/CAMR Alone, the IL Rule, and the IL Rule with Ameren Using the MCS

(2006 Present Value)

$200,000 -

$180,000 -

$160,000 -

$140,000 -

$120,000

$100,000

$80,000

$60,000

$40,000

$20,000 -

CAIR/CAMR

fIL Rule w/o MCS

-~ IL Rule w/ MCS

$0

2006

2010

2014

2018

12

---

Figure 5. Overnight Capital Expense for Ameren Projected Using NEEM under

CAIR/CAMR Alone, the IL Rule, and the IL Rule with Ameren Using the MCS

(2006 Present Value)

$700,000

_ .

$600,000

0

a

$500,000

$400,000 -

0

$300,000

$100,000

$0

∎

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

∎ CAIR/CAMR

•

IL Rule w/o MCS

•

IL Rule w/ MCS

V

. CONCLUSION

As explained in Section IV .A, the higher total investment in controls, and the way

that they are spread over multiple pollutants under the MCS provision is a good

environmental deal for the state of Illinois . As explained in Section IV

.B, the MCS

provision also represents a prudent trade-off for Ameren to make from the perspective of

corporate financial stability, corporate management of construction projects (with

associated operational stability), and the creation of opportunities to achieve these

environmental benefits at lower ultimate total cost .

13

---

ANNE E . SMITH

Vice President

~Wftm

INTERNATIONAL .

Ph

.D

. Economics,

Stanford University

M.A. Economics,

Stanford University

B.A. Economics,

summa cum laude

Duke University

Dr. Smith is a nationally recognized expert in risk assessment, uncertainty analysis, and

environmental economics, applying economics, decision sciences and systems modeling to help

manage complex environmental and energy issues . Dr. Smith has been engaged by clients to

analyze risks, benefits, and costs of the most prominent environmental policy issues of the past

decade, including air quality, climate change, contaminated sites, nuclear waste cleanup, and food

safety. She has testified before the U .S . Senate on costs of climate policy, risks of particulate

matter and on technical assessments of regional haze benefits and costs

. In the area of solid waste

risk management, Dr . Smith has submitted expert comments on EPA's Hazard Ranking System and

on its underground tank rules

. She has served on several committees of the National Academy of

Sciences, and on a subcommittee of EPA/ORD's Board of Scientific Counselors . Her clients have

included research institutions, trade associations, private corporations, multi-stakeholder

organizations, and governments .

Before joining CRA, Dr . Smith was a vice president at Decision Focus Incorporated and leader of

the company's environmental policy analysis practice . She has also served as an economist in the

Office of Policy Planning and Evaluation of the US Environmental Protection Agency .

PROFESSIONAL EXPERIENCE

Below are listed examples of relevant projects by Dr

. Smith during her thirty-year career .

Risk Assessment and Uncertainty Analysis

•

Utility Air Regulatory Group - Technical review of PM risk analyses and demonstration of

methods for incorporating uncertainty into the analysis

. Technical reviews of health effects

literature for ambient particulate matter (PM),

with focus on potential errors in the statistical

inferences being used as the basis for risk and benefits estimates associated with the proposed

PM NAAQS .

•

US Department of Energy -

Assessed risks to public and workers at and surrounding sites

within DOE's nuclear weapons complex, for input into a DOE Report to Congress . Compared

---

ANNE E. SMITH

Page 2

occupational safety and health impacts associated with alternative site remediation plans and

review of OS&H programs .

•

US Department of Agriculture, Food Safety and Inspection Service. Worked closely with USDA

staff to develop a risk ranking system to support a risk-based procedure for allocating

Department resources for sampling for contaminants across the entire US food supply

.

•

Electric Power Research Institute - Developed the Constituent-Level PM Standards

Assessment Framework and associated control options data for assessing costs and risks of

different regulatory standards for PM at the regional level, and of different implementation

options

. Also performed uncertainty analysis on health damage functions and benefits

valuation

.

Electric Power Research Institute . Designed, developed and applied screening-level risk

estimation methods for prioritizing risks and other concerns associated with contaminated sites

.

Applications to coal tar sites and PCB spill sites .

•

Utility Solid Waste Activities Group . Prepared expert comments on correlation of Superfund

Hazard Ranking System results with actual environmental risks of sites, as part of rulemaking

process .

•

EPRI and individual utilities - Developed probabilistic model for assessing risks and

uncertainties associated with underground tank leaks, and associated tank management

decision support tools .

•

Stanford University- Developed air toxics risk analysis for Stanford University research

laboratories . Prepared statistical design for ambient monitoring program

.

•

US Environmental Protection Agency -

Performed risk assessment of the health effects of

ambient carbon monoxide, using physiological modeling and decision analysis, in support of the

National Ambient Air Quality Standards-setting process .

•

Various companies and government . Conducted training courses in risk assessment and risk

management for environmental and legal staff of large companies, and for government

agencies .

Environmental Economics

•

EPRI-Managed the design and implementation of a full-scale contingent valuation survey to

estimate willingness to pay for improvement in regional haze conditions in scenic vistas in the

Eastern U .S

. The survey explored the sensitivity of stated willingness to pay to different

questionnaire formats

. Results were found to be sensitive to alternative ways of reminding

respondents of their personal budgets

.

•

Southern Appalachian Mountains Initiative -

Led a team of expert economists and sociologists

to advise SAMI's multi-stakeholder group on the state of the art in valuing changes in air quality-

---

ANNE E. SMITH

Page 3

related values, and provided guidance for SAMI to plan a comprehensive socioeconomic impact

assessment of alternative emission management options for the southeastern region of the

United States . Valuation techniques covered included ecosystem-related changes, visibility,

recreation, health, materials, agro-forestry, lifestyle changes, and reliability . Also provided

guidance on options and techniques for assessing economic impacts and other distributional

impacts .

•

Stoel Rives - Provided expert testimony in legal proceedings on valuation of visibility benefits

associated with a power plant's emissions in legal proceedings .

•

US Environmental Protection Agency - Interdisciplinary review and critique of considerations

for valuing ecosystem-related damages associated with global climate change

.

•

Electric Power Research Institute -

Member of group of experts advancing the state of

knowledge regarding appropriate ways for estimating societal value associated with ecosystem

impacts of global climate change .

•

CONCAWE - Prepared policy-focused white paper on the state of the art in valuing mortality

risks associated with air pollution, and summarized needs for further methodological

development

.

•

Nuclear Electric, plc, UK

-

Reviewed and critiqued existing and on-going efforts to value the

environmental externalities of electricity fuel cycles . Prepared a research plan in this area for

the client to address data gaps in evaluating environmental externalities of power

.

•

National Acid Precipitation Assessment

Program - Prepared materials damages portion of

Integrated Assessment report and contributed to State-of-Science paper No . 27 on valuation of

materials damages .

•

US Department of Energy - Developed and demonstrated model for assessing interaction

between physical deterioration and economic behavior in assessing the losses due to painted

surface damages from acid deposition

.

Integrated Environmental Policy Assessment

•

Electric Power Research

Institute-Prepared a framework integrating scientific and economic

models and data to assess the cost-effectiveness of alternative mercury emissions control

policies

. Prepared paper demonstrating the framework for two alternative utility sector

emissions policies, including cap-and-trade versus a MACT standard .

•

Grand Canyon Visibility Transport Commission

- Led the development of the GCVTC's

Integrated Assessment System, its associated database of emissions control measures, and

projected baseline of visibility conditions in the southwestern region of the United States

. Also

applied a 15-region REMI model of the western United States to assess the macroeconomic

---

ANNE E . SMITH

Page 4

impacts of alternative visibility management strategies generated through use of the Integrated

Assessment System .

•

US Environmental Protection Agency - Designed and developed a multi-criteria decision-

aiding framework, TEAM (Tool for Environmental Assessment and Management), for building

consensus on complex public policy decisions marked by long-term uncertainties . Applications

to coastal zone management, water resources, and agricultural strategies in the United States

and abroad .

•

US Environmental Protection Agency- Prepared an integrated assessment model for climate

change costs and benefits (PEF), and used it to explore the trade-offs between costs and

benefits for alternative time paths to achieve atmospheric stabilization of greenhouse gases .

•

National Acid Precipitation Assessment Program - Advised the Director of NAPAP in

managing its Integrated Assessment of findings from its diverse research fields, with particular

emphasis on uncertainties assessment and communication .

•

Utility Solid Waste Activities Group . Analysis of cost and environmental benefits of Federal

policy options for management of underground storage tanks . Prepared expert report for

USWAG comments on Federal proposed regulations to manage tanks .

•

Secretary of Energy, Mexico-Analyzed the role of natural gas in an environmentally sound

energy policy for Mexico, focusing on the air quality impacts of such policy decisions . Assessed

the return on investments for alternative refinery investment options that could support a

government natural gas strategy . Liaison with U .S. energy and environmental programs

.

Environmental Markets Modeling and Policy Impact Assessment

•

Edison Electric Institute, EPRI, other

industry organizations, and private corporations-

Developed an integrated modeling framework for assessing costs and economic impacts of

multi-pollutant emissions trading policies in the U .S

. Framework incorporates a bottom-up, unit-

level model of U .S

. electricity sector with a top-down macroeconomic model of the U .S .

economy at large . Led the implementation of data for assessing mercury emissions and

controls for input to the model . Submitted formal comments on cost and impact analyses for

rulemaking process leading to the Clean Air Mercury Rule (CAMR), and also on the Clean Air

Interstate Rule (CAIR), both of which were finalized in 2005

.

•

[Confidential International Power Company]-In

a country with no previous emissions trading

experience, provided expertise on program design considerations, analysis needs, and cost-

reduction opportunities in developing a regional emissions trading program .

•

Americans for Equitable Climate

Solutions-Quantified the economic impacts and cost-

effectiveness of incorporating a "safety valve" into a greenhouse gas cap-and-trade program

.

---

ANNE E. SMITH

Page

5

•

Several clients-Analyzed the costs and economic impacts of the McCain-Lieberman Bill to cap

U.S . greenhouse gas emissions . An important insight from this effort was that long-run policy

and cost expectations can strongly affect even the near-term economic impacts of such a

policy . This demonstrated the importance of using dynamic or forward-looking models in

estimating policy costs .

•

Center

for

Clean

Air Policy -

Developed state impact models to assess the distributional

impacts to sectors of carbon trading policies that employ alternative ways of distributing the

carbon permits . Focus of work was on efficiency-equity trade-offs .

• EPRI - Developed a general equilibrium model for analysis of alternative ways of achieving

greenhouse gas targets, including emissions trading and hybrids of trading with technology

standards

. Added distortions of existing taxes to allow evaluation of efficiency-distributional

trade-offs associated with alternative permit allocation schemes .

•

Edison Electric Institute

-

Prepared two papers on emissions trading . First paper analyzed

errors being made in the interpretation of Title IV SO

2

allowance prices and their relationship to

actual costs of achieving the SO 2 emissions reductions under Title IV

. Second paper analyzed

the differences in markets for S0 2,

NO, and greenhouse gases, and the challenges in creating

effective emissions trading programs for each one .

•

Reason Public Policy Institute - Assessed costs and regional economic impacts of proposed

national air quality standards for particulate matter and ozone . Used multi-region REMI national

model to assess economic impacts, including regional competitiveness effects, job loss/creation

by sector, income impacts, and equity/distributional impacts .

•

US Environmental Protection Agency-

Developed engineering-based model (GEMINI)

integrating environmental and energy-economy feedbacks, for use in evaluating a range of

regulatory options to control greenhouse gases

; this effort involved a detailed analysis of energy

subsidy impacts .

•

Nuclear Electric, plc, UK -

Developed engineering-based economic model of UK energy

markets for use in evaluating the national value of nuclear power in helping the UK meet its

environmental objectives .

• US Environmental Protection Agency-

Investigated practical implementation issues for using

emissions trading to address global climate change goals, and compared emissions trading to

other incentive mechanisms .

Business Decisions and Environmental Risk Management

•

Southern Company-Supported senior executives of the company in the planning and

development of its May 2005 report to shareholders on environmental assessment

. Activities

included the modeling of climate policy scenarios, integration of results into internal corporate

analyses, and participation in presentations to the board of directors

.

---

• [Confidential Diversified Energy Company]--Assessed the sensitivity of profitability to potential

climate policy of the individual business operations across the varied operations of a large

diversified energy company . This effort enabled an integrated and internally-consistent view of

overall corporate risks and opportunities .

•

Cooperative Research Network of National Rural Electric Cooperative

Association-Prepared

report explaining business opportunities and strategies for cooperative utilities as participants in

upcoming NO, emissions trading programs .

•

[Confidential Power Companies]-Developed real options analysis for developing corporate

NO, compliance strategies, accounting for regulatory and market uncertainties

. One of these

analyses identified ways to reduce compliance costs by over $60 million

.

•

Petro-Canada-Prepared a company-wide assessment of the firm's business strategy and

recommended adjustments in light of potential new developments in air quality and climate

change policy . Developed real-options analyses for specific asset development projects that

were presented to the firm's CEO and executive team .

•

Skadden, Arps, Slate, Meagher, and Flom,

LLP-In support of major litigation, managed

analysis and delivery of an expert report regarding probabilistically sound estimates of

environmental remediation liabilities reportable under SEC rules .

•

Comision Federal de Electricidad, Mexico-Developed utility-company emissions control

strategies in the context of integrated energy planning for Mexico .

TESTIMONY

•

"Science and Risk Assessment Behind the EPA's Proposed Revisions to the Particulate Matter

Air Quality Standards" U.S. Senate Environment and Public Works Committee,

July 2006 .

•

"Economic Impacts of Various Proposals to Reduce Domestic Greenhouse Gas Emissions"

U.S. Senate Committee on Energy and Natural

Resources, September 2005 .

•

Expert witness on estimating economic benefits of visibility improvements, State of

Washington

Pollution Control Hearings Board, December 1998 .

• "The Proposed Regional Haze Regulation and its Relationship to the Work of the Grand

Canyon Visibility Transport Commission," U.S.

Senate Committee on Energy and Natural

Resources, Subcommittee

on Forests and Public Land Management, October 1997

.

• "Scientific Foundations for U .S

. EPA's Proposed New National Ambient Air Quality Standard for

PM2,5,"

U.S

.

Senate

Committee on Environment and Public Works, Subcommittee on Clean Air,

Wetlands, Private Property, and Nuclear

Safety, February 1997 .

ANNE E. SMITH

Page 6

---

•

On costs and benefits of PM2.5 NAAQS, EPA Public Hearings on PM2.5 Proposed Rule, Boston,

MA, January 1977 .

•

On PM2 .5 and ozone risk analysis and risk management, before EPA's Clean Air Scientific

Advisory Committee, (multiple occasions), Durham, NC, 1996-2006

.

ADVISORY COMMITTEES

•

Congressionally Mandated Committee on Management of Certain Radioactive Waste Streams

Stored in Tanks at Three Department of Energy Sites, National Academy of Sciences, 2005-

2006

.

•

Committee on Risk-Based Approaches for Transuranic and High-Level Radioactive Waste,

National Academy of Sciences, 2003-2005 .

•

Committee on the Characterization of Remote-Handled Transuranic Waste for the Waste

Isolation Pilot Plant, National Academy of Sciences, 2001-2002 .

•

Programmatic Review of EPA's PM2,5 Research Program, Subcommittee on Risk Management,

Board of Scientific Counselors, U .S. Environmental Protection Agency, 1999 .

•

Technical Expert to Committee on Idaho National Engineering and Environmental Laboratory

High-Level Waste Alternative Treatments, Board on Radioactive Waste Management, National

Academy of Sciences, 1998 .

•

Committee to Evaluate Science, Engineering, and Health Basis of DOE's Environmental

Management Program, Subcommittee on Priority Setting, Timing and Staging, National

Academy of Sciences, 1995-2002 .

•

Panel on DOE's Environmental Restoration Priority-setting System, National Academy of

Sciences, 1992-1993 .

•

Dialogue on Global Climate Change and National Energy Policy, Keystone Foundation,

Keystone, CO, 1989-1990.

•

Working Group on Assessment of the Impact of Pollutants on the Marine Environment, Group of

Experts on Scientific Aspects of Marine Pollution (GESAMP), United Nations, Bangkok,

Thailand, 1984 .

•

Working Group on Biological Aspects of Thermal Pollution of the Marine Environment,

GESAMP, United Nations, Rome, Italy, 1983 .

•

Ad-hoc Committee on Cost-Benefit Analysis, United Nations Economic Commission for Europe,

Geneva, Switzerland, 1982 .

ANNE E. SMITH

Page 7

---

SELECTED PAPERS

•

"Price, Quantity, and Technology Strategies for Climate Change Policy," (with W . D.

Montgomery), chapter in Human Induced Climate Change : An Interdisciplinary Assessment,

Cambridge University Press, 2006 .

•

"Methods and Results from a New Survey Of Values For Eastern Regional Haze

Improvements," with M . Kemp, T . Savage and C . Taylor, Journal of the Air and Waste

Management Association, November 2005 .

•

"Implications of Trading Implementation Design for Equity-Efficiency Trade-offs in Carbon

Permit Allocations", with M . Ross and D . Montgomery (in revision for Energy

Journal) .

•

"Improving Estimates of Uncertainty in PM 2

,

5 Health Risk Analyses", with P . Labys (in revision

for Risk Analysis) .

•

"Not All Problems Have Been Solved in Emissions Trading", Natural Gas,

John Wiley & Sons,

Inc.,

December 2001, pp . 15-20

.

•

"An Empirical Mechanistic Framework for Heat Related Illness," with N . Y. Chan, M . T. Stacey,

and others, Climate Research Vol. 16 (January 2001), pp . 133-143 .

•

"Global Climate Change and the Precautionary Principle," with W . D . Montgomery, Human and

Ecological Risk Assessment, Vol . 6, No. 3, (2000), pp . 399-412

.

•

"

Analysis of the Reduction of Carbon Emissions Through Tradable Permits or Technology

Standards in a CGE Framework," with E

. J . Balistreri, P . M. Bernstein, and others,

AEREIHarvard Workshop on Market-Based Instruments for Environmental Protection,

Cambridge, MA, July 18-20,1999 .

•

"An Integrated Assessment Framework for Climate Change and Infectious Diseases," with N

. Y.

Chan, K . L . Ebi, and others, Environmental Health Perspectives, Vol

. 107, No . 5, May 1999 .

•

"Preserving Flexibility in the Kyoto Protocol," Journal of the

Forum for Environmental Law,

Science, Engineering and Finance, August 1998 .

•

"Making Appropriate Comparisons of Estimated and Actual Costs of SO 2

Emissions Reductions

under Title IV," Paper 98-TP49 .01,

Air and Waste Management Association Conference, San

Diego, CA (June 14-18, 1998)

.

•

"The Costs Of Reducing Utility SO 2 Emissions-Not As Low As You Might Think" with J

. Platt

and A . D . Ellerman, Massachusetts Institute of Technology, Center for Energy and

Environmental Policy Research, WP-98010, August 1998

. (A shorter version of the paper was

published in Public Utilities Fortnightly, May 15, 1998) .

ANNE E . SMITH

Page

8

---

• "The GCVTC Integrated Assessment : Putting All the Science Together," Paper 96-TP46 .04, Air

and

Waste Management

Association Conference,

Nashville, TN (June 23-28, 1996) .

•

"Energy Modeling with Environmental Constraints," in Nuclear Energy in the 21st Century-An

Environmental Bonus? Proceedings of the International Conference of the British Nuclear

Energy Society, Bath, U .K., April 14-15, 1994

.

•

"Integrated Environmental/Energy Policy Analysis for the U .K.," with Stephen M . Haas . In

Global Climate Change: Science, Policy, and Mitigation Strategies, C .V . Mathai and G .

Stensland (ads.), Air and Waste Management Association, 1994 .

•

"A Multi-attribute Approach to Choosing Adaptation Strategies," with H

. Quan Chu . In Global

Climate Change : Science, Policy, and Mitigation

Strategies, C .V . Mathai and G . Stensland

(eds.), Air and Waste Management Association, 1994

.

•

"The Effect of Daytime Running Lights on Crashes Between Two Vehicles in Saskatchewan : A

Study of a Government Fleet," with G . A. Sparks, R . D. Neudorf and others, Accident Analysis

and Prevention, 25:5 (1993), pp . 619-625 .

•

"Issues in Implementing Tradable Allowances for Greenhouse Gas Emissions," Paper 91-

169.4, Proceedings of the Air & Waste

Management Association Conference, Vancouver, BC,

June 1991 .

•

"A Probabilistic Model for Assessing Damages of Acid Deposition to Painted Surfaces," in

Acid

Rain: Scientific and Technical Advances, Selper Ltd ., London, 1987

.

•

"TANKS

: A Software Tool for Managing the Risks of Underground Storage Tanks," in Managing

Environmental Risks, APCA, Washington, D.C ., 1987 .

•

"The Costs and Benefits of Sulphur Oxide Control," with R .A. Barnes and G

.S. Parkinson,

Journal of the Air Pollution Control Association, 1983.

ANNE E

. SMITH

Page 9

---

TESTIMONY OF AMEREN CORPORATION

BY MICHAEL L. MENNE, VICE PRESIDENT

RECEIVED

CLERK'S OFFICE

JUL Z 0i 2006

Pollution

STATE OF

ControlILLINOIS

bu..,n

My name is Michael L . Menne and I am the Vice President of the Environmental,

Safety and Health Department for Ameren Services Company, a subsidiary of Ameren

Corporation. I am responsible for developing policies and procedures relating to

environmental compliance for Ameren Corporation and its subsidiaries . In addition, I

am responsible for ensuring that Ameren's operating subsidiaries comply with state and

federal permitting conditions and regulatory requirements

. In presenting this testimony,

I am speaking solely on behalf of Ameren and not on behalf of the IEPA

.

Through its operating subsidiaries, Ameren operates regulated utilities and power

plants in Illinois and Missouri . Ameren Corporation owns the following utility companies:

Illinois Power Company (AmerenlP), Central Illinois Public Service Company

(AmerenCIPS), Central Illinois Light Company (AmerenCILCO), and Union Electric

Company (AmerenUE), the last of which operates primarily in the State of Missouri

.

The utility companies procure power from the following Ameren generating companies

also located in Illinois

: Ameren Energy Resources Generating Company (AERG),

Ameren Energy Generating Company (AEG), and Electric Energy Inc . (EEI). In total,

Ameren's coal-fired facilities in Illinois comprise 19 steam generating units located at

seven plants throughout the state

. These are primarily base load facilities which

provide electricity for central and southern Illinois homes and businesses

. They employ

1,018 people in seven communities

. The proposed mercury rule you are debating today

certainly does impact Ameren company operations and our customers

.

Ameren companies -

particularly Ameren's predecessor company Union Electric

1

---

- which I have been affiliated with for over 30 years, has a long history of being

proactive in reducing emissions from our power plants

. This includes installing one of

the first commercial SO2 scrubbers in the late 1960's, developing Quality Control and

Quality Assurance programs for Continuous Emissions Monitoring systems with the

Federal EPA in the 1980's, developing the only utility-owned federally permitted PCB

destruction method - for which we received a Resource Steward Award from the State

of Missouri in 1983, and developing industry leading combustion control NO x reduction

methods on coal-fired power plants, beginning in 1989, for which we received the

Governor's Pollution Prevention Award in Missouri in 1998 . Indeed, our NO, emission

reduction program resulted in AmerenUE having the lowest NO, emitting large coal-fired

generating unit in the nation for 5 years running, and AmerenUE continues to have the

lowest NO, emitting cyclone-fired boiler in the nation operating without Selective

Catalytic Reduction technology .

Thus, when it became apparent a few years ago that coal-fired boilers were to be

controlled for mercury emissions, Ameren embarked on a program to research and

conduct tests to determine the feasibility of both reducing and monitoring mercury

emissions from our boilers . Ameren commenced extensive characterization studies

across its generating system to analyze mercury in coal, ash and flue gas

. Ameren has

been funding Washington University in St . Louis to develop non carbon-based injection

sorbents since 2003 . Ameren provided a host site for testing various carbon and non-

carbon based gas stream injection technologies in conjunction with the Department of

Energy at our AmerenUE Meramec facility in 2004. Ameren has retained ADA-ES, a

leading expert in the field of mercury control technologies, to conduct tests as part of the

2

---

Meramec program, as well as testing the effect of S03 injection on mercury removal at

our AmerenUE Labadie facility . Ameren has an agreement with the Energy and

Environment Research Center in North Dakota to study the formation and speciation of

mercury in power plant boilers . This year, Ameren will complete mercury testing at our

Joppa, Edwards, Hutsonville, Meredosia, and Newton plants in Illinois . In addition,

Ameren will be working with the Electric Power Research Institute to evaluate ways for

continuously measuring mercury emissions . Ameren recently announced a pollution

control technology exchange contract with Hitachi, Ltd . headquartered in Tokyo, Japan .

And finally, Ameren will be conducting a pilot test, with Washington University and

Powerspan, Inc

. out of New Hampshire, of a photo-chemical oxidation mercury control

technology under a congressionally funded grant to the Federal EPA at our AmerenUE

Rush Island facility in 2007 .

The point of raising all this is to illustrate to you that Ameren is taking the control

of mercury emissions from our power plants seriously . We want to understand just how

to attain and maximize mercury reductions, as well as measure mercury emissions, in

the most reliable and economically viable way for future compliance obligations on our

generating units

. This Board has heard much testimony as to the effectiveness of

mercury control technologies

. And while some testimony may seem contradictory of

others, the simple fact is that there are many variables that can affect the efficacy of

mercury control technology, particularly a technology such as activated carbon injection

.

Ameren is determined to find out how effective this type of technology will be on our

generating units .

Over the past 15 years, Ameren has reduced SO2

and NO, emissions 60 to 70%

3

---

across our generating fleet . As I mentioned, our combustion control technology

development program has been industry leading

- many units across the country

employ combustion controls to reduce NO, emissions that were piloted and perfected

on our generating units

. We have learned a great deal from this experience, but two

points in particular should be kept in mind that we believe are pertinent to the mercury

control program . First, it takes time to engineer, install, and "fine tune" new

technologies to achieve maximum performance

. Second, because of the many

variables involved, what you can achieve at one facility may not be reflective of what

you can achieve somewhere else

.

Ameren fully supports the goal of reducing mercury emissions in ways that are

technically feasible and economically reasonable

. In an attempt to develop a mercury

emissions reduction program, Ameren conducted an evaluation of its system and its

emission control capabilities

. In developing its compliance strategy, Ameren considered

a number of control technologies, including

: activated carbon, developing sorbents, Hg

oxidation catalyst, and wet scrubber additives

.

This Board has heard testimony that halogenated carbon injection (HCI) can

achieve 90% mercury reductions

. However, we do not believe Ameren's system can

make the IEPA 90% reduction requirement with HCI alone

. This is primarily due to

predominate use of subbituminous coal and S03 conditioning (used for opacity control,

typically with subbituminous coals) on its system

. 90% of Ameren's MWs have S03

conditioning systems installed

. Ameren has determined that S03 conditioning severely

impacts the performance of halogenated sorbents to reduce mercury emissions

.

Ameren concluded that halogenated activated carbon preferentially absorbed the S03,

4

---

interfering both with mercury removal and opacity compliance . Mr. Stoudt has testified

that S03 flue gas conditioning systems may limit sorbent effectiveness such that HCI

alone may not suffice to reach 90% removal . Ameren's experience with its system

confirms Mr. Stoudt's position .

Further evaluation by the company, in conjunction with ADA, revealed that

mercury emission reductions that would approach 90% removal using current

technologies would require either a wet FGD/SCR system for those units still burning

bituminous coal, or a fabric filter plus sorbent injection for units burning subbituminous

coal. The addition of a fabric filter to a subbituminous unit would also allow the unit to

reduce or cease S03 conditioning, and would further generally, and independently,

improve the performance of the sorbent over an ESP configuration . The installation of

fabric filters in these two applications, however, is substantially more expensive than an

ACI-halogenated sorbent system and would take much longer to design, procure and

install

. In addition, Ameren concluded that fabric filter installations on subbituminous

units, and SCR/FGD or fabric filters on bituminous units, would need to be coordinated

with the company's overall NO, and SO2 emissions reduction strategy .

An Alternative, Multi-Pollutant Approach

For many years, the power industry and other stakeholders have been struggling

with the complexity of new and overlapping emission reduction mandates . The end

goal of emission reduction is clear and a coordinated and synchronized approach to

those reductions allow the power industry the best means of reaching that goal

. The

proposal we put before you today sets out a regulatory scheme that addresses three

pollutants-SO2, NO

x and mercury-in a way that synchronizes and coordinates regulatory

5

---

reduction mandates that are clearly on the way . This multi-pollutant mechanism

balances the environmental goal of effective controls across pollutants and, at the same

time, supports the goal for industry of a more stable and certain regulatory framework

.

Indeed, with these two goals as the focus, the results are more certain and accelerated

reductions, more effective planning and smarter technology choices

. The alternative

that we have developed in conjunction with Illinois EPA called "Multi-Pollutant

Standards," or "MPS", will reduce mercury emissions by 90% on most units, as well as

make significant reductions in nitrogen oxide and sulfur dioxide, above those required

by the Federal Clean Air Interstate Rule (CAIR) .

Under the proposal, Ameren intends to install either HCI or FGD/SCR or

equivalent technology on all of its Illinois units greater than 90 MW in 2009, and then

meet a 90% mercury reduction requirement on these units by 2015

. To qualify for this

mercury control plan, a generating system must install additional NOx and SO2 control

technologies that achieve stringent multi-pollutant NOx and SO

2 emission rates set forth

in the proposal

. The multipollutant alternative allows Ameren to take advantage of the

"co-benefits" that established NOx and SO

2 pollution control equipment provide for

mercury control This approach both assures that 90% mercury removal can be met,

and provides substantial beyond-CAIR NOx and SO2 controls

.

Federal CAIR was issued in March, 2005, and will reduce power plant emissions

of NO, and SO2

from sources in the eastern half of the country by about 60% (NO

x) and

70% (SO2)

from 2003 levels when fully implemented

. CAIR relies on an emissions cap

and trade program that has a two-phase step down, with the first phase NO

x reduction

occurring beginning January 1, 2009 and the first phase SO

2

reduction occurring

6

---

beginning January 1, 2010 . The second and final reduction phase for each pollutant

begins January 1, 2015 .

In addition to CAIR, many states, including Illinois, have begun additional

emissions reduction planning to address their ozone and PM 2 .5 nonattainment areas .

Consequently, emission reductions of NO, and SO2 that are beyond CAIR will further

reduce ambient levels of ozone and PM 2 .5, and provide substantial environmental

benefits to the residents of Illinois.

LADCO's Midwest Regional Planning Organization lists CAIR Phase 2 2015

emission rates as 0 .125 Ibs/mmBtu for NOx and 0 .47 Ibs/mmbtu for SO2 . Under

Ameren's proposal, power companies electing the multi-pollutant option, at a minimum,

will have to meet a system-wide NO, emissions rate of 0 .11 Ibs/mmBtu by 2012 (more

and earlier than CAIR) and a system-wide SO2 emissions rate of 0 .33 lbs/mmBtu by

2013, dropping to 0 .25 lbs/mmBtu by 2015 (again, more and earlier than CAIR)

.

To structure the Multi-Pollutant Standards or MPS, Ameren's built upon

IEPA's recent Temporary Technology Based Standard (TTBS) . The TTBS approach

recognizes that "one size does not fit all," and provides a temporary extension from the

90% removal requirement until 2015, when 90% reduction is required, provided units

subject to exemption install ACI and inject halogenated PAC by 2010

. The TTBS

recognizes that ACI and halogenated PAC will get whatever removals it will get upon

installation, and that level of removal is adequate until the technology can be developed

and installed to ensure 90% removal

. Ameren believes that although the TTBS may

provide an alternative for some, it does not allow for multi-pollutant coordination and

reductions, and it does not address Ameren's technical conclusions on the effectiveness

7

---

of ACI or HCI at its plants . Building upon the TTBS concepts, Ameren and other

companies that elect to be covered by the proposal, will be required to install HCI (or

FGD/SCR) on all units, except certain very small units (i.e ., units under 90 MW), by

2010, and operate those systems, as generally provided in the TTBS . In addition, all

units installing ACI by 2010 will have to meet 90% removal or the alternative output

based limit by 2015, consistent with the TTBS, and any small units that did not install

ACI in 2010 will have to install it by 2012 . Under Ameren's proposal, to provide an

additional significant public health benefit, power companies electing to use the multi-

pollutant approach will also have to install NO

X

and SO2 pollution control equipment not

otherwise required by the Federal CAIR program .

Ameren's only condition is that it be provided the same timeframe contemplated

by the TTBS to meet the 90% mercury reduction requirement, so that it can sensibly

manage the massive amount of equipment procurement and construction, and raise the

capital required to meet this commitment and so that it can coordinate the scrubber and

FGD/SCR controls with its beyond-CAIR multipollutant plan

Like the TTBS, Ameren's proposal includes injection of halogenated sorbent at

specified rates, and incorporates the alternatives provided by the TTBS, including the

ability to inject at a lower rate if Ameren demonstrates the higher rate will interfere with

meeting opacity and particulate compliance

. This will ensure that the ACI systems are

operated for effective mercury removal .

Ameren's amendment reflects our commitments to meet specific regulatory limits

for mercury by 2010 and 2015, representing 90% reduction in mercury on all but its

smallest units, and substantial and real reductions in NO, and SO2 which go beyond the

8

---

CAR requirements . The proposal also incorporates other requirements regarding NO,

and S02

reductions requested by the Agency .

The proposal we are submitting does not come before you lightly . The

commitment in pollution control technology could cost as much as $2 billion in

investments on a very aggressive schedule . Ameren brings forth this proposal as an

attempt to satisfy the spirit of the proposed Illinois rule and we believe it provides

significant air quality benefits not otherwise contemplated through this rule

.

I have attached to my Testimony as Attachment 1 the Multi-Pollutant Standards

(MPS) proposal . We believe this proposal in conjunction with the underlying rule

represents the maximum reductions in mercury, NO, and SO2 that are technically

feasibly and economically reasonable for Ameren's facilities in the timeframes provided

.

We urge the Pollution Control Board to include the multi-pollutant standards language

along with, and as a part of, the Illinois EPA's proposed regulation

.

9

---

(1)

(3)

PROPOSED MULTI-POLLUTANT STANDARDS

pursuant

Base Emission

to Section

Rate means,

225.233,

for

the

a group

average

of

emission

EGUs subject

rate of

to

NOx

emission

or S02

standards

from the

for

EGUs,

NOx

in

and

poundsS02

per million Btu heat input, for calendar years 2003 through 2005 (or for seasonal NOx, the 2004

and 2005 ozone seasons), as determined from the data collected and quality assured by the

USEPA pursuant to the federal Acid Rain and NOx Budget Trading Programs for emissions and

heat input of the group of EGUs .

Section 225 .233

Multi-Pollutant Standards (MPS)

a)

General

As an alternative to compliance with the emissions standards of Section

225 .230(a) of this Subpart, the owner of eligible EGUs may elect for such EGUs

to comply with this Section, which establishes control requirements and standards

for emissions of NOx and SO2, as well as emissions of mercury .

(2)

For the purpose of this Section :

(A)

An eligible EGU is an EGU located in Illinois that commenced

commercial operation on or before December 31, 2000

.

(B)

For the purposes of this Section, ownership of an eligible EGU is

determined based on direct ownership, or by holding a majority interest in

a company that owns an EGU or EGUs or by common ownership of the

company that owns the EGU, whether through a parent /subsidiary

relationship, as a sister corporation, or as an affiliated corporation with the

same parent corporation, provided that the owner has the right or authority

to submit a CAAPP application on behalf of the EGU .

The owner of one or more EGUs electing to comply with this Subpart by means

of this Section must submit an application for a CAAPP permit modification to

the Agency, as provided in Section 225 .220 of this Subpart, that includes the

information specified in subsection (b) of this Section and that clearly states the

owner's election to comply with the provisions of this Section 225 .233 .

(A)

If the owner of one or more EGUs elects to comply with this Subpart by

means of this Section, then all EGUs it owns in Illinois as of July 1, 2006,

as defined in subsection (a)(2)(B) of this Section, shall be thereafter

subject to the standards and control requirements of this Section, except as

provided in subsection (a)(3)(B) below. Such EGUs shall be referred to

as an MPS Group .

(B) Notwithstanding the foregoing, the owner may exclude from the MPS

Group any EGU scheduled for permanent shutdown that the owner so

designates in its CAAPP application required to be submitted pursuant to

---

b)

Notice of Intent

The owner of one or more EGUs that intends to comply with this Subpart by means of

this Section shall notify the Agency of its intention by December 31, 2007, which

notification shall be accompanied by the following :

(1)

(3)

(4)

A summary of the current control devices on the EGUs and identification of the

additional control devices that will likely be needed for the EGUs to comply with

emission control requirements of this section

.

Identification of any EGU or EGUs that are scheduled for permanent shut down,

as provided by Section 225

.235, which will not be part of the MPS Group and

will not be complying with this Subpart by means of this Section

.

(5)

c)

Control Technology Requirements for Emissions of Mercury

:

(1)

(A)

subsection (a)(3), with compliance for such unit(s) to be achieved by

means of Section 225 .235 of this Subpart

.

(4)

When an EGU is subject to this Section, the requirements of this Section shall

apply to all owners and operators of the EGU, and to the designated representative

for the EGU.

Identification of each of the EGUs that will be complying with this Subpart by

means of the multi-pollutant standards contained in this Section, with evidence

that the owner has identified all EGUs that its owns in Illinois as of July 1, 2006,

and that commenced commercial operation on or before December 31, 2000

.

(2)

If an EGU identified above is also owned or operated by an entity different than

the owner submitting the notice of intent, a demonstration that the submitter has

the right to commit the EGU or authorization from the responsible official for the

EGU accepting the application .

The Base Emission Rates for the EGUs, with copies of supporting data and

calculations

.

For each EGU in an MPS Group with a capacity of 90 MW or more, for

the period beginning July 1, 2009 (or December 31, 2009 for an EGU for

which an SO2 scrubber is being installed to be in operation by December

31, 2009), and ending on December 31, 2014 (or such earlier date that the

EGU is subject to the mercury emission standard in subsection

(d)(1) of

this Section), the owner or operator of the EGU shall install, to the extent

not already installed, and properly operate and maintain one of the

following :

2

---

(i) A Halogenated Activated Carbon Injection System, complying with

the sorbent injection requirements of subsection (c)(2) of this Section,

except as may be otherwise provided by subsection (c)(4) of this Sec

ion, and followed by a Cold-Side Electrostatic Precipitator or Fabric

Filter ; or

(ii)

If the boiler fires bituminous coal, a Selective Catalytic Reduction

(SCR) System and an SO

2

Scrubber .

(B)

For each EGU in an NIPS Group with a capacity that is less than 90 MW,

unless the EGU is subject to the emission standards in subsection (d)(2) of

this Section, beginning on January 1, 2013, and continuing until such date

that the owner or operator of the EGU commits to comply with the

mercury emission standard in subsection

(d)(2) of this Section, the owner

or operator of the EGU shall install and properly operate and maintain a

Halogenated Activated Carbon Injection System, complying with the

sorbent injection requirements of subsection

(c)(2), except as may be

otherwise provided by subsection (c)(4) of this Section, and followed by

either a Cold-Side Electrostatic Precipitator or Fabric Filter

. The use of a

properly installed, operated and maintained Halogenated Activated Carbon

Injection System that meets the sorbent injection requirements of

subsection (c)(2)

of this Section is referred to as the "principal control

technique ."

(2)

For each EGU for which injection of halogenated activated carbon is required by

subsection (c)(1)

of this Section, the owner or operator of the EGU shall inject

halogenated activated carbon in an optimum manner, which, except as provided in

subsection

(c)(4) of this Section, shall be deemed to be the following

:

(A)

Use of an injection system designed for effective absorption of mercury,

considering the configuration of the EGU and its ductwork

;

(B)

The injection of halogenated activated carbon manufactured by Alstom,

Norit, or Sorbent Technologies, or the injection of other halogenated

activated carbon or sorbent that the owner or operator of the EGU shows

to have similar or better effectiveness for control of mercury emissions

;

(C)

The injection of sorbent at the following minimum rates, as applicable

:

(i)

For an EGU firing subbituminous coal, 5

.0 pounds per million

actual cubic feet.

(ii)

For an EGU firing bituminous coal, 10

.0 pounds per million actual

cubic feet.

3

---

(3)

(iii) For an EGU firing a blend of subbituminous and bituminous coal,

a rate that is the weighted average of the above rates, based on the

blend of coal being fire .

(iv)

A rate or rates lower than the rate specified above may be set on a

unit-specific basis to the extent that the owner or operator of the

EGU demonstrates that such rate or rates are needed so that carbon

injection will not increase particulate matter emissions or opacity

so as to threaten compliance with applicable requirements for

particulate matter or opacity .

For this purpose, flue gas flow rate shall be determined for the point of sorbent

injection, provided, however, that this flow rate may be assumed to be identical to

the stack flow rate if the gas temperatures at the point of injection and the stack

are normally within 100° F, or may otherwise be calculated from the stack flow

rate, corrected for the difference in gas temperatures.

The owner or operator of an EGU that seeks to operate an EGU with an activated

carbon injection rate or rates that are set on a unit-specific basis pursuant to

subsection (c)(2)(C)(iv)

of this Section shall submit an application to the Agency

proposing such rate or rates, and shall meet the following requirements

:

(A)

The application shall be submitted as

an application for a new or revised

federally enforceable operating permit for the EGU and include a

summary of relevant mercury emission data for the EGU, the unit-specific

injection rate or rates that are proposed and detailed information to support

the proposed injection rate or rates

.

(B)

This application shall be submitted no later than the date that activated

carbon must first be injected . For example, the owner or operator of an

EGU that must inject activated carbon injection pursuant to subsection

(c)(1)(A) of this subsection shall apply for unit-specific injection rate or

rates by July 1, 2009 . Thereafter, the owner or operator of the EGU may

supplement its application

.

(C)

The decision of the Agency denying a permit or granting a permit with conditions

that set a lower injection rate or rates may be appealed to the Board pursuant to

Section 39 of the Act.

(D)

The owner or operator of an EGU may operate at the injection rate or rates

proposed in its application until a final decision is made on the application,

including a final decision on any appeal to the Board

.

4

---

(4)

During an evaluation of the effectiveness of a listed sorbent, an alternative

sorbent, or other technique to control mercury emissions, the owner or operator of

an EGU need not comply with the requirements of subsection (c)(2) of this

Section for such system as needed to carry out an evaluation of the practicality

and effectiveness of such technique, as further provided below :

(A)

The owner or operator of the EGU shall conduct the evaluation in

accordance with a formal evaluation program submitted to the Illinois

EPA at least 30 days in advance.

(B)

The duration and scope of the evaluation shall not exceed the duration and

scope reasonably needed to complete the desired evaluation of the

alternative control technique, as initially addressed by the owner or owner

in a support document submitted with the evaluation program

.

(5)

(C)

The owner or operator of the EGU shall submit a report to the Illinois EPA

no later than 30 days after the conclusion of the evaluation describing the

evaluation that was conducted and providing the results of the evaluation

.

(D)

If the evaluation of the alternative control technique shows less effective

control of mercury emissions from the EGU than achieved with the

principal control technique, the owner or operator of the EGU shall

resume use of the principal control technique

. If the evaluation of the

alternative control technique shows comparable effectiveness to the

principal control technique, the owner or operator of the EGU may either

continue to use the alternative control technique in a manner that is at

least as effective as the principal control technique or resume use of the

principal control technique

. If the evaluation of the alternative control

technique shows more effective control of mercury emissions, the owner

or operator of the EGU shall continue to use the alternative control

technique in a manner that is more effective than the principal control

technique, if it continues to be subject to this subsection (c) of this

Section.

In addition to complying with the applicable recordkeeping and monitoring

requirements in Sections 225

.240 through 225 .290 of this Subpart, the owner or

operator of an EGU electing to comply with this Subpart by means of this

Section shall also:

(A)

For the first 36 months that injection of sorbent is required, maintain

records of the usage of sorbent, the exhaust gas flow rate from the EGU,

and the sorbent feed rate, in pounds per million actual cubic feet of

exhaust gas at the injection point, on a weekly average

.

(B)

After the first 36 months that injection of sorbent is required, monitor

activated sorbent feed rate to the EGIJ, flue gas temperature at the point of

5

---

d)

Emission Standards for Mercury

(1)

(3)

sorbent injection, and exhaust gas flow rate from the EGU, automatically

recording this data and the sorbent carbon feed rate, in pounds per million

actual cubic feet of exhaust gas at the injection point, on an hourly

average.

(C)

If a blend of bituminous and sub-bituminous coal is fired in the EGU, keep

records of the amount of each type or coal burned and the required

injection rate for injection of activated carbon, on a weekly basis .

(6)

In addition to complying with the applicable reporting requirements in Sections

225.240 through 225 .290 of this Subpart , the owner or operator of an EGU

electing to comply with this Subpart by means of this Section shall also submit

quarterly reports for the recordkeeping and monitoring conducted pursuant to

subsection (c)(5) of this Section .

For each EGU in an MPS Group with a capacity that is 90 MW or more,

beginning January 1, 2015 (or such earlier date that the owner or operator of the

EGU notifies the Agency that it will comply with these standards) and thereafter,

the owner or operator of the EGU shall comply with one of the following

standards on a rolling 12-month basis

:

(A)

An emission standard of 0

.0080 lb mercury/GWh gross electrical output ;

or

(B)

A minimum 90-percent reduction of input mercury .

(2)

For each EGU in an MPS Group with a capacity that is less than 90 MW,

beginning on the date that the owner or operator of the EGU notifies the Agency

that it will comply with these standards and thereafter, the owner or operator of

the EGU shall comply with one of the following standards on a rolling 12-month

basis :

(A)

An emission standard of 0 .0080 lb mercury/GWh gross electrical output

;

or

(B)

A minimum 90-percent reduction of input mercury .

Compliance with the mercury emission standard or reduction requirement shall be

calculated in accordance with Section 225

.230(a) or (d) of this Subpart .

e)

Emission Standards for NOx and SO

2

(1)

NOx Emission Standards :

6

---

U

(2)

SO2 Emissions Standards :

(3)

(1)

(A)

Beginning in calendar year 2012, and each calendar thereafter, for the

EGUs in each MPS Group, the owners and operators of the EGUs shall

comply with an overall NOx annual emission rate of no more than 0 .11

lbs/million Btu or a rate equivalent to 50 percent of the Base Annual Rate

of NOx emissions, whichever is more stringent .

(B)

Beginning in the 2012 ozone season and each ozone season thereafter, for

the EGUs in each MPS Group, the owners and operators of the EGUs shall

comply with an overall NOx seasonal emission rate of no more than 0.11

lbs/million Btu or a rate equivalent to 80 percent of the Base Seasonal

Rate of NOx emissions, whichever is more stringent .

(A)

Beginning in calendar year 2013 and continuing in calendar year 2014, for

the EGUs in each MPS Group, the owners or operators of EGUs shall

comply with an overall SO2 annual emission rate of 0 .33 lbs/million Btu

or a rate equivalent to 35 percent of the Base Rate of SO2 emissions,

whichever is more stringent .

(B) Beginning in calendar year 2015, and continuing in each calendar year

thereafter, for the EGUs in each MPS Grouping, the owners or operators

of EGUs shall comply with an overall annual emission rate for SO2 of 0

.25

lbs/million Btu or a rate equivalent to 30 percent of the Base Rate of SO2

emissions, whichever is more stringent

.

Compliance with the NOx and S02 emission standards shall be determined

in

accordance with Sections 225

.310, 225 .410, and 225 .510 of this Part . The owners

or operators of EGUs must complete the determination of compliance by March 1

of the following year for annual standards and by November 1 for seasonal

standards, by which date a compliance report shall be submitted to the Agency .

Requirements for NOx and S02 Allowances

The owners or operators of EGUs in an MPS Group shall not sell or trade to any

person or otherwise exchange with or give to any person NOx allowances

allocated to the EGUs in the MPS Group for vintage years 2012 and beyond that

would otherwise be available for sale, trade or exchange as a result of actions

taken to comply with the standards in subsection (e) of this Section . Such

allowances that are not retired for compliance shall be surrendered to the Agency

on an annual basis, beginning in calendar year 2013

. This provision does not

apply to the use, sale, exchange, gift or trade of allowances among the EGUs in an

MPS Group .

(2)

The owners or operators of EGUs in an MPS Group shall not sell or trade to any

person or otherwise exchange with or give to any person S02 allowances

7

---

g)

allocated to the EGUs in the MPS Group for vintage years 2013 and beyond that

would otherwise be available for sale or trade as a result of actions taken to

comply with the standards in subsection (e) of this Section

. Such allowances that

are not retired for compliance shall be surrendered to the Agency on an annual

basis, beginning in calendar year 2014

. This provision does not apply to the use,

sale, exchange, gift or trade of allowances among the EGUs in an MPS Group

.

(3)

The provisions of this subsection do not restrict or inhibit the sale or trading of

allowances that become available from one or more EGUs in a MPS Group as a

result of holding allowances that represent over-compliance with the NOx or

SO2

standard in subsection (e) of this Section, once such a standard becomes effective,

whether such over-compliance results from control equipment, fuel changes,

changes in the method of operation or unit shut downs, or for other reasons

.

(4)

For purposes of this subsection, NOx and SO

2

allowances shall mean allowances

necessary for compliance with Sections 225

.310, 225 .410, 225 .510 of this Part, 40

CFR Part 72, or 40 CFR 96.101,

et seq., and 40 CFR 96 .301, et seq .

The

provisions of this Section do not prohibit the owners or operators of EGUs in an

MPS Group from purchasing or otherwise obtaining allowances from other

sources as allowed by law for purposes of complying with federal or state

requirements, excluding specifically the requirements of this Section

.

(5)

By March 1, 2010, and continuing each year thereafter, the owner or operator of

EGUs in an MPS Group shall submit a report to the Agency demonstrating

compliance with the requirements of this subsection for the previous year, which

shall include identification of any allowances that have been surrendered to the

USEPA or to the Agency, and identification of any allowances that were sold,

gifted, used, exchanged or traded because they became available due to over-

compliance .

Notwithstanding 35 Ill

. Adm. Code 201

.146(hhh), until an EGU has complied with the

applicable emission standards of subsections (d) and (e) of this Section for 12 months, the

owner or operator of the EGU shall obtain a construction permit for any new or modified

air pollution control equipment proposed to be constructed for emissions of mercury,

NOx or SO2.

8