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BEFORE

THE

ILLINOIS

POLLUTION

CONTROL

BOARD

THE MATTER OF

)

)

NOx TRADING

PROGRAM:

)

R06-22

AMENDMENTS

TO

35

ILL.

)

(Rulemaking — Air)

ADM. CODE PART2I7

)

MOTION

FOR

EXPEDITED ACTION

ON THE ILLINOIS

ENVIRONIWENAL.

R

JJLATORY

GROUP’S ALTERNATIVE

PROPOSAL

HOW

COMES

the ILLINOIS

ENVIRONMENTAL

REGULATORY

GROUP

(“IERG”),

by and

through

its

attorneys,

Alec M. Davis and HODGE

DWYER

&

DRiVER,

and

pursuant

to 35 111.

Adiriin. Code

§

101.500,

hereby

moves

the Illinois

Pollution

ControL Board (“Board”)

to grant this Motion for

Expedited Action

on IERO’s

Alternative Proposal

(“Motion”).

In support of

this Motion,

IERG states as follows:

IERCI

hereby

submits

to the

Board

its alternative

proposal, attached

hereto

as

Exhibit 1, in the

above-referenced

proceeding.

The proposal includes a

new

35111,

Admin.

Code

Part

217

(“Part 217”)

Subpart

U

(“Subpart

[7),

revisions

to

Part 217

Appendix

E (“Appendix

E”), and

revisions to update 35

III. Admin,

Code

§

217.104

(Incorporations

by Reference)

(“Section

217.104”).

This

alternative proposal

is based on

the

most recent

version of

Part 217, as

found on the

Board’s website.

IERG is

a

not-for-profit

Illinois

corporation affiliated

with the Illinois

Chamber

of

Commerce, IERG

is composed

of fifty-four

(54)

member companies that

are

regulated

by governmental

agencies that promulgate,

administer

or

enforce

environmental

laws,

regulations,

rules

or other policies. This

rulemaking

substantially

impaets IERO

member

companies

since TERO member companies

own

and operate a

large

number

of Nan

ElectricaL

Generating

Units (“Non-EGUs”),

or

as referenced

in the

alternative

proposal,

budget

units, Of the forty-six

(46)

budget units

listed in Appendix

E to

Subpart

U,

thirty-

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eight

(38)

of the

budget

units are

owned or

operated

by

flERO member

companies.

Accordingly,

it is imperative

that ERG

provide

an

alternative

proposal

to the

Board for

consideration

in this rulemaking.

As

detailed

below,

the

1llinoi Environmental

Protection

Agency (“Illinois EPA”

or

“Agency”)

has

failed

to

issue

nitrogen

oxide (“NOx”) allowances

for

the 2009 control

period

to NOx State Implementation

Plan (“SIP”) Call budget

units. The

failure

to

do so

will cause

serious problems for

affected Non-EQtJs,

as

they

may

face

potential

liability

for

not holding NOx SIP

Call

allowances

at the end

of the control period as

required

by

Subpart

U.

Thus,

as described

below, a rule is necessary

in order

to require the Illinois

PA to

bring NOx SIP

Call

budget

units into the

Clean Air Interstate Rule

(“CAIR”)

NOx Ozone

Season Trading

Program and

distribute allowances

accordingly.

I.

FACTS

Lt’ SUPPORT

OF

ALTERNATIVE

PROPOSAL

A.

History

øf

this

Proceedn

On January

19,2006,

the illinois EPA filed its

Regulatory Proposal

for

NOx

Trading

Program:

Amendments

to

35

Ill. Adrn.

Code Part 217,

proposing amendments

to

the NOx SIP Call

regulations

governing

NOx

emissions

found at 35 111.

Admin. Code

Part 217,

Subparts

A,

T, U

and W.

Illinois

IPA,

Regulatory Proposal

for

NOx Trading

Program:

Amendments to 35

Iii.

Adrn.

Code Part 217, In

the Matter of:

NOx Trading

Program:

Amendments

t

35

IlLMru..ç.pde Part

217,

R06-22 (Ill.Pol.Control.fld,

Jan. 19, 2006) (rulemaking

hereafter

cited as “R06-22”).

The

Illinois

EPA

stated

that

the purpose

and effect

fthe

proposal

was:

“Budget unit”

is defined in the

elternative proposal

as

“any

fossil fuel-fired

stationary boiler,

combustion

turbine,

or combined

cycle system,

with a maximum design heat

input

greater

then

250

mmbtulbr

that

meets

the rteria

in

Section

217.454(a)

of this

Subpart”

Exhibit 1

2

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to

update

Part 217

to reflect

recent

amendments

made

by [the

United

States

Environmental

Protection

Agency

(“USEPA”)]

to

the Code

of

Federal

Regulations

(CFR)

concerning

several

test methods

and

procedures

and by the

Illinois

General

Assembly

to

Section

9.9 of the Act

concerning

the

sale

of NOx allowances

and

the repeal of

the stay

provisions.

The

proposal

will also ensure

that the

NOx

budgets

for both

the [Electric

Generating

Units

(“EGOs”)]

and the non-EGUs

are

not

reduced by

low-emitters

in a

way

that

was

not

anticipated

at the

time

the

rules

were

originally

adopted

by

the

Board,

Finally,

the

proposed

clarifications

to the dates

and

timing of

allocations

should simplify

the

administration

of

the NOx

Trading

Program.

This proposal

does not

change the

emission

limits

or

require new

control

devices

on affected

sources.

Illinois

EPA,

Statement

of

Reasons,

R06-22

at 10

(Ill.Pol.Control,Bd.

Jan.

19,

2006),

In

addition,

the

Illinois

EPA stated

that “Subparts

T, U and

W

of

Part

217 were

adopted

by

the Board

on December

21, 2000,

March I, 2001,

and April

5, 2001,

respectively.

All three

Subparts

received

approval

by

the

[USEPA),

as part

of

the Illinois

State

Implementation

Plan

(“SfP”) for

ozone

on November

8,

2001.

6

Fed.

Reg.

56449 (DR

0.”

ichat

1.

On

February

2, 2006, the

Board

accepted

the Illinois

EPA’s

proposal

for hearing.

Order

of

the Board,

R06-22

(I1I.Po1.Contr1.Bd.

Feb. 2,

2006).

Thereafter,

on

March 13,

2006, [ERG

filed

with

the

Board

a

Motion for

Expedited

Review

requesting

the Board

to

expedite

its review

of thc Illinois

EPA’s

proposed

amendments

to the

NOx

SIP Call

requirements

at

Subpart U

of Part

217.

IERG,

Motion

for

expedited

Review,

R0-22 (IlLPol.Control.Bd. Mar. 13, 2006).

In

its Motion

for

Expedited

Review,

TERO argued

the following

[S)ince the

proposed amendments

include allocations

of

NOx

Allowances

that

are

different

for

some sources

than

the

current

rule,

it

is unclear

if

the

Agency

will,

or

could

properly,

issue

NOx

Allowances

for the

2007,

2008

and

2009

seasons

before

this rulemaking

is complete.

If

the Agency

allocates

the

NOx Allowances

for

2007,

2008 and

2009 under

the

current

rule,

it

may have to

make an

adjustment

to the

allocation

to

redistribute

3

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certain

NOx

AHowanccs.

Such

a redistribution

would

materially

prejudice

the

owners

of

the

units involved

since

they

would

not

be certain

of

the

number

of

NOx

Allowances

that

they

could

rely

upon

until

some

future

date

after

the

allocation,

at6,

[ERG also

argued:

if

this

rulemaking

is nor

expedited

and

the

Agency

does

not

allocate

the

NOx

Allowances

for

2007,

2008

and

2009

until

after

this

rulemaking

is

complete,

Illinois

owners

of

units

subject

to

Part

217

would

be

at

disadvantage

with

regard

to

sources

in

other

states.

NOx

Allowances

are

transferable

between

entities

in

approximately

20

states.

Approximately

16

states

in

the

NOx

trading

program

have

already

made

allocations

for

year

2007.

Some

states

have

made

allocations

through the

year

2009.

Sources

in

those

states

currently have

the

opportunity

to

sell

the

future

year

NOx

Allowances,

use

them

and

sell

older

NOx

Allowances

or

to

engage

in

trades intended

to

maximize

the

value

øf

their

NOx

Allowances.

In

Illinois,

owners

of

units

subject

to

Part

217,

would

be

denied

this

opportunity

until

this

rule

is

finali2ed.

at7.

Finally, [ERG

argued

that

“[s]irwe

the

initial

proposal

of

Part

217

was

required

to

mccc

the

State’s

federal

obligations

under the

Clean

Air

Act,

42

U.S.C.

§

7401,

et

seq.,

the

Board’s review

of

the

proposed

amendments,

which clarify

and

update

Part

217

regulations,

should

also

be

expedited.”

j

at

9.

On

March

27,

2006,

the

Illinois

EPA

filed

with

the

Board

a

Response

to

Motion

for

Expedited

Review,

requesting

the

Board

to

enter

an

order

denying

[ERG’s

Motion

for

Expedited

Review.

Illinois

EPA,

Response

to

Motion for

Expedited

Review, R06-22 (fll.Pol.Control.Bd,

Mar,

27,

2006).

On

March

31,

2009,

[ERG

filed

a

Reply

to Response

to

Motion

for

Expedited

Review. IERGI

Motion

for

Leave

to

File

a Reply

to

Response

to

Motion

for

Expedited

Review

and

Reply

to Response

to

Motion

for

Expedited

l.eview,

R06-22

(IlLPol.Control.Bd.

Mar.

31,

2006).

Thereafter,

on

April

20,

2006,

the

Board

4

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“reluctantly” denied

IERG-’s

Motion

for

Expedited

Review.

Order

of

the

Board, R06-22

(fll.PoLControl

.Bd.

Apr.

20,

2006).

On

October

29,

2007, Hearing

Officer Timothy

J.

Fox

issued

a

Hearing

Officer

Order

noting

that

there

had

been

no

activity

in

the

docket since

April

20,

2006,

and

directing

the

Illinois EPA

to,

within

twenty-one

(21)

days

of

the

date

of

the

Hearing

Officer Order,

file

a

status report

addressing

the

Illinois

EPA’s

readiness

to

schedule

and

proceed

to

bearings.

Hearing Officer

Order,

R06-22

(I1l.PoI.Control,Bd.

Oct.

29,

2007).

On

November

20,

2007,

the

Illinois

EPA

filed

a status report,

which

stated

the

following,

in

pertinent

part:

The

rlHnois

EPA

has

had

discussions

with interested

parties

concerning

R06-22,

and

will

continue

to

do

so.

The

Illinois

EPA

is

in

the

process

of

evaluating

whether

the

proposed

amendments

are

now

moot,

or

whether

some

of

the

amendments

would

best

be

addressed

in

an

upcomIng

rulemaking

concerning

the

transition

of

both

industrial

boilers

and

utility

boilers

from

the

NOx

SIP

Call

trading

program

to

the

Clean

Air

Interstate

Rule

(CAIR) trading

program.

The

Illinois

8PA is

planning

to

proceed

with

that

rulemaking

early

this

winter,

and,

at

that

time

it

will

be

in the

best

position

to

determine

whether

any

outstanding

issues

from

P.06-22

would

be

best

addressed

in

that

rulemaking

or

whether

the

above

proposal,

in

an

amended

format,

should proceed.

Illinois

EPA,

Motion for

Leave to

File Instanter

and

Status Report,

R06-22

(Ill,PoL,Control.Bd.

Nov. 20,

2007).

On

May 13,

2008,

Hearing

Officer Fox

issued

another

Hearing Officer

Order

summarizing

the

Illinois EPA’s

November

20,

2007

status

report,

and

also

noting

that

there had

been

no

activity

in

the

docket

since

that

filing. Hearing

Officer

Order,

P.06-22

(IIl.PoLControl.Bd.

May

13,

2008).

In

addition,

Hearing

Officer

Føx

directed

the

Illinois

EPA

to,

within

thirty

(30)

days

of

the

date

of

the

Hearing

Officer

Order, on

or

before

June

12,

2008,

file

a

status

report

addressing

whether

the

Illinois

EPA

had

determined

5

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whether

to

proceed

in

this

docket

with

an

amended

proposal

or

to

address

the

proposed

amendments

in

another

docket.

Id.

On

June

25,

2008,

the

Illinois

EPA

filed

a

status

report,

which

stated

the

following,

in

pertinent

part:

The Illinois

EPA

has had

discussions

with

interested

parties

concerning

R06-22,

and

will

continue

to

do

so. The

Illinois

EPA

is

in

the process

of

evaluating

whether

the

proposed

amendments

are

now moot,

or

whether

some

of

the

amendments

would

best

be

addressed

in

en

upcoming

rulemaking

concerning

the

transition

of

both

industrial

boilers

and

utility

boilers

from

the

NOx

SIP

Call

trading

program

to

the

Clean

Air

Interstate

Rule

(CAR)

trading

program.

The

Illinois

EPA

is

planning

to

proceed

with

tbat

rulemaking

early this

Fall,

and,

at

that

time

it

will

be

in

the

best

position

to

determine

whether

any

outstanding

issues

from

R06-22

would

be

best

addressed

in

that

rulemaking

or

whether

the above

proposal,

in

an

amended format,

should

proceed.

illinois

EPA, Motion

for

Leave

to

File Instanter

and

Status

Report,

R06-22

(IILPøI,Control.Bd.

June

25,

2008).

On

July 2,

2008,

Hearing

Officer

Fox

issued

another

Hearing

Officer

Order

summarizing

the

Illinois

EPA’s

June 25,

2008

status

report,

and

directing

the

Illinois

EPA

to, within

120

day5

of

the date

of

the

Hearing

Officer

Order,

on

or

before

October

30,

2008,

file

a

status

report

addressing

whether

the

Illinois

EPA

had

determined

whether

to

proceed

in

this docket

with

an

amended

proposal

or

to

address

the

proposed

amendments

in

another

docket.

Hearing

Officer

Order,

R06-22

(Xll,Pol.ControL8d,

July

2,

2008).

On October

30,

2008,

the Illinois

EPA

filed a

status

report,

which

stated

the

following,

in

pertinent

part:

On

July

ii,

2008,

the

Clean

Air Interstate

Rule

(“CAIR”)

rule was

vacated

by

the

United

States

Court

of

Appeals;

however

the

requirements

to

address

interstate

transport

from

large NOx

sources

remain.

North

Carolina

v.

EPA,

No.

05-1244

(D.C.

Cit

July

2008).

The

decision

left

the

6

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NOx

SIP Call trading

program

intact.

The

United

States

Environmental

Protection

Agency

(“USEPA”)

requested

a

hearing

on

September

24,

2008,

and

the

court has

not yet

ruled

oil

that

request.

In

light

of

the above

decision

and

the

possible

rehearing,

the

Illinois

EPA

is

in

the

process

of

evaluating

whether

the

proposed

amendments

affecting

the

NOx

SIP

Call

trading

program

are

now

moot, or

whether

some

of

the

amendments

would

best

be

addressed

when

the

Illinois

EPA

addresses

its

obligations

to

mitigate

interstate

transport.

The

timetable

for

addressing

that

requirement.

is

uncertain

at

this

time;

the

Illinois

EPA

will

be

in

a

better position

to

determine

its

timetable

when

the

court rules

on

USEPA’s

and other

petitioners’

requests

for

rehearing.

Illinois

1PA, Status

Report,

R06-22

(ElLPoI.Control.d.

Oct. 30,

2008).

On

November

7,

2008, Hearing

Officer

Fox

issued

another

Hearing

Officer

Order

summarizing

the Illinois

EPA’s

October

30, 2008

status

report, and

directing

the

Illinois

EPA

to,

within

120

days

of

the

date

of

the

Hearing

Officer

Order,

on

or

before

March

9,

2009, file

a

status report

addressing

whether

the Illinois

EPA

had

determined

that

proposed

amendments

affecting

the

NOx

SIP

Call are

moot

or

whether

it

would

deal

with

the

proposed

amendments

in

meeting

its

obligations

to

mitigate

interstate

transport.

Hearing

Officer

Order,

R06-22

(lll.Pol.ControL.Bd

Nov.

7,

2008).

On

March

9,

2009, the

Illinois

EPA

filed

a

status report,

which

stated

the

following,

in

pertinent

part;

On

July Ii,

2008, the

Clean

Air

Interstate

Rule

(

4

’CAIR”) rule

was

vacated

by

the

United

States

Court

of

Appeals;

however

the

requirements

to

address

interstate

transport

from large

NOx

sources

remain,

North

Carolina

y.

EPA,

No, 05-1244

(C.A.D.C.

Cir

July

2008).

The

decision

left

the

NOx

SIP

Call

trading

program

intact.

The

United

States

Environmental

Protection

Agency

(“OSEPA”)

requested

a

hearing

on

September

24,

2008.

On

December

23,

2008, the

court reversed

in

part

its

earlier

decision

and

remanded

the

CAIR rule

to

USEPA

without

vacatur.

North

Carolina

v.

EPA,

550

.3d

1176

(C.A.D.C.

2008).

This

opinion

means

that

the

CAIR

rule

remains

in

effect.

In

light

of

the

above

decision

and

the

rein.tatemnt

of

the obligation

for

meeting

interstate

NOx

reductions

for

industtiai

boilers.

the

Illinls

1PA

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is

planning

to

replceSubpart

U

witha

new

rule

and

withdraw

this

nilemaking. R06-22,

at

that

time. The

ie

mlemakingwill

integrate

the

NQ&EtJs

into

the

CAIR

rle.

The

timetabl,e

for

addressing

that

reguirment

is

expected

toJe

the

Spriof

2009,

Illinois

EPA,

Status

Report,

R0&22

(IlI.Pol.ControLBd.

Mar.

9,

2009).

(Emphasis

added.)

As

sot

forth

in

Section

III

of

this

Motion,

Subpart

U

has

not

been

replaced

with

a

new

rule

that

integrates

Non-EGUs

into

CAIR.

The

current

Subpart

U

still

requires that

affected

Non-EGUs

hold

NOx

allowances

on

November

30,

2009;

however,

the

Illinois

EPA has

failed

to

issue

any

NOx allowances

for

2009

to

Non-EGUs.

B

)3ackeround

Regardine

ALternative Propos

On

May 12,

2005,

the

USEPA

adopted

CAIR

with the

purpose of

replacing

the

NOx

SIP

Call trading

program.

Rule

to

Reduce

Interstate

Transport

of

Fine

Particulate

Matter

arid

Ozone

(Clean

Air

Interstate

R.ule);

Revisions

to

Acid

Rain

Program;

Revisions

to

the

NOx

SIP

Call; Final

Rule,

70

Fed.

Reg.

25162

(May

12,

2005).

The

USEPA

stated

that

it

“will

no

longer operate

the

NOx

SiP

Call

trading

program

after the

2008

ozone

season.”

70

Fed.

Reg.

at

25290.

jo

40

C.F.R.

§

51.

122(r)(l).

On

July

11,

2008, the

United

States

Court

of

Appeals

for

the

District

of

Columbia

Circuit (“D.C. Circuit”)

issued an

order

vacating

CAIR

in

its

entirety,

and

remanding

the

rule

to

the

USEPA.

North

Carolina

v.

EPA,

531

F.3d

896

(D.C.

Cir.

2008).

The

D.C.

Circuit’s

opinion

further

stated that

the

NOx

SIP

Call

trading

program

would

remain

in

place.

icL

at 930.

On

December

23,

2008, the

D.C.

Circuit issued

an

opinion

modifying

its

July

11,

2008

order, and

remanded

CAIR without

vacatur,

North

Carolina

v.

EPA,

550 F.3d

1176 (D.C. Cir.

2008).

8

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According

to

the

LJSEPA,

as of

the

date

of

this

filing,

“cAIR

is in

place

in

its

final

form.

The

Court ruling

did

not

modify

any

of

the

provisions

in

CAIR.

The

original

deadlines are

still

effective.”

CAIR

Frequent

Questions

— Post-court

Decision,

available

at

http://www.epa.gov)airmarktlprogsregs/cair/faq-14.html,

last

visited

July

27,

2009,

CAIR

includes

the

NOx

ozone

season

trading

program. As

explained

by

the

USEPA:

The

ozone-season

NOx

model

rule

is

designed

to

be used

by

those

States

that

are

affected

by the

CArR

ozone

finding

as

well

as

take

the

place

of

the

NOx

SIP

Call

requirements.

The

CAIR

ozone-season

NOx

program

will

be

the

only

ozone-season

NOx

program

that

[USEPA]

will

administer.

Because

[USEPA]

will

no

longer

run

a NOx

SIP

Call

trading

program,

States

may

include

their

NOx

SIP

Call

trading

sources

it’ they

adopt

the

[USEPA]-aclministered

CAIR

ozone-season

NOx

program.

70

Fed,

Rcg.

25274.

In

addition, the

trading

program

“will

r1y

upon

CAIR

ozone-season

NO[X}

allowances

allocated

by

the

States,”

and

States

may

participate

in

the

NOx

ozone

season

trading

program

by

adopting

the

federal

model

cap

and

trade

rules.

However,

a

state

has

the

“flexibility

to

modify

sections

regarding

NOEX]

allocations

and

whether

to

include individual

unit

opt-in

provisions.”

a

The

USEPA

further

explained

that

the

CATR

trading programs are

‘a

fully

approvable

control

strategy

for

achieving

all

of

the

emissions reductions

required

under

today’s

rulemaking

in

a highly

cost-effective

manner,” and

“[s]tates may

simply

reference

the

model

rules

in

their

State

rules

and,

thereby, comply

with

the

requirements

for

statewide

budget

demonstrations.

.“

70

Fed.

Reg.

25275. The

USEPA

stated;

2

rERGs

proposal

does

not

adopt

the

optional

individual

opt-in

provisions

of

the

federal

CAIR

model

rule.

Although

IERG’s

altcrnativc

proposal

does

not

include

the

individual

opt-in

provisions

of

the

federal

CAIR.

model

rule,

it

does

allow,

as

th

current

Subpart

U

provides,

enislon

units

to

become

“opt-in

budget

units”

subject

to

Subpart

U

requirements

if

certain

criteria

are

met.

The

“opt-in

budget

units”

are

emission

units

that

may

participate

in

the

trading

program

in

accordance

with

Subpat

U

requirements.

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States

that

wish

to

achieve

their

CAIR

ozone-season

requirements

through

a

[USEPA-adminiscered

ozoneseason

NOx

cap

and

trade

program

will

adopt

the

CAIR

model

rule

in

subparts

AAAA

through

JILL.

.

.

Because

[USEPA)

will

no

longer

administer

the

trading

program

for

the

NOx

SEP

Call,

States

that

wish

to

continue

to

meet

their

NOx

SIP Call

obligations

through

a

[tJSEPAJ-adrninistered

cap and

trade

program

will

also

adopt

the CA1R.

ozone-season

model

rule.

NOx

SIP

Call

States

will

“sun

setH

their

NOx

SIP

Call

rules

for

sources

that

will move

into

the

CAIR

NOx

ozone-season

program.

a

Id.

The USEPA

has spoken

to

the

issue

of

what

is

required

to

address

emissions

from

Nøn-EGUs

to

satisfy

the

requirements

of the

NOx

SIP Call,

in

light

of

the

discontinuance

of

the NOx SIP

Call

trading

program

after

the

2008

ozone

season:

If

States

affected

by

the

NOx

SIP

Call

do

not

wish

to

use

EPA

1

s

CAIR

ozone

season

NOx

trading

program

to

achieve

reductions

from

non-EGU

boilers

and

turbines

required

by

the

NOx

SIP

Call,

they would

be

required

to

submit

a

SIP

Revision

deleting

the

requirements

related

to

non-E3U

participation

inthe

NOx

SIP

Call

Budget

Tra4ing

Program

ad

replaçj

them

with

new.reguiremenrs

thatachieve

the

.me_level

of

reduction.

70 Fed. Reg.

at

25290.

(Emphasis

added.)

Alternatively,

the

USEPA

has indicated

that

a

State

can

meet

the

requirements

of

the

NOx

SIP

Call

for

Non-EGUs

through

participation

in

the

CAIR

ozone

season

NOx

trading

program:

lithe

only

changes

a

State

makes

With

respect

to its

NOx

SIP Call

regulations

are:

(1)

tbring

non-EGUs

thatare

currently

picipatinJp

the_NQx

SIP Call

Bud

et

Trading

Program into

the

CAIR

ozoneseason

program using

thesame

non-EGU

budget

and applicability

reouirements

that

are.

in

their existing

NOx

SIP

Call

Budget

Tradin.Proam;

4

and

(2)

Since

the

alternative

proposal

is

a

full

replacement

of

[he

current

Subpart

U,

the

result

is

a

“sunsettitig”

of

the

current

Subpart

U.

4

The

alternative

proposal

is

bringing

NOx

SIP

Call

budget

units

into

CAIR

for

trading

purposes

only

and

is

not

intended

to

require

that

budget

units

meet

the

CAIR

emission

reduction

requirements.

10

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to achieve all of the

emissions

reductions required

under the

CAIR

from

EGUs by participating in the

CAIR

ozone season

NOx trading

program,

EPA will

find that the State continues to

meet the

requirements

of the

NOx SiP Call.

70 Fed. Reg. at 25290. (Emphasis

added.) Thus, CAIR allows

Non-EGT.Js

to trade

under

CAIR to satisfy NOx SIP Call budget requirements.

On

September

7, 2007, Illinois adopted amendments

to 35 Ill,

Admin, Code

Part

225 to implement the

sulfur dioxide (“S02”), NOx annual, and

NOx Ozone season

trading

programs

under

CAIR, applicable

only

to

EGUs. 31111,

Reg. 12864 (Sept. 7,

2007).

On

October 16, 2007, the USEPA approved the

Illinois

SIP revision

to

implement

CAIR for

QUs.

In

doing so,

the

(JSEPA stated;

Illinois’ CAIR submittal

does not fully address the replacement

of the

NOx SiP Call. Illinois’ CAIR. NOx ozone

season

trading

program

addresses

the emissions from EGtJs and do

[si1

not address

emissions

from non-EGUs that are covered

by the NOx SIP Call tTading

ororarn.

Appro’at

of Implementation

Plans

of Illinois: Clean Air Interstate

Rule,

72 Fed. Reg.

58528, 58531 (Oct. 16, 2007). (Emphasis added.)

To date, the Illinois

EPA has

done

nothing to address the NOc SIP

Call

budget

trading program

for Non-EGUs.

Therefore, because of the Agency’s

failure to act, IERG

s compelled

to

offer this

alternative proposal to address

the problems that will be faced

by

owners/operators

of affected Non-EG’Us

should they not hold the requisite

NOx

allowances

through

no fault of their own.

The Illinois EPA’s failure to choose

to

use LJSEPA’s “CAIR ozone

season

NOx

trading

program

to

achieve reductions

from

nonEGU

boilers and

turbines” required

by

the NOx SIP Call or to “submit a

SIP Revision deleting

the

requirements related

to

non

EOU

participation

in the NOx SIP Call Budget Trading Program

and replacing them with

11

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new

requirements.

. .“ has

placed

the

State’s

owners/operators

of affected

NonEQUs

in

a

critical

bind.

The

source

of

the

problem

is

two-fold.

First,

the

USEPA

ceased

to

operate

the

NOx

SIP

Call

trading

program

after

the

2008

ozone

season,

Second

1

facilities

subject

to

Subpart

U

are

required

by

existing

Subpart

U to

hold

sufficient

NOx

SIP

Call

allowances

to cover

NOx

emissions

for

the

2009

ozone

season

and

beyond.

The Illinois

EPA

failed

to

issue

any

NOx

allowances

to

Non-EGUs

for

2009.

and

now,

there is

no

mechanism

by

which

the

Illinois

EPA

may

allocate

those

allowances.

IL

EMERGENCY,

RULE

Simultaneously

with

this

Motion,

IERO

submitted

a

separate Motion

for

Emergency

Rule

requesting

that

the

Board,

pursuant

to

its authority

to

adopt

an

emergency

rule,

replace

the

current

version

of

Subpart

U

with

a revised

Subpart

U

5

by

bringing

NOx

SIP

Call

budget

units

into

the

CAIR

NOx

Ozone

Season

Trading

Program

using

a slightly

revised

Non-EGU

budget,

and

the

same

applicability

requirements as

found

in

the

current

Subpart

U.

Motion

for Emergency

Rule,

R06-22

(Ill.Pol.Control.Bd.

Aug.

3, 2009).

As

discussed

in

the

Motion

for

Emergency

Rule,

an

emergency rule

is

necessary

because

the

Illinois

EPA

failed

to

issue

NOx

allowances

to

Subpart

U

sources

for the

2009

control

period.

jç

Accordingly

1

the

Motion

for

Emergency

Rule

requests

the

adoption

of

a

rule

for

purposes

of requiring the

IlHnois

EPA

Co

allocate

allowances

for only

the

2009

control

period.

This

Motion,

on

the

other

hand,

is

intended

to be

the rule

requiring the allocation of

allowances

for

the

2010

control

period

and

beyond.

The

revised

Subpart

U

attached

to

the Motion

for

Emergency

Rule

as Exhibit

I

is identical

to

IERO’s

alternative

proposal,

attached

hereto

s

Exhibit

1.

12

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ILL

PURPOSE

AND EFFECT OFIERG’S

ALTNATVE

PROPOSAL

This

alternative proposaL will

satisfy the

requirement

for Illinois to have

regulations in place to address the

NOx

SIP

Call emissions reductions from Non-EGUs,

absent the USPA’s continued

administration

of

the

NOx SIP

Call

trading

program.

The

amendLuents

proposed

in this alternative proposal comply with the approach suggested

by

the

TJSEPA

to

satis’

the

NOx

SIP

Call

requirements:

by

bringing Non-EGUs that

are

currently participating in the NOx SIP Call budget trading program into

the CALR NOx

Ozone

Season Trading

Program using the same

Non-EGLJ

budget, with minor exceptions

(see

further

discussion

below), and applicability requirements that

are

in the existing

NOx SIP Call budget trading program

Further, this alternative

proposal

gives

effect to

Section 9.9 of the Illinois Environmental Protection

Act

(“Act”), under which the Illinois

General Assembly finds emissions trading to be a cost effective

means

of

reducing

NOx

emissions, and requires the Agency to propose and

the Board

to

“adopt regulations

to

implement an interstate NOx trading program.” 415 ILCS 5/9.9(a)(3) and 9.9(b). Since

the Agency has failed to

take

action to adopt

rules that address the

NOx

SI? Call

requirements

for Non-EGUs beyond the 2008 ozone season, JERO offers

the

alternative

proposal,

as

set

forth

in

Exhibit

1, as an appropriate

revision

to the current Subpart U in

order to bring NOx SIP Call budget units into

the

CA. NOx Ozone Season Trading

Program. The effect of this alternative proposal is to

allow

the continued

trading of NOx

emissions

allowances as

seamlessly

as possible so that operations of industry throughout

Illinois can continue to comply with the federal NOx SIP Call requirements forNon

EQtJs,

13

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According

to

the

current

version

of

Section

217.456(d)

of

Subpart

U,

owners/operators

of

affected

Non-EGUs

in

Illinois,

including

those

owners/operators

that

are

IER.O

member

companies,

must

hold

NOx

allowances

for

every

ton

of

NOx

emitted

during the

2009

ozone

season

on

November

30, 2009,

and

thereafter.

In

addition,

most

of

those

sources

have

“budget

unit”

requirements

in

their

Clean

Air

Act

Permit

Program

(

4

’CAAPP”)

permits.

For

example,

several

companies

have

the

following

provision

in

the

CAAPP

permits

issued

for

their

facilities;

Beginning

in

2004,

by

November

30

of

each

year, the

allowance

transfer

deadline,

the

account

representative

of

each

budget

unit at

this

source

must

hold

allowances

available for

compliance

deductions

under

40

CFR

96,54

in

the

budget

Unit’s

compliance account

or

the

source’s

overdraft

account

in

an

amount

that

shall

not

be

less

than

the

budget

unit’s

total

NOx

emissions

for

the

preceding

control

period

(rounded

to

the

nearest

whole

ton),

as

determined

in

accordance

with

applicable

monitoring

requirements,

plus

any number

of

allowances

necessary

to

account

for

actual

utilization

(e.g.,

for

testing,

start-up,

maLfunction,

and

shut

down)

under 40

CFR

96.42(e)

for

the

control

period,

pursuant

to

35

IAC

217.456(d)(l).

For

purposes

o.this

requirement,

an

allowance

may

not

be

utilized

for

a

control

period

in

a

year

prior

to

the

year

for

which

the

allowance

is

allocated,

pursuant

to

35

IAC

217.456(d)(4).

Condition

6.4(a),

CAAPP

Permit

No.

96030001;

Condition

6.1.4(a),

CAAPP

Permit

No.

95120306;

and

Condition

61.4(a),

CAAPP

F’ermitNo.

99110011.

If

affected

sources

with Non-EGUs

subject

to

Subpart

I)

cannot

receive

their

allocated

NOx

Budget

Trading

Program

allowances

for

the

current

2009 ozone

season,

the

effect

is

to

cause those

units

to

be

in

violation of

Subpart

U

and

their

CA.APP

permits,

which

remain

enforceable

by

the

Illinois

EPA,

the

USEPA,

and

third-parties.

Because

the

illinois

EPA

failed

to

meet

itS

obligation

to

either

join

USEPAs

CAIR NOx

Ozone

Season

Trading

Program

for

Non-EGUs

or

to

submit

a

SIP

revision

that

would

provide

for

the

same level

of

reduction

as

that achievable

by

participation

in

the

NOx

SIP

Call

14

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Budget

Trading Program,

owners/operators

of affected Non-EGUs

face potential liability

for

failure

to

hold required

NOx allowances. Such

potential

liability must be disclosed

by publicly-held

companies

on their Securities Exchange

Commission

filings, impacting

their

bottom

tines

during

these

times

of hardship

in the United

States economy.

IERQ

recognizes

the availability

of

a

tuechanism

to obtain

the required

allowances

that companies must

hold at the end

of

the

ozone

season,

thus

avoiding such

potential

liability. They

may purchase

CAR. NOx

allowances, although

it

is uncertain

whether such

purchases would be deemed

in compliance with

a requirement

to hold NOx

SIP

Call

allowances.

There is

no

mechanism, however

to use

such allowances

to

demonstrate compliance

since the USEPA

will not establish CAIR.

compliance accounts

for sources until the

illinois EPA takes steps

to adopt a rule

for Non-EGUs.

Owners/operators

of affected

Non-EGUs

will

be placed in the position

of expending

capital,

again impacting their bottom

lines, to avoid potential

compliance violations

that

would not

exist

but for

the Illinois EPAS

failure

to propose

a

necessary

rule

at

the

appropriate

time.

Adoption of this

alternative proposal

would have a positive economic

impact.

Owners/operators

of affected

Non-EGUs would benefit

by avoiding

the potentially costly

consequences

described

above,

Further,

by

enabling

the

owners/operators

of

affected

Non-EGUs

to

participate

in the

federal CAIR NOx Ozone

Season Trading

Program, units

that

are able to efficiently

reduce

their

emissions of NOx

will be able

to

take advantage

of

the large, multi-state

market for

selling andlor

purchasing

their

allowances,

as may be

necessary. This alternative

proposal is

intended to provide

the same degree of

environmental benefit

that was achieved under

current

Subpart

U. The amendments

15

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proposed herein

will

maintain

the

same

budget

and

applicability

requirements,

as

provided

by

the

USEPA

in

its

approval

of

Illinois’

NOx

rules

as

satisfying

the

State’s

NOx

SIP

Call obligations.

Approval

and

Promulgation

of

Implementation

Plans;

Illinois

NOx Regulations,

66

Fed.

Reg. 56449

(Nov.

8,

2001).

The

costs

to

the

Illinois

EPA in

implementing

the

CAIR

NOx

Ozone

Season

Trading

Program

for

specified

NOx

generating

units

will

be

minimal,

as

it

is

in

essence

the

same

program

as

is

the

current

Subpart

U

NOx trading

program

and

will

be

administered

through

federal

CAIR.

IV.

SVIMARY

OF

PROPOSED

AMENDMENTS.

IERO

understands

that

it

is

the

preference

of

the

Illinois

EPA

to

have

the

NOx

ozone

season

trading

program

for

Non-EOUs

resemble

the

Illinois

CAIR

Ozone

Season

Trading

Program

in

place

for

EGUs.

Thus,

the

proposed amendments

have

been

drafted

to

mirror

as

closely

as

possible

the

illinois

regulations

implementing

CAIR

ozone

season

trading

for

EGUs,

contained

in

35

lii.

Admin.

Code Part

225,

Subpart

E.

The various

provisions,

as

described

in

greater

detail

below,

amend

the

current

Part 217

Subpart

U

trading

program,

to

refer

to

the

CAI.R

NOx

Ozone

Season

Trading

Program

and

associated

requirements

under

CAIR,

and

incorporate

the

necessary

references

under

Subpart

A. Finally,

an

updated

Appendix

E is

included,

reflecting

revisions,

as

set

forth

in

detail below.

A.

SubpartA

The

proposal

amends

Subpart

A

by

adding

as

incorporated

by

reference

federal

provisions

at

40

CFR

Part

78

and selected

provisions

at

40

CFR

Part

96

to

Section

217.104,

which

iS

necessary

to

implement

the

CAIR

NOx Ozone

Season

Trading

16

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Program.

In

additions

references

to

provisions

for

40

C.P,R.

Parts

75

and

96

have

been

updated.

B.

jiiriart

U

IERG’s

alternative

proposal

deletes

the

current

version

of

Subpart

U

and

replaces

it

with

a

new

Subpart

U

that

mirrors

as

closely

as

possible

the

structure

and

requirements

of

Part

225

Subpart

E,

as

well

as

retains

requirements

that are

unique

to

Subpart

U,

such

as

the

applicability,

low

emitter,

and

opt-in

provisions,

which

are

required

by

Section

9.9

of

the

Act,

415

ILCS

519.9.

Substantive

changes

made

to

the

current

version

of

Subpart

Ii,

as

reflected

by

IERO’s

alternative

proposal,

include

the

following:

•

Revises

and

renumbers

sections

in

order

to

mirror

the

format

and

structure

of

Part

225

Subpart

E;

•

Renames

sections

and

revises

terminology

to

closely

resemble

Part

225

Subpart

,

where

possible,

and

federal

model

rule for

the

CAIR

NOx Ozone

Season

Trading

Program;

•

Adds definitions

for

the following:

Agency,

Budget

Permit,

Budget

Unit,

Board,

CAIR

esignated

Representative,

CAIR

NOx

Ozone

Season

Trading

Budget,

Compliance

Account,

and

NOx

Trading

Program

applicable

only

to

this

Subpart

(35

III.

Admin.

Code

§

2

17.452);

•

Specifically

exempts

from

the

Subpart

certain

boilers

used

to

combust

and

thereby

control

carbon

monoxide

emissions

from

a

fluIdIzed

catalytic

cracking

unit,

and

deletes

references

to

Subpart

W

and

the

NOx

SIP

Call

(35 Iii.

Admin.

Code

§

217.454);

•

Revises

compliance

requirements

to

include

compliance

with

the

provisions

of

the federal model

rule

for

the

CAIR

NOx

Ozone

Season

Trading

Program,

(35

111.

Adrnin,

Code

§

2

17.456(a));

•

Adds

a

provision

stating

that

sources

with

existing

NOx

budget

permits

issued

under the

NOx trading

program

are

in

compliance

with CA1R

permitting

requirements

(35

III.

Admin.

Code

§

217.456(c));

17

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•

Adds

a

requirement

that

budget

units

are

subject

to the

emission

requirements

for

the

control

period

starting

May

1,

2009,

or

the

deadline for meeting

the

unit’s

monitoring

certification

requirements

(35

II).

Admin.

Code

§

217.456(d));

•

Adds

a

requirement

that

for

the

2009

controL

period,

CAIR

NOx

Ozone

Season

sources

may

to

submit

a

single

report

covering

the

entire

control

period

(35

111.

Admin.

Code

§

217.456(e)(3));a

•

Adds

a

section

on

appeal

procedures

for

decisions

of

the

USEPA

(35

III.

Adrnin,

Code

§

217.457);

•

Adds

a

section

regarding

the

contents

of

the

NO

budget

permit

(35

Ill.

Admin.

Code

§

217.458(c));

o

Revises

the

total

number

of

budget

allowances

and

corresponding

New

Unit

Set

Aside

(“NLJSA”)

allowances

(35 111.

Admin.

Code

§

217.460(a))

(see

further

diseusion

below

regarding

revisions

to

Appendix

E);

•

Adds

new

Section

217.461

setting

Out

the

timing

for

ozone

season

allocations

for the

2009

control

period

and

control

periods

thereafter

(35

Ill.

Admin.

Code

§

217.461);

•

Revises

the

section

on

NUSAs

to

combine the

current

Subpart

U

new

source set

aside

sectiOns

into

one

cohesive

section

and

includes

necessary

provisions similar

to

those

provided in

Part

225

Subpart

E

(35

ill.

Admin.

Code

§

217.466);

•

Deletes

Section

217468

of the

current

Subpart

1) and

places

such

provisions

in new

Section

217.466,

which

provides

the

rules

for

I’4IJSAs;

•

Deletes

Section 217.470

of the

current

Subpart

U

because

early

reduction credits

are

no

longer

necessary;

and

6

The

federal

CA1.

model

nile

requires

sources

to

submit

quarterly

reports.

40 C.F.R

§

96.374.

However,

because

of

the

failure

to have

a

rule

in

place

that

brings

NOx

SIP

Call

budget

units

into the

CAIR.NOx

Ozone

Season

Trading

Program,

the

deadline

for

the

quarterly

rcport

covering

the second

quarter

has

passed.

Such

quarterly

reports

would

have

included

information

on

the

first

part

of

the

ozone

season,

Since

sources

subject

to

Subpart

U did

not

have

a CAIR

rule

with

which

toc&nnpy, (he

quarterly

report

for

the

third

quarter,

covering

the

remainder oIthe

ozonc

season,

may

cover

the

entire

2009

control

period.

A

provision,

as

referenced

above,

has

been

added

to

the

reporting

requirements

to clarify

that

fr

the

2009

ozone

scason

only

a single

report

is

allowed.

Fr

thc 2010

control

period

and

beyond,

sources

will

submit

reports

in

accordance

with

applicable

regulations.

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.

Adds

Board

Notes

to

clarify

purpose

of

particular

sections of

the

revised rule

laaguage

(35

III. Admin. Code

§

217.461, 217.462,

and

217.472).

C.

Apend1x

E

1.

Background

in

April

2001,

the

Board

adopted

the

original,

final

Subpart U

rules.

Board

Order,

In

the

Matter

of: P•roposed New

35

Iii.

Adrn.

Code217.Subpart

U, NOx

Control

and

Trading

Program

for

Specified NOx

.Oenerating Units.

Subpa

X. VoluntaNOx

emissions

Reduction

Proam. and

Amendments

tc

35

III.

Adm.

Code

21

l.

PCB

No.

01-

17 (1l1.PoL.Control.Bd.

Apr.

5,

2001)

(hereafter

“Final

Order

7

2001

Subpart

U

Rulemaking”).

The

rules

adopted

by the

Board

included Appendix E to

Subpart

U,

which

Listed

the

large

Non-EOt,Ss

subject

to

Subpart

U.

On

November 8,

2001,

the

USEPA

approved

the Subpart U

rules

as

satisfying

Illinois’ NOx

SIP

Cafl

requirements,

but

made

two

adjustments to the

allocation

distribution

as

listed

in

Appendix

.

66

Ped.

Reg.

56449

(Nov.

8, 2001),

attached

hereto

as

exhibit

2.

In

approving

Subpart

U

as

satisfying

Illinois’

NOx

SIP

Call

requirements, the

EJSEPA

adjusted

the

Illinois

allowance

budget

by

allocating

allowances

to

LTV

Steel

Company

(“LTV

Steel”)

and

removing

the

boiler

owned

by

the

University of

Illinois

from

the

Non-EQ1J

inventory.

j

at

56453.

The

USEPA

stated

in

regards

to LTV

Steel

that

it

“is

adjusting Illinois’

budget

to

include

L’l’V

Steel’s

Boiler

48

as

a

60 percent

control

level,

which

under

Illinois’ rules

will

result

in

LTV

Steel

receiving an

allocation

for

60

tons

of

allowances for

each

ozone

season,”

at 56452.

The

allocation

of sixty

(60)

tons

of

allowances

to

LTV

by

the

USEPA

is

consistent

with

the

footnote

incLuded

in

the

Appendix

E

adopted

in

2001,

which

stated

that

the

allocation to

LTV

Steel

would

be

19

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adjusted at such time that

the

USEPA

made

an allowance to LTV

Steel for Boiler

4B,

Final

Order, 2001

Subpart

U

Rulemaking at

76.

The

USEPA

also

removed

a

boiler

owned

by

the

University

of Illinois from the

inventory

because

the boiler “is below 250 mmBTU/hour, so the source should

have

remained

uncontrolled.”

Approval

and Promulgation

of Lmplementation Plans; Illinois

NOx Regulations, 66 Fed. Reg. 34382, 34390

(June

28, 2001), attached hereto as Exhibit

3. The Illinois EPA recognized that the University of illinois’ boiler is

not included

in

the

“NOx

trading program and does not

allocate allowances for such boiler to the

source.”

Condition

7,2.4(b), CAAPP Permit

No. 9512006g. The

USEPA concluded that

with

the adjustments

for LTV Steel

and the

University of

Illinois, “the sources

in

subpart

U

have

a

total

allocation of 4856 tons per ozone season.” 66 Fed, Reg. at 34387.

In addition

to

the discrepancies

in

the inventory

and allocations

of

allowances

discussed

above, another

source,

Bunge Milling, Inc. (“unge’), was inadvertently

excluded from the Appendix B, and accordingly, allocations for Bunge’s CFB Boiler

were never included in the Illinois budget. In September 2005, Bunge

requested

determinations from the Illinois EPA

and

the USEPA regarding

whether

it was subject to

Subpart U. Letter from

Katherine

I). Hodge,

I-lodge

Dwyer

Zeman, to DougLas

P. Scott,

Illinois EPA (Sept. 20, 2005); Letter from Katherine D. Hodge, Hodge

Dwyer Zeman, to

Thomas

V. Skinner,

USEPA

(Sept.

20, 2005),

attached

collectively

hereto as

Ethibit 4.

In response, the Illinois EPA concluded that Bunge’s CFB Boiler

“is not

currently

covered

by the

NOx Budget

Trading

Program.”

Letter

from

Laurel

Kroack, I1linos EPA,

to Katherine I-lodge, Hodge Dwyer Zeman (Dec. 13, 2005), attached hereto

as

Exhibit

5.

Illinois EPA ex.plained

20

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[Tjhis

exclusion

of

Bunge

from

the

program

was

inadvertent

and the

Illinois

PA

believes

that

Bunge’s

boiler

should

be

a

Listed

non-EGU

in

Appendices

D

and

E

of Part 217.

As

such

Illinois

EPA

plans

to correct

this

exclusion

in

the

upcoming

amendments

to

Part

217.

To

accomplish

this,

the

Illinois

EPA

will

work

with

Bunge

and

will

request

that

USEPA

add

the

appropriate

number

of

NOx

allowances

for

Bunge’s

CFB

Boiler

to

the

statewide

NOx

budget

for

non-EGUs.

Id.

at

2.

The

USEPA

concurred

“with

Illinois EPA’s

determination

that

the

CFB

boiler

. .

. is

not

subject to

the

NOx

SIP

regulations

published

in

the

Illinois

SIP at

35

IAC Part

217,

Subparts

A,

U,

and

W.”

Letter

from

George

Czerniak,

USEPA,

to

Katherine

Hodge,

1-lodge Dwyer Zeman

(Dec.

22,

2005),

attached

hereto

as

Exhibit

6.

On

May

3,

2006,

Bunge

submitted

a

formal

request

to

the

Illinois

EPA

regarding

the

inclusion

of

the

CFB Boiler into

the

Subpart U

program.

Letter

from Gale

Newton,

Hodge

Dwyer

Zeman,

to

Gary

Beckstead,

Illinois EPA

(May

3,

2006),

attached

hereto

as

Exhibit

7.

Subsequently,

on

August

17,

2006, the

Illinois

EPA

submitted

a

request

to

LJSEPA

for

the

allocation

of

an

additional

101

allowances

to

the

Illinois

budget

for

the

Illinois EPA

to allocate

to

Bunge

for

its

CFB

Boiler.

Letter

from

Laurel

Kroack,

Illinois

EPA,

to

Mary

Shellabarger,

t..JSEPA

(Aug.

17,

2006),

attached

hereto

as

Exhibit

8.

Thereafter,

on

December

10,

2007,

the

Illinois

EPA

informed

Bunge

that

because

the

NOx

Budget

Trading

Program would

be

sunsetting

in

2008

and

because the

illinois

EPA

“met

its

commitment

to

Bunge

by

requesting

that

USEPA

approve

additional

allowances”

for

Bunge’s

CPB Boiler, “it

would

be

useless

to

pursue

the

current

amendments

under

proposal

R06-22,

as

that

docket

merely

provides

a

space

holder

(i.e.,

an

asterisk)

where

a possible

allocation

could

be

documented.”

Letter

from

Rachel

Doctors,

Illinois

EPA,

to

Gale

Newton,

Hedge

Dwyer

Zeman

(Dec.

10,

2007),

attached

hereto

as

Exhibit

9.

Illinois

EPA

concluded:

21

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USEPA

has

indicated that it will never

provide the

necessary

NOx

allowances

to populate the

account

and

the

applicable

program

sunsets

in

less than

a year.

In

addition, all other

significant

issues in

R06-22

are

moot or will

be best addressed

in

th

Illinois EPA’s

upcoming

(Winter

2008)

regulatory

proposal for NOx RACT

for industrial

boilers,

Hence,

the Illinois

EPA plans to

withdraw

this regulatory

proposal.

Id.

On

August

27, 2008,

Bunge renewed

its request to the

Illinois EPA

for 101 NOx

SIP

Call allowances

for its CFB Boiler.

Letter from Katherine

Hodge,

Hodge Dwyer

Zeman,

to

Laurel Kroaek, Illinois

EPA (Aug. 27, 2008),

attached hereto

as

Exhibit

10.

Further, Bunge requested

that

the Illinois

EPA renew its request

to

USEPA for 101

allowances for the

CFB

Boiler,

as well as move

forward

“with

action to seek

amendments

to

the

Illinois

NOx SIP Call Program

for

non-EGUs,

to

include Bunge’s

CFB

Boiler.”

at 2.

Not

only

was

Bunge

inadvertently

excluded from

Appendix E,

Flint Hills

Resources,

LP’s

(“Flint Hills”)

Joliet Facility

was also mistakenly

excluded

from

Appendix

E. In the Illinois

EPA’s

Statement

of Reasons

in

this

rulemaking, the Illinois

EPA

states thut

it is

proposing

to “update

the

listing of

existing non-EGUs

in Appendix

E”

and is also

“proposing

to

add

Flint Hills.

. and,

to

provide

an allocation

of 6

allowances.”

Statement

of

Reasons,

R06-22

at 9. The Illinois

EPA

further

stated

that the

allocations

of several

other sources

listed

in Appendix

B were reduced

to allow

for the

allocation,

As stated in IERG’s

comments

previously filed in this

rulemaking,

“Flint

Hills

Boiler

CB-706

was

covered

by the Program

but did

not receive

an

allocation

of

NOx

Allowances.”

Comments

of IERG,

R06-22 at 3

(IILPo1.Control.Bd.

Mar. 13, 2006).

Accordingly,

Flint

Hills

has

been added to the

revised Appendix

E

to

IERO’s alternative

proposal.

However,

Flint Hills

requests

an additional

eight

allowances

to better

reflect

22

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the

facility’s

current

operating

scenario,

which

has

changed

since

this

rulemaking

was

initially

proposed,

Thus,

the

Appendix

E

to

IERO’s

alternative

proposal

provides

fourteen

(14)

aLlowances

for

Flint

Hills.

It

is

possible

to

provide

the

additional

allowances

to

Flint

Hills because

the

total

budget

for

NonlGUs

includes

allowances that

were

never

distributed

to

Jefferson

Smurfit

Corporation

(“Jefferson

Sniurfitj.

The current

Appendix

E

lists

Jefferson

Smurtt

as

a

source

and

allocates

thirty-nine

(39)

allowances

for

its

boiler.

However,

the

flhinois

EPA has

not

distributed

the

thirty-nine

(39)

allowances

to

Jefferson

Smurfit

because

it

does

not

own or

operate

a

budget

unit subject

to

Subpart

U.

Thus,

the

total

budget

includes

thirty-nine

(39)

aLlowances

that can

be

reallocated

to

other Appendix

B

sources.

Appendix

B

to

TERG’s

alternative

proposal

deletes

Jefferson

Srnurtit

as

a

source

and

reallocates

the

thirty-nine

(39)

allowances

that

would

have

been

distributed

to

Jefferson

Smurfit

if

it

owned

or

operated

a

budget

unit

to

Flint

Hills

and Citgo

Petroleum

Corporation

(“Citgo”).

The aHocation

of

allowances

to

Citgo has

also

been

revised.

The

current

Appendix

B

shows an

allocation

of

twenty-three

(23)

allowances

to

Citgo’s

facility;

however,

the

allocation

of

only

twenty-three

(23) allowances

is

artificially

low

for

several

related

reasons.

A single

baseline

year

(1995)

was

used

by

the

Illinois

EPA

to

establish

the

summertime

allocations under

Subpart

U,

and during

this

time,

Citgo’s

Aux

Boiler

was

shutdown

for

maintenance

for

almost

seven

weeks

(late

July

through

mid-

September),

i.e.

almost

one-third

of

the

ozone season.

In

addition,

the

summer

in

1995

was an

extremely

hot

summer,

and

since

the

Aux

Boiler

is

a

swing

boiler,

it

was

not

fired

as

hard

as

it

could

have

been

when

it was operating,

since steam

demand

was

further

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depressed. Thus,

for

the

Aux

Boiler,

15

was

not a

representative year;

yet,

it

was

used

to

establish

the

initial

allocation

of

allowances. The

additional

allocation

of

sixteen

(16)

allowances to

Citgo

shown

in the

revised

Appendix

E to

IERO’s

alternative

proposal

accounts

for

the representative

operation

of

the

Aux

Boiler.

Further,

as with

Flint

Hills,

the

additional

allowances

allocated

to

Citgo

are

already

included

in

the

total

budget,

but

were

never

disttibuted to

Jefferson

Smurfit

because

it

did not

operate

an emissions

unit

subject

to

Subpart

U.

2.

Revisions

to

Appendix £

JERO’s

alternative

proposal

revises

Appendix B to

include

the

allocation

of

sixty

(60)

aLlowances to LTV

Steel’s

boiler,

which

was

sold

to

Chicago

Coke

Company,

Inc.

(“Chicago

Coke”),

and

the

deletion

of the

University

of

illinois

boiler.

66

Fed.

Reg,

at

6453.

Further,

in

regards

to

Bunge,

because

the

Illinois

EPA

has failed

to

propose

a

rule

to replace

the

NOx

Budget

Trading

Program,

circumstances have

changed

from

the

ones

described

in

Illinois

EPA’s

December

10,

2007

letter.

Accordingly, the

total

budget

in

Appendix E

to the

alternative

proposal

was adjusted

to

include

101

allowances

that

the

Illinois

EPA

requested

for

Bunge’s

CFB

Boiler.

However,

IERO

understands

that the

tJSEPA

will

not

take

action

on the

Illinois

EPA’s

request

to

add

101

allowances to the

Illinois’

budget

for

Bunge’s

CFB

Boiler

until

the

allocation

for

the

CFB

Boiler

is set

forth

in

a final

rule

so

IERG’s

alternative

proposal

includes

an

allocation

of

101

allowances for

Bunge’s

CFB

Boiler,

rule

language,

and

the

pending

request

from

the

Illinois

EPA

to

USEPA

for

101

allowances

for

Bunge’s

CFB

Boiler.

As

discussed

above,

not

only

was

Bunge

inadvertently

excluded

from

Appendix

E,

Flint

Hills

was

also

excluded

from

Appendix

E.

Statement

of

Reasons,

R06-22

at 9;

24

Electronic Filing - Received, Clerk's Office, August 3, 2009

---

1U6—04—2009

12:30

HDD

P.26/27

Comments

of

JERO,

R06-22

at

3. Accordingly,

Flint

Hills

has

been added

to

Appendix

E

and

allocated

fourteen

(14)

allowances,

and

as

discussed

above,

Citgo

has

also

been

allocated

an additional

sixteen

(16)

allowances.

In

addition,

the

following

revisions

have been

made

to

the

current

version

of

Appendix

E

and are

reflected

in

ERG’s

alternative

proposal:

•

Company

names,

source

identification

numbers,

and unit

designations

have

been

updated;

•

Allowance

allocations

have

been

aggregated

by source

rather

than

by budget

unit because,

unlike under

the

NOx Budget

Trading

Program,

compliance

accounts

under

the

CAIR

NOx

Ozone

Season

Trading

Program

will

only

be

established

for sources

rather

than

for

individual

budget

units;

•

The

allocation

to Archer

Daniels

Midland

Company

(“ADM”)

has

been

divided

between

ADM’S

Decatur

Complex

and Peoria

Plant;

•

As

discussed

above,

sixty

(60)

allowances

have

been

added

to

the

flhinois

budget

and

allocated

to

Chicago

Coke,

the new

owner

of

the LTV

Steel

facility;

•

Jefferson

Smurfit,

as

discussed

above,

has

been removed

from

Appendix

B since

his

no

longer

an

owner

or

operator

of a budget

unit;

•

As

discussed

above)

the

University

of Illinois

Abbott

Power

Plant

has been

removed

as

a

source

as approved

by

the

USEPA;

•

As

discussed

above,

Bunge

has

been added

to the

list of

sources,

and the

budget

has been

revised

to include

the

101 allowances

that

the

Illinois

EPA

requested

from

the

USEPA

for Bunge;

•

An additional

sixteen

(16) allowances

have

been

allocated

to

Citgo

in

order

to account

for the

unrepresentative

year

in which

the

initial allocation

was

determined;

and

•

Flint

Hills

has

been added

as a source,

as

discussed

in

the

fllinois

EPA’s

Statement

of

Reasons,

and allocated

fourteen

(143

allowances.

25

---

AUG—04—2009

12:30

HO8D

P.27/27

I

Allocation

of

Allowances

The

illinois

budget

has

been

recalcuLated

based

on

the

addition

of allowances

for

Chicago Coke

and

Bunge

and

the

removal

of

the

University

of illinois

from

Appendix

E,

Further, individual

allocations

to sources

have

been

slightly

revised

to distribute the

allowances that

would

have

been

allocated

to

Jefferson

Srnurfit

to

Flint

Hills

and

Citgo.

The

adjustment

to

the

budget

is

based

on

the

caLculation

provided

in

Exhibit

1

L

WHEREFORE,

the

ILLINOIS

ENVIRONMENTAL

REGULATORY

GROUP

requests that

the

Board

to

grant

this

Motion

for

Expedited

Action

on

IERO’s Alternative

Proposal.

Date&

August

3,

2Q09

Alec

M.

Davis

General

Counsel

ILLINOIS

ENVIRONMENTAL

REGULATORY

GROUP

215

East

Adams

Street

SpringfieLd,

Illinois

62701

(217)

522-5512

Respectfully

submitted,

ILLINO]S

ENVIRONMENTAL

REGULATORY

GROUP

By:

/s/

Katherine

D.

Hodge

One

of

its

Attorneys

Katherine

D,

Hodge

N.

LaDonna Driver

Monica

T.

Rios

HODGE

DWYER

&

D1UVER

3150

Roland

Avenue

Post

Office

Box

5776

Springfield,

Illinois

62705

(217)

523-4900

rsao:oo1/R

Docket/F1/RO6-22/MotjQn

fGr E,cpcditcd

Action

on

IERG’s

Alten

rke

?roposI

(8.03.09)

26

TOTAL

P.27

Electronic Filing - Received, Clerk's Office, August 3, 2009

---

RU&-04—2009

12:33

HDD

P.@1/30

Section 217.104

Incorporations

by

Reference

The

foLlowing

materials

are

incorporated

by

reference,

These

incorporations

do

not

include

any

later amendments

or

editions,

a)

The phenol

disulfonic

acid

procedures,

as

published

in

40 CFR

60, Appendix

A,

Method

7

(2000);

1.,)

40

CFR

96, subparts

B, D,

G,

and

H

(+4j9);

c)

40 CFR

96.1

through

96,3,

96.5 through

96.7,

96.50

through

96.54,

96.55

(a)

&

(b), 96.56

and

96.57

(-l-992.Q.Q9);

d)

40

CFR

60,

72,

75 &

76(200%);

e)

Alternative

Control

Techniques

Document-—-

NO

Emissions

from

Cement

Manufacturing,

EPA-453/R-94-004,

U.

S.

Environmental

Protection

Agency-

Office

of

Air

Quality

Planning

and

Standards,

Research

Triangle

Park,

N.C.

27711,

March

1994;

f)

Section

11.6,

Portland

Cement

Manufacturing,

AP-42

Compilation

of

Air

Emission

Factors,

Volume

1:

Stationary

Point

and

Area

Sources,

U.S.

Environmental

Protection

Agency-Office

of

Air

Quality

Planning

and

Standards.

Research

Triangle

Park,N.

C.

27711,

revised

January

1995;

g)

40

CFR

60.13

(2001);

h)

40

CFR 60,

Appendix

A,

Methods

3A,

7,

7A, 7C,

70,

7E, 19,

and

20 (2000);

i)

ASTM

D6522-00,

Standard

Test

Method

for

Determination

of

Nitrogen

Oxides,

Carbon

Monoxide,

and

Oxygen

Concentrations

in

Emissions

from Natural

Gas-

Fired

Reciprocating

Engines,

Combustion

Turbines,

Boilers,

and

Process

Heaters

Using

Portable

Analyzers

(2000);

k)

Standards

of

Performance

for Stationary

Combustion

Turbines,

40

CFR

60,

Subpart

KKKK,

60.4400

(2006);

affd

1)

Compilation

of

Air

Pollutant

Emission

Factors:

AP-42,

Volume

I:

Stationary

Point

and Area

Sources

(2000),

USEPAT

ni)

40

CF1196, CAIR

NQ

Ozone

Season

Tradingirorarn.

subpar

AAAA

(excluding

40

CER

96304.

9.3O5(b)(2).

aiç196.3O6).

BBaB,

FPFP,

GG.GG,

and

HHH.H

(2009):

and

r)

40

CFR

78

(2009).

iL

EXHIB

I

Electronic Filing - Received, Clerk's Office, August 3, 2009

---

AUG—04—2009

12:33

HDD

P.02/30

(Source:

Amended

at

4--14-Re.

I

‘1754

effective &

Electronic Filing - Received, Clerk's Office, August 3, 2009

---

SUBI’ART

Us—NON

GONTROL-AND-TRAD-FNG-P-POGIIAM

FOR

SPECTFJED-No%-GENERA-TrNO

UNITS

The

purpose

ac-this

Subpart

is

te-cap-theemissions

ofnitrogen

oxide&

(NO)-during-the

ozete

eantrel

period-from

unitt

subject

to-the

provisions

of1his

Subpnrt{budget-unita)4y

detemñning

seurceallocatiens

and-by

implenieraing1he

federal-

O4ading

Pro-gram,

40-CFR

96,

cozthtent

with-the

provisions

of-this

Subpa

(Souree:

Added-at

25411.

Reg$914,

effective

April

1740014

€ootien

217A-52

•-Severabi4ty

1-fanySootlo;

-.

_I

fiLT.

flTL

rn

!.

-1-_Il

the

validity

of

this-Subpart-as

a

whole

sittley

.eeuon,

srnnec

or

crnuae-nor

xourio

irwauu,

•

DCUOfl--U[

CtU1J-Ol

LfliS-ZiUUj3WT”

I4)H-’S1

flh1ttflflrflufa421

f$ource:

Added-at-25--14-Reg.

59-14

April

l720O-1-)

ni_V

.4tA

Applicability

a)—-

This-Subpart-applies-to

any-fossil

aol

fired

stationary

boiler,

combustion

turbine;

er-combined

cycle

system

with

a

maximum

desip

heat

-input-greater

than

250

mmbtu/hr

and-that

is-f

1)

•-

-

A

unitlisted-in

Appendix

Bef

this

Subpart,-irrespective-ef

any

subsequent

e-hanges-4n-ownership-4init-desi-gnatien,

or

name

of-the

unitj-or

A

_f.

Is..i

A

—/

T

I.)

1’

_rtr.

o

B-)

--At

any-time

socvez

a

gencrator-produeing

eleetricity4br

sale,

if

sueh’genefator

has-a

namepaw

capacity-of

25

MWe

or

less

and

has-the

potential-to

use-no

more

than

50%-of

the-potential

electrieal

output

capacity

of

the-unit.

F-Iffy

percent

of

a

unit’spoteatial

‘$eetrical

output

capaeity

*nU

he-daterrnaad

IvLmultinlvinr4ka

unit’-s-maximum

design

heat-Input-by

O.04€S

MWc/mmbtu,

If—the

size-of

the

generator

issmaller

than

this-calculated

numbeis-the

Sis-subject

to

the

prov

ens

-of

this-Subpartbut

if

the

size-of

th—cnn

Fec-€.i-afeatef-thafl

this

calculated

number.-tlie

iinit4c

-

G-)----—{s-part

of

an-y-sourte,;

Seetion-2-1

1.61-34,

listed-in

App

te’t.t

ir

.P.ln_.

n.

HDSCD

AUG—04—2009

12:33

s.fl1_VAtA

P.03/30

that

term

is

defined

in-35

I1l.-Mrn-Codc

di*-E

of-this

Pafl-or

Electronic Filing - Received, Clerk's Office, August 3, 2009

---

FU6-04—2009

12:34

HD2D

see

ael€’

a&

wifl-c”

&ibpart

Uor

Subpart-WNO-Trading-Bidget.

:1..uyu

P.

04/30

t__

_1

e)

Low-emittcr.stutu:

Notwithtandi

ubscction,

(a)

ofthis

Seetign,

the-owner

or

eperato-€$-budget-triit

subject

to

the4eguiremnts

ofsubsection-(a)

of

this

SectiOn

m

e1ect-1ew-e+ittei-&tatus

by-ebtaieiig-a

pennit

with

fedoiel4y

eal’ec-eable

conditions

thatrneet

thc-reguirements

of

Section

21

7A

72(a)

Starting

w-the-effeetivc

date

of

such-permit4iie

unit-shall-be

subject

only

te

the

eqeireinents

of

Section

217.4Th

4)

The

owner

or

operator

of

any-budget-unit

not-li&ted

in

Appendix

E

of

this

Port

but

&ubject

to

.t4,.is

Subpart

thall

not4eeei-ve

an-allocation

of

NO

allowances-

from-the

Subpart

l-or

Suhart

W

NOTrading

u4get,

except

for-.any

allowance

from

the

nv-soerce--$et

asi-&-in

accor4nce-wkFrScction

2l7.i68f

this

Subpart.

Sieh

t-rnust

acquire

NO-allowanees-hi

an

-amount

not-less

then

the

NQ

enissiens

‘frem-

such

budget

uiit

during

the

confrel

perioc%roundcd

1o-the

-nearest

who1

ton)-in

accordance

with-the

federal-

4O-rading

Prcram,

Subpart

X

ofthis-Part

er-pursuant

te-a-permanent

tra+for

of

NO

alloca

en-purstant

to

Section

17A

62(b)-of

this

Subpart-i

c)

Notwitha

+—

th

—,,—-.--.-

ii

thi

...,

-other-v.

f-this

DL

aduni

serce

subject-to

thepm’ovisions-ofsubseet4en-(a)-of

this

Section

will

become

subject

-te-this

Subpart

on-th-ftrst

dayftI:e

c€mtml

season

subcguont

t.-Iw

eie1a’earin

whish—aIl

of

the-at/icr

s1aes

sul?Ject

to

the

-provikrn

-afthe--NO

SIP

ail-(63

Fed-Reg.

573-55

(Octeer-27,

1992))

thi-

are

located

in

US[44

Region

V

or

re

tlsat•contiguo-us

to

fIhuois

havc

adapted

Fegulations

to

inipknwn’

N-tiad;g-programc--and

oñzer

required

duotions

qfNQ

cmis.s

ions

p**rcuant

to

the

AO

SIP-Gall,

and-such

regulations

hc

reeei.vcdJitralpproveI-by

(1SEP

44

as

pi

of1heiipective

stoics

SIP

.for

vne.

or

afina!

oze

pomuigitcd

by

USEP,I

is

ffiictivc.

[-1-45

JLCS

5/9.9(f).)

(Souree—Addod-at

25

HI.

-Reg.59l-4-

April-17,

2001)

tion

217,4W

MI

budot

units

su1ject

to

t4e-

1))

-Is

a

unit-sejeet

to

Sth-art

W

of-this

Part(excIuding-any

unit-listed

ie-Ajendh--F-ef-this

Part-regnrcl1ess

of

any

change

in

ownership

er-any

chane

of

operator),

and-the

o-wneror

operator

makes-a

permanent

e1oction—at4he

time-efapplyi-ng

for

a-budget

permit

purs*aiit

to

this-Part,

to-.sibject.tha

unit

to-the

requirements-of

this

$ubpart-ratherthan

Subp’art

W

of-this

Part.

Any

unit—for

whieh

-Vt

nn-ajipcptign.-frpm

thci

.1

.-....‘4.T..

.L.

Electronic Filing - Received, Clerk's Office, August 3, 2009

---

flUI3—04—2009

12:34

HD&D

P.05/30

a)

T-he

requirements

of

this-Subpart-arid-40

CFR

96-excIuding--1O

CFR86A(b)

96

1

55(e)-and

subparts-

C,

E,-artd-l,

as-incorporated

by

reference-hi-Section

217404

of-this

Part.

To

the

extent-that-thi&

Subpart-contains

provisions

which

are

inconsistent

with-any

provisions

of4O-CFR-

C16,

the-owner

or-eerator

of-budget

units-subject-ta

this

Subpart

shall-comply

with-the-provisions

of-this

Subpart-in

H-eu-of-those

previsions

which

were-incorporated

by-ceferenee

—el’-.

1’—

4-)

—The-owner

or-eperator

sf

each—source

wi-tb-one

or

more-budget

units

at

-the

source-subject

to

this

Subpart

must-submit

a-completa

periit-appli-oation

for—a

budget-permit

in-eccordanee

with

the

previsions

oflection

2l7.45SfaØ),

(u(5)

or

(a),

as

applicable,

to

beiscue

-by--he

Agency

with

federally

enftreeahle-eonditions-coverinfle

N%-Trathng

Proam

(bud-get

-permit)and

that--complies

with

the

requirements

of

Section

217,458-of

this

Subpart

2)

The

owner

or

operator

of

one—or

more

budget

units

subject

to

this

-Subpa#

must-eper-ate•each-sueh-b-u4get-u&t

in

compliance

with

sweb

budget

permit

or

complete-budget

permit-application,

as

applicable.

3)

The

owiier—or

operator-of

one

-eEniorc-budget

units

subjoet

to-this--S-ubpac

at

the-time

of

filing-an

applie-ation-fer

a

permit

under-this

Section,

mwst

submit

a

comple*applicationSor-either

a

permit-incorporating

a

source—

wide--ovcrdraft

aecount-(as

gjdi4ej-m

is-defined--in-dO

CFW96.2}

1

-or

a

permit

incorporating-unit

specific

compliance-account

for

each-budget

unit

at-the

source-subject-to

this—Subpart;

--Such

election

shall

heat

the

sole

di-sefetion

of

the

owner

or-operator

of-the-seufee

and-the

Agency

shall

jj’jg-.r’,in

n’

Lelectionntp

a-permit

issued

to

the

source-pursuant

to

this

Subpat

I)—-

-

For-budget-units

subject

to

th

commence

operation

on—and

afIoi—

January

1,

2000,

the

owner

or

operatsi’

clench

such

budget

unit

-*ths-seuree-must-oomply-with

the

monitoring

iequirements

of4O—GFR,

96,-subpart-H.

The-account

-representative

of

each-such

budget

unit

at-the

source

shall

comply

-wi-tb

those-sections

of

tb-c

me-nitoring-requirernents-of

49

CF

R

96subpurt+l,

applicable

team

LI,bflI

V

2)—

The

compliance

of

each-budget-unit

subject

to

the

requirements

-a-f

subsection

(c)(

I-)

or

subceetion-(e)9)EA)-ef

this

-Section--with

the-control

period

NOK-emissiens

limitation

under

subsection

(d)-of

this4ection-shall

be

detemünod-by-thee

ssiens—measuremcnts---recorded

and

reported

-in

c)-

--Me

___s

____

_t_

-with--40-CFR

96,

-subpart-H

Electronic Filing - Received, Clerk's Office, August 3, 2009

---

3-)

For-budget

units

which

eemmenccd-eperation-prior

to-Sew.wry

1,

2000:

A-)---

The-owner

or

eperator

of-each-such

budget-unit

at

the

source-must

comply

with

thereguiremonw

of

40

CFR

96,

cubpart

Htor

-8)

-

Tithe

monitoringrequirements

of-40

(FR

9&,-subpe*Hrafe

demonstrated

by

the-senree

to

be-technically

infeasible

as-applied

to-a-budget-unit

subject

to

the

reguirements-ef

this

Subpart,

the

owner-or

operator

ofsuch

-budget

unit

may

monit-orby

an

alternative

monitoring

proeedure

for—the

budget

unit-approved

by

the-Ageney-end

the

Administrator

of-U-SEPA

pursuant-to-the

provisions

of-’lO

CFR-7-5,

subpart-E.

Such

alternative

mothering

procedures

rnustbc

contained

as-federally-enforceable

conditions

in

the-mit

ncniii-t

4-)——

-

Thcoemplianeo

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