1098
    1
    BEFORE THE ILLINOIS POLLUTION CONTROL BOARD
    2
    VOLUME VI
    3
    IN THE MATTER OF: )
    4 )
    EMISSIONS REDUCTION MARKET ) R97-13
    5 SYSTEM ADOPTION OF 35 ILL. ) (RULEMAKING)
    ADM. CODE 205 AND AMENDMENTS )
    6 TO 35 ILL. ADM. CODE 106. )
    7
    8
    9 The following is the continued transcript
    10 of a rulemaking hearing held in the above-entitled
    11 matter taken
    stenographically by Michelle M. Dose,
    12 C.S.R., a Notary Public within and for the County of
    13 Cook and State of Illinois, before Hearing Officer
    14 Charles M.
    Feinen at 100 West Randolph Street, Room
    15 9-040, Chicago, Illinois, on the 11th day of
    16 February, 1997, commencing at the hour of 9:00 a.m.
    17
    18
    19
    20
    21
    22
    23
    24
    L.A. REPORTING - (312) 419-9292

    1099
    1
    2 A P
    P E A R A N C E S :
    3 HEARING TAKEN BEFORE:
    4 ILLINOIS POLLUTION CONTROL BOARD,
    100 West Randolph Street, Suite 11-500
    5 Chicago, Illinois 60601
    (312) 814-3473
    6 BY: MR. CHUCK FEINEN,
    HEARING OFFICER,
    7
    THE ILLINOIS POLLUTION CONTROL BOARD MEMBERS
    8 PRESENT:
    9 MS. ELIZABETH ANN
    MR. KEVIN DESHARNAIS
    10 MS. KATHLEEN M. HENNESSEY
    MS. MARILI MCFAWN
    11 MR. JOSEPH YI
    12
    ILLINOIS ENVIRONMENTAL PROTECTION AGENCY MEMBERS
    13 PRESENT:
    14 MR. RICHARD FORBES
    MR. ROGER KANERVA
    15 MR. DAVID KOLAZ
    MR. BHARAT MATHUR
    16 MR. GALE NEWTON
    MR. CHRISTOPHER ROMAINE
    17 MR. DONALD SUTTON
    MS. BONNIE SAWYER
    18
    19 ADDITIONAL AUDIENCE MEMBERS WERE PRESENT AT THE
    HEARING, BUT NOT LISTED ON THIS APPEARANCE PAGE.
    20
    21
    22
    23
    24
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    1100
    1
    2 I N D E X
    3
    4 Testimony was heard from the following Board Members
    of the Illinois Environmental Protection Agency in no
    5 specific order:
    6 MR. RICHARD FORBES
    MR. ROGER KANERVA
    7 MR. DAVID KOLAZ
    MR. BHARAT MATHUR
    8 MR. GALE NEWTON
    MR. CHRISTOPHER ROMAINE
    9 MR. DONALD SUTTON
    MS. BONNIE SAWYER
    10
    11 NO EXHIBITS MARKED
    12
    13
    14
    15
    16
    17
    18
    19
    20
    21
    22
    23
    24
    L.A. REPORTING - (312) 419-9292

    1101
    1 THE HEARING OFFICER: Good morning. It's the
    2 second day of this week's hearing for February,
    3 February 11th. Yesterday we talked about having --
    4 or actually setting hearings for the 10th and 11th of
    5 March for more questioning and presentation of
    6 economic testimony. We are going to set hearings for
    7 April 21st and then reserve the 22nd, 23rd, and 24th
    8 if needed for the presentation of testimony from
    9 other participants besides the Agency and questioning
    10 of that, which by doing that means that I am
    11 scheduling for
    prefiled testimony.
    12 We are looking at
    prefiled testimony
    13 coming in on April 4th and
    prefiled questions coming
    14 in on April 14th.
    15 Now, I am going to explain a little bit
    16 more of the summer schedule. We will close the
    17 public comment period on May 16th, which means most
    18 likely the Board will go to first notice on June 19th
    19 at the Board meeting scheduled for that date. It
    20 will get published most likely in the Illinois
    21 Register on July 3rd because July 4th is a holiday.
    22 Forty-five days from the July 3rd date roughly brings
    23 us to August 22nd -- or 21st for a second notice to
    24 be adopted by the Board.
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    1102
    1 MR. FORCADE: August?
    2 THE HEARING OFFICER: August 21st, which
    3 45 days brings us to October, and the first available
    4 Board meeting to go final will be October 16th.
    5 However, if
    Jaycar gets to it sooner and we can adopt
    6 a final notice sooner, we'll move that date up
    7 accordingly.
    8 One of the big problems is that the 45
    9 days starts from when it gets published in the
    10 Illinois Register; and even though the Board can
    11 adopt it on a Thursday, it takes roughly 10 or so
    12 days before it gets published in the Illinois
    13 Register, and that's why we have like a 55-day if not
    14 larger gap between first and second notice. We're
    15 kind of hamstrung there with that, and there's
    16 nothing we can do about it. It's just dead time.
    17 We just file it, send it in, and it takes them that
    18 long to publish it.
    19 I'll probably follow-up next week when I
    20 get back with a Hearing Officer order that will set
    21 all this stuff -- will set out the March 10th and
    22 11th and all the other hearings and dates we just
    23 talked about.
    24 Are there any questions at this time?
    L.A. REPORTING - (312) 419-9292

    1103
    1 MS. MIHELIC: When do you think the transcript
    2 from the March 10th hearing will be done?
    3 HEARING OFFICER: I'm going to do expedited
    4 transcripts on that. Hopefully that means we'll get
    5 them, depending how many days we use, Monday the
    6 17th, which is St. Patrick's Day, of March. Of
    7 course, you will have the transcripts from the other
    8 proceedings already at that time. So the only part
    9 of the transcript you won't have or only part of the
    10 record hopefully will just be the economic section.
    11 Any other questions?
    12 MR. WAKEMAN: Are we starting at 9:00?
    13 THE HEARING OFFICER: Yes. Thank you.
    14 I'm going to start those on March 10th
    15 and 11th at 9:00, and I'll start the 21st at 9:00
    16 also.
    17 And hopefully I will remember to continue
    18 all this on the record so we don't have to do any
    19 noticing because if we do noticing, that kicks it
    20 another 45 days. So this will all be continued on
    21 the record.
    22 Any other questions?
    23 MS. MCFAWN: I would just note for the record
    24 that the Board had a more ambitious record because
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    1104
    1 when this rulemaking was first filed, there was a
    2 motion for expedited consideration which we were
    3 going to grant in essence. We were expediting this
    4 rulemaking. We've run into a lot more testimony and
    5 a lot more questions than we normally do in the
    6 rulemaking. So even though we had to allow for some
    7 slippage, we couldn't allow -- the slippage right now
    8 I think is basically because the economic testimony
    9 is being put off a month longer than initially
    10 anticipated. So that puts -- that explains the
    11 reason that we are a month behind or a month and a
    12 half behind our original schedule, which was to
    13 accommodate the Agency's moving this matter into a
    14 SIP process. I just wanted that noted on the record.
    15 THE HEARING OFFICER: Any other questions about
    16 the schedule or comments?
    17 Okay. Let's go off the record for a
    18 second.
    19 (Discussion had off
    20 the record.)
    21 THE HEARING OFFICER: We'll set out for
    22 Tenneco's question No. 33.
    23 MR. FORCADE: Good morning. Bill
    Forcade from
    24 Jenner & Block representing Tenneco Plastics Company.
    L.A. REPORTING - (312) 419-9292

    1105
    1 With me is Jim
    Wakeman. We are asking questions
    2 pertaining to Section 205.405 from our January 27th
    3 submittal. We are on Question 33.
    4 THE HEARING OFFICER: If I could quickly
    5 interrupt, we have a new court reporter. Please
    6 state your name again and who you are with; and when
    7 you are reading your questions, speak a little bit
    8 slowly. And when you are referring to CAAPP
    9 permitting, please use permitting; if you are
    10 referring to CAAPP, just say CAAPP so that we can
    11 Be clear on the record. Thank you.
    12 MR. FORCADE: Okay. Question 33, referring to
    13 Sections 205.405(b) and (d) and the definition for
    14 BAT in Section 205.130, the Agency will need to
    15 determine BAT for emission units on a case-by-case
    16 basis using factors listed in the definition.
    17 For how many of the 4,105 emission units
    18 identified in Table 7 titled Analysis of ERMS
    19 Participating Sources, of the Exhibits of the
    20 Illinois EPA's Air Quality Strategy Presentation
    21 (Table 7) will the Agency need to make a BAT
    22 determination?
    23 MR. ROMAINE: We don't know. The BAT exclusion
    24 is an option that we have made available to
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    1106
    1 participating sources. We can only speculate how
    2 many of the 200 to 250 participating sources decide
    3 to pursue this option.
    4 MR. FORCADE: For how many of these 4,105
    5 emission units does the Agency anticipate that the
    6 Pollution Control Board will be required to hear
    7 appeals?
    8 MS. SAWYER: Objection; speculative.
    9 MR. FORCADE: Is it true that the Board then
    10 will be required in appeals to evaluate the factors
    11 listed in the definition in order to determine BAT
    12 for each emission unit?
    13 MS. SAWYER: This question calls for a legal
    14 interpretation.
    15 MS. MCFAWN: Well, I'm kind of curious. Is
    16 that the Agency's intention? Maybe you should answer
    17 it, Bonnie.
    18 MR. ROMAINE: I guess I'm the witness.
    19 MS. MCFAWN: Okay. If you would, Mr. Romaine.
    20 MR. ROMAINE: The Board would obviously have to
    21 review the Agency's determination based on the record
    22 before it.
    23 MR. FORCADE: For the RACT/BACT/LAER analysis,
    24 regulated sources can use U.S. EPA's database for
    L.A. REPORTING - (312) 419-9292

    1107
    1 such determinations in order to follow U.S. EPA's
    2 decisions on permitted units.
    3 Where will regulated sources look in
    4 order to follow the Agency's and the Board's
    5 determinations on BAT? Will the Agency maintain a
    6 similar database?
    7 MR. ROMAINE: Well, the determinations on BAT
    8 will be reflected in the draft and the final Title 5
    9 permits issued to the participating source.
    10 MR. FORCADE: I'm sorry. That's not really
    11 responsive to the question.
    12 Will the Agency maintain a single unified
    13 database where sources in the state can go to
    14 determine what decisions the Agency has made that
    15 sources do or do not qualify for BAT?
    16 MR. SUTTON: Well, if I could just interject
    17 for a second.
    18 The problem is going to be that all these
    19 people have to do this prior to January 1998. So, in
    20 effect, they will all be doing them simultaneously.
    21 Our review will be 120 days after they are
    22 submitted. So our determinations, in fact, won't be
    23 made in the large part until after all the
    24 applications are submitted.
    L.A. REPORTING - (312) 419-9292

    1108
    1 So where do you see the benefit?
    2 MR. FORCADE: You have a new and undefined term
    3 that the Board will have to on appeal evaluate.
    4 Should any appeals arise, it would be
    5 helpful to know what decisions the Agency has reached
    6 on BAT in order to present those decisions to the
    7 Board on appeal.
    8 MR. SUTTON: Well, I think we can accommodate
    9 that. I was just saying that the timing is such
    10 that -- and I don't think we have a great objection
    11 to a bulletin board -- but it is the access to the
    12 data at the time you need it.
    13 MR. FORCADE: Will the Title 5 ERMS permit
    14 include any BAT determinations made by the Agency;
    15 and if not, how will other sources track the Agency's
    16 BAT determinations?
    17 MR. ROMAINE: As I said, the BAT determinations
    18 will all be reflected in a source's Title 5 permits.
    19 THE HEARING OFFICER: Let the record reflect
    20 that he was responding to question No. 34 from
    21 Tenneco.
    22 Moving along on the outline read by the
    23 Agency the other day, we are up to
    Sonnenschein's
    24 Questions 9(a), (b), (c) and (d) from their January
    L.A. REPORTING - (312) 419-9292

    1109
    1 16th filing.
    2 MS. FAUR: Good morning. I am Cindy
    Faur from
    3 Sonnenschein.
    4 Question 9(a) we are withdrawing. That
    5 has been effectively asked and answered.
    6 Question 9(b), I believe the first part
    7 of it has been answered; but I would like to clarify
    8 that response and then ask the second.
    9 Mr. Romaine, I believe in your testimony
    10 yesterday you testified that if a source had BAT, the
    11 facility was overall BAT, that that source would be
    12 exempt from reductions under the ERMS rule?
    13 MR. ROMAINE: That is correct. The source
    14 would be exempt from the 12 percent reduction
    15 requirement.
    16 MS. FAUR: If an exempt source requested a
    17 permit limit based upon maximum reduction capacity in
    18 its CAAPP permit application, may that source operate
    19 under that permit limit if it is recognized in its
    20 permit, that maximum permit limit?
    21 MR. ROMAINE: Yes.
    22 MS. FAUR: Thank you.
    23 Questions 9(c) and (d) we also withdraw.
    24 I think that they both have been effectively asked
    L.A. REPORTING - (312) 419-9292

    1110
    1 and answered.
    2 THE HEARING OFFICER: Thank you.
    3 We enter Dart Containers' Questions 24,
    4 25, 26, 27, 31, 32, 33, and 34.
    5 MR. NEWCOMB: This is Christopher
    Newcomb for
    6 Dart Container, N-e-w-c-o-m-b.
    7 Question No. 24 has been asked and
    8 answered.
    9 Question No. 25 has been asked and
    10 answered.
    11 Question Nos. 26, 27, and 28 have been
    12 asked and answered as well.
    13 Question No. 29, can you identify and
    14 describe any examples of a participating source not
    15 able to reduce emissions further because it would not
    16 be economically feasible?
    17 THE HEARING OFFICER: I know this one has
    18 not -- this was not included in the outline, but it
    19 does --
    20 MS. SAWYER: Yes. It must have been something
    21 that we missed.
    22 THE HEARING OFFICER: But it does appear to go
    23 along with the line of questioning. So if the Agency
    24 wants to take a minute to prepare to answer, that
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    1111
    1 would be great.
    2 Let's go off the record for a second
    3 while they are getting ready.
    4 (A short recess was taken.)
    5 MR. ROMAINE: As I have said, we have not
    6 identified particular emissions at this point that
    7 would qualify for the best available technology
    8 exclusion.
    9 We could simply come up with a
    10 hypothetical example and have an emission unit that
    11 is already very well controlled so that further
    12 process changes to change emissions would be very
    13 expensive, and so that application of add-on control
    14 technology to that unit would be very expensive. So
    15 that would be one sort of example where the sources
    16 relying on process changes to reduce its emissions or
    17 control its emissions such that further measures to
    18 reduce emissions would be expensive.
    19 The other example would be in a unit that
    20 is used applying add-on controlled features that
    21 controls emissions and would already be doing very
    22 well in controlling emissions so that pulling that
    23 current control device out and replacing it with a
    24 slightly more efficient control device would also be
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    1112
    1 extraordinarily expensive.
    2 MR. NEWCOMB: As a point of clarification, when
    3 you say extraordinarily expensive, would the Agency
    4 strongly consider the fact that a source may have to
    5 shut down because of the ERMS 12 percent reduction
    6 that might be required?
    7 In other words, if they didn't get the
    8 BAT determination and they were forced to do further
    9 reduction because of that, they would decide to close
    10 that facility?
    11 MS. SAWYER: I think this question would be
    12 better asked during the economic portion.
    13 MR. NEWCOMB: This is a determination of fact.
    14 I don't think that was an economic determination
    15 underlying the entire rulemaking.
    16 MR. ROMAINE: No. The best available
    17 technology determination is not able to factor in the
    18 specific choices a company might make in light of the
    19 cost of particular control measures.
    20 MR. NEWCOMB: I also notice on the outline that
    21 my Question No. 30 -- 29 and 30 wasn't included as
    22 well.
    23 MS. SAWYER: No.
    24 MR. NEWCOMB: But --
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    1113
    1 MS. SAWYER: Sorry. Go ahead.
    2 MR. NEWCOMB: But it doesn't really matter
    3 because that was asked and answered, so I withdraw it
    4 anyhow.
    5 THE HEARING OFFICER: Chris, can you speak up?
    6 MR. NEWCOMB: I'm sorry. That was already
    7 asked and answered, so I withdraw it anyhow, even
    8 though it wasn't included on the outline.
    9 Question No. 31 has been asked and
    10 answered.
    11 Question No. 32, if a participating
    12 source has implemented the technological control that
    13 has been accepted as MACT or LAER in a different
    14 state or jurisdiction, will the Agency presume that
    15 this technology meets the BAT standard for purposes
    16 of the ERMS?
    17 MR. ROMAINE: No, it would not. That
    18 information would be suggestive, however, that they
    19 are possibly meeting the best available technology.
    20 MR. NEWCOMB: Question No. 33, if a
    21 participating source has obtained a RACT adjusted
    22 standard based upon the Agency's prior determination
    23 that the source of these using the greatest emissions
    24 controls shown to be technologically feasible for
    L.A. REPORTING - (312) 419-9292

    1114
    1 that type of source, that further control technology
    2 would not be economically feasible for the source and
    3 that the technology has been accepted as MACT or LAER
    4 in a different state or jurisdiction with the source
    5 being the proposed BAT standard?
    6 MR. ROMAINE: Again, that would not be
    7 sufficient by itself. It would be a strong
    8 indication as has been described that that emission
    9 might, in fact, be in line with the best available
    10 technology, and it would have to be reviewed.
    11 One of the questions certainly would be
    12 how long ago was that adjusted standard process and
    13 does that still reflect the current situation.
    14 MR. NEWCOMB: Question No. 34 I believe was
    15 actually asked and answered by the Hearing Officer,
    16 so I withdraw that one.
    17 THE HEARING OFFICER: I hope I didn't answer
    18 it.
    19 MR. NEWCOMB: Actually, no. You asked it.
    20 THE HEARING OFFICER: Okay. Let's move on then
    21 to questions from Mr.
    Trepanier, Questions 23, 24,
    22 29, 31, 32, and 33. And there's some more there.
    23 Let's start with those, though.
    24 MR. TREPANIER: Good morning. This is Lionel
    L.A. REPORTING - (312) 419-9292

    1115
    1 Trepanier.
    2 Question No. 23, will the Agency subject
    3 a facility to an emission reductions that operates a
    4 BACT unit?
    5 MR. ROMAINE: The program as established would
    6 not subject these emissions to the 12 percent
    7 reduction in establishing their allotment of
    ATUs. I
    8 assume you are referring to BAT, not BACT.
    9 MR. TREPANIER: And did I understand correctly
    10 from a previous question that you don't know how many
    11 units you may have applications for not subject to
    12 the emissions reductions?
    13 MR. ROMAINE: That's correct.
    14 MR. TREPANIER: Question 24, would then these
    15 units be expected to have emissions equal to or
    16 higher than their previous year's emissions? I'm
    17 referring to these units in question 23, BAT units.
    18 MS. SAWYER: Could you clarify that question a
    19 little bit? I'm not sure what you are asking.
    20 MR. TREPANIER: I think that maybe that the
    21 answer is so obvious, that the question is not making
    22 sense.
    23 I'm asking you if the limit that the
    24 Agency will set for these BAT units would be expected
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    1116
    1 to be equal to or higher than what that unit emitted
    2 in the previous year?
    3 MR. ROMAINE: Well, you are referring to the
    4 amount of
    ATUs that would be allotted for that
    5 particular emission unit. All I could say is that
    6 that amount would be different than the previous year
    7 because emission baselines are determined as the
    8 average of two years.
    9 MR. TREPANIER: But then maybe the question
    10 does make sense.
    11 Is it reasonable to expect that that
    12 baseline then would be equal or higher than the
    13 previous year? Is it reasonable to -- is that a
    14 reasonable expectation?
    15 MR. ROMAINE: Well, since the emission baseline
    16 is determined as the average of two years, that half
    17 of the time it would be higher, half of the time it
    18 would be lower.
    19 MR. TREPANIER: When you say that the baseline
    20 is a determination of two years, is that mandatory
    21 that it's the certain two years previous or does the
    22 emitter have a choice of two years?
    23 MR. ROMAINE: The emitter has a choice of two
    24 years.
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    1117
    1 MR. TREPANIER: Do you expect that some
    2 emitters may choose their lower numbers to submit for
    3 their baseline determination?
    4 MR. ROMAINE: That would be highly unlikely. I
    5 would expect all emitters will seek seasons with the
    6 higher emissions.
    7 MR. TREPANIER: So then would it be an
    8 incorrect statement to say that some of the baselines
    9 would be -- that you would expect some baselines to
    10 come in being lower than the average emission year,
    11 the previous year?
    12 MR. ROMAINE: No.
    13 MR. TREPANIER: Would it be reasonable to
    14 expect that the limit set for those units in Question
    15 No. 23 would be equal to or higher than the average
    16 of the three years, the previous years?
    17 MR. ROMAINE: Yes.
    18 MR. TREPANIER: Question 29, on Page 25 of
    19 Mr. Romaine's testimony, there was a reference to a
    20 fuel burning device.
    21 My question is, what type of fuel is
    22 referenced by that? What type of fuel is referred to
    23 in that reference?
    24 MR. ROMAINE: There is no particular
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    1118
    1 restriction on the type of fuel.
    2 MR. TREPANIER: Does this include the operation
    3 of Avery kilns?
    4 MR. ROMAINE: No, it would not. Avery kilns do
    5 burn fuel, but they also dry and process aggregate.
    6 So those are process emission units where there may
    7 be emissions attributable to action processing the
    8 aggregate; therefore, they would not qualify for an
    9 exclusion as we propose in this rulemaking.
    10 MR. TREPANIER: Does this include the burning
    11 of refused dry fuels?
    12 MR. ROMAINE: Refused dry fuels -- well, I
    13 don't know if you'd call those a fuel. Refused dry
    14 fuels are burned in incinerators. Incinerators are
    15 not processed emission units as we included in this
    16 particular exemption.
    17 MR. TREPANIER: Does this include the flares
    18 that oil refineries operate in heavy rain?
    19 MR. ROMAINE: No, it would not include flares.
    20 Flares are control systems designed to treat and
    21 safely dispose of process gases. They are not
    22 covered within this exclusion.
    23 MR. TREPANIER: Referring to Mr. Romaine's
    24 testimony under the top-down BACT process, how long
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    1119
    1 could this scrutinizing in actual operation take?
    2 THE HEARING OFFICER: Let the record reflect
    3 this is Question 31.
    4 MR. ROMAINE: Well, what I was referring to
    5 in my testimony was the action of reviewing an
    6 application. Depending on the degree of difficulty
    7 and the extent of material provided in the
    8 application, this could be a relatively
    9 straight-forward matter taking a couple hours; if
    10 it's a complicated matter, it could take a couple
    11 of days to review the information that's presented
    12 by the applicant. That might not all occur at one
    13 time. It might occur over a series of days as we
    14 obtain additional information and we conduct other
    15 independent evaluations of the material that's been
    16 provided by the applicant.
    17 MR. TREPANIER: Is the Agency going to actually
    18 scrutinize the operations?
    19 MR. ROMAINE: By that, do you mean visit the
    20 operation, stand by it?
    21 MR. TREPANIER: That's what I understood from
    22 your testimony.
    23 MR. ROMAINE: I'm sorry for that
    24 misunderstanding. I was referring to scrutinizing in
    L.A. REPORTING - (312) 419-9292

    1120
    1 the sense of scrutinizing an application, reviewing
    2 the paperwork that has been submitted by the
    3 applicant where they are attempting to demonstrate
    4 that a particular emission unit should be considered
    5 to have best available technology.
    6 MR. TREPANIER: Question 32, how would the
    7 analysis of various circumstances of BAT units, these
    8 similar units, be coordinated?
    9 MR. ROMAINE: Could you please repeat the
    10 question?
    11 MR. TREPANIER: How will the analysis of the
    12 various circumstances of the BAT units, the similar
    13 units, be coordinated?
    14 MR. ROMAINE: The obligation that's first on
    15 the applicant is to provide information so they would
    16 come up with a list of potentially similar sources
    17 and then try to highlight and differentiate those
    18 sources that they believe should be considered
    19 relevant precedents for the BAT determination versus
    20 ones they think can be, in fact, distinguished.
    21 We would then review the information that
    22 the applicant has provided and see whether we agree
    23 with them or we, in fact, think that they are
    24 improperly distinguishing units that we think are
    L.A. REPORTING - (312) 419-9292

    1121
    1 similar.
    2 We would also conduct our own independent
    3 review to see if there are other similar units that
    4 we know of that should also be considered for the
    5 evaluation.
    6 MR. TREPANIER: What diversity of units is
    7 expected?
    8 MR. ROMAINE: Are you asking diversity of units
    9 for a particular evaluation or in general for all
    10 evaluations?
    11 MR. TREPANIER: I am looking for the diversity
    12 as that would refer to the units that could be
    13 referred to as similar units. So I am looking for
    14 the diversity of those units.
    15 So when I have a unit and I'm looking for
    16 if there's a similar unit, how many of those base --
    17 how many different types of these base units do you
    18 anticipate?
    19 MR. ROMAINE: It would depend on the particular
    20 type of unit. For some types of operations, there
    21 are a handful of similar units to look at. It's a
    22 fairly narrow industry, and there are a few
    23 precedents that have to be considered.
    24 For others, there may be many more units;
    L.A. REPORTING - (312) 419-9292

    1122
    1 but, again, you may be able to focus in on several
    2 particular units that are reflective of a better
    3 level of control and focus your analysis on those
    4 particular units. So it really depends on the
    5 particular circumstances, but there certainly can be
    6 some diversity in the particular units that are being
    7 examined.
    8 MR. TREPANIER: The units -- If the units were
    9 separated into categories by type, how many
    10 categories would there be? How many categories would
    11 there be?
    12 MR. ROMAINE: I guess we haven't really thought
    13 about separating them into categories. We are
    14 thinking about coming up with a compilation of
    15 particularly similar units that would be relevant to
    16 look at as a precedent for a particular best
    17 available technology determination and then to
    18 further evaluate those certain particular units and
    19 refine that population to come up with a key unit or
    20 a group of key units that should be examined as the
    21 other similar units that would be governing in a
    22 particular evaluation.
    23 MR. TREPANIER: What would qualify Agency
    24 personnel to process BAT exclusion applications?
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    1123
    1 MR. ROMAINE: Well, what a permit analyst needs
    2 or other Agency personnel need is experience in
    3 making technology determinations, reviewing
    4 application information. So we would expect that
    5 this task would require somebody that the Agency used
    6 to have several years of experience and has as part
    7 of that experience in reviewing applications
    8 previously made these sort of technology
    9 determinations.
    10 MR. TREPANIER: How long do you expect the
    11 process would take for an application of a complex
    12 source? I almost feel like I've asked this question.
    13 I don't know if you've answered it.
    14 MR. ROMAINE: I think I have.
    15 MS. SAWYER: I think we have.
    16 MR. ROMAINE: Conceivably, it could take
    17 several weeks in total before that evaluation or it
    18 can take longer. We are hopeful that such constant
    19 complex sources would be few and far between, and we
    20 would be pleased if there were none of them.
    21 MR. TREPANIER: How many complex sources are
    22 expected to apply for BAT exemptions?
    23 MR. ROMAINE: As we have said, we don't know
    24 how many sources in total will apply for BAT
    L.A. REPORTING - (312) 419-9292

    1124
    1 exclusions there; therefore, we can't further
    2 speculate on what those particular sources might be.
    3 MR. TREPANIER: Question 33, most of this has
    4 been answered except for the last sentence. Oh, and
    5 that's also answered.
    6 THE HEARING OFFICER: I believe there's a
    7 couple more questions, Mr.
    Trepanier; the questions
    8 that were directed to Mr.
    Sutton.
    9 MR. TREPANIER: I will strike my questions from
    10 Mr.
    Sutton. Most of the questions have been answered
    11 but for near the end of these long questions where it
    12 says with the exclusion determination process
    13 occurred during the determination of the emission
    14 baseline itself.
    15 MR. ROMAINE: Yes, it would. It's an inherent
    16 part of the determination of a source's allotment.
    17 MR. TREPANIER: And, finally, my question on
    18 this section comes from my last page of my
    prefiled
    19 questions handwritten.
    20 The first question on the last page, will
    21 Sections 205.405 sub (a), sub (b), sub (c), allow any
    22 unit to get an exclusion as long as it achieves the
    23 maximum degree of reduction for which it was
    24 designed?
    L.A. REPORTING - (312) 419-9292

    1125
    1 MR. ROMAINE: No, it would not.
    2 MR. TREPANIER: What would be necessary in
    3 addition? What's necessary for that exclusion in
    4 addition to achieving the maximum degree of reduction
    5 for which it was designed?
    6 MR. ROMAINE: That goes through -- back through
    7 the entire best available technology determination.
    8 We'd be looking at emission levels and control
    9 technology used at other similar sources in all
    10 cases. If the emission unit is not doing as well as
    11 other similar sources or similar emission units, then
    12 presumably that emission unit will not have best
    13 available technology. If it does do as well as other
    14 similar emission units, but there are further control
    15 measures that still could be applied to that unit and
    16 the costs associated with those are not
    17 extraordinary, then those additional control measures
    18 would be necessary before we determine that that
    19 emission unit would qualify with best available
    20 technology.
    21 MR. TREPANIER: Thank you.
    22 THE HEARING OFFICER: Any follow-up?
    23 MR. SAINES: Rich
    Saines, S-a- i-n-e-s, with the
    24 ERMS Coalition.
    L.A. REPORTING - (312) 419-9292

    1126
    1 I just have one follow-up from
    2 yesterday's questioning.
    3 THE HEARING OFFICER: Yesterday's questioning?
    4 MR. SAINES: Yes. It didn't deal with the
    5 MACT. It dealt with -- well, it deals with the MACT,
    6 but that was --
    7 THE HEARING OFFICER: But it's still on this
    8 section?
    9 MR. SAINES: It's on this section, yes.
    10 THE HEARING OFFICER: Okay.
    11 MR. SAINES: During the testimony, one of the
    12 examples presented -- I believe it is example --
    13 Question No. 28, and it is 28(c), Mr.
    Forcade asked
    14 whether if a MACT standard were promulgated in
    15 February of 1998 for which MACT has no controls, he
    16 asked whether or not the particular unit that was
    17 subject to those no controls MACT would meet Section
    18 205.405.(a)(1). And I believe the answer was yes,
    19 the individual could make a supplemental showing in
    20 his ERMS application; and as the Agency was reviewing
    21 that, they could go back and that would be considered
    22 sufficient to meet the exclusions.
    23 MR. ROMAINE: Yes, that was my answer.
    24 People are under an obligation to update
    L.A. REPORTING - (312) 419-9292

    1127
    1 their Title 5 applications. And certainly if we have
    2 the information on MACT when the MACT standard was
    3 proposed, that they would be required or obligated
    4 to update their application. And if it came in
    5 within a month after January 1, 1998, I doubt we
    6 would have finalized the baseline emission
    7 determination.
    8 MR. SAINES: So there's not a specific timeline
    9 you are saying after January 1, 1998. It's just when
    10 the Agency is in the process of reviewing the CAAPP
    11 application which the ERMS application is a part of
    12 until such time there is due information; and,
    13 hypothetically, a MACT standard comes in
    in that
    14 interim, then a supplemental application could be
    15 filed?
    16 MR. ROMAINE: We don't expect that circumstance
    17 to come up that often. We expect generally for MACT
    18 to be adopted and done with, but it is conceivable
    19 there may be circumstances where there is a posed
    20 standard that hasn't been finalized yet, and the
    21 finalization could occur while the application is
    22 still pending with us.
    23 MR. SAINES: And if the
    finalization occurs
    24 after the application is completed, does that change
    L.A. REPORTING - (312) 419-9292

    1128
    1 the analysis?
    2 MR. SUTTON: Well, I guess where Chris is
    3 heading is the actual baseline determination will
    4 show up in the CAAPP permit; and up until that point
    5 in time, that we would appreciate earlier than later,
    6 that it is still subject to debate up until the time
    7 the draft permit is going out until notice. So if
    8 something comes up, historically, we would deal with
    9 that as it comes up. Again, I don't think it's going
    10 to be highly likely that it happens. And the MACT
    11 standards themselves have a very long history.
    12 People know where they are headed before they
    13 actually hit the street.
    14 MR. SAINES: Okay. Thank you.
    15 MS. MIHELIC: Just one follow-up question on
    16 the BAT issue.
    17 Just to clarify that MACT applies to
    18 sources of half emissions, correct?
    19 MR. ROMAINE: That's correct.
    20 MS. MIHELIC: And that BAT will apply to VOM
    21 emission sources, correct?
    22 MR. ROMAINE: That is correct.
    23 MS. MIHELIC: Okay. So what is MACT for a
    24 source that has half emissions may not necessarily be
    L.A. REPORTING - (312) 419-9292

    1129
    1 BAT from a VOM emission source, correct?
    2 MR. ROMAINE: That's correct.
    3 MS. MIHELIC: And, in fact, even if the sources
    4 are similar but have different pollutants, could BAT
    5 be less stringent than what MACT is for half the
    6 sources?
    7 MR. ROMAINE: That is conceivable.
    8 THE HEARING OFFICER: Moving on then to Section
    9 205.410, participating source shutdowns, questions of
    10 Tenneco, 35, 36, 37, 38, 39, and 40.
    11 MR. FORCADE: Thank you.
    12 These questions relate in large part to
    13 the definition of shutdown.
    14 Please define shutdown. Does shutdown
    15 mean nearly ceasing operations?
    16 MR. ROMAINE: Shutdown does not mean nearly
    17 ceasing operations. As discussed in Section 205.410,
    18 shutdown means the withdrawal or expiration of a
    19 permit so that there is no longer a permitted source.
    20 MR. FORCADE: If a facility dismantles all of
    21 its equipment but does not relinquish its permit, is
    22 that facility's emissions unit shutdown?
    23 MR. ROMAINE: No. The facility would not be
    24 shut down until its permit is withdrawn or expires.
    L.A. REPORTING - (312) 419-9292

    1130
    1 MR. FORCADE: Can the Agency mandate that a
    2 unit be deemed shutdown as opposed to simply inactive
    3 if the facility wishes to maintain its permit for
    4 that unit?
    5 MR. ROMAINE: Conceivably, at the time of
    6 permit renewal if we find out that all the equipment
    7 is, in fact, dismantled and removed, we may get
    8 hard-pressed to go forth and renew a permit for a
    9 non-existing source. But if, in fact, the plant is
    10 still intact, the equipment is there, I think we'd be
    11 hard-pressed to deem a source shutdown if it pursues
    12 renewal of the permit.
    13 MR. FORCADE: If I could, I'd like to explore a
    14 little bit more about what would qualify the
    15 Agency -- what set of factual circumstances would
    16 justify the Agency deeming a unit shutdown short of
    17 removal of all of the equipment.
    18 Are there any incapacity to operate
    19 scenarios or partial equipment removals or anything
    20 more that you could elaborate on as to what
    21 circumstances would authorize the Agency to deem a
    22 unit shutdown when a facility wishes to continue its
    23 permit?
    24 MR. ROMAINE: I guess I apologize. I glanced
    L.A. REPORTING - (312) 419-9292

    1131
    1 over the point of unit.
    2 We are, again, looking at an entire
    3 source shutdown. The fact that a unit or two is no
    4 longer present would not be a relevant factor in
    5 evaluating whether a source is shut down. So the
    6 scenario I was discussing was a circumstance where
    7 somebody is attempting to renew a permit for a plant.
    8 And, in fact, all of the operations, all the
    9 equipment at the facility, have been physically
    10 removed. There is absolutely nothing there, and we
    11 would just be permitting a shell of a building as if
    12 the plant were still there.
    13 MR. FORCADE: But as far as it pertains to a
    14 single emissions unit, are there any factual
    15 scenarios where the Agency would refuse to issue a
    16 permit for that emissions unit or deem that unit
    17 shutdown even if the facility wanted to continue?
    18 MR. ROMAINE: There are circumstances that
    19 could exist in terms of the context of Title 5 that
    20 we would presumably refuse to include for conditions
    21 that had no practical purpose. However, that
    22 circumstance for the Title 5 permit would have no
    23 relationship as to what would be considered a source
    24 shutdown under the training program.
    L.A. REPORTING - (312) 419-9292

    1132
    1 MR. FORCADE: Okay. Then for purposes of the
    2 source shutdown under the ERMS trading program, if a
    3 facility wishes to continue its permit for that
    4 emissions unit, is there any circumstance in which
    5 the Agency would deem that emissions unit shutdown?
    6 MS. SAWYER: I mean, is that a question?
    7 MR. ROMAINE: Yes, we could deem that emission
    8 unit shutdown, but we have no indications for a
    9 trading program.
    10 MR. FORCADE: Okay. Maybe we can address it in
    11 the remaining questions here. Go on to Question 30.
    12 THE HEARING OFFICER: Before we move on, for
    13 the record, 35(c) was withdrawn for asked and
    14 answered, I would assume?
    15 MR. FORCADE: Yes.
    16 THE HEARING OFFICER: And 35(d) was just
    17 withdrawn?
    18 MR. FORCADE: Will the Agency add a definition
    19 of shutdown?
    20 MR. ROMAINE: No. We believe it's adequately
    21 described in Section 205.405.
    22 THE HEARING OFFICER: Thank you.
    23 MR. ROMAINE: 410, 410. Sorry.
    24 MR. FORCADE: We are going to move on to 36,
    L.A. REPORTING - (312) 419-9292

    1133
    1 but I am going to slightly modify the language to
    2 reflect your answers.
    3 Consider the following scenario: Up
    4 until 1997, Facility A emitted over 10 tons of VOM
    5 per season and was subject to the CAAPP program.
    6 Facility A discontinues one of its emissions units
    7 operations, dismantles the equipment, and ships it
    8 off site, but does not relinquish the permit.
    9 Facility A did not yet submit its ERMS application,
    10 and Facility B is a participating source that wishes
    11 to obtain facility A's
    ATUs.
    12 Does Section 205.410(a) apply to Facility
    13 A which discontinued emissions in January 1977 --
    14 1997?
    15 MR. ROMAINE: No, but the Facility A isn't a
    16 participating source.
    17 MR. FORCADE: Simply because it did not submit
    18 an ERMS application?
    19 MR. ROMAINE: You have described a situation
    20 where they are not pursuing an ERMS application.
    21 They are not continuing into the program as a
    22 participating source.
    23 MR. FORCADE: So the sole reason why they would
    24 not be subject to 205.410(a) is because they did not
    L.A. REPORTING - (312) 419-9292

    1134
    1 submit an ERMS application as part of the CAAPP
    2 permit?
    3 MR. ROMAINE: Well no. And the further thing
    4 is that you haven't shown that this facility has shut
    5 down. All you have described is one particular
    6 emission unit has left. There is still a source
    7 there. In that circumstance, the source would still
    8 be considered an operating source. It would not be
    9 considered a shutdown source.
    10 MR. FORCADE: Can facility A's emissions
    11 reductions be credited towards Facility B in forms of
    12 ATUs?
    13 MR. ROMAINE: Yes, but Facility A would have to
    14 go through the emission reduction generator process
    15 to accomplish that.
    16 MR. FORCADE: I think I would like to rephrase
    17 Question C then.
    18 Is there any mechanism for Facility A to
    19 transfer emission credits to Facility B prior to the
    20 ERMS regulations being approved by the Board?
    21 MR. ROMAINE: If you are talking about somebody
    22 transferring emission reductions, there can certainly
    23 be some mechanism whereby an arrangement between
    24 Facility A and Facility B can be reached for transfer
    L.A. REPORTING - (312) 419-9292

    1135
    1 of credits between them that might ultimately be
    2 recognized at some point in terms of allowing its
    3 trading units.
    4 MR. FORCADE: If I could slightly rephrase the
    5 example based on the responses I've received from
    6 you.
    7 Assume that Facility A had over 10 tons
    8 of emissions, assume that Facility A discontinues its
    9 emissions of VOM from the emissions unit that emitted
    10 VOM, and assume that Facility A decided nonetheless
    11 to submit an ERMS application, even though at that
    12 point it had no emissions unit which emitted VOM, but
    13 it did not withdraw its permit application or revoke
    14 its existing permit for the VOM emissions unit. In
    15 that circumstance, would Section 205.410(a) apply to
    16 Facility A?
    17 MR. ROMAINE: No. The facility would have had
    18 a permit. It would not be operating without a
    19 permit. It would not be
    permitless.
    20 MR. FORCADE: Okay. Can Facility A then
    21 receive
    ATUs based on its baseline emissions and
    22 sell those
    ATUs even though the emissions unit has
    23 been dismantled and shipped off-site?
    24 MR. ROMAINE: Yes. You have described a
    L.A. REPORTING - (312) 419-9292

    1136
    1 circumstance where Facility A continues through the
    2 baseline determination process and becomes a
    3 participating source, and you've further described a
    4 situation where that Facility A has not been shut
    5 down.
    6 MR. SUTTON: If I can interject, the purpose of
    7 an operating permit and especially a Title 5 permit
    8 is to explain what operational conditions exist if
    9 and when you elect to operate something. It doesn't
    10 mandate that you operate anything; but it says when
    11 you decide to operate, it will then control that
    12 operation.
    13 MR. FORCADE: What is the current permit fee
    14 for a ton of VOC in the Chicago's non-attainment area
    15 for a major source?
    16 MR. SUTTON: A permit fee is $13.50 a ton
    17 allowable --
    18 MR. FORCADE: $13.50 allowable.
    19 MR. SUTTON: -- on an annual basis.
    20 MR. FORCADE: With the cost of a permit fee of
    21 $13.50 per ton allowable and the anticipated cost of
    22 an ATU up to $10,000 a ton, what motivation would a
    23 facility have to shut down as opposed to simply
    24 discontinuing operations of an
    emissionship?
    L.A. REPORTING - (312) 419-9292

    1137
    1 MR. ROMAINE: I don't think that those two
    2 factors would be relevant. By that, I mean that
    3 certainly the permit fee would not be a major
    4 consideration in that determination.
    5 MR. FORCADE: Assume the Agency accepts a
    6 proposal pursuant to which a participating source
    7 will receive five
    ATUs from the shutdown of another
    8 source. The shutdown source will stop all operations
    9 on January 1, 2000.
    10 Is it correct that the participating
    11 source will receive five
    ATUs dated year 2000 from
    12 the shutdown?
    13 MS. SAWYER: This is Question 39?
    14 MR. FORCADE: Yes.
    15 THE HEARING OFFICER: Let the record reflect
    16 this is Question 39.
    17 And if you could when we are done go back
    18 and tell us what happened, which questions you asked,
    19 which have been answered, which are withdrawn,
    20 changed.
    21 MR. FORCADE: I'm sorry. Questions 37 and 38
    22 have been asked and answered.
    23 THE HEARING OFFICER: Thank you.
    24 MR. ROMAINE: You have described this as a
    L.A. REPORTING - (312) 419-9292

    1138
    1 situation where we are apparently at an accepted ERG
    2 proposal. You alluded that this shutdown does create
    3 ATUs that we can recognize; and, accordingly, the
    4 participating source could receive five
    ATUs.
    5 MR. FORCADE: And would it receive five
    ATUs in
    6 the year 2001?
    7 MR. ROMAINE: If there is agreement for a
    8 stream of
    ATUs, yes, it would.
    9 MR. FORCADE: And that would run continuously
    10 if there's an agreement?
    11 MR. ROMAINE: Yes, it would.
    12 MR. FORCADE: What form of agreement must the
    13 applicant submit to verify the permanent nature of
    14 the agreement?
    15 MR. KOLAZ: Well, you know, first of all,
    16 regarding Rule 205.410, it explains that in Part C in
    17 the situation you described, the receiver of the
    18 allotment would need to modify the permit the next
    19 time it was revoked into renewal. But the way we
    20 would execute that particular arrangement would be
    21 through a
    multi-year transfer agreement initially.
    22 And then when you came in to reopen or modify your
    23 permit, we would then issue the -- you know, make the
    24 change to your permit so that
    multi-year transfer
    L.A. REPORTING - (312) 419-9292

    1139
    1 agreements would not be necessary from that point
    2 onward.
    3 MR. FORCADE: Question 40 has been asked and
    4 answered.
    5 THE HEARING OFFICER: Moving on then to Dart
    6 Container Questions 15, 16, 17, and 18.
    7 MR. NEWCOMB: No. 15 has been asked and
    8 answered.
    9 No. 16 is, therefore, irrelevant.
    10 No. 17 has been asked and answered as
    11 well.
    12 And 18 is withdrawn.
    13 THE HEARING OFFICER: Any follow-up on that
    14 section?
    15 MR. SAINES: Yes. We do have some, and
    Tracey
    16 momentarily stepped out. She'll be back in a
    17 second. I don't know. She went to make a phone call
    18 or something. I know she had some questions she
    19 wanted to ask. I don't personally have any
    20 questions.
    21 THE HEARING OFFICER: Well, let's move on.
    22 Subpart E, Alternative ATU Generation, Section
    23 205.480, Emissions Reduction Generated, Tenneco's
    24 Questions 41, 42, 43, 44, 45, and 46.
    L.A. REPORTING - (312) 419-9292

    1140
    1 MR. SAINES: I'll raise a question here.
    2 Are we going to be able to ask the
    3 questions when
    Tracey returns?
    4 THE HEARING OFFICER: We'll see.
    5 MR. SAINES: Thank you.
    6 MR. FORCADE: Question 41, is a VOM-emitting
    7 source which is exempted under 205.205(a) because it
    8 emits under 15 tons per season eligible to be an
    9 emissions reduction generator?
    10 MR. ROMAINE: Yes, it is.
    11 MR. FORCADE: If yes, how will this reduction
    12 be calculated?
    13 MR. ROMAINE: It could be calculated as --
    14 emissions reductions can be calculated for other
    15 emissions reduction generators and as described in
    16 our proposals. Obviously, in this case, the source
    17 could never generate more than 15 tons per season
    18 emissions reductions.
    19 MR. FORCADE: Will the emissions reduction be
    20 calculated based on excess available emissions from
    21 15 tons or from past
    actuals?
    22 MR. ROMAINE: It can be calculated from past
    23 actuals as emissions reductions from -- emissions
    24 reduction generators are generally calculated from
    L.A. REPORTING - (312) 419-9292

    1141
    1 past
    actuals.
    2 MR. FORCADE: If an emissions reduction
    3 generator had baseline emissions that would have
    4 brought it within the ERMS program during the
    5 baseline years and elected to request a 15-ton
    6 limitation because of some process change going on
    7 and subsequently was subject to 205.205(a), would its
    8 baseline emissions be the baseline emissions during
    9 1994, '95, and '96, or would it be the baseline
    10 emissions after they had instituted the changes which
    11 allowed them to accept the 15-ton reduction
    12 limitation?
    13 MR. ROMAINE: You are asking the question
    14 whether somebody who has pursued this exemption then
    15 decides to abandon the exemption?
    16 MR. FORCADE: No. I am positing a scenario in
    17 which a facility had hypothetically 15 tons of
    18 seasonal emissions through '94, '95, and '96 in lieu
    19 of submitting an application for ERMS on January 1st
    20 of 1998 seeking a 15-ton baseline, it implemented
    21 some process change to reduce its emissions to below
    22 15 tons per season; subsequently, it institutes
    23 additional process changes to generate additional
    24 potentially to use.
    L.A. REPORTING - (312) 419-9292

    1142
    1 I am trying to determine whether the
    2 baseline for calculating the
    ATUs that that emissions
    3 reduction generator would have for sale would be its
    4 1994, '95, '96 baseline of 15 tons or its 1998
    5 baseline of something less than 15 or 15 tons itself?
    6 MR. ROMAINE: It could be higher than the
    7 15-ton limit. You'd have to look at what the actual
    8 emission level was before those changes were made,
    9 before the second set of changes were made.
    10 MR. FORCADE: But it could be the 15-ton limit?
    11 MR. SUTTON: In your particular case, the
    12 applicant could go into the -- file an ERMS
    13 application, use his 15-ton, and take advantage of
    14 that during the trading program as a normal trading
    15 partner. Right?
    16 MR. ROMAINE: Yes.
    17 MR. FORCADE: Okay. No. 42, is a VOM emitting
    18 source which is exempted under 205.205(b) because it
    19 reduced its emissions by 18 percent eligible to be an
    20 emissions reduction generator?
    21 MR. ROMAINE: Yes.
    22 MR. FORCADE: Question 43, is it true that a
    23 Non-Clean Air Act permit source can be an emissions
    24 reduction generator?
    L.A. REPORTING - (312) 419-9292

    1143
    1 MR. ROMAINE: Yes.
    2 MR. FORCADE: Assume that such a source emits 8
    3 tons of VOM per season and then reduces to 4 tons.
    4 The source wants to sell this reduction to another
    5 facility. What procedure must this emissions
    6 reduction generator follow? Is the emissions
    7 reduction generator required to obtain a Clean Air
    8 Act permit?
    9 MR. ROMAINE: No. The facility is not required
    10 to obtain a Clean Air Act permit. In fact, it may
    11 not be required to amend its permit at all. It's
    12 really its choice. What it does have to do is submit
    13 an emissions reduction generator proposal to the
    14 Agency that reviews and describes the nature of the
    15 emission reduction, explains how the amount of
    16 emission reduction has been calculated.
    17 Then the choice that the facility has to
    18 make is whether they want to then operate on a
    19 season-by-season basis to have emission reductions
    20 reflected as they occur or whether they want to, in
    21 fact, have the permit amended to actually include
    22 limits that make a 4-ton reduction enforceable in
    23 which case they would have a stream of allowance
    24 trading units that could be used in the future.
    L.A. REPORTING - (312) 419-9292

    1144
    1 MR. FORCADE: I'm sorry. A stream?
    2 MR. ROMAINE: A stream.
    3 MR. FORCADE: Okay. I think that's answered
    4 the subsections under 43.
    5 No. 44 --
    6 MR. ROMAINE: I just want to make it clear in
    7 the last question, one of the requirements for an
    8 emission reductions generator is that they must be
    9 permitted sources. They don't necessarily have a
    10 CAAPP permit, but they must have at least a state
    11 permit.
    12 MR. FORCADE: So they must have at least some
    13 form of existing state permit in order to be in the
    14 RMS generation?
    15 MR. ROMAINE: To be an ERG generator.
    16 MR. FORCADE: Emissions reduction generator?
    17 MR. ROMAINE: Right. Otherwise, it would be
    18 going through the
    intersector path to generate
    19 emissions reductions.
    20 MR. FORCADE: Consider the following -- this is
    21 Question 44 -- consider the following scenario:
    22 Until January 1997, Facility A emitted over 10 tons
    23 per season and was subject to the Clean Air Act
    24 Permit Program.
    L.A. REPORTING - (312) 419-9292

    1145
    1 Let me take a second and see if I want to
    2 explain this.
    3 I think this question was asked and
    4 answered in the questions related to shutdown.
    5 Question No. 45, assume that the
    6 Agency accepts an emissions reduction generated
    7 proposal pursuant to which a participating source
    8 will receive five
    ATUs from an emissions reduction
    9 generator. The emissions reduction generator will
    10 stop its permitted operations on January 1st, the
    11 year 2000.
    12 Is it correct that the participating
    13 source will receive five
    ATUs dated year 2000 from
    14 the emissions reduction generator?
    15 MR. ROMAINE: Yes. It would receive five
    ATUs
    16 for the year 2000 season.
    17 MR. FORCADE: Okay. And would it continue to
    18 receive five
    ATUs per year thereafter if the transfer
    19 agreement so provided?
    20 MR. ROMAINE: Yes, it would.
    21 MR. FORCADE: Question 46 has been answered.
    22 THE HEARING OFFICER: I guess we'll turn
    23 to
    Sonnenschein's questions from their January 16th
    24 filing, Question No. 10.
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    1146
    1 MS. FAUR: Question No. 10, it appears that the
    2 only way to be an emissions reduction generator is to
    3 modify sources operating the permit or submit a
    4 program, but the operating permit you are discussing
    5 appears to be a state operating permit, not a Title 5
    6 or a CAAPP permit.
    7 If so, why can't a Title 5 permit holder
    8 be an emissions reduction generator?
    9 MR. ROMAINE: A Title 5 source could be an
    10 emissions reduction generator if it wasn't a
    11 participating source.
    12 MS. FAUR: What about a party holding an
    13 environmental management systems agreement or a
    14 project excel agreement?
    15 MR. ROMAINE: Nothing in our proposal would
    16 prohibit a party with an environmental management
    17 system agreement or an excel agreement from being an
    18 emissions reduction generator. Any additional
    19 requirements for creation of ATU by such sources
    20 would have to be established in that particular
    21 agreement.
    22 MS. FAUR: Thank you.
    23 And there were two other questions listed
    24 here from our January 31st filing.
    L.A. REPORTING - (312) 419-9292

    1147
    1 THE HEARING OFFICER: Yes.
    2 MS. FAUR: Question 2 we withdraw, and
    3 Questions 3(b) and (c) have already been answered.
    4 THE HEARING OFFICER: Thank you.
    5 Moving on to ERMS Coalition, Questions 1,
    6 2, 3, 4, and 5.
    7 MR. SAINES: Thank you. Rick
    Saines.
    8 Question No. 1, pertaining to
    9 Section 205.408, Subpart (f), why is a source only
    10 given 15 days to appeal a denial of an emissions
    11 reduction generator proposal when most other sources
    12 are provided 35 days to appeal Agency decisions?
    13 MR. ROMAINE: The key point is that this rule
    14 would provide an accelerated track for emission
    15 reduction generators. We are doing that to
    16 facilitate the participation of emissions reduction
    17 generators in the program in the season which
    18 emission reductions occur so we have a much tighter
    19 time frame for review of a proposal. Likewise, a
    20 source has a much shorter time frame to decide
    21 whether they are going to appeal our decision.
    22 We believe that 15 days certainly should
    23 allow sufficient time to file an appeal if somebody
    24 doesn't like what we have done when we propose it.
    L.A. REPORTING - (312) 419-9292

    1148
    1 MR. SAINES: Thank you.
    2 Question 2, could the review and appeal
    3 of emissions reduction generator proposal extend
    4 beyond the reconciliation period?
    5 MR. ROMAINE: Yes, it could. Certainly if a
    6 source wants to make sure that these matters get
    7 taken care of in a timely manner, what they need to
    8 do is apply early, provide sufficient lead time for
    9 whatever eventualities happen.
    10 MR. SAINES: Question 3, if so -- and I guess
    11 the answer is yes -- will the source be given amnesty
    12 for excess emissions excursions pending the appeal?
    13 MR. ROMAINE: We wouldn't expect that to
    14 occur. Sources should not rely on allowance trading
    15 units from an emission reduction generator proposal
    16 until it's been approved.
    17 MR. SAINES: So the answer to that would be no
    18 then?
    19 MR. ROMAINE: No.
    20 MR. SAINES: I'm sorry. Did you answer that?
    21 MR. ROMAINE: No.
    22 MR. SAINES: No. Okay. Thank you.
    23 MR. ROMAINE: The answer is no.
    24 MR. SAINES: Okay. Thank you.
    L.A. REPORTING - (312) 419-9292

    1149
    1 Question 4 -- I'll ask it anyway -- will
    2 the source be provided an opportunity to hear any
    3 excess emission excursions if the source loses the
    4 appeal?
    5 MR. ROMAINE: No such cure provision is
    6 provided in the rule.
    7 MR. SAINES: So Question 5, how does the source
    8 cure in this instance?
    9 MR. ROMAINE: First of all, primarily, don't
    10 rely on them. And then if you get into a situation
    11 where you have
    ATUs, you are going to have to pursue
    12 another alternative means for the
    ATUs for that
    13 season.
    14 MS. MIHELIC: Is it correct at that time after
    15 the December -- if after the December 31st
    16 reconciliation period, you'd have to go to the ACMA;
    17 you would actually -- you probably would have to be
    18 given a notice of excursion, whatever it's called,
    19 and then do the relief pursuant to that, which would
    20 be going to the ACMA and obtaining 1.21 or some
    21 offset, 1.31 emission?
    22 MR. ROMAINE: I think that's certainly the
    23 worst case scenario. A source could go to the
    24 marketplace to obtain
    ATUs. They could obtain
    ATUs
    L.A. REPORTING - (312) 419-9292

    1150
    1 from the ACMA prior to the proposed reconciliation
    2 period.
    3 MS. MIHELIC: But if it's after the
    4 reconciliation period and it appealed its refusal for
    5 its emission reduction generator, it was refused by
    6 the Agency, they appealed it, and they lost an
    7 appeal.
    8 After the reconciliation period, can the
    9 source go to the market at that time?
    10 MR. ROMAINE: No.
    11 MS. MIHELIC: So the only option is to
    12 basically go to the ACMA and handle that as an
    13 emissions excursion?
    14 MR. ROMAINE: In that circumstance, yes. Let
    15 me stress here, this is a voluntary element of the
    16 trading program to allow non-participating sources to
    17 be recognized for emission reductions.
    18 In those circumstances, participating
    19 sources should not count their chickens before they
    20 are actually hatched.
    21 THE HEARING OFFICER: Moving on then to Section
    22 205.490, Inter-Sector Transaction, ERMS Coalition's
    23 questions on Page 19 of the filing under Section 16.
    24 It seems that you have more questions
    L.A. REPORTING - (312) 419-9292

    1151
    1 than what the Agency listed. You deferred a whole
    2 bunch of them. I don't know if you plan on asking
    3 all of the ones you deferred on an earlier date or
    4 how you want to handle that?
    5 MR. SAINES: You are talking about Section 490?
    6
    7 THE HEARING OFFICER: Yes.
    8 MR. SAINES: Yes.
    9 THE HEARING OFFICER: You want to ask them now?
    10 MR. SAINES: Now is the time if that's what we
    11 want to do.
    12 Okay. Is the Agency ready?
    13 MS. SAWYER: Yes.
    14 MR. SAINES: Question No. 1, to what standard
    15 of review is the Agency held in conducting its review
    16 of the transaction?
    17 MS. SAWYER: Hold on a second. Maybe not this
    18 one.
    19 MR. SAINES: It's under the introduction
    20 section.
    21 MS. SAWYER: Yes. Those questions call for a
    22 legal interpretation.
    23 MS. MIHELIC: Will they be answered by written
    24 comments then?
    L.A. REPORTING - (312) 419-9292

    1152
    1 MS. SAWYER: Yes. We can answer them by
    2 written comments.
    3 MS. MIHELIC: That would be 1 and 2(a)(1) and
    4 (2)?
    5 MS. SAWYER: Yes.
    6 MR. SAINES: Okay. We'll proceed with Section
    7 205.490(a), which would be Question 1 under B.
    8 Why does the Agency need 45 days to
    9 review a transaction proposal?
    10 MR. KOLAZ: Well, we thought 60 days would be
    11 too much time and 30 days too little for one. There
    12 really isn't a compromise. We certainly feel that
    13 some proposals will be able to be reviewed quicker
    14 than others, but it provides a time where the Agency
    15 feels it can commit to and assure that we've had
    16 ample time to do an adequate review, and that's how
    17 we chose 45 days.
    18 MR. SAINES: Question 2, will this length of
    19 review time cause some sources to be unable to
    20 reconcile
    ATUs with their actual emissions by the end
    21 of the reconciliation period?
    22 MR. KOLAZ: Well, I think that the correct
    23 answer to that is it's not the length of time that
    24 would cause a difficulty. I believe it would be the
    L.A. REPORTING - (312) 419-9292

    1153
    1 failure to plan ahead because the length of time
    2 required to conduct a review is 45 days as stated in
    3 the regulations. So any planning that the source
    4 needs to do to acquire these
    ATUs in sufficient time
    5 to reconcile the emissions needs to be based on that
    6 45-day review period. In other words, I don't think
    7 there's a review period that could absolutely assure
    8 that the circumstance you described here would not
    9 occur, whether that was 15 days or 5 days.
    10 MR. SAINES: True. I guess the question really
    11 relates to the fact that emission units on sources
    12 with 10 units or more are not required to submit
    13 their data until November 30th under the curtain
    14 rules, so that only provides 31 days of a time period
    15 where all the data will be out there for sources to
    16 start trying to reconcile as opposed to 90 days or
    17 whatever.
    18 MR. KOLAZ: Well, first of all, I think
    19 there's two ways to look at the situation as
    20 described. November 30th is the deadline, but
    21 there's certainly nothing that compels you to wait
    22 until November 30th.
    23 Secondly, the inter-sector transaction
    24 proposal itself may not necessarily have a bearing or
    L.A. REPORTING - (312) 419-9292

    1154
    1 be affected by your seasonal report.
    2 MR. SAINES: Can you just explain the last part
    3 of that answer a little bit?
    4 MR. KOLAZ: Yes. For example, it might be that
    5 you choose to acquire
    ATUs through some type of car
    6 scrappage program, but there's two ways you may be
    7 viewing this. You may view the desire to do this
    8 because you feel you'll need
    ATUs, and I think your
    9 point is you won't absolutely know that you need
    ATUs
    10 until maybe November 30th.
    11 However, I don't think that it would be
    12 prudent under any circumstance to wait that long
    13 until you have made all the arrangements necessary to
    14 make sure that you could actually carry through with
    15 that
    scrappage program.
    16 So even if we were, for example, saying
    17 that we could do the review in 15 days, if you wait
    18 until November 30th to institute the actions you need
    19 to make the commitment to us to convince us that you
    20 are really fully able to carry through, there just
    21 wouldn't be enough time.
    22 So I think under any scenario, it's going
    23 to require planning well -- probably well before the
    24 end of this season allotment period to accomplish
    L.A. REPORTING - (312) 419-9292

    1155
    1 that.
    2 MR. SAINES: Thank you.
    3 Question 3, if the Agency disapproves the
    4 transaction proposal, will the source acquiring
    ATUs
    5 be provided an opportunity to purchase
    ATUs from
    6 another source or from the ACMA?
    7 MR. KOLAZ: Let me ensure that my answer really
    8 fits with what you're getting at.
    9 I assume you're talking about the ability
    10 to reconcile the previous season's emissions with
    11 ATUs that you now find you don't have a sufficient
    12 number because the transaction proposal was not
    13 approved; is that correct?
    14 MR. SAINES: That's correct.
    15 MR. KOLAZ: Only if it's prior to
    16 December 31st. There are no provisions to allow you
    17 to purchase
    ATUs after the reconciliation period
    18 specifically because a transaction proposal has been
    19 disapproved. There are, as now in the rule, emission
    20 excursion compensation periods which you would be
    21 subject to.
    22 THE HEARING OFFICER: Any follow-up?
    23 MS. MIHELIC: I have a quick follow-up to this
    24 section of questioning.
    L.A. REPORTING - (312) 419-9292

    1156
    1
    Tracey Mihelic.
    2 Is it possible that neither the ERMS
    3 participating sources or the Agency will know whether
    4 there are any
    ATUs in the market available for sale
    5 until November 30th when all sources are required to
    6 submit their seasonal emissions reports?
    7 MR. KOLAZ: Could you read back that question
    8 to make sure I understand it?
    9 (Record read as requested.)
    10 MR. KOLAZ: You know in earlier questions, we
    11 mentioned how -- what techniques would be available
    12 for people to post the fact that they either have
    13 ATUs for sale or that a company is in the market to
    14 buy
    ATUs.
    15 I don't believe that November 30th itself
    16 has any specific significance to the availability for
    17 the sale of
    ATUs.
    18 But to specifically answer your question,
    19 I think at any point in time, the Agency is not
    20 really able to ensure that there are
    ATUs for sale
    21 other than what might be available in the ACMA.
    22 So to continue further just for a moment,
    23 I would suggest that anyone who anticipates they are
    24 in the market for
    ATUs needs to use the bulletin
    L.A. REPORTING - (312) 419-9292

    1157
    1 board that we are going to establish to publish that,
    2 that desire to purchase
    ATUs. And certainly as part
    3 of the record keeping and reporting necessary for
    4 this program, a person should be compiling their
    5 seasonal VOM emissions as they continue through the
    6 season. They should not be waiting until the end of
    7 the season.
    8 So my point is, this program does require
    9 very careful planning, very careful record keeping,
    10 for everyone involved to work properly so that at the
    11 end there are no surprises.
    12 MS. MIHELIC: Right. But isn't it possible if
    13 a source who may have exceeded their allotment has
    14 kept careful planning who is aware that it's exceeded
    15 its allotment, that sources who haven't exceeded
    16 their allotments and may have excessive emissions,
    17 they are not required to report what their emissions
    18 are until November 30th; so there may be no
    19 information available until November 30th what other
    20 sources may have additionally to use?
    21 MR. KOLAZ: That's correct.
    22 THE HEARING OFFICER: Moving on.
    23 MR. SAINES: Well, we have questions pertaining
    24 to Section 490(e).
    L.A. REPORTING - (312) 419-9292

    1158
    1 THE HEARING OFFICER: Right. Moving on to
    2 Section 205.490(e), Denial of Inter-Sector
    3 Transaction, ERMS Coalition Questions 1, 2, 3, 4,
    4 which is on Page 19 of their
    prefiled questions.
    5 MR. SAINES: Thank you.
    6 Question No. 1, if a source appeals the
    7 denial of an inter-sector transaction proposal, how
    8 will the Agency allot
    ATUs to the source during the
    9 appeal process?
    10 MR. KOLAZ: Well, Section 205.490(c) specifies
    11 that the Agency may not issue
    ATUs until a proposal
    12 has been approved, so there will be no allotment of
    13 ATUs.
    14 MR. SAINES: Question No. 2 has been asked and
    15 answered. I will withdraw that.
    16 Question No. 3 will also be withdrawn for
    17 the same reason.
    18 But we'd like to ask Question No. 4.
    19 Will the source be given amnesty for any
    20 excess emissions excursions pending the appeal and an
    21 opportunity to cure any access emissions excursions
    22 if the source loses an appeal?
    23 MR. KOLAZ: No.
    24 MS. MIHELIC: I guess I would like to ask a
    L.A. REPORTING - (312) 419-9292

    1159
    1 clarifying question.
    2 If a source has appealed an inter-sector
    3 transaction proposal, okay, because it wants to gain
    4 emissions from some outside source, a source outside
    5 of the program, it appeals this transaction, this
    6 appeal process takes longer or extends beyond
    7 December 31st and could extend, let's say, into March
    8 or April of the following year, will this source be
    9 considered out of compliance with the ERMS programs
    10 during that time, during that appeal process?
    11 MR. KOLAZ: Well, let me give a little bit more
    12 of a complete answer. Excuse me for just a moment.
    13 The situation you described I assume is
    14 one where you do not have sufficient
    ATUs to
    15 reconcile your emissions and need the
    ATUs from the
    16 inter-sector transaction proposal to have sufficient
    17 ATUs by December 31st; is that correct?
    18 MS. MIHELIC: Yes.
    19 MR. KOLAZ: My answer really was directed at
    20 the rule the way it's written, which means it does
    21 not have any specific provision that allows
    ATUs to
    22 be issued until the actual proposal has been
    23 approved. It does, as you well know, under
    24 205.490(e) allow for a, you know, petition to the
    L.A. REPORTING - (312) 419-9292

    1160
    1 Board, you know, to review the Agency's decision.
    2 We will expect and we will issue the
    3 emissions excursions compensation notices after
    4 December 31st to a source that does not hold
    5 sufficient
    ATUs even if they have filed such a
    6 request for review to the Board.
    7 It is possible that the Board as
    8 part of their decision -- assuming that they do
    9 not agree with the Agency and uphold the request
    10 for review by the source -- I assume it's possible
    11 that the Board as part of their decision-making
    12 could enter into some type of decision that would
    13 allow for a special circumstance.
    14 MS. MIHELIC: So are you saying if a source
    15 wins on appeal or wins the review and the Board says
    16 you should be allowed to have this inter-sector
    17 transaction and you should be given the
    ATUs
    18 generated from that inter-sector transaction, that
    19 would not necessarily cure any of its emissions
    20 excursions from the previous season if it's after
    21 December 31st?
    22 MS. KOLAZ: That's correct.
    23 MS. MIHELIC: Further action has to be taken by
    24 the Board to say, well, this notice you got, now, it
    L.A. REPORTING - (312) 419-9292

    1161
    1 is, you know, accurate and correct, but now we have
    2 to do something else with respect to the notice?
    3 MR. KOLAZ: No. I think I must have confused
    4 you on that. Let's just say that you appeal the
    5 Agency's decision and the Board rules in favor of the
    6 Agency. At that particular point in time, you would
    7 have undoubtedly already received an excursion
    8 compensation notice, and the Agency would expect you
    9 to compensate for those excess emissions in
    10 accordance with the way the rule is written right
    11 now.
    12 What I am saying is, hypothetically, if
    13 the Board ruled in your favor, it is conceivable that
    14 as part of their decision, they would establish a
    15 remedy in which those
    ATUs from your inter-sector
    16 transaction proposal were issued to you in such a way
    17 that it would compensate for your pre-season
    18 emissions excursions.
    19 MS. MIHELIC: But the Board has to make that
    20 determination?
    21 MR. KOLAZ: That's correct. That is my opinion
    22 that that is how it would have to be resolved because
    23 there is nothing specifically in the rule to address
    24 the situation you are talking about to allow you to
    L.A. REPORTING - (312) 419-9292

    1162
    1 compensate for those excess emissions outside of
    2 what's already been provided through the excursion
    3 compensation notice process.
    4 MS. MIHELIC: If there were a provision
    5 allowing for a stay, perhaps, of any determination of
    6 an excess emissions excursion until that appeal is
    7 determined by the Board, would that then provide an
    8 opportunity that if the source wins -- let's say that
    9 the Board rules in favor of the source, the source
    10 would not be issued an emissions excursion notice?
    11 MS. SAWYER: Objection; speculative.
    12 THE HEARING OFFICER: I think we are really
    13 getting into some kind of legal questions here, which
    14 I don't know if his opinions will help the Board in
    15 deciding these matters. So it might be better that
    16 these be put on in public commenting, if that's
    17 okay. I'd like to move on then.
    18 MS. MCFAWN: You can also provide testimony if
    19 that's something your group could advocate.
    20 THE HEARING OFFICER: Moving on to Subpart (f),
    21 Market Transaction.
    22 I think you were out of the room,
    23 Ms.
    Mihelic, and you had some follow-up questions.
    24 MS. MIHELIC: I just had two quick --
    L.A. REPORTING - (312) 419-9292

    1163
    1 THE HEARING OFFICER: I was hoping that maybe
    2 you could save those until we do your 320 questions,
    3 your 205.320 questions, just so you know you'll have
    4 the opportunity to do it.
    5 Subpart (f), Market Transactions then.
    6 MR. TREPANIER: I had a follow-up question to
    7 Tenneco's first question under Subpart (e). We moved
    8 real quickly from that first section.
    9 THE HEARING OFFICER: Why don't you ask that
    10 then.
    11 MR. TREPANIER: Thank you.
    12 And following up Tenneco's Question No.
    13 41, was it -- is it the Agency's testimony that a
    14 source that had received the exemption under
    15 205.205(a), that it becomes an emission reduction
    16 generator could produce 15 tons of
    ATUs, generate
    17 those 15 tons of reductions?
    18 MR. ROMAINE: That is conceivable if at some
    19 point it had increased its emissions to be exactly at
    20 15 tons, and then it comes up with some new process
    21 that allows it to conduct its business without any
    22 emissions.
    23 MR. TREPANIER: And does that include emitters
    24 who in 1990 and in 1996 had emissions of under 15
    L.A. REPORTING - (312) 419-9292

    1164
    1 tons or even at 10 tons when they came into the
    2 program, that they can later generate 15 tons of
    3 reduction?
    4 MR. ROMAINE: In that hypothetical situation,
    5 that would be the case. But, again, that's a very
    6 hypothetical situation that we are addressing.
    7 All we said was that when you calculate
    8 the emission reductions from such a source, the most
    9 they would ever be entitled would be 15 tons per
    10 season because they have pursued the exemption under
    11 Section 205.205.
    12 MR. TREPANIER: And just to be certain, they
    13 can generate those 15 tons of exemptions even if when
    14 the baselines and the CAAPP for this program were
    15 established, they were a 10-ton emitter?
    16 MR. ROMAINE: Yes.
    17 THE HEARING OFFICER: Okay. Moving on then to
    18 Subpart F, Market Transaction, Section 205, I
    19 believe, 500, ERMS database. That's ERMS database.
    20 Tenneco's Questions 47, 48, 49, 50, 51.
    21 MR. FORCADE: Our Question No. 47 has been
    22 asked and answered; 48, asked and answered; 49, 50,
    23 and 51 have been asked and answered.
    24 Ready for 52?
    L.A. REPORTING - (312) 419-9292

    1165
    1 THE HEARING OFFICER: Let's hear 52.
    2 MR. FORCADE: I'm sorry. Is that a yes?
    3 THE HEARING OFFICER: Hold on. Let me clarify
    4 the record, Mr.
    Forcade.
    5 Then moving on since those have been
    6 asked and answered to Section 205.520, Application
    7 for Transaction Account, Questions 52, 53, 54, 55,
    8 and 56.
    9 MR. FORCADE: All right. Question 52, why do
    10 participating sources need to apply for an account?
    11 Will the Agency revise this requirement so that all
    12 participating sources automatically receive a
    13 transaction account when they apply for an -- submit
    14 an ERMS application?
    15 MR. KOLAZ: The rule of 510 that describes the
    16 process for applying for a transaction account has
    17 several requirements that are not a part of the ERMS
    18 application process, although they could be made to
    19 be part of the process.
    20 However, the part that I think is on our
    21 mind in establishing the rule the way we did is that
    22 part of the transaction account application process
    23 is the need to designate an account officer. Our
    24 feeling is that at the time the ERMS application is
    L.A. REPORTING - (312) 419-9292

    1166
    1 required, a source may not have an account officer in
    2 mind. They may need time to make special
    3 arrangements. So that's why we do not -- that's one
    4 of the reasons why we do not make the ERMS
    5 application process and the process of applying for
    6 the transaction account one in the same.
    7 MR. FORCADE: Are participating sources
    8 required to re-apply for a transactional account
    9 every year?
    10 MR. KOLAZ: No.
    11 MR. FORCADE: Is it a one time only
    12 application?
    13 MR. KOLAZ: That's correct.
    14 MR. FORCADE: Are there restrictions for --
    15 this is -- Question 53 I just finished, and I'm doing
    16 Question 54 -- are there any restrictions or
    17 requirements which will determine who is eligible to
    18 be a special participant?
    19 MR. KOLAZ: No.
    20 MR. FORCADE: Will the identities of special
    21 participants be made available to the public?
    22 MR. KOLAZ: Yes. A list of special
    23 participants will be included on the electronic
    24 bulletin board portion of the ERMS database.
    L.A. REPORTING - (312) 419-9292

    1167
    1 MR. FORCADE: When the Agency -- this is
    2 Question 55 -- when the Agency issues
    ATUs to a
    3 participating source, are the
    ATUs issued to the
    4 source's transactional account or does the source
    5 have to put its
    ATUs in its transactional account?
    6 MR. KOLAZ: They would be issued directly to
    7 the transactional account.
    8 MR. FORCADE: Are all of -- this is Question
    9 56 -- are all of the source's past, present, and
    10 future
    ATUs always kept in the account or is the
    11 transactional account only used for transferring
    ATUs
    12 between participants?
    13 MR. KOLAZ: I believe there's probably several
    14 ways to view this, but I'm trying to understand what
    15 your question's really getting at.
    16 Let me just say that by looking at your
    17 transactional account, you will be able to see a
    18 record of all of the past transactions and all of the
    19 ATUs that have been issued to your account, those
    20 that are retired and those that have expired.
    21 My point being in the design of a
    22 database, they may not actually be in your database;
    23 but by accessing your transactional account, you will
    24 have access to view the type of information that you
    L.A. REPORTING - (312) 419-9292

    1168
    1 have listed in your question.
    2 THE HEARING OFFICER: Before we go on, I have a
    3 quick question.
    4 At a couple hearings ago, I think Mr.
    5 Mathur testified about this database and the
    6 contracting for a designer.
    7 Has there been any more movement since
    8 the last time we have heard testimony on
    9 interrogation of this database, the program?
    10 MR. MATHUR: I think Mr.
    Kolaz can answer that.
    11 MR. KOLAZ: Well, there has been some
    12 progress. We received approval from Central
    13 Management Services to proceed with our RFT process,
    14 which is a necessary step in the process. So that's
    15 been progress. And we have an internal draft that's
    16 being reviewed, an internal request for proposal
    17 draft. So we have made progress since the last
    18 hearing.
    19 THE HEARING OFFICER: Thank you.
    20 MR. NEWCOMB: On that point, how does one
    21 become aware of the RFT when it's finalized and how
    22 does the Agency go about announcing the RFT?
    23 MR. KOLAZ: Well, there's a process where
    24 there's
    advertisings that must be provided in
    L.A. REPORTING - (312) 419-9292

    1169
    1 newspapers within Illinois, and we are also -- as we
    2 become aware of people who we believe either would be
    3 good candidates to bid on the project, we can add
    4 them to a list to ensure they receive the proposal.
    5 People who may hear about the proposal either through
    6 the newspaper notice or some other means can also let
    7 us know their interest. We have had some inquiries
    8 along that line already. So we are building a list
    9 of people who have to receive the ERFP.
    10 THE HEARING OFFICER: Then moving on to Section
    11 205.520, account officer. Hold on.
    12 MR. SAINES: We have questions that we have
    13 organized as pertaining to Mr.
    Kolaz's testimony,
    14 prefiled testimony, and not specific to a section,
    15 but it appears that it is relevant here. We've asked
    16 some of them already when we were going through our
    17 original questioning about the database. I think it
    18 is probably a good time now to ask these questions
    19 here.
    20 THE HEARING OFFICER: Could you -- what page
    21 are you on?
    22 MS. MIHELIC: We are on Page 22 -- really, Page
    23 23 because the ones that are specific to this ATU
    24 account is starting on page -- or Questions 4 through
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    1170
    1 7.
    2 MS. SAWYER: You didn't ask those questions?
    3 MS. MIHELIC: We did not ask those questions
    4 yet. We asked 8 on.
    5 MR. SAINES: Yes. We started at 8.
    6 MS. SAWYER: Why didn't you ask them? Did we
    7 defer them? I don't think we deferred them.
    8 MS. MIHELIC: Yes, we did because they were to
    9 be asked during the specific section in which they
    10 pertained to.
    11 MS. MCFAWN: These are relevant to --
    12 MS. MIHELIC: Questions 4 through 7 go to the
    13 transaction account. Questions 1 through 4 are just
    14 general questions, but Questions 4 through 7 do go
    15 specifically to the transaction account. We can
    16 defer these until later.
    17 MS. SAWYER: We should just do them.
    18 THE HEARING OFFICER: Why don't we just take
    19 them now then, if the Agency --
    20 Let's go off the record for a second.
    21 (A short recess was taken.)
    22 THE HEARING OFFICER: Nos. 5, 6, and 7 on
    23 Page 23 of the ERMS Coalition's
    prefiled questions.
    24 MS. MIHELIC:
    Tracey Mihelic. Should all --
    L.A. REPORTING - (312) 419-9292

    1171
    1 Sorry. Strike that.
    2 No. 5, where in the proposed rule does it
    3 state that if a discrepancy exists between the Agency
    4 and a participating source regarding that source's
    5 transaction account, quote, the account officer may
    6 petition the Agency to take appropriate action, close
    7 quote?
    8 MR. KOLAZ: Well, the place in the rule is on
    9 205.530(d)(2). And I think the key thing that would
    10 clarify this is -- the proper word would be request
    11 in place of the word petition, and it says, a request
    12 for correction, you know, may be made instead of a
    13 petition.
    14 MS. MIHELIC: So you are saying a source that
    15 does not petition the Agency can only request the
    16 Agency?
    17 MR. KOLAZ: It requests the Agency. I mean, it
    18 says directly, any discrepancies found by the
    19 account officer shall be reported to the Agency or
    20 its designee along with a request for correction.
    21 MS. MIHELIC: And how does one go about
    22 requesting this correction?
    23 MR. KOLAZ: Well, I mean, in a simpler sense,
    24 you could write a letter describing your request.
    L.A. REPORTING - (312) 419-9292

    1172
    1 But when we establish the database, we do intend on
    2 having an E-mail type of capability, and I would
    3 assume that your account officer could E-mail the
    4 Agency and describe the correction. I think a lot of
    5 this would depend upon the nature of the correction.
    6 For example, if you were simply updating
    7 the account officer's new telephone number, I would
    8 think that would not require the same level of
    9 attention that maybe a more serious type of
    10 correction would require.
    11 MS. MIHELIC: Withdrawing specifically
    12 section -- question -- the first question in 6, if I
    13 could modify it since we don't have to petition; you
    14 simply have to request the Agency; if the discrepancy
    15 is with respect to the amount of
    ATUs held by the
    16 source, what are basically the specific requirements
    17 regarding the ability of a source to request the
    18 Agency to take appropriate action?
    19 MR. KOLAZ: Well, let me answer that question
    20 in two ways. One is I think that particular type of
    21 error is extremely unlikely because of the checks and
    22 balances that we will build into the system. But as
    23 all of you are probably thinking, no system is
    24 perfect. And it is possible, although I think very
    L.A. REPORTING - (312) 419-9292

    1173
    1 remotely possible, that there could be a difference
    2 of opinion.
    3 I would say that the account officer
    4 should just assemble the facts known them much like
    5 you would do if you had a discrepancy in your
    6 checking account or savings account and make that
    7 information known to the Agency.
    8 MS. MIHELIC: Withdrawing -- or saying 6(b) has
    9 already been answered; withdrawing 6(c).
    10 6(d) is, how many days does the Agency
    11 have to respond to such a petition now being changed
    12 to request?
    13 MR. KOLAZ: Well, there is nothing specifically
    14 in the rule, but our intention is to respond to all
    15 of these within seven days.
    16 MS. MIHELIC: And what if -- I'm going to
    17 Question (e) -- what happens if the Agency denies
    18 such a petition or request? And this goes to -- is
    19 with respect to changing the amount of
    ATUs or
    20 disagrees with the amount of
    ATUs that should be
    21 in a transaction account. What is a source able to
    22 do?
    23 MR. KOLAZ: Just a moment.
    24 Well, there is nothing specifically in
    L.A. REPORTING - (312) 419-9292

    1174
    1 the rule to address that, so the finding of the
    2 Agency as far as the Agency's concerned is final.
    3 MS. MIHELIC: It's a final Agency decision?
    4 MR. KOLAZ: Right.
    5 MS. MIHELIC: And is that decision
    appealable?
    6 MR. KOLAZ: I think that's --
    7 MS. SAWYER: A legal interpretation.
    8 MS. MIHELIC: Will that be answered then in
    9 written comments?
    10 MS. SAWYER: Do you want us to answer it right
    11 now?
    12 THE HEARING OFFICER: Sure.
    13 (A brief pause.)
    14 MS. MIHELIC: So that's a yes; it will be
    15 answered in written comments?
    16 THE HEARING OFFICER: Yes, I hope.
    17 MS. MIHELIC: And we withdraw Question No. 7.
    18 THE HEARING OFFICER: Thank you.
    19 Going back then to questions from
    20 Tenneco, Section 205.520, Question 57.
    21 MR. FORCADE: Question 57, under Section
    22 203.420(b), the account officers must complete the
    23 training program.
    24 Is a potential account officer merely
    L.A. REPORTING - (312) 419-9292

    1175
    1 required to attend a training program or must he or
    2 she also pass the program?
    3 MR. NEWTON: He must only attend the programs
    4 day through day. There would be no examination or
    5 anything.
    6 MR. FORCADE: Will the account officer receive
    7 any certification of having attended or passed the
    8 training program?
    9 MR. NEWTON: Yes. We don't have it made up
    10 yet, but we will do something, yes.
    11 MR. FORCADE: Will the Agency -- or will the
    12 account officer receive any certification that the
    13 Agency has approved of this account officer?
    14 MR. NEWTON: Yes.
    15 MR. FORCADE: Will these be the same document?
    16 MR. NEWTON: Probably, yes.
    17 MR. FORCADE: Will the Agency conduct the
    18 training program; and if so, where?
    19 MR. NEWTON: We will conduct it, but we haven't
    20 decided where yet.
    21 MR. FORCADE: Have you decided whether it will
    22 be in Chicago or Springfield?
    23 MR. NEWTON: We haven't but I would assume it
    24 would be -- I would assume at least part of it will
    L.A. REPORTING - (312) 419-9292

    1176
    1 be in Chicago.
    2 THE HEARING OFFICER: Any follow-ups to those
    3 questions, Section 520?
    4 MR. NEWCOMB: Yes.
    5 Will there be a fee for that training?
    6 MR. NEWTON: No, there will not.
    7 THE HEARING OFFICER: Moving to Section
    8 205.530, ATU transaction procedures, Tenneco's
    9 Questions 58, 59, 60, and 61.
    10 MR. FORCADE: Question 58, what is the meaning
    11 of the term recognized in the phrase recognized sales
    12 and purchases in the opening sentence of this
    13 section? Are there any sales or purchases which
    14 would not be recognized; and if yes, please list all
    15 sales or purchases which the Agency would not
    16 recognize?
    17 MR. KOLAZ: Okay. The term recognize means
    18 sales and purchases which the Agency ultimately
    19 validates and authorizes. And the Agency will not
    20 validate or authorize a transaction which does not
    21 include signed transfer agreements between both
    22 parties, for example, both the buyer and the seller.
    23 And we also will not authorize transfer
    24 agreements which either include expired or retired
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    1177
    1 ATUs or that involves a sale of
    ATUs from a special
    2 participant is another example; involves immediate
    3 transfers of
    ATUs from an amount greater than that
    4 held by the seller; that would not be a valid
    5 transaction. There's probably other examples, but
    6 another one might be a
    multi-year transfer agreement
    7 in which the seller does not hold an allotment level
    8 plus credit-type transfer agreements sufficient to
    9 equal or exceed the debit-type transfer agreement
    10 that's being contemplated.
    11 MR. FORCADE: You make reference to a transfer
    12 agreement. Do you have a copy of such a transfer
    13 agreement?
    14 MR. KOLAZ: Not at this point.
    15 MR. FORCADE: Can you describe what the minimum
    16 requirements for a transfer agreement would be?
    17 MR. KOLAZ: Well, I believe the minimum
    18 requirements certainly would include information
    19 describing both the seller and the buyer in terms of
    20 name, address, account officers. It would include
    21 the amount of the transaction that's contemplated,
    22 the number of
    ATUs, for example, being sold, and the
    23 amount of
    ATUs being bought by the person receiving
    24 the
    ATUs.
    L.A. REPORTING - (312) 419-9292

    1178
    1 There may be a few other things, but I
    2 think that probably captures 80 to 90 percent of what
    3 we would contemplate would be in a transaction
    4 agreement, transfer agreement, that is.
    5 MR. FORCADE: Is it your intention that these
    6 signed original transfer agreements would be mailed
    7 to the Agency?
    8 MR. KOLAZ: Yes, at some point. Now, we do
    9 believe -- we do intend on having this automated as
    10 part of the database, the ERMS database, that is; but
    11 we do want to work out a means whereby we do have
    12 some type of signed agreement between both parties.
    13 MR. FORCADE: Would it be correct that the
    14 Agency will not transfer
    ATUs until they receive the
    15 original signed transfer agreement?
    16 MR. KOLAZ: Yes. That is possible. Again,
    17 time is of the essence, and we know that, so we are
    18 going to work out whatever mechanism we can to
    19 expedite that; but we do want to be sure that both
    20 the buyer and the seller are in agreement with the
    21 amount of
    ATUs being transferred, that is both being
    22 bought and sold.
    23 MR. FORCADE: Assuming that the deadline is
    24 December 31st of a particular year for
    L.A. REPORTING - (312) 419-9292

    1179
    1 reconciliation, would a transfer agreement signed on
    2 December 31st and received at the Agency on January
    3 2nd satisfy the requirements for having a balanced
    4 account?
    5 MR. KOLAZ: You know, we've really never gone
    6 into that level of detail; but let me just say, we
    7 will establish a system of mechanisms similar to the
    8 April 15th postmark date of the -- that the IRS is
    9 using, so I'm sure we will work out some scheme that
    10 will allow last-minute agreements to be entered into
    11 with the final processing and validation of the
    12 transaction occurring after December 31st. So I am
    13 presuming that the situation you described would be
    14 allowed.
    15 MR. FORCADE: So there would be some situation
    16 to allow the conclusion of the transaction to be the
    17 binding date for reconciliation of accounts as
    18 contemplated in the ERMS rules?
    19 MR. KOLAZ: That's correct.
    20 MR. FORCADE: Moving on to Question No. 59,
    21 Section 205.530(a)(2)(b), Authorizes
    multi-season
    22 transfer agreements, for how long will the Agency
    23 issue
    ATUs to participating sources under the ERMS
    24 proposal?
    L.A. REPORTING - (312) 419-9292

    1180
    1 MR. KOLAZ: There is nothing in the ERMS
    2 proposal that has a final date where
    ATUs not be
    3 issued, so the answer is indefinitely.
    4 MR. FORCADE: Is it true that a facility can
    5 purchase
    ATUs from another facility through a
    6 multi-year transfer agreement between those
    7 facilities?
    8 MR. KOLAZ: Yes.
    9 MR. FORCADE: And the Agency has not proposed
    10 any specific requirements other than those that you
    11 previously described for such transfer agreements?
    12 MR. KOLAZ: That's correct.
    13 MR. FORCADE: Will advance Agency approval be
    14 required for
    multi-season transfer agreements?
    15 MR. KOLAZ: When I use the term
    multi-year
    16 transfer agreement, I am talking about a transfer
    17 agreement that is submitted to the Agency that
    18 recognizes an agreement between two parties, a buyer
    19 and a seller. And those would have to be -- those
    20 would have to be received by the Agency and approved
    21 before we recognized that transfer agreement and
    22 before we would actually transfer
    ATUs from one
    23 account to another.
    24 However, there's nothing in the rule that
    L.A. REPORTING - (312) 419-9292

    1181
    1 prohibits two companies from reaching agreement in
    2 some form themselves and not transferring that
    3 information to the Agency.
    4 For example, one, Company A could enter
    5 into a
    multi-year option agreement maybe, you know,
    6 for some type of consideration, some price per ATU
    7 for the option to buy in future years; those would
    8 not have to be received by the Agency. The only
    9 requirements before the Agency will transfer
    ATUs
    10 from one account to another, we have to have a
    11 transfer agreement between both parties.
    12 MR. FORCADE: Would the
    multi-year transfer
    13 agreement under this section be effectively the same
    14 document as the single-year
    multi -- single-year
    15 transfer agreement, but with the addition of each
    16 year's transfer described therein?
    17 MR. KOLAZ: Yes.
    18 MR. FORCADE: This agreement would also have to
    19 be filed with the Agency; is that true?
    20 MR. KOLAZ: Yes.
    21 MR. FORCADE: Are there any other record
    22 keeping requirements with respect to the
    multi-year
    23 transfer agreements? And this is down through
    24 Subsection (e) of Question 59.
    L.A. REPORTING - (312) 419-9292

    1182
    1 MR. KOLAZ: No. There's no other record
    2 keeping agreements that the
    multi-year transfer
    3 agreements bring about in and of themselves, you
    4 know, that's not already described in the rule.
    5 MR. FORCADE: Is there any limit to the number
    6 of years for a
    multi-year agreement to transfer
    ATUs
    7 from one source to another?
    8 MR. KOLAZ: No.
    9 MR. FORCADE: If two sources enter into an
    10 agreement to transfer
    ATUs over a 10-year period,
    11 will the Agency give any assurance that the existing
    12 program will continue unmodified for that period of
    13 time?
    14 MR. KOLAZ: No.
    15 MR. FORCADE: Let me sort of restate that.
    16 I understand the Agency can impose
    17 additional programs beyond this; but is there any
    18 assurance the Agency can give that this program will
    19 remain unchanged for any length of time?
    20 MR. KOLAZ: No, no. There is no assurance that
    21 there won't be changes.
    22 MR. ROMAINE: Let me just --
    23 MR. FORCADE: Somebody better do something.
    24 MR. ROMAINE: This is a proposal program that's
    L.A. REPORTING - (312) 419-9292

    1183
    1 being put in place by rulemaking. Certainly, any
    2 further changes would require a rulemaking. These
    3 would not be simply actions that the Agency would be
    4 back before this body again explaining why we are
    5 proposing -- answering questions.
    6 MR. FORCADE: Let me amend the question
    7 slightly.
    8 Assume that a facility was attempting to
    9 secure 10 years worth of
    ATUs, that facility could
    10 reasonably expect there may be additional control
    11 programs in the future, but may wish to count on the
    12 continued operation of this program as part of its
    13 evaluation of what price to assign to those
    ATUs
    14 it's going to purchase.
    15 What assurance, if any, can such a
    16 participating source receive from the Agency to
    17 assist in making good economic decisions as to what
    18 the value of an ATU is in the future?
    19 MS. SAWYER: I tend to think that this
    20 question is better asked during the economic
    21 portion, Mr.
    Forcade. And, actually, that was your
    22 final question in this whole package, and that's
    23 what -- we think it's more of an economic question.
    24 MR. FORCADE: Well, yes, just as long as we get
    L.A. REPORTING - (312) 419-9292

    1184
    1 to it sometime.
    2 Moving to Question 60, Section 205.530(d)
    3 requires account officers to report the purchase
    4 price of all ATU transfers.
    5 What documentation must an account
    6 officer keep to verify the purchase price of an ATU?
    7 MR. KOLAZ: Well, there is none currently
    8 specified by the rule, and I think that -- I just
    9 think that whatever documentation -- whatever
    10 agreements were entered into between the two parties
    11 would be such documentation.
    12 MR. FORCADE: Does this documentation need to
    13 be submitted to the Agency?
    14 MR. KOLAZ: We are not anticipating that it
    15 does, but it would need to be available for Agency
    16 review.
    17 MR. FORCADE: If this purchase price were
    18 specified in a contract or other legal document,
    19 would the document need to be filed with the Agency?
    20 MR. KOLAZ: We are not anticipating it needs to
    21 be filed; but as I mentioned previously, it would
    22 need to be available for Agency review.
    23 MR. FORCADE: Is it your intention that the
    24 purchase price would be just one blank on the
    L.A. REPORTING - (312) 419-9292

    1185
    1 transfer agreement or something like that?
    2 MR. KOLAZ: We haven't actually worked that out
    3 in detail, but I don't think it would be necessarily
    4 just one blank because there's other considerations
    5 that could go into the value of an ATU other than
    6 simply a numerical value.
    7 MR. FORCADE: Has the Agency decided how it
    8 will value ATU transfers which are not made
    9 primarily on a dollar basis?
    10 MR. KOLAZ: We have discussed that, but we
    11 haven't come up with anything definitive at this
    12 time; but we are aware that that is a consideration
    13 in establishing the market price.
    14 MR. FORCADE: Is there a penalty for
    15 inaccurately reporting to the Agency the purchase
    16 price of an ATU?
    17 MR. KOLAZ: There's none that's specified
    18 specifically in the ERMS rule.
    19 MR. FORCADE: And our last question in this
    20 Section is Question 61.
    21 Under Section 205.530(d)(3), what is the
    22 deadline for an account officer to specify to the
    23 Agency the order in which
    ATUs shall be retired?
    24 MR. KOLAZ: It would be in the close of
    L.A. REPORTING - (312) 419-9292

    1186
    1 business on December 31st.
    2 THE HEARING OFFICER: Are there any follow-up
    3 questions? I think we'll take a 10-minute break at
    4 this point. The next set of questions deal with the
    5 alternative compliance market account.
    6 (A short recess was taken
    7 whereupon Hearing Officer
    8
    Feinen dismissed himself
    9 and Mr. Kevin
    Desharnais
    10 sat in his place for the
    11 remainder of the hearing.)
    12 MR. DESHARNAIS: My name is Kevin
    Desharnais.
    13 I am going to be filling in for Chuck for the
    14 remainder of today's hearing.
    15 We are going to continue on with the
    16 questions that the Agency has put together in their
    17 lists beginning with the questions for Subpart (g),
    18 Performance Accountability. And we will turn to the
    19 questions of Tenneco.
    20 Mr.
    Forcade?
    21 MS. SAWYER: Just one thing. Mr.
    Kanerva does
    22 have a little diagram to explain certain portions of
    23 the ACMA in response to a specific question. I don't
    24 know if you wanted to go through that first or just
    L.A. REPORTING - (312) 419-9292

    1187
    1 wait until the question is asked.
    2 THE HEARING OFFICER: We'll wait for the
    3 question so that the questioning will proceed in
    4 order.
    5 MS. SAWYER: Okay.
    6 MR. FORCADE: Okay. This will be Question
    7 No. 62.
    8 Do the provisions for special access to
    9 the ACMA, Section 205.610(d)(1) authorize the Agency
    10 to deposit 1 percent of the next seasonal allotment
    11 for all sources?
    12 MR. KANERVA: Well, it authorizes up to
    13 1 percent of the allotments for all the sources.
    14 MR. FORCADE: Would that include 1 percent of
    15 the sources that are not participating in the special
    16 access to the ACMA?
    17 MR. KANERVA: Yes. It's the entire pool of
    18 participating sources irrespective of whether or not
    19 they were asking for access.
    20 MR. FORCADE: Okay. Question No. 63, under the
    21 provisions for special access to the ACMA, Section
    22 205.610(d)(1), is a participating source limited to
    23 purchasing 1 percent of its own next seasonal
    24 allotment or 1 percent of the next seasonal allotment
    L.A. REPORTING - (312) 419-9292

    1188
    1 of all sources?
    2 MR. KANERVA: All the sources.
    3 MR. FORCADE: Under the provisions -- this is
    4 Question 64 -- under the provisions for special
    5 access to the ACMA, Section 205.610(e)(2), may the
    6 Agency impose additional emissions reductions beyond
    7 the initial 12 percent reduction on all
    8 participating sources?
    9 MR. KANERVA: No.
    10 MR. FORCADE: Question No. 65, under the
    11 provisions for special access to the ACMA, Section
    12 205.610(h), please list all possible bases for the
    13 Agency to deny special access to the ACMA?
    14 MR. KANERVA: There are three reasons for a
    15 denial. One would be that a source submitted its
    16 written request for regular access either before or
    17 after the reconciliation period. In other words,
    18 that's the initial qualifier to give somebody access
    19 into the ACMA is that they file during the
    20 reconciliation period.
    21 A second reason that gets more to or
    22 directly to the special access is that the source
    23 fails to show that it could not get
    ATUs in the
    24 market.
    L.A. REPORTING - (312) 419-9292

    1189
    1 And a third reason would be that the
    2 actual seasonal emissions are less than the
    ATUs held
    3 by the source.
    4 MR. FORCADE: I'm sorry. And the third reason
    5 was?
    6 MR. KANERVA: The third reason is their actual
    7 emissions are less than their allotment of actual
    8 ATUs.
    9 The importance of that is that for
    10 regular access, when there's a positive balance, it
    11 doesn't matter whether the source is going to need
    12 those additional
    ATUs for compliance or not. They
    13 can purchase them if they are available if they are
    14 willing to pay the appropriate fee. But when you get
    15 into special access, that's reserved for those
    16 situations where a source actually has more emissions
    17 than allotment and needs to have them for compliance.
    18 MR. FORCADE: Question 66, in the statement of
    19 reasons, the Agency states that the amount of $1,000
    20 for ATU from the ACMA, quote, represents the maximum
    21 exposure for any source under the ERMS, close quote.
    22 What is the maximum exposure for any source under the
    23 ERMS?
    24 MR. KANERVA: The first thing you need to
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    1190
    1 remember is that the ACMA is intended to be used as a
    2 secondary source of
    ATUs. It's the system's safety
    3 net, if you will, and it is not intended to be used
    4 in direct competition with the open marketplace.
    5 Given this setup, the purchase price for
    6 ATUs from the ACMA is purposely designed to be higher
    7 than what we would expect to find in the normal
    8 marketplace. So the cost that someone paid for their
    9 purchases from ACMA would represent the greatest
    10 expense a source would see in order to come into
    11 compliance since ACMA is designed purposely to be
    12 higher than the projected marketplace.
    13 The reference to the $1,000 rate is
    14 appropriate for regular access and actually advises
    15 to $1,100 per ATU for special access.
    16 MR. FORCADE: I think Subsection (b) has been
    17 answered.
    18 Subsection (c), what is the maximum
    19 financial exposure to a source which opted at the
    20 beginning of the year to purchase
    ATUs for the coming
    21 season; and at the end of the year, there are no
    ATUs
    22 available in the ACMA or on the market?
    23 MR. KANERVA: The way I'm going to answer
    24 this -- and this is not what you intended to clarify
    L.A. REPORTING - (312) 419-9292

    1191
    1 for me -- but I'm assuming that special access is not
    2 available here.
    3 MR. FORCADE: Right.
    4 MR. KANERVA: That is also used up. And if
    5 that's the case, then what's applicable is excursion
    6 compensation at 1.2 times the amount of the excess
    7 emissions to be taken from the next seasonal
    8 allotment. That's what the consequence is.
    9 MR. FORCADE: And that 1.2 times would be 1.2
    10 times either the current market rate or $1,000 per
    11 ATU or $1,100 per ATU depending upon how you were
    12 able to achieve the
    ATUs?
    13 MR. KANERVA: No.
    14 MR. FORCADE: No?
    15 MR. KANERVA: It's just a draw down with the
    16 20 percent surcharge directly from the
    ATUs that
    17 would have been allotted to that source.
    18 Ultimately because those
    ATUs do have a
    19 market value, the source can figure out what that was
    20 worth that they didn't get, but it isn't actually
    21 something financial that they directly have to incur.
    22 MR. FORCADE: Question 67, if a facility is
    23 required to determine at the beginning of the year
    24 whether to implement control technology in order to
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    1192
    1 comply with this ATU allotment, may such a facility
    2 make an economically reasonable decision if it will
    3 not know the cost of purchasing extra
    ATUs until the
    4 end of the year; and if so, how?
    5 MR. KANERVA: The response to that involves a
    6 couple of things. First of all, the last section of
    7 the rule talks about the performance review report,
    8 the annual performance review report. It's 205.660.
    9 And that's required to be completed and made publicly
    10 available by May 15th of each year. And that will
    11 include information -- that's No. 8 there -- on the
    12 average market price for the transactions from a
    13 previous period.
    14 So going into an ozone season, the
    15 participants will have a public document that
    16 describes what the market forces generated just
    17 prior.
    18 The second thing that's going to be
    19 available to any source obviously is to interact with
    20 other sources. If something -- conditions are going
    21 to change for the current season that would influence
    22 that market price up or down, that's the kind of
    23 thing you'll learn from talking to some of the other
    24 participating sources and people that you might want
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    1193
    1 to buy or sell to. Everybody's free to have all
    2 those interactions they want. They don't need to get
    3 anything from the Agency on that.
    4 MR. FORCADE: All right. If I could follow up,
    5 those responses seem appropriate for the periods of
    6 time after the year 2000, but for the decisions that
    7 will have to be made in the 1999 calendar year when
    8 the 206.600(g) report will not be prepared and when
    9 the available emission
    ATUs for the existing
    10 facilities will not be known, how would a source at
    11 the beginning of 1999 make a reformed decision over
    12 whether to install controlled technology or to pursue
    13 the purchase of
    ATUs?
    14 MR. KANERVA: I think a wise course of action
    15 would be for that source to have some of those
    16 communications with other participants in the
    17 market. There will be people going into the start-up
    18 of the system that will be interested in being
    19 sellers. It doesn't do you much good to be a seller
    20 unless you can find some buyers.
    21 And so people's compliance strategy work,
    22 I think, will clearly lead them to have some of these
    23 interactions, although there won't be a public
    24 presentation of how the first year operated, but
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    1194
    1 there will be plenty of reasons for interactions to
    2 occur where people could get a sense of what their
    3 compliance cost would be.
    4 MR. FORCADE: Is it the Agency's intention to
    5 have the bulletin board system or that section of the
    6 bulletin board system which will advertise
    ATUs for
    7 sale fully operational by January 1st of 1999?
    8 MR. KANERVA: I think that was an order from
    9 the Bureau Chief of Air that we make sure that
    10 happens.
    11 MR. FORCADE: Does that mean yes?
    12 MR. KANERVA: Yes.
    13 MR. FORCADE: I believe Question No. 68 has
    14 been asked and answered.
    15 Question No. 69, how will the Agency
    16 calculate the market values of
    ATUs? I can either
    17 go to the individual subsections or allow you to.
    18 MR. KANERVA: What we will utilize is to
    19 just do an arithmetic average basically are the
    20 transactions, monetary consideration involved, the
    21 transactions that take place for the most current
    22 year.
    23 And you said you want me to just go
    24 through this sequence?
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    1195
    1 MR. FORCADE: I didn't know whether your
    2 initial answer would be broader and cover the
    3 question.
    4 How will the Agency account for
    5 transfers between facilities owned by the same
    6 parent corporation?
    7 MR. KANERVA: If no dollar is involved, if
    8 they simply have exchanged the units in order to
    9 achieve their compliance, then we wouldn't utilize
    10 that transaction in the average.
    11 MR. FORCADE: So the Agency intends to put in
    12 some procedure to subtract from the average those
    13 transactions which have a common parent corporation
    14 or which have a value of zero, which?
    15 MR. KANERVA: No. They wouldn't put a value of
    16 zero in. You'd have a subset of transactions that
    17 were truly a monetary exchange back and forth. If a
    18 company just exchanged -- physically transferred the
    19 units without a charge associated with them between
    20 another part of the company, we would just separate
    21 that out and not consider it part of the pool that we
    22 would utilize for the average. If you start putting
    23 in bunches of zeros in there, you are going to
    24 obviously have an arbitrary impact on the average
    L.A. REPORTING - (312) 419-9292

    1196
    1 calculation.
    2 MR. FORCADE: How will the Agency account for
    3 transfers for the consideration of
    ATUs as not money?
    4 MR. KANERVA: As I have just mentioned, they
    5 would be excluded from the averaging process unless
    6 we are able to find some way of giving a
    7 representative value to that transaction. And there
    8 may be information that can be provided to us that
    9 would enable us to do that; but, otherwise, it would
    10 be left out.
    11 MR. FORCADE: Will the Agency include all
    12 transactions in calculating the market value or will
    13 the Agency limit its calculations to a particular
    14 period of time?
    15 For example, which transactions will the
    16 Agency include when computing the market value in the
    17 year 2010? Will they use transactions from 1999 to
    18 2010 or some other period?
    19 MR. KANERVA: Our intent is to use the
    20 transactions from that current year. So when we get
    21 to the reconciliation period -- I mean the start of
    22 it, October 1st, early in October we would calculate
    23 the average from the transactions of 2010 that were
    24 available. So that a source trying to decide whether
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    1197
    1 or not to -- what is the best course for them during
    2 that three-month reconciliation period would have
    3 that information available.
    4 MR. FORCADE: For that particular year only?
    5 MR. KANERVA: Right.
    6 MR. FORCADE: Historic data would be maintained
    7 in someplace too?
    8 MR. KANERVA: Well, the historic data would be
    9 documented in each year's annual performance report.
    10 If for some reason -- and I would say
    11 this is a very extreme situation -- but if for some
    12 reason there were just hardly any usable transactions
    13 in the current year, then I think we could simply
    14 rely on the last year's average.
    15 MR. FORCADE: Will the Agency verify the
    16 information it receives from account officers on the
    17 amount of the cost of the transfer of
    ATUs?
    18 MR. KANERVA: Well, the information on the
    19 price and what have you is part of the source's
    20 compliance master file, and that is subject to review
    21 by the Agency, that is subject to a good
    22 documentation practice, and it's something we can
    23 enforce if there was a problem with it, just like
    24 anything else.
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    1198
    1 MR. FORCADE: Does the Agency have any plans
    2 for routine inspections of ATU files in order to
    3 verify the cost of transaction amounts?
    4 MR. KANERVA: For accountability of the system,
    5 we will obviously set up some kind of on-site review
    6 process. I don't think we have sorted through
    7 exactly how many facilities ought to be looked at in
    8 any particular year and what have you. That's
    9 something that will come along later on. There's not
    10 that much difference in the compliance plans that the
    11 Bureau of Air has now to go out and inspect sources
    12 for compliance.
    13 MR. FORCADE: Are there any specific documents
    14 relating to the transfer of an ATU that the facility
    15 must maintain on-site?
    16 MR. KANERVA: Could you repeat that, please?
    17 MR. FORCADE: Are there any specific documents
    18 relative to the transfer of
    ATUs that the facility
    19 must keep on-site or contractual documents the
    20 facility must keep on-site?
    21 MR. KANERVA: I think the real answer to that
    22 question is sort of good business practice. I mean,
    23 good accounting procedures would call for you to be
    24 able to back up what went into putting a contractual
    L.A. REPORTING - (312) 419-9292

    1199
    1 relationship into place, and corporations, companies,
    2 have their own audits and accountability process. So
    3 I think we expect that there would be suitable
    4 documentation available.
    5 MR. DESHARNAIS: Moving on to the
    prefiled
    6 questions from
    Sonnenschein filed January 16th,
    7 Question 3.
    8 MS. FAUR: Question 3, I'd like to ask this
    9 question in a different manner so as to clarify it.
    10 Mr.
    Kanerva, when determining the $10,000
    11 per ton develop price for the ACMA, did you examine
    12 market transactions involving emission reduction
    13 credits in either the Chicago
    nonattainment area or
    14 other severe
    nonattainment areas?
    15 MR. KANERVA: No, we didn't.
    16 MS. FAUR: And why weren't these considered?
    17 MR. KANERVA: Because the basis for that value
    18 is derived a whole different way.
    19 The basis is really control cost. And we
    20 did consider control cost information from the
    21 Chicago
    nonattainment area in designing and arriving
    22 at that particular dollar amount.
    23 In the last RACT rulemakings, the upper
    24 end of the cost per ton for the rules that were put
    L.A. REPORTING - (312) 419-9292

    1200
    1 on the books was about $7,000 a ton. Of course, we
    2 are looking in the future mode here to 1999. And in
    3 projecting sort of forward, our feeling was that we
    4 should be at about the $10,000 a ton level to get --
    5 to put ACMA in this secondary source mode.
    6 MS. FAUR: Thank you.
    7 MR. DESHARNAIS: Okay. I believe that there
    8 were some remaining questions from the ERMS Coalition
    9 there, Section 19, Questions 20 and 21.
    10 MS. MIHELIC: You mean pages 20 and 21?
    11 MR. DESHARNAIS: Pages 20 and 21.
    12 MR. SAINES: Thank you. I'm Rick
    Saines with
    13 ERMS Coalition.
    14 This question is question A, pertaining
    15 to Section 205.610(b).
    16 Does the Agency intend to reduce a
    17 participating source's emissions by 1 percent each
    18 year to replenish the ACMA?
    19 MR. KANERVA: Yes.
    20 MS. MIHELIC: A quick follow-up question to
    21 that.
    22 So each year, a source's allotment will
    23 be reduced by 1 percent so that in 2001, the source's
    24 allotment will reduce by 1 percent, in 2002 by 1
    L.A. REPORTING - (312) 419-9292

    1201
    1 percent, and in 2003 by 1 percent?
    2 MR. KANERVA: No. The initial compliance
    3 reduction, if you will, is the 12 percent that
    4 sources are going to have to achieve, and the 1
    5 percent for ACMA is part of that 12 percent. So
    6 that just carries through, carries forward, from
    7 there on. It would be sort of silly to give the 1
    8 percent back each year and take it, so it's just
    9 committed for the ACMA.
    10 MS. MIHELIC: Thank you.
    11 MR. SAINES: This pertains to Section
    12 205.610(c).
    13 Question No. 1, what is the standard for
    14 obtaining regular access to the ACMA?
    15 MR. KANERVA: That it's a participating source
    16 or a new participating source and that they apply
    17 during the reconciliation period.
    18 MR. SAINES: Question No. 2, must a source
    19 demonstrate that the source has not been able to
    20 attain
    ATUs in the market prior to obtaining regular
    21 access to the ACMA?
    22 MR. KANERVA: No.
    23 MR. SAINES: That would be no. Okay.
    24 Question No. 3, is special access to the
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    1202
    1 ACMA always available?
    2 MR. KANERVA: It's available provided the
    3 source qualifies by the criteria that are listed
    4 there, and it's available up to the extent of 1
    5 percent of the next season's allotment, 1 percent per
    6 next year.
    7 MR. SAINES: Okay. Question 4, what is market
    8 price?
    9 MR. KANERVA: It's the price of the
    10 transactions that take place for trading of the
    11 allotment that was used.
    12 MR. SAINES: And we are going to withdraw
    13 Question Nos. 5 and 6 as being asked and answered.
    14 Question No. 7 -- and this is really a
    15 clarification of an earlier question asked by
    16 Tenneco -- when must transactions have occurred in
    17 order to be considered in the Agency's determination
    18 of the market price?
    19 MR. KANERVA: During that calendar year.
    20 MR. SAINES: So the previous season; same
    21 season?
    22 MR. KANERVA: Same season; same calendar year.
    23 MR. SAINES: Same calendar year.
    24 I guess this is -- well, I'll just ask
    L.A. REPORTING - (312) 419-9292

    1203
    1 it. Question No. 8, is it not inherent that the
    2 market will determine the market price?
    3 MR. KANERVA: Yes.
    4 MR. SAINES: We will withdraw Question No. 9.
    5 Question No. 10, what does the
    6 Agency mean by, quote,
    ATUs shall only be available
    7 at two times the market price if sufficient single
    8 season ATU transfers have occurred with a purchase
    9 price that fully reflects the consideration involved
    10 in the transfer to establish an average market price,
    11 end quote?
    12 MR. KANERVA: Well, I think we have described
    13 that, but that's a qualifier to ensure that we'll be
    14 able to truly calculate a meaningful average. And we
    15 need to have transactions where representative
    16 monetary exchange takes place. And if it's a
    17 nonmonetary consideration such as the questions posed
    18 by Mr.
    Forcade, we wouldn't really be able to
    19 calculate a valid average.
    20 MR. SAINES: All right. Question No. 11, what
    21 are sufficient single transfers?
    22 MR. KANERVA: Well, if you really want to get
    23 mathematical, it takes two to average. So we have to
    24 have at least two transactions with monetary
    L.A. REPORTING - (312) 419-9292

    1204
    1 exchange. If there's any question about those,
    2 obviously our preference would probably be to have
    3 many more than that, and there probably will be, but
    4 ...
    5 MR. SAINES: Would the two transfers alone be
    6 sufficient for the Agency to determine their market
    7 price?
    8 MR. KANERVA: Sure.
    9 MR. SAINES: Question No. 12, why must the
    10 Agency consider whether the purchase price in the
    11 market, quote, fully reflects the consideration
    12 involved in the transfer, end quote, to establish an
    13 average market price?
    14 MS. SAWYER: I think we've already explained
    15 this one.
    16 MR. SAINES: The question really is, since this
    17 is a market-based program, isn't whatever the sources
    18 are able to get for their
    ATUs, isn't that ultimately
    19 the market price?
    20 MR. KANERVA: And the answer to that is the
    21 example question Mr.
    Forcade asked; and that is, a
    22 company internally itself may simply decide to shift
    23 ATUs from one part of the company to another and
    24 leave the cost inherent in how it works out. It's
    L.A. REPORTING - (312) 419-9292

    1205
    1 accounting. And we would have no idea what the value
    2 or the true market representation of that exchange
    3 was.
    4 MS. MIHELIC: But you said earlier that those
    5 would not be considered in determining the market
    6 price; that those would be excluded.
    7 So in determining the market price, then
    8 you would only consider transactions that have a
    9 monetary value; is that right?
    10 MR. KANERVA: Or that we can figure out in
    11 monetary terms what their value was, if there are
    12 ways -- if there's other documentation that will help
    13 us do that. But the simplest criteria is simply the
    14 ones where there's a buyer, seller, and an actual
    15 exchange of money.
    16 MR. SAINES: Okay. Then we will withdraw
    17 Question No. 13 as being asked and answered.
    18 Question No. 14, why isn't the Agency
    19 required to provide written notification allowing or
    20 denying regular access to the market as set forth in
    21 Section 205.610(d)(4)?
    22 MR. KANERVA: You know, for the special acts,
    23 I'm going to back into that as the prerogative of the
    24 testifier here.
    L.A. REPORTING - (312) 419-9292

    1206
    1 For the special acts in part since that
    2 does involve the possibility of appeal, we put in
    3 there a written notification provision. I think the
    4 practice we would use for regular access is the same
    5 thing. We would notify in writing so there would be
    6 a record of it. If that's a clarification that needs
    7 to be made, it's not a problem.
    8 MR. SAINES: Is that to mean that you can
    9 appeal determination of a denial of regular access?
    10 MR. KANERVA: No. I said special access. I
    11 backed in this and explained special access and then
    12 answered your question about regular access.
    13 MR. SAINES: So for purposes of regular access,
    14 you cannot appeal the Agency's determination?
    15 MR. KANERVA: What's there to appeal?
    16 MR. SAINES: Well, if it's denied. I mean --
    17 MR. KANERVA: The only criteria are if you're
    18 either in the reconciliation period or not, and I
    19 think we can keep track of the calendar. The other
    20 is if you're a participating source or not, and
    21 that's cut and dry. You got a transaction to count,
    22 and then you are in the system. If we figure out
    23 something to appeal in that situation, we've got our
    24 wires crossed.
    L.A. REPORTING - (312) 419-9292

    1207
    1 MR. SAINES: I suppose the reason there would
    2 be a need for it to appeal would be that the source
    3 believes in good faith that they were unable to
    4 attain
    ATUs based on the market price, and they were
    5 looking first for a regular access.
    6 MR. KANERVA: That's special access.
    7 Regular access, they just got to be a
    8 player and they've got to file the reconciliation,
    9 and they got it.
    10 You only have the additional tests, two
    11 additional criteria, if you are into a negative
    12 balance situation and we have run the account down to
    13 zero. I mean, we remove, really, any hurdles to
    14 getting the
    ATUs if there's a positive balance.
    15 MR. SAINES: Okay. One more follow-up.
    16 Can you appeal a market price
    17 determination, an Agency's market price
    18 determination?
    19 MR. KANERVA: The way the rule is structured,
    20 that's not -- it's not structured to provide for
    21 contesting the Agency's decision on that. The appeal
    22 is really linked to a specific access request
    23 action.
    24 MR. SAINES: Okay. Moving along to questions
    L.A. REPORTING - (312) 419-9292

    1208
    1 pertaining to Section 205.610(d), which is special
    2 access.
    3 Question No. 1, will insufficient
    ATUs
    4 in the ACMA ever be a basis for requiring further
    5 reductions from participating sources?
    6 MR. KANERVA: No.
    7 MR. SAINES: Question No. 2, how does one
    8 demonstrate that it has been unable to obtain
    ATUs in
    9 the market?
    10 MR. KANERVA: Normal business practice
    11 documentation; providing us copies of written offers
    12 to buy, and they can take whatever form. I mean, it
    13 might be sort of a contractual type of arrangement.
    14 A lot of other offers are made back and forth between
    15 businesses to enable transactions to take place, and
    16 whatever accounting they would normally use is fine.
    17 MR. SAINES: Does the Agency have any idea as
    18 to how many showings there needs to be; how many
    19 records of attempts to attain
    ATUs? Is one denial of
    20 ATUs sufficient? Is it two, three, or is this just
    21 something that is going to be worked on in a
    22 case-by-case base?
    23 MR. KANERVA: 4.5.
    24 MR. SAINES: 4.5. The answer is obviously
    L.A. REPORTING - (312) 419-9292

    1209
    1 more than one because that's not much of a good faith
    2 effort to really go look for something. I think
    3 probably in the vicinity of two or three legitimate,
    4 you know, attempts to seek a seller.
    5 MR. SAINES: Question No. 3 -- and if it
    6 doesn't come out clearly, I'll be happy to try and
    7 explain it -- why is there a greater increase in the
    8 multiple of the market price, that is, 2.02.5 than
    9 the increase of the ATU price, that is, $1,000 to
    10 $1,100, between regular access and special access to
    11 the ACMA?
    12 MR. KANERVA: You must have worked a long time
    13 on that question.
    14 MR. SAINES: I'm very proud of that question.
    15 MR. KANERVA: That's good. It's the one I
    16 liked.
    17 No. I think it's
    comprehendible, I
    18 think.
    19 We obviously expect a market price side
    20 of this to be much lower than the fixed rate side of
    21 it. And that being the case, if we didn't have a
    22 higher multiplier in going from the regular to
    23 special, we'd, in effect, be skewing all the results
    24 over to the market price side, and it's just to sort
    L.A. REPORTING - (312) 419-9292

    1210
    1 of keep a balance between those two as the market
    2 price starts to go up.
    3 Now, is that as clear as your question?
    4 Almost?
    5 MR. SAINES: I think that's about as good as we
    6 can get.
    7 MR. KANERVA: Good.
    8 MR. SAINES: It doesn't mean that I understand
    9 it, of course.
    10 Moving to Sections 205.610(e) and (f),
    11 Replenishing the ACMA.
    12 Question, how does the Agency intend to
    13 obtain
    ATUs to replenish the ACMA? It may be
    14 answered already.
    15 MR. KANERVA: Well, there's at least four major
    16 ways that it might be done. One is for us to
    17 actually go out and implement emission reduction
    18 projects, such as old vehicle scrapping projects to
    19 get dirty cars off the road. Another might be to
    20 work with emission reduction generators, small
    21 generators, and work with them to get controlled
    22 technologies put on.
    23 And don't forget, we've got -- I mean,
    24 the ACMA account is actually -- it's a monetary
    L.A. REPORTING - (312) 419-9292

    1211
    1 fund. We have legislative authority to operate that
    2 fund and to go out and make purchases in order to
    3 drive reductions to happen.
    4 Shutdowns is another avenue that we have
    5 a 20 percent split off from the shutdown allotment
    6 portion that would come to the account. And we think
    7 there would be contributions. People will actually
    8 voluntarily contribute portions of their allotments
    9 into the account for reasons that are, you know,
    10 specific to that company, to each company.
    11 MR. SAINES: Thank you.
    12 Questions pertaining to Sections
    13 205.610(g) and (h), Limitations on the Operation of
    14 ACMA.
    15 Question No. 1, why is access to the ACMA
    16 limited to 50 percent to new participating sources if
    17 no other sources require access?
    18 MR. KANERVA: Well, there's two parts to that.
    19 First of all, there's a 2002 cut-off point in which
    20 any sort of limitation on new sources versus existing
    21 goes away. It's wide open to anybody.
    22 In the first several years, we felt it
    23 was important to put that sort of ceiling on the new
    24 sources because the majority of the activity and the
    L.A. REPORTING - (312) 419-9292

    1212
    1 majority of the responsibility to achieve compliance
    2 and get the system functioning will be the existing
    3 sources. They are the ones that need to have the
    4 insurance pool and the safety valve. And they need
    5 the assurance that a portion of the ACMA is sort of
    6 reserved for them, at least for the first couple of
    7 years until we get the system fully functioning and
    8 everyone comfortable with it.
    9 MR. SAINES: Question No. 2, may a new
    10 participating source appeal the denial of the access
    11 to the ACMA?
    12 MR. KANERVA: If they are at the point that
    13 they are seeking special access.
    14 MR. SAINES: Okay. And this is Question
    15 No. 3.
    16 What does in the aggregate mean? It's
    17 related to language that's --
    18 MR. KANERVA: It means all the new sources that
    19 might request access.
    20 MR. SAINES: Okay. That's it. Thank you.
    21 MR. DESHARNAIS: Any additional questions on
    22 205.610?
    23 Ms.
    Hodge?
    24 MS. HODGE: Yes. I have a few questions.
    L.A. REPORTING - (312) 419-9292

    1213
    1 Katherine
    Hodge with the firm of
    2 Hodge & Dwyer representing the Illinois Environmental
    3 Regulatory Group. And these are from our
    prefiled
    4 questions dated January 14th.
    5 Starting at Question No. 25 on Page 11,
    6 Question No. 25 has been asked and answered, so we
    7 will withdraw it.
    8 Question No. 26 -- and I apologize.
    9 There is a typo in this question, so I will read it
    10 with the correct citation.
    11 Section 205.610(d)(1) states the Agency
    12 shall credit the ACMA with up to 1 percent of
    ATUs
    13 from this season allotment for the next seasonal
    14 allotment period as an advance to provide assistance
    15 for special access to be granted.
    16 Does this mean that the Agency will run a
    17 1 percent negative balance based on the overall
    18 number of
    ATUs that will be issued in the next season
    19 allotment period and apply it to the ACMA?
    20 MR. KANERVA: Basically, yes. But the way we
    21 look at it is it's a credit, you know. It's like
    22 having a draw down on an account where you could use
    23 funds in advance of actually providing the cash.
    24 But, yes, we are borrowing from next year.
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    1214
    1 MS. HODGE: Thank you.
    2 Question No. 27, I think the first part
    3 of this has been asked and answered, so I will just
    4 ask the second part.
    5 Is it correct that Section 205.610(d)(1)
    6 will not require the imposition of a further
    7 reduction beyond the voluntary 18 percent reduction
    8 for exempt sources? I believe Mr.
    Forcade had asked
    9 the 12 percent for participating sources question.
    10 MR. KANERVA: That's correct.
    11 MS. HODGE: Question No. 28, that has been
    12 asked and answered. We will withdraw it.
    13 Question 29, what did you mean,
    14 Mr.
    Kanerva, when you made the following statements
    15 in your
    prefiled testimony; and we are looking at
    16 Page 5 and Page 7 of your testimony, and these are
    17 quotes. The first one is, the simplest way to avoid
    18 these adverse consequences is to borrow the needed
    19 ATUs from the next year and pay them back as other
    20 emission reductions are generated or deduct them from
    21 allotments to participating sources.
    22 And in particular, we are concerned about
    23 that last phrase, or deduct them from allotments to
    24 participating sources.
    L.A. REPORTING - (312) 419-9292

    1215
    1 And the other quote that fits in with
    2 that is the system that is brought into balance the
    3 next year by adjusting the allotments to reflect the
    4 borrowed amount of
    ATUs.
    5 MR. KANERVA: The way I'd like to answer this
    6 question is with my infamous example that I've been
    7 waiting patiently to provide, and, hopefully, this
    8 will get the question you are really asking here. I
    9 think we have copies of this available.
    10 What I'd like to do is actually run
    11 through how the sequence of events would work to show
    12 how these component parts come into play, at what
    13 time, and that will wind up answering your question.
    14 I have set this example to assume that
    15 1,100
    ATUs, which represents about 110 tons, it's the
    16 1 percent of the allotments, would be available in
    17 the year 2000 and 1,100
    ATUs again in 2001.
    18 And I'm saying here that sources
    19 request -- during their reconciliation period, they
    20 request the entire amount, the entire 1,100
    ATUs. So
    21 we wind up with a balance of zero at that point.
    22 And then we have near the end of the
    23 reconciliation period more qualified sources request
    24 ATUs; another 550
    ATUs.
    L.A. REPORTING - (312) 419-9292

    1216
    1 That's probably a little more readable;
    2 technical difficulties.
    3 We have another 550
    ATUs requested. The
    4 balance is at zero, so we are into the special access
    5 situation.
    6 And here's where we would do the
    7 advance. We would credit the ACMA with 550
    ATUs to
    8 satisfy these requests with an advance from 2001, and
    9 then the sources could go ahead and purchase those
    10 for the applicable price. That still leaves us 550
    11 ATUs that will be available when we get to 2001 for
    12 the ACMA.
    13 Now, in terms of the emission reductions
    14 that would be happening here, the ACMA provisions say
    15 that we are supposed to generate -- attempt to
    16 generate emission reductions to cover any deficit
    17 situation like this.
    18 So I'll just arbitrarily come up with as
    19 an example that we find 30 tons of reductions out
    20 there, which would be 300
    ATUs, and we do that as we
    21 head into the new year. We keep trying to get the
    22 reductions and to balance out the account. And in
    23 this case, that's all we are able to generate, so
    24 that leaves a 250 shortfall by the time we are at the
    L.A. REPORTING - (312) 419-9292

    1217
    1 end of that next season. So when you balance that
    2 all out, we had 550
    ATUs available and 250 they've
    3 got that we found in reductions.
    4 So, basically, there were still 300
    ATUs
    5 that are available for purchase. So it's kind of a
    6 sequence of steps that the draw down of the -- up to
    7 the 1 percent is a bookkeeping action that creates
    8 sort of the safety valve. But then we don't actually
    9 take that away as available for sources until we have
    10 exhausted our efforts to try and get the emission
    11 reductions underway. And it may not be even -- maybe
    12 my testimony wasn't as artful as it should have been,
    13 but it's that sequence of events that the rule sets
    14 up.
    15 MS. HODGE: So then what you are saying is that
    16 the Agency does not intend to deduct the shortfall
    17 from allotments issued to participating sources?
    18 MR. KANERVA: Not as an additional deduction,
    19 no. The most it would ever be is the same 1 percent
    20 that would have been taken anyway. It was already
    21 part of the 12 percent and what have you. It's not
    22 an increment on top of that. It's just whether or
    23 not the portion size of ACMA remains for purchase
    24 because of how we regenerate reductions or it
    L.A. REPORTING - (312) 419-9292

    1218
    1 doesn't.
    2 MR. DESHARNAIS: Thank you.
    3 Okay. Could the record please reflect
    4 that the Agency has been referring to an overhead
    5 projection entitled Example for ACMA Access prepared
    6 by Roger
    Kanerva for ERMS hearing, February 3, 1997.
    7 Does the Agency wish to have this
    8 admitted as an exhibit?
    9 MS. SAWYER: Yes.
    10 MR. DESHARNAIS: Can we go off the record for a
    11 second?
    12 (Discussion had off the
    13 record.)
    14 MR. DESHARNAIS: Okay. The Agency has moved to
    15 have this admitted into evidence.
    16 Is there any objection?
    17 Okay. The document entitled Example for
    18 ACMA Access prepared by Roger
    Kanerva for ERMS
    19 hearing, February 3, 1997 will be admitted as Exhibit
    20 No. 47.
    21 MS. MCFAWN: I would just note that
    22 Mr.
    Kanerva thought he would see us sooner since
    23 it's dated February 3rd and today is February 11th.
    24 MR. KANERVA: That was not a subtle hint.
    L.A. REPORTING - (312) 419-9292

    1219
    1 MS. MCFAWN: We would have loved to have had
    2 you on the 3rd.
    3 MR. DESHARNAIS: Okay. Are there any
    4 additional questions on 205.610?
    5 MR. WAKEMAN: I have one question on the
    6 exhibit that we just entered. Mr.
    Wakeman from
    7 Tenneco.
    8 The 30 tons that you mentioned that you
    9 are going to go out and find as a further reduction,
    10 can you give me an example of what that is if it's
    11 not going to be deducted from somebody's account?
    12 MR. KANERVA: I gave that answer to their
    13 questions about how you replenish the ACMA; for
    14 instance, going out and doing a car scrapping
    15 project.
    16 MR. WAKEMAN: Okay. Thank you.
    17 MR. DESHARNAIS: Additional questions?
    18 Mr.
    Trepanier?
    19 MR. TREPANIER: Yes, clarification of the
    20 question asked by the ERMS Coalition on how does the
    21 Agency intend to obtain
    ATUs to replenish the ACMA.
    22 My question is, in your response that the
    23 ACMA would be replenished through the 20 percent
    24 take-away from shutdowns, is it your belief that
    L.A. REPORTING - (312) 419-9292

    1220
    1 this -- is it your belief that there will be -- that
    2 during shutdowns, there will be some allotments yet
    3 available to subtract 20 percent from -- given Chris
    4 Romaine's testimony that participating sources may
    5 simply -- that these provisions for shutdown of
    6 participating sources may simply encourage sources
    7 to divest themselves in surplus
    ATUs as part of a
    8 process of downsizing in closing a plant?
    9 MR. KANERVA: Well, there's no inconsistency
    10 between those provisions. What he was getting at
    11 was a source may make some arrangement to essentially
    12 turn their whole allotment over to some party.
    13 but in the course of doing that, because it was
    14 originally from a shutdown, 20 percent of that
    15 would have to be taken off to be placed in the
    16 ACMA.
    17 So the new source for getting the
    18 transfer would be getting 80 percent of what the
    19 shutdown source's allotment would have been, which
    20 still may be something they want to do.
    21 MR. TREPANIER: Are you suggesting that when
    22 a long-term transfer of
    ATUs occurs prior to a
    23 shutdown, that there will be a 20 percent reduction
    24 that will go to the ACMA?
    L.A. REPORTING - (312) 419-9292

    1221
    1 MR. KANERVA: No. I'm looking to my example to
    2 where there's actually a source that stops operating
    3 and surrenders its permits and shuts down.
    4 I think Chris was talking about a
    5 sequence of events where someone decides in advance
    6 of shutting down to enter into a transfer agreement
    7 and make their allotment available to somebody. And,
    8 yes, they could do that. They could make that
    9 arrangement in advance.
    10 MR. TREPANIER: Is it fair to say that given
    11 Chris Romaine's understanding that the provision for
    12 shutdown may simply encourage sources to divest
    13 themselves in surplus
    ATUs as part of the process of
    14 downsizing and closing a plant, that this 20 percent
    15 that you spoke of replenishing the ACMA may not
    16 be available?
    17 MS. SAWYER: I don't think Mr.
    Kanerva can
    18 testify as to Mr. Romaine's understanding.
    19 MR. TREPANIER: I'm asking if that given the
    20 testimony of Mr. Romaine, that these provisions
    21 encourage, simply encourage, sources to divest
    22 themselves of surplus
    ATUs as part of the process of
    23 downsizing and closing a plant, is it fair to say
    24 that that 20 percent that Roger testified that would
    L.A. REPORTING - (312) 419-9292

    1222
    1 be available to replenish the ACMA may not be
    2 available?
    3 MR. KANERVA: Well, to put this in context, I
    4 did not hear all of Chris Romaine's testimony, and
    5 that may be one statement out of a whole sequence of
    6 discussions.
    7 I mentioned shutdowns as one possibility.
    8 That's not the only way to replenish the ACMA. I
    9 mentioned at least three other approaches. For
    10 instance, the car scrapping type of project where we
    11 actually go out and sponsor something and do it;
    12 generating from other smaller stationary sources in
    13 addition to the reduction generator category; or for
    14 that matter, contributions from the Agency. I mean,
    15 there's multiple ways.
    16 The other one is the 6 percent surplus
    17 reduction for a source that decides to opt out in the
    18 beginning of the system. That's the one that takes
    19 the 18 percent reduction approach. There's another 6
    20 percent difference or more that could come under
    21 ACMA.
    22 MR. TREPANIER: Do you also acknowledge that
    23 the provisions of this proposal may simply encourage
    24 sources to divest themselves in surplus
    ATUs as part
    L.A. REPORTING - (312) 419-9292

    1223
    1 of a process of downsizing and closing a plant?
    2 MR. KANERVA: No, I don't. And I think there's
    3 so many other economic aspects to making a decision
    4 like that that I don't think what we are doing with
    5 this rule is going to drive the process one way or
    6 another.
    7 MR. TREPANIER: What advantage do you see?
    8 What force is that that you believe that would
    9 encourage the emitter to ask for the permit to be
    10 rescinded prior to transferring away their
    ATUs?
    11 What force do you believe would be to --
    12 that would encourage the emitters to have 20 percent
    13 of their allotment set in the ACMA rather than having
    14 it available for themselves to sell it?
    15 MR. KANERVA: The economics of their shutdown
    16 might be so overwhelming compared to the size and the
    17 economic value of their allotment that it really
    18 doesn't make any difference to them one way or the
    19 other.
    20 MR. TREPANIER: In which case it would be kind
    21 of an oversight, an economic oversight?
    22 MR. KANERVA: It would be something they
    23 wouldn't pay enough attention to
    to bother one way or
    24 another.
    L.A. REPORTING - (312) 419-9292

    1224
    1 MR. TREPANIER: All right. So you said that
    2 the ACMA may be replenished through donations from
    3 sources?
    4 MR. KANERVA: Contributions is the term I used,
    5 but either one is probably fine.
    6 MR. TREPANIER: What do you believe will
    7 motivate an emitter to make a contribution to the
    8 ACMA?
    9 MS. SAWYER: I actually think he already
    10 answered that question in response when he responded
    11 to that question initially. He did answer that.
    12 MR. DESHARNAIS: Mr.
    Kanerva, do you have any
    13 additional responses?
    14 MR. KANERVA: Let me elaborate a little bit.
    15 We already have examples of that sort of
    16 situation taking place. A major manufacturing
    17 company here in the Chicago area contributed I think
    18 it was 300 tons of emissions that were generated from
    19 them accepting reduced limitations in their permit or
    20 more stringent control level in their permits to the
    21 City of Chicago for their banking approach, emissions
    22 credit banking approach.
    23 Public image, their concern for the
    24 economic vitality of the area, being a good guy
    L.A. REPORTING - (312) 419-9292

    1225
    1 company, there's a lot of possibilities. Maybe the
    2 deduction would result in some kind of a tax
    3 advantage for them. That's perfectly fair too.
    4 MR. TREPANIER: Do you believe that a donation
    5 to the ACMA would be tax deductible?
    6 MR. KANERVA: It all depends on the individual
    7 tax circumstances for a company. I don't think I
    8 could make a generalized projection one way or
    9 another. I think it's a possibility. I sure hope it
    10 is anyway.
    11 MR. TREPANIER: Thank you.
    12 MR. DESHARNAIS: I believe there's a question
    13 from Ms. Elizabeth Ann.
    14 MS. ANN: Yes, just a quick question on
    15 clarifying your example on the bottom.
    16 Where you say it's a credit of 550, that
    17 means a credit -- that the 550
    ATUs that was credited
    18 to the year 2000 from the year 2001 allotment, and
    19 then you are subtracting 300
    ATUs from the new
    20 reduction, so that the 250 ATU shortfall means that
    21 in the year 2001 allotment, there's 250
    ATUs less
    22 than before; and so that there are 750
    ATUs available
    23 for the 2001 allotment, and you need
    24 to -- 850
    ATUs available for 2001?
    L.A. REPORTING - (312) 419-9292

    1226
    1 MR. KANERVA: Well, actually, it's not that way
    2 because you are down to 550 because we needed to use
    3 that to actually address the needs for special
    4 access. Okay. So that sort of becomes the maximum
    5 you can get back.
    6 And to the extent we can go out and get
    7 that 550 back, that's the difference. So it's always
    8 what we can generate minus the amount left. And so
    9 you are going to wind up with 300 instead, so it's a
    10 deduction. You don't add it on to the 550.
    11 Now, I could have made this example come
    12 out like you are saying if we'd have generated three
    13 times as many reductions as this, we could have
    14 actually gotten back up to the full amount.
    15 MS. MCFAWN: Maybe I misunderstand this. You
    16 needed to draw 550 from the next season, and that
    17 left you with 550, didn't it?
    18 MR. KANERVA: Right.
    19 MS. MCFAWN: So after you have taken that
    20 advance, you are left with 550; you found 300. So
    21 why isn't it 550 plus 300?
    22 MR. KANERVA: I knew this example would turn
    23 into a problem. Let's see. What's the best way to
    24 explain this?
    L.A. REPORTING - (312) 419-9292

    1227
    1 The 550 -- the simplest way to do this
    2 is let me clarify the example and we'll just
    refile
    3 it because I think what I actually need to do is
    4 explain this a little more carefully. Is that
    5 appropriate?
    6 I mean, the main point I was trying to
    7 make here to answer Kathy
    Hodge's question was, when
    8 does the 1 percent draw-down happen relative to us
    9 going out and trying to take care of it through
    10 reductions so the sources don't lose it.
    11 MS. ANN: All right. So I understand that just
    12 basically because you've used all of the allotments
    13 through 2000 through regular access, for special
    14 access, you just took 550 allotments from the next
    15 year, so that you wanted to make up that next year,
    16 so you went out and did extra reductions someplace
    17 else. So you got extra reductions, 300
    ATUs; so that
    18 in the year 2000, you have 850
    ATUs available; and if
    19 you wanted to get it back up to the number that it
    20 was before, you could find 250
    ATUs.
    21 MR. KANERVA: Yes.
    22 MS. MCFAWN: As far as correcting it on the
    23 record, I think that summarized it correctly. And
    24 maybe what you want to do is submit another example
    L.A. REPORTING - (312) 419-9292

    1228
    1 on a revised sheet.
    2 MR. DESHARNAIS: Okay. Any additional
    3 questions on 205.610? Just to clarify, we are
    4 intending to go on to about 1:00. We'll see how far
    5 we get by then. We will take lunch at 1:00.
    6 Okay. The next section is 206.620,
    7 Emissions Excursion Compensation. We will begin with
    8 questions from the ERMS Coalition.
    9 MS. SAWYER: Just one moment. We have to get
    10 the right witnesses up.
    11 MS. MIHELIC:
    Tracey Mihilic on behalf of the
    12 ERMS Coalition. I am asking questions from Page 22
    13 of our
    prefiled questions, Section 20(a) with respect
    14 to Section 205.620.
    15 When must a source file a petition
    16 contesting the findings of the Agency in seeking
    17 review by the Board of an emissions excursion notice?
    18 MR. KOLAZ: That would be within 30 days of the
    19 notice. Although that's not specifically stated in
    20 the rule, that is the time frame we intend to give a
    21 source to either compensate for the excursion or to
    22 file a petition with the Board.
    23 MS. MIHELIC: Do you intend to modify any of
    24 the rules to set forth that time frame or will that
    L.A. REPORTING - (312) 419-9292

    1229
    1 simply be set forth in the notice?
    2 MR. KOLAZ: That's something we'll discuss.
    3 MS. MIHELIC: Question (b), if a source
    4 complies with the requirements of an emissions
    5 excursion notice, may the state, federal government
    6 or citizens groups bring an enforcement action for
    7 violation of the source's CAAPP permit?
    8 MR. KOLAZ: Well, the rule itself addresses
    9 that, in that it states I think pretty clearly in
    10 205.620(f) that no action can be taken for the
    11 emission excursion itself. However, if there is a
    12 violation of the permit, a fundamental rule or
    13 regulation, maybe it's a VOM content limit, then
    14 there could be an action taken in that regard.
    15 MS. MIHELIC: Okay. And will it not -- the
    16 follow-up question is, won't the allotment that a
    17 source gets be set forth in its Title 5 permit as a
    18 seasonal allotment?
    19 MR. KOLAZ: The seasonal allotment will be
    20 listed in the permit, but primarily for informational
    21 purposes. It will not be a restriction.
    22 MS. MIHELIC: It will not be a condition of the
    23 Title 5 permit that the source have only this amount
    24 of emissions or this allotment each season?
    L.A. REPORTING - (312) 419-9292

    1230
    1 MR. KOLAZ: That's correct. A source can hold
    2 any number of
    ATUs that it can acquire.
    3 MS. MIHELIC: So it will not be an enforceable
    4 condition by either the state, federal government or
    5 any citizen group?
    6 MR. KOLAZ: That's correct.
    7 MS. MIHELIC: So a follow-up question to that
    8 would be Question (c); does this section provide
    9 complete immunity from enforcement by the state,
    10 citizens, and the federal government and to clarify
    11 that in the instance where a source has complied with
    12 the emissions excursion notice?
    13 MR. KOLAZ: Let me give you an answer and then
    14 qualify it.
    15 If the only violation a source had was
    16 that it exceeded -- it emitted volatile organic
    17 material in the preceding season in excess of the
    18 number of
    ATUs that it had available to compensate,
    19 then there would be no further action it could have
    20 taken on the basis of Rule 205.620(f).
    21 But, again, if there were another
    22 violation, an emission limit violation that's
    23 contained in the permit, then that is not protected
    24 under that Paragraph (f).
    L.A. REPORTING - (312) 419-9292

    1231
    1 MS. MIHELIC: And what would be other -- I
    2 think you said other violations of other permit
    3 conditions. What would be examples of those?
    4 MR. KOLAZ: Well, the existing rules and
    5 regulations still are in force. So, again, a simple
    6 example would be a coating limit that the company was
    7 subject to. In fact, there's any number of
    8 conceivable scenarios we could come up with.
    9 There could be a situation where a
    10 company does not have any ATU
    exceedance. In fact,
    11 it could be that they are well within the allotment
    12 that's issued them in their permit; yet, if they use
    13 coatings in excess of the limitations that would be
    14 applicable to them, then they would be subject to
    15 enforcement action.
    16 But in the situation where they hold
    17 enough
    ATUs, even if it comes about as part of the
    18 excursion compensation notice process, then they
    19 would not be in violation of the ERMS rule that
    20 requires them to hold enough
    ATUs to cover the
    21 volatile organic material with emissions from the
    22 preceding season.
    23 MS. MIHELIC: And a follow-up question to that
    24 is, why if the Agency has decided at this time to set
    L.A. REPORTING - (312) 419-9292

    1232
    1 CAAPPS, basically a CAAPP on all the emission sources
    2 in the Chicago area, an area-wide CAAPP basically by
    3 this market program, why then does a source still
    4 have to comply with a pound-per-gallon limitation if
    5 it is complying with its ATU allotment or it is
    6 obtaining
    ATUs from other sources within the area?
    7 MS. SAWYER: Could you repeat the question or
    8 have it read back?
    9 (Record read as requested.)
    10 MR. FORBES: I'll try to answer that.
    11 Mr.
    Forbes.
    12 The Agency and the State is still
    13 obligated to comply with all federal requirements.
    14 And in complying with RACT requirements is one of the
    15 requirements contained in the Federal Clean Air Act.
    16 So we are still obligated to meet all of those
    17 various requirements as well as those requirements
    18 contained in our state adaptation plan that we have
    19 relied on.
    20 MR. DESHARNAIS: Moving on to the questions
    21 filed by Tenneco, Questions 70, 71, and 72.
    22 MR. FORCADE: Thank you.
    23 Question 70, does Section 205.620
    24 authorize the Agency to issue excursion compensation
    L.A. REPORTING - (312) 419-9292

    1233
    1 notices when a source was unable despite diligent
    2 efforts to purchase
    ATUs on the market or because no
    3 ATUs were available in the ACMA account for that
    4 source?
    5 MR. KOLAZ: Yes, it does.
    6 MR. FORCADE: If a participating source
    7 appeals an excursion compensation notice to the
    8 Board, is the Board authorized to vacate the notice
    9 or the source was unable despite diligent efforts to
    10 purchase
    ATUs from the market or because no
    ATUs were
    11 available in ACMA to that source?
    12 MS. SAWYER: I suggest this is a legal
    13 interpretation. We could provide a written response
    14 to this question if that's suitable.
    15 MR. FORCADE: Sure.
    16 Question 27, if a source has attempted to
    17 purchase
    ATUs, but no ATUs were available on the
    18 market and no
    ATUs were available in the ACMA to that
    19 source, then is the source's maximum exposure $1,000
    20 for the ATU?
    21 MR. KOLAZ: No.
    22 MR. FORCADE: The Agency has repeatedly stated
    23 that the maximum exposure is $1,000 per ATU. Would
    24 the Agency be willing to place a $1,000 per ATU limit
    L.A. REPORTING - (312) 419-9292

    1234
    1 in the regulations and provide that as a defense to
    2 a compensation excursion notice?
    3 MR. KOLAZ: I think the maximum exposure phrase
    4 that you use I think is taken out of the context of
    5 the question which you have now framed. The Rule 620
    6 I think clearly explains that in an excursion
    7 compensation notice period, your liability is for 1.2
    8 or 1.5 times the number of
    ATUs from next year's
    9 allotment, and that comes directly out of your
    10 allotment.
    11 So your exposure really is on the basis
    12 of the market value of the
    ATUs in the next season,
    13 which, you know, is really unpredictable. It could
    14 be on the low side. It could be much less than
    15 $1,000. On the other hand, it's conceivable that you
    16 could have sold those
    ATUs for more than $1,000; and
    17 it's also conceivable that in that next year, there
    18 were not
    ATUs available in the ACMA at $1,000, but
    19 maybe available in the special access part at $1,100.
    20 So it's difficult to say that under all
    21 circumstances your exposure is at $1,000 per ATU,
    22 again, in the way that you have framed your
    23 particular question.
    24 MR. DESHARNAIS: Okay. Moving on to the
    L.A. REPORTING - (312) 419-9292

    1235
    1 prefiled questions from Mr.
    Trepanier, prefiled
    2 questions, Page 12, Question No. 9. Anyone know
    3 where that is?
    4 MR. TREPANIER: I did look for that. I
    5 couldn't identify which question it was, so I suggest
    6 that I review that with the Agency at lunch.
    7 MS. SAWYER: Okay.
    8 MR. TREPANIER: But I did have a follow-up
    9 question, just one, to the ERMS Coalition earlier.
    10 MR. DESHARNAIS: Okay.
    11 MR. TREPANIER: And that regards your example
    12 of the camcorders, still following the rules when
    13 it's a pounds per gallon rule. I understand that's a
    14 RACT rule.
    15 Are there least achievable emission rate
    16 rules that will not still be followed when the ERMS
    17 program is operating?
    18 MR. SUTTON: Well, one of the things that will
    19 be carried forward in a Title 5 permit are
    20 restrictions that are taken to either comply with or
    21 avoid a new source review in the
    Chicagoland area,
    22 and those will still exist at the source and still
    23 will have to be complied with, if that's what you
    24 mean by least achievable.
    L.A. REPORTING - (312) 419-9292

    1236
    1 If they had to have put in LAER, for
    2 example, L-A-E-R, they would continue that forward in
    3 their Title 5 permit and compliance with that would
    4 have to be carried forward in the future.
    5 MR. TREPANIER: Is there any other existing
    6 restrictions such as that pounds per gallon
    7 requirement for amount of emissions per unit produced
    8 that currently exist that will be eliminated when and
    9 if the ERMS program is found?
    10 MR. SUTTON: It will not eliminate any current
    11 SIP requirement.
    12 MR. TREPANIER: So just to make sure I have
    13 gotten the answer, if someone currently has some type
    14 of a restriction where they have an emissions per
    15 unit produced, if in the future their pollution
    16 control equipment starts to break down, some very
    17 expensive pollution control equipment breaks down,
    18 and they no longer are producing their products at
    19 that required level of emissions per unit, they will
    20 not be able to purchase allotments to make up that
    21 difference?
    22 MR. SUTTON: Let me answer that in two parts.
    23 One, if they are in violation of the
    24 permit that forces that pollution control device to
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    1237
    1 work at a certain level, then there would be
    2 enforcement action to show that violation. It won't
    3 be an automatic relaxation. So they would be in
    4 violation of the underlying permit condition.
    5 They may also because of that
    exceedance
    6 not have enough
    ATUs to satisfy their allotment
    7 needs and they would have to, I presume, purchase
    8 those.
    9 MR. KOLAZ: That's correct.
    10 MR. TREPANIER: So in that case, is purchasing
    11 the allotments obviating that discussion?
    12 MR. SUTTON: No. I think it's fair to say that
    13 the ERMS rule actually establishes another level of
    14 requirements. It does not replace any of their
    15 non-existence.
    16 MS. MCFAWN: So in his example, would they have
    17 to seek a permit obligation to continue operating
    18 absent their control equipment so that they are not
    19 in violation of their permit?
    20 MR. SUTTON: Once they are out of compliance,
    21 they have to come into compliance. Either they can
    22 shut down or they can seek legal forbearance or a few
    23 other vehicles available possibly to solve that; but
    24 once out of compliance, then the enforcement action
    L.A. REPORTING - (312) 419-9292

    1238
    1 starts.
    2 MS. MCFAWN: All right. So purchasing the
    3 ATUs -- because we have talked this rule in the
    4 context that this will alleviate the need for
    5 variances and that type of thing because now there
    6 will be alternative methods of compliance.
    7 But if in their permit, which is a permit
    8 to operate, there's a requirement that they have
    9 control equipment, which is a normal plan, they
    10 suffer a malfunction which is maybe due to a
    11 breakdown. Do they then have to modify their permit
    12 so that they don't face an enforcement action? How
    13 do they avoid the enforcement action assuming they
    14 are willing to buy the
    ATUs?
    15 MR. SUTTON: I guess the easiest way to say it
    16 is it's the same as it is today.
    17 MS. MCFAWN: Which is?
    18 MR. SUTTON: They will either be shut down,
    19 seek provisional variance.
    20 MS. MCFAWN: But that's only for 45 days?
    21 MR. SUTTON: Yes. I mean, that's the option
    22 available. This does not change that particular
    23 status.
    24 MR. MCFAWN: All right.
    L.A. REPORTING - (312) 419-9292

    1239
    1 MR. KOLAZ: You know, maybe one thing -- I mean
    2 we could come up with other examples; but in the
    3 Chicago area, there are some sources, for example,
    4 that are required to control their emissions by 81
    5 percent. Many people you know, have chosen to use
    6 thermal oxidizers or afterburners. They will still
    7 need to do that after this rule is in place.
    8 So let's just say there was an explosion
    9 or some type of problem, let's just say it breaks
    10 down, they certainly will need to buy
    ATUs to
    11 compensate for their excess emissions or else they
    12 are going to be in violation of the ERMS rule. But
    13 depending on the circumstances, they would be in
    14 violation of the 81 percent control requirement.
    15 MR. DESHARNAIS: Ms.
    Mihelic, did you have a
    16 question?
    17 MS. MIHELIC: Right. I mean, I guess going
    18 back to this obviating the need for variances, this
    19 rule is only eliminating the need for a variance or
    20 adjusted standard from further reduction. It is not
    21 eliminating the need for variances or adjusted
    22 standards from the current applicable rules.
    23 MR. KOLAZ: That's correct.
    24 MS. MIHELIC: And you just stated that if a
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    1240
    1 person has a breakdown of a control device, it's not
    2 in compliance with this permit or the RACT rule. Are
    3 there not provisions for breakdowns?
    4 MR. KOLAZ: Yes. And that's the thing that Mr.
    5 Sutton and I were just talking about.
    6 There are provisions within permits for a
    7 start-up, shutdown, malfunctions. There's even
    8 provisions in the ERMS rule for emergency
    9 conditions. So let's simplify it by saying it's a
    10 situation that does not fit any of those categories,
    11 the equipment has gotten old, the company hasn't
    12 maintained, they are not actually able to take any of
    13 the protections that are offered under the permit,
    14 and they cannot choose under Mr.
    Trepanier's
    15 explanation -- they cannot decide that instead of
    16 controlling at 81 percent, they are just going to buy
    17 ATUs.
    18 But, again, I want to point out, they are
    19 in violation of the 81 percent provision, and they
    20 are in violation of the ERMS rule if they do not buy
    21 the
    ATUs. So they are really forced to do both.
    22 If they buy -- an example we've been
    23 talking about and that questions have been asked --
    24 if they buy the
    ATUs, then they are protected from
    L.A. REPORTING - (312) 419-9292

    1241
    1 enforcement for that provision of ERMS rule, but they
    2 are not ever protected for violation of the 81
    3 percent reduction requirement I had talked about.
    4 And that's covered by 205.640 under Enforcement
    5 Authority.
    6 MR. DESHARNAIS: Any additional questions on
    7 205.620?
    8 MS. SAWYER: I figured out what question we
    9 are referring to in Mr.
    Trepanier's prefiled
    10 questions when we refer to Question 9. The question
    11 begins -- or the question reads, is there a penalty
    12 available for claiming invalid
    ATUs. That's the
    13 question we had stuck in that section.
    14 MR. TREPANIER: Okay. I'll ask that question
    15 now.
    16 MS. SAWYER: Okay. Before we answer the
    17 question, could you clarify it? What do you mean by
    18 invalid
    ATUs?
    19 MR. TREPANIER: Well, an invalid ATU would be
    20 one for which the person claiming it isn't deserving.
    21 MR. KOLAZ: There is a penalty. And let me
    22 state my assumptions to answer the question to make
    23 sure it's getting at your point.
    24 There might be a person that somehow some
    L.A. REPORTING - (312) 419-9292

    1242
    1 way in reviewing their transaction account thought
    2 they had enough
    ATUs. But as a question that was
    3 asked earlier today, they will be able to look at
    4 their expired
    ATUs, they'll be able to look at the
    5 retired
    ATUs, and somehow they get confused and think
    6 they have enough to cover it.
    7 But when low and behold in maybe about
    8 the middle of January they get an excursion
    9 compensation notice from them and then they realize
    10 their mistake.
    11 Well, the penalty in that case or if they
    12 try to claim that an expired or retired ATU is to be
    13 used for compensation during that preceding season,
    14 their penalty will really be the excursion
    15 compensation requirement of 1.2 or 1.5 times the next
    16 season's allotment of
    ATUs.
    17 MR. TREPANIER: Now, in your example, if that
    18 person who was mistaken further was mistaken and sold
    19 and attempted to sell, entered into a contract to
    20 sell those
    ATUs that didn't exist or they were
    21 mistaken that they existed, then would there be a
    22 penalty in that situation and where would the penalty
    23 fall?
    24 MR. KOLAZ: Well, first of all -- in fact, a
    L.A. REPORTING - (312) 419-9292

    1243
    1 similar, not identical, but a similar question was
    2 answered -- or was asked earlier today about the
    3 process that we are going to use to ensure that that
    4 doesn't happen. I don't think it can happen because
    5 the Agency is going to be validating every
    6 transaction, and we will be reviewing the accounts of
    7 the people buying as well as the ones selling and we
    8 will require transfer agreements from both. So you
    9 really should have three sets of eyes or more looking
    10 at that. I mean, the buyer should ensure that they
    11 have the
    ATUs to sell, the buyer should be sure that
    12 they have -- that the person that they are buying
    13 from actually has them, and the Agency would be
    14 looking at both to make sure that there are actually
    15 valid
    ATUs to enter into the agreement. And this
    16 won't be so much a manual process, I mean, although
    17 that will be part of it, but we will build into the
    18 database systems and capabilities to ensure that that
    19 doesn't happen.
    20 And as Mr.
    Forcade asked earlier, there
    21 would be identification numbers on the
    ATUs that
    22 will provide information as to the date and their
    23 status so we will be able to see if they expired. So
    24 there would be a number of checks and balances to
    L.A. REPORTING - (312) 419-9292

    1244
    1 ensure that that did not happen.
    2 MR. TREPANIER: Would a buyer be able to check
    3 in the database to see if the ATU numbers being
    4 offered to them are valid
    ATUs?
    5 MR. KOLAZ: Yes. And that's actually part of
    6 the rule. In fact, the public can do that as well;
    7 although, I will point out they won't actually be
    8 looking in the transaction account. But under
    9 205.500, Paragraph (a), we are required through the
    10 bulletin board access to provide information on the
    11 status of
    ATUs in each account, that is, whether they
    12 are available for use, the date retired, the date
    13 expired. There will be a lot of checks and balances
    14 to ensure that that doesn't happen.
    15 But another way of answering your
    16 question is if somehow someone tries to enter into a
    17 transaction agreement, we do not intend on penalizing
    18 them; but we will be able to ensure that that
    19 transaction is not carried through.
    20 MR. TREPANIER: So what I am understanding is
    21 that in this case, it would be a buyer beware; that
    22 the buyer needs to check that the
    ATUs that they are
    23 purchasing are valid because this they turn them in
    24 on the last day and it turns out that they are
    L.A. REPORTING - (312) 419-9292

    1245
    1 invalid, there would be a penalty. Does that
    2 penalty then fall upon the person who purchased the
    3 invalid
    ATUs?
    4 MR. KOLAZ: Well, I don't think that's correct
    5 the way you stated that. I mean, certainly the buyer
    6 should always be aware and sure that they know what
    7 they are buying; but I'm saying that we would never
    8 authorize a transaction in which the seller did not
    9 hold the
    ATUs that they were selling. And by holding
    10 them, we will ensure they are not expired, they are
    11 not retired.
    12 But your point is well taken. I mean,
    13 it's conceivable that someone could buy
    ATUs on
    14 December 1st that are set to expire December 31st,
    15 and they somehow are confused and intend on using
    16 them in the next seasonal allotment period. So it is
    17 conceivable that someone could get confused, and we
    18 would authorize that sale if we had a transfer
    19 agreement from both parties and the
    ATUs were valid
    20 and
    unexpired at the time the transfer agreement went
    21 into place.
    22 But, again, buyer beware; it's January,
    23 and suddenly the person looks into their account and
    24 view their 100
    ATUs and all of a sudden see expired
    L.A. REPORTING - (312) 419-9292

    1246
    1 next to each of them, they will be probably great
    2 greatly disappointed.
    3 MR. TREPANIER: Now, will there be a penalty in
    4 the case that someone turns in their -- they try to
    5 balance their account and they are doing it on the
    6 last day if that's December 31st and they don't --
    7 their account doesn't balance because the transfer
    8 doesn't go through because who sold it to them didn't
    9 actually have those valid
    ATUs, now, does that person
    10 who submitted those on December 31st suffer a
    11 penalty?
    12 MR. KOLAZ: The penalty is through the
    13 excursion compensation notice provisions of 205.620
    14 where they won't be required to pay a 20 percent or
    15 50 percent penalty depending if this is the first
    16 time or second time in a row that occurred. That is
    17 the penalty.
    18 MR. TREPANIER: Thank you.
    19 MR. DESHARNAIS: Okay. We'll take a break for
    20 lunch now. We'll meet back here in an hour at five
    21 after 2:00. Thank you.
    22 (A lunch recess was taken.)
    23 MR. DESHARNAIS: Okay. We are going to
    24 continue with the questions that were set out in the
    L.A. REPORTING - (312) 419-9292

    1247
    1 list filed out by the committee.
    2 What we are hoping to accomplish this
    3 afternoon is to complete this list and complete the
    4 additional
    prefiled questions that were received.
    5 Currently, we are up to Section 205.640,
    6 I believe, and that would be the question of the ERMS
    7 Coalition, Questions (a), (b), and (c).
    8 MS. MIHELIC: At this point, we want to
    9 withdraw those questions, but ask in its place just a
    10 follow-up question because these questions deal with
    11 the assumption that the CAAPP permit would contain a
    12 condition requiring you to have a certain allotment
    13 of
    ATUs. And to clarify that is to say that is not
    14 correct.
    15 So just as a follow-up question and to
    16 clarify what was testified to earlier, is it correct
    17 then that if a source meets all of its permit
    18 requirements, but exceeds its ATU allotment, goes
    19 out, and then satisfies the requirements of any
    20 emissions excursion notice, that there is no
    21 enforcement -- there can be no enforcement by the
    22 federal government or other citizens groups?
    23 MR. KOLAZ: The provision of 205.620 addresses
    24 that, although we certainly -- I don't believe that
    L.A. REPORTING - (312) 419-9292

    1248
    1 we can -- this may be a question answered by the U.S.
    2 EPA. I guess they approve the rules. But, actually,
    3 maybe that's a confusing way to answer it.
    4 I think the strict answer is yes because,
    5 really, the only rule under the conditions that you
    6 specified, the only plausible violation would be a
    7 violation to the ERMS rule; and, therefore, the only
    8 rule the U.S. EPA could enforce against would be the
    9 ERMS rule. And the provision of the ERMS rule under
    10 205.620(f) says that under the circumstance you
    11 described, there would be no violation to enforce
    12 against.
    13 MS. MIHELIC: I have no further questions.
    14 MR. DESHARNAIS: Any additional questions on
    15 205.640?
    16 Mr.
    Forcade?
    17 MR. FORCADE: Just as a follow-up on that one,
    18 will you provide a notice to facilities that they
    19 have satisfied their emissions excursion
    20 compensation?
    21 MR. KOLAZ: Yes. That is something that we
    22 will do, yes.
    23 MR. DESHARNAIS: Mr.
    Newcomb?
    24 MR. NEWCOMB: And as a follow-up to that, is
    L.A. REPORTING - (312) 419-9292

    1249
    1 the language that will be provided in the Title 5
    2 permit going to somehow account for this type --
    3 detention-type of enforcement that
    Tracey has brought
    4 up here?
    5 And if I may clarify, that if the
    6 language in the permit says something along the lines
    7 of
    thou shalt not exceed the number of
    ATUs allotted
    8 during your season and you go ahead and do that and
    9 go through the excursion compensation provisions,
    10 technically -- and I do mean this only as a
    11 technicality -- a citizen group can say you violated
    12 a permit provision?
    13 MR. SUTTON: Well, as a point of
    14 clarification, the Title 5 permit will obviously
    15 define what permit provisions apply to the source
    16 based on the SIP requirements. It will identify the
    17 ATUs allotted to the company. It will also identify
    18 that at the end of the season, you have to have in
    19 your possession enough
    ATUs to match your actual
    20 emission; but it doesn't mean it has to be
    21 necessarily assigned to you.
    22 So it will be basically dovetailing to
    23 the rule, which you have the obligation to hold at
    24 the end of the season the number of
    ATUs that match
    L.A. REPORTING - (312) 419-9292

    1250
    1 your actual emissions.
    2 The
    ATUs that you allotted in front is
    3 basically just telling you how much the State of
    4 Illinois has allocated to your company.
    5 MR. NEWCOMB: Exactly.
    6 And then the follow-up would be that the
    7 ERMS provisions should be exclusively enforced by
    8 Illinois?
    9 MR. SUTTON: My lawyer is motioning.
    10 I think I've already stated it this way;
    11 but basically the permit will indicate that at the
    12 end of the season, you either hold the necessary
    ATUs
    13 to match your actual emissions or you can go through
    14 the surging process to solve that.
    15 MS. MIHELIC: Okay. I have a follow-up
    16 question.
    17 MR. DESHARNAIS: Ms.
    Mihelic?
    18 MS. MIHELIC: Previously you just said or I
    19 guess in response to Mr.
    Newcomb's question was that
    20 it would be in a condition that you had to hold
    ATUs
    21 sufficient -- or in a sufficient amount to meet your
    22 allotment by the end of the reconciliation period.
    23 So now you are saying no, that's not how -- I'm
    24 trying to figure out how it's going to be in a
    L.A. REPORTING - (312) 419-9292

    1251
    1 permit that's not going to be a condition that you
    2 must have sufficient
    ATUs at the end of the
    3 reconciliation period whereby then a citizens group
    4 or user then can't come in and enforce against that
    5 because you don't have it?
    6 MR. SUTTON: One more time, the Title 5 permit
    7 would reflect that at the time of the reconciliation
    8 period, you hold enough
    ATUs to match what your
    9 actual emissions were or you can go through the
    10 excursion process to satisfy that need.
    11 MS. MIHELIC: So it will have that language in
    12 it?
    13 MR. SUTTON: Yes.
    14 MS. MIHELIC: Okay. I understand.
    15 MR. DESHARNAIS: Mr.
    Newcomb?
    16 MR. NEWCOMB: And then to address that from a
    17 different tactic, if I may, that it is only Illinois
    18 which is going to be authorized to enforce this
    19 provision; you do not intend to create a citizens
    20 suit authorization for ERMS types of
    exceedances?
    21 MS. MCFAWN: Perhaps that's a legal question
    22 that the Agency better address by their legal staff.
    23 MR. NEWCOMB: If they agree to go ahead and
    24 answer that question in writing, that would be fine
    L.A. REPORTING - (312) 419-9292

    1252
    1 with me.
    2 MS. SAWYER: Well, could you repeat the
    3 question?
    4 MR. NEWCOMB: Is it the Agency's intention to
    5 provide citizens with any enforcement authority under
    6 the ERMS program at all?
    7 MS. MCFAWN: You know, maybe we can clear this
    8 up. It seems to me that the Act provides the
    9 citizens' suit provisions. I don't know that the
    10 Agency can or cannot create a citizens right to bring
    11 an enforcement action.
    12 MR. NEWCOMB: Which Act do you mean?
    13 MS. MCFAWN: Environmental Protection Act.
    14 So while I could say to the Agency please
    15 answer this in writing and that may clear that up, I
    16 believe the answer is contained in the Act.
    17 MR. NEWCOMB: Inasmuch as this has been
    18 described as an overlay to all the other pre-existing
    19 permit provisions, I think that maybe if the Agency
    20 could address it only in terms of the ERMS program, I
    21 would appreciate that.
    22 MS. MCFAWN: Well, what I am wondering,
    23 Mr.
    Newcomb -- and this is lawyer to lawyer here --
    24 is how the Agency could possibly create a citizen
    L.A. REPORTING - (312) 419-9292

    1253
    1 enforcement action that's not authorized under the
    2 Environmental Protection Act or take it away if it is
    3 authorized under the Environmental Protection Act.
    4 They've already said to you we are not going to do it
    5 by permit language. They've made that clear. They
    6 are not going to do it by the language contained in
    7 the Title 5 permit.
    8 MR. NEWCOMB: In other words, so the language
    9 is going to be written so that in ERMS -- that
    10 violating the ERMS program is not a permit
    11 violation; is that --
    12 MS. MCFAWN: Maybe I should have Mr.
    Sutton
    13 explain it again.
    14 MR. KOLAZ: Well, I think maybe we could do it
    15 in two parts.
    16 MR. SUTTON: Go ahead.
    17 MR. KOLAZ: Mr.
    Sutton can answer part of it.
    18 But the requirement to hold sufficient
    ATUs is in the
    19 ERMS proposed Rule 205.150(c) and 150(c). And the
    20 excursion compensation notice provision is in the
    21 205.620. And those are the requirements that really
    22 apply to a company and requires them to hold
    23 sufficient
    ATUs.
    24 Now, what Mr.
    Sutton has to answer is
    L.A. REPORTING - (312) 419-9292

    1254
    1 whether or not those will specifically be restated
    2 within the Title 5 application itself. And the
    3 question as to what rights it gives a citizen to
    4 enforce with is, you know, a legal opinion that I
    5 can't say.
    6 So what I am saying is that I don't know
    7 whether the conclusion of that in the permit
    8 increases or changes that right or not, but that is a
    9 specific provision that we are referring to when we
    10 talk about providing some level of immunity against a
    11 source as long as they comply with 205.150(c), (d),
    12 or 620.
    13 MR. SUTTON: And I guess my intent would be
    14 actually to put that right in the permit.
    15 MR. DESHARNAIS: Mr.
    Forcade?
    16 MR. NEWCOMB: That's wonderful. Thanks.
    17 That's what I needed to hear.
    18 MR. FORCADE: I'd like to sort of refresh one
    19 of the questions we had in our pre-submitted
    20 testimony and reiterate it again.
    21 We ask at one point in our pre-submitted
    22 questions if the Agency had prepared or would be
    23 willing to prepare a draft Title 5 permit for a very
    24 simple source that would contain the ERMS language so
    L.A. REPORTING - (312) 419-9292

    1255
    1 that we can evaluate it.
    2 At the time, I believe the response was
    3 no, we have not and no, we do not intend to do so.
    4 This particular conflict essentially re-invigorates
    5 that question because unless we have access to the
    6 actual language that the Agency intends to place in a
    7 permit as well as knowledge of whether the Agency
    8 intends to place it in the federally enforceable
    9 provisions, state enforceable provisions or not, we
    10 wouldn't have any idea.
    11 And with respect, Mr.
    Sutton has said the
    12 permit would reflect, well, I don't know whether that
    13 means it would be a permit condition that or it would
    14 be language in the part of the permit that is not
    15 enforceable.
    16 So I think there's a substantial amount
    17 of ambiguity here, and I would like to at this point
    18 reinstate my question requesting the Agency to
    19 provide sample ERMS language so that we can clearly
    20 understand in a written format what will be included
    21 in Title 5 permits relating to the ERMS provisions
    22 and conditions so we can tell from our own legal
    23 interpretation whether we believe they would be
    24 enforceable by U.S. EPA or citizens.
    L.A. REPORTING - (312) 419-9292

    1256
    1 MR. SUTTON: Well, I guess in response to that,
    2 we have not prepared that. I am not saying that we
    3 won't; but, first of all, our historic practice has
    4 been to provide under the Title 5 permit an advance
    5 copy to the company in prior notice to assure that we
    6 are on the same wavelength as you will.
    7 And during the notice period itself, you
    8 still have the ability to bring it to our attention
    9 changes that you would like to see in the Title 5
    10 permit if, in fact, you think they are based on law.
    11 So there is an opportunity for the company to address
    12 those even prior to the permit issuance; and if we
    13 still continue to be obstinate, you then have a right
    14 to appeal to the Board if you think that we have not,
    15 in fact, complied with the law.
    16 So I think there will be an opportunity
    17 for you to see this permit language in advance of it
    18 becoming a final permit.
    19 MR. FORCADE: I would stand with my question
    20 and ask the Hearing Officer to request the Agency to
    21 provide sample language that would be included in the
    22 Title 5 permit reflecting the ERMS conditions because
    23 the alternative could be the potential for 20 or 30
    24 permit appeals if that language does not reflect --
    L.A. REPORTING - (312) 419-9292

    1257
    1 MR. DESHARNAIS: Mr.
    Mathur, do you have a
    2 response?
    3 MR. MATHUR: Yes. Let me respond to the few
    4 sentences I heard when I came in.
    5 I think as far as the Agency is
    6 concerned, the ERMS rule is an alternative to a
    7 command and control VOC regulation. As we have
    8 stated previously, this rule will be submitted to EPA
    9 as a
    subprovision. So as far as I am concerned, the
    10 whole ERMS rule and process and permit conditions
    11 based on the ERMS rule should be considered as having
    12 the same status as if we had picked select sources
    13 and come up with specific command and control rules.
    14 So I don't see why this is such an issue.
    15 The treatment of this program in a Title
    16 5 should be seen as exactly the same as any other
    17 rule which would be in a SIP, is federally
    18 enforceable, and is in a permit that contain all of
    19 the opportunities that we, the U.S. EPA or anybody
    20 else has.
    21 So your insistence that the Agency show
    22 you what a permit would look like, I just don't
    23 particularly understand.
    24 MR. FORCADE: Perhaps it's my confusion, but I
    L.A. REPORTING - (312) 419-9292

    1258
    1 thought I heard statements from the Panel that these
    2 terms and conditions would not be federally
    3 enforceable, and I believe I may have heard some
    4 recanting of that from you just now; is that correct?
    5 MS. SAWYER: That isn't what we said.
    6 MR. MATHUR: I don't recall what the Panel
    7 said, but I am -- and maybe we need to confer with
    8 each other before we give a final answer -- it's my
    9 understanding that permit conditions in a Title 5
    10 permit based on the ERMS rule will be federally
    11 enforceable. This rule will be federally enforceable
    12 through a SIP. It will be submitted to the EPA in
    13 its entirety as a
    subprovision. This is the State of
    14 Illinois' response to further reductions as opposed
    15 to category-by-category command and control. And
    16 once it's in a Title 5 permit, it affords all parties
    17 the same opportunities as other SIP-based federally
    18 enforceable provisions do.
    19 MR. FORCADE: But at this point, I still have
    20 no idea what that term and condition and the permit
    21 that will be federally enforceable will say.
    22 MR. ROMAINE: Well, I guess what that provision
    23 will say is what the rules require; and what the
    24 rules require is that you hold
    ATUs or you go through
    L.A. REPORTING - (312) 419-9292

    1259
    1 the excursion compensation process. If you do either
    2 A or B, there is no violation; there is no
    3 opportunity for enforcement by us, U.S. EPA, or a
    4 citizen for failure to comply of that provision under
    5 the ERMS.
    6 MR. DESHARNAIS: Okay. We understand that the
    7 Agency at this point does not have language developed
    8 in response to -- or language that would address
    9 Mr.
    Forcade's concern. If the Agency would take that
    10 suggestion under advisement, we can address it at a
    11 later time.
    12 MR. KOLAZ: One thing I might clarify is the
    13 Panel never made any statement about these terms and
    14 conditions being a state enforcement. Mr.
    Newcomb as
    15 he was framing one of his questions did refer to the
    16 state enforceable portion of the permit.
    17 MR. DESHARNAIS: At this time, I think we will
    18 move on.
    19 Before we do go on to the next question,
    20 I would just ask people when asking a question, if
    21 they could identify themselves for the benefit of the
    22 court reporter.
    23 The next section that we have is Section
    24 205.650, Emergency Conditions, questions from the
    L.A. REPORTING - (312) 419-9292

    1260
    1 ERMS Coalition.
    2 MS. MIHELIC:
    Tracey Mihelic.
    3 Our questions are set forth on Page 22 of
    4 our
    prefiled questions. We withdraw Question (a) in
    5 Section 22 at this time.
    6 Question (b) is when must a source submit
    7 a final report?
    8 MR. ROMAINE: A proposal provides for the
    9 source to have up to 10 days after the conclusion of
    10 the emergency to file its final report.
    11 MR. DESHARNAIS: The next
    prefiled question on
    12 205.650 is from Mr.
    Trepanier. It's Question 9.
    13 MS. SAWYER: Actually, this is a question we
    14 took earlier.
    15 MR. DESHARNAIS: Oh, okay. That was the one
    16 that was last --
    17 MS. SAWYER: Right. It was somewhat out of
    18 order in our list.
    19 MR. DESHARNAIS: Any additional questions on
    20 205.650?
    21 Mr.
    Trepanier, did you agree with the
    22 Agency that this question was adequately addressed?
    23 MR. TREPANIER: I apologize. Since coming back
    24 from lunch, I haven't located my questions. Which
    L.A. REPORTING - (312) 419-9292

    1261
    1 one was that?
    2 MS. SAWYER: It's the one, is there a penalty
    3 available for claiming invalid
    ATUs.
    4 MR. TREPANIER: Yes, that one was answered.
    5 MR. DESHARNAIS: Moving on, we are up to
    6 questions on the TSD. The first questions are from
    7 Tenneco.
    8 Mr.
    Forcade?
    9 MR. FORCADE: Right.
    10 Referring to Page 45, Question 1,
    11 referring to column four of Appendix E of the
    12 technical support document, quote, facility
    13 emissions, slash, TPY, quote, from which specific
    14 air emissions reports or other data did the Agency
    15 compile facility emissions TPY?
    16 MR. FORBES: The Agency utilized the annual
    17 emissions report submitted by sources for calendar
    18 year 1994 to compile this data.
    19 MR. FORCADE: Did the Agency convert any of
    20 this source reported data to the numbers in the chart
    21 in any manner?
    22 MR. FORBES: This data were reported directly
    23 by the source in their AER.
    24 MR. FORCADE: Did the Agency make any
    L.A. REPORTING - (312) 419-9292

    1262
    1 adjustments or changes to the source reported data?
    2 MR. FORBES: In general, the Agency relied on
    3 the annual emissions data reported by the source
    4 without any conversion or adjustment. However, the
    5 Agency did perform a basic quality control review of
    6 the data and did correct for any mathematical errors
    7 which it found. The Agency relied upon the source's
    8 individual emission unit data in carrying out this
    9 review.
    10 MR. FORCADE: And was this for the year 1994
    11 only?
    12 MR. FORBES: Yes.
    13 MR. FORCADE: Question 2, referring to column
    14 three of Appendix E of the technical support
    15 document, facility emissions ERMS TPS, from which
    16 specific sources did the Agency compile these
    17 figures?
    18 MR. FORBES: The specific sources that the
    19 Agency compiled this data for in Appendix E are
    20 CAAPP'd sources which have seasonal emissions of 10
    21 tons per season or greater. The Agency relied on
    22 the data contained in the source's 1994 AER to
    23 compile the figures.
    24 MR. FORCADE: How did the Agency convert any
    L.A. REPORTING - (312) 419-9292

    1263
    1 source reported data to the numbers in this chart?
    2 MR. FORBES: In general, these figures were
    3 calculated by multiplying the source's total facility
    4 annual actual emissions by one-third of the spring
    5 throughput, plus the annual actual emissions
    6 multiplied by the summer throughput, plus the annual
    7 actual emissions multiplied by one-third of the fall
    8 throughput.
    9 MR. FORCADE: And this was for year 1994 again?
    10 MR. FORBES: This was for 1994.
    11 MR. FORCADE: Question No. 3, referring to
    12 Appendix E of the technical support document, does
    13 facility emissions under column three or column four
    14 include both point source and fugitive emissions?
    15 MR. FORBES: The emissions reported under
    16 columns three and four reflect total emissions
    17 reported by the source. To the extent that sources
    18 reported fugitive emissions, they are included in the
    19 emissions reported in columns three and four.
    20 MR. FORCADE: Question No. 4, referring to
    21 column seven of Appendix C of the technical support
    22 document, Source Description, do any of the source
    23 descriptions reflect fugitive emissions?
    24 MR. FORBES: Yes.
    L.A. REPORTING - (312) 419-9292

    1264
    1 MR. FORCADE: And how did the Agency compile
    2 this information?
    3 MR. FORBES: This information is based on the
    4 information provided by the source in its 1994 AER.
    5 MR. FORCADE: Okay. Question No. 5, referring
    6 to column eight of Appendix E of the technical
    7 support document, unit emissions, slash, ERMS TPS,
    8 from which sources did the Agency compile this data?
    9 MR. FORBES: The specific sources that the
    10 Agency compiled this data for in Appendix E are
    11 CAAPP'd sources which have seasonal emissions of 10
    12 tons per season or greater, excluding those emission
    13 units identified in Section 205.405, which are exempt
    14 from further reduction. The Agency relied on the
    15 data contained in the source's 1994 AER to compile
    16 the figures.
    17 MR. FORCADE: And did the Agency convert the
    18 source's data in anyway through this chart?
    19 MR. FORBES: Okay. I think you missed Subpart
    20 A.
    21 MR. FORCADE: I thought you had already
    22 answered Subpart A, but I'll ask it again.
    23 MR. FORBES: Okay.
    24 MR. FORCADE: Please explain how the Agency
    L.A. REPORTING - (312) 419-9292

    1265
    1 calculated these figures.
    2 MR. FORBES: In general, these figures are
    3 calculated by multiplying the source's annual actual
    4 emissions for the specific emissions unit by
    5 one-third of the spring throughput plus annual actual
    6 emissions multiplied by the summer throughput plus
    7 the annual actual emissions for the unit multiplied
    8 by one-third of the fall throughput.
    9 MR. FORCADE: And did the Agency make any other
    10 adjustments or changes to that data?
    11 MR. FORBES: Calculations were carried out as
    12 previously described utilizing the source's data. In
    13 general, the Agency relied upon the annual emissions
    14 data reported by the source without any conversion or
    15 adjustment. However, the Agency did perform a basic
    16 quality control review of the data and did correct
    17 for any mathematical errors for which it found. The
    18 Agency relied upon the source's individual emissions
    19 unit data when carrying out that review.
    20 MR. FORCADE: And this would be for the year
    21 1994 also?
    22 MR. FORBES: Yes.
    23 MR. FORCADE: Question No. 6, referring to
    24 column nine of that same Appendix E of the technical
    L.A. REPORTING - (312) 419-9292

    1266
    1 support document, unit emissions TPD, from which
    2 sources did the Agency compile this data?
    3 MR. FORBES: The specific sources that the
    4 Agency compiled this data for in Appendix E are
    5 CAAPP'd sources which have seasonal emissions of 10
    6 tons per season or greater, excluding those emission
    7 units identified in Section 205.405. The Agency
    8 relied on the data contained in the source's 1994 AER
    9 to compile the figures.
    10 MR. FORCADE: And please explain how the
    11 Agency calculated these figures.
    12 MR. FORBES: The Agency calculated this data by
    13 utilizing the source's hourly emissions multiplied by
    14 the hours of operation per day multiplied by the
    15 ratio of the summer throughput percent to 25 percent
    16 and converted that into tons per day to represent the
    17 typical ozone season weekday emission level in tons
    18 per day.
    19 MR. FORCADE: Did the Agency make any
    20 adjustments?
    21 MR. FORBES: The calculations were carried out
    22 as described utilizing the source's data. In
    23 general, the Agency did rely on the emissions data
    24 reported by the source without any adjustment or
    L.A. REPORTING - (312) 419-9292

    1267
    1 conversion; however, a quality control review of the
    2 data was performed and any mathematical errors were
    3 corrected.
    4 The Agency relied upon the source's
    5 individual emission unit data when carrying out that
    6 review.
    7 MR. FORCADE: And this would be for year 1994
    8 again?
    9 MR. FORBES: Yes.
    10 MR. FORCADE: Thank you.
    11 The last question is No. 7, referring to
    12 column 10 of Appendix E of the technical support
    13 document, unit emissions TPDAW, slash, RE, from which
    14 sources did the Agency compile this data?
    15 MR. FORBES: The specific sources that the
    16 Agency compiled this data for in Appendix E are
    17 CAAPP'd sources which have seasonal emissions of 10
    18 tons per season or greater, excluding those emission
    19 units identified in Section 205.405 which are exempt
    20 from further reduction. The Agency relied on the
    21 data contained in the source's 1994 AER to compile
    22 the figures.
    23 MR. FORCADE: And please explain how the Agency
    24 calculated these figures.
    L.A. REPORTING - (312) 419-9292

    1268
    1 MR. FORBES: The Agency calculated this data by
    2 utilizing the source's ozone season weekday emissions
    3 calculated as previously described and then adjusted
    4 for the rule effectiveness or RE based on that value
    5 which was used for the source in the 1990 SIP
    6 inventory to represent the typical ozone weekday
    7 emissions level adjusted for rule effectiveness and
    8 expressed in tons per day of emissions.
    9 MR. FORCADE: As a point of clarification,
    10 could you explain what rule effectiveness means?
    11 MR. FORBES: Rule effectiveness is an inventory
    12 term defined and required by U.S. EPA to represent
    13 the effectiveness of the inventory in general for
    14 meeting particular control estimates and control
    15 requirements.
    16 MR. FORCADE: Would this be somewhat similar to
    17 the capture and construction efficiency of control
    18 equipment?
    19 MR. FORBES: It really goes more to the
    20 effectiveness of all of the sources complying with
    21 that stated captured control requirement.
    22 MR. FORCADE: And for which years did the
    23 Agency use the facility emissions reports?
    24 MR. FORBES: 1994.
    L.A. REPORTING - (312) 419-9292

    1269
    1 MR. FORCADE: Thank you.
    2 MR. DESHARNAIS: Next
    prefiled question is from
    3 Sonnenschein.
    4 MS. FAUR: Cindy
    Faur from Sonnenschein.
    5 Mr.
    Forbes, in response to one of
    6 Mr.
    Forcade's questions, you noted that the emission
    7 data included in Appendix E was based on 1994 annual
    8 emission reports.
    9 Could you please clarify as to whether
    10 this data was included merely to illustrate the
    11 number of affected sources and not as a determinative
    12 of their baseline numbers?
    13 MR. FORBES: The purpose of Appendix E was to
    14 reflect potentially affected sources and was based
    15 upon the sources' reported emissions in their 1994
    16 annual emission report.
    17 MS. FAUR: That was Question 7(a) for the
    18 record.
    19 Question 7(b) I am going to ask in a
    20 slightly different manner to clarify it.
    21 To what extent does the Agency anticipate
    22 that there will be a variation in the number of
    23 sources that will be affected by the ERMS program and
    24 the number of sources that were major and for
    L.A. REPORTING - (312) 419-9292

    1270
    1 purposes of the 1996 rate of progress plan?
    2 MR. FORBES: I guess to the best of our
    3 knowledge, we would not anticipate that there would
    4 be a great deal of difference between those two sets
    5 of data or with respect to whether they would be
    6 major or not to answer your question.
    7 MS. FAUR: Thank you.
    8 MR. DESHARNAIS: The next question is from
    9 Dart.
    10 Mr.
    Newcomb, Question 10.
    11 MR. NEWCOMB: That's right. This question
    12 has been asked and answered; however, based on
    13 Mr.
    Forbes' testimony in response to Mr.
    Forcade's
    14 question, a point of clarification because this is
    15 basically the same question that Mr.
    Forcade asked.
    16 You said that the sources from Appendix E
    17 were identified as CAAPP permit sources. Excluding
    18 those, you said that it excluded those that met the
    19 exclusion under 205.405.
    20 Just a point of clarification, this does
    21 not include any source that might be or you expect it
    22 to be a BAT exclusion; correct?
    23 MR. FORBES: That's correct.
    24 MR. NEWCOMB: Thank you. No further questions.
    L.A. REPORTING - (312) 419-9292

    1271
    1 MR. DESHARNAIS: The next questions are from
    2 Mr.
    Trepanier, Questions 12(c), 20, 21, and 22.
    3 MR. TREPANIER: I am going to withdraw Question
    4 12(c). I can't make sense out of that question right
    5 now myself.
    6 Question 20, what percentage of the point
    7 source emissions subject to this rule are expected to
    8 somehow opt out by some exemption; for example, BAT,
    9 BATC 15-ton limit, FESOP, LAER, et cetera?
    10 MR. FORBES: The percentage of emissions
    11 expected to opt out in further reductions under the
    12 MACT and LAER, FESOP and fuel combustion emission
    13 unit exemption of 205.405 is about 4 percent of the
    14 total point source emissions. And that's based on
    15 the 1994 annual emission report data. The Agency has
    16 estimated that of this 4 percent, about 3.7 percent
    17 is due to MACT, FESOP, and LAER sources, and
    18 approximately .45 percent is due to fuel combustion
    19 emission sources.
    20 MR. TREPANIER: Okay. Have you addressed the
    21 BAT exemptions?
    22 MR. FORBES: The number and identity of sources
    23 which will seek BAT exemptions is not known at this
    24 time and cannot be estimated.
    L.A. REPORTING - (312) 419-9292

    1272
    1 MR. TREPANIER: And how about the number of --
    2 the amount of sources or the percentage of the total
    3 emissions that's going to seek that exemption of the
    4 15-ton limit?
    5 MR. FORBES: Okay. It is not known at this
    6 time the number or identity of sources who will seek
    7 that exemption under the 15-ton per day option; but
    8 the Agency identified on Page 75 of the TSD that
    9 using the conservative assumption that all 75 sources
    10 between 10 tons per season and 20 tons per season who
    11 possibly would choose this option, the maximum loss
    12 of reductions by those sources opting out and not
    13 staying in the ERMS program is estimated at .75 tons
    14 per day.
    15 MR. FORCADE: And did you just say that with
    16 regard to those between 10 and 20? Did you mean
    17 between 10 and 15?
    18 MR. FORBES: No. At the time we did the
    19 analysis, we weren't sure, again, who would choose
    20 this option. And at the time that we put the option
    21 in, the discussion was that there may be some sources
    22 who are just over that -- the 10-ton requirement who
    23 might choose to do something to try and opt out of
    24 the program, and that was part of the reasoning for
    L.A. REPORTING - (312) 419-9292

    1273
    1 us putting in the 15-ton per season option. So we
    2 considered the possibility that in that range, that
    3 any of those might be interested in choosing an
    4 option, so we wanted to be a little more conservative
    5 and look at the entire group, larger group.
    6 MR. TREPANIER: An emitter at a 20-ton level,
    7 if they reduce to 15 tons, they have more than
    8 exceeded the 18 percent exemption which they could
    9 have sought?
    10 MR. FORBES: At the high end that's true; but
    11 if there happen to be some that were 16 tons, 17
    12 tons, then that percentage would not be exceeded. So
    13 there's a whole range of sources, and I am not -- I
    14 don't recall what the distribution is.
    15 But, again, we had comments during our
    16 outreach meetings that sources might be interested in
    17 taking an option to get out of the program and avoid
    18 all the various complications. And so that had to be
    19 considered when we looked at this option.
    20 MR. TREPANIER: On Page 75, does that reflect
    21 how much emissions the Agency's expecting will seek
    22 that 15-ton? How many sources are going to seek that
    23 15-ton limit?
    24 MR. FORBES: No. As I answered just a few
    L.A. REPORTING - (312) 419-9292

    1274
    1 minutes ago, we do not know exactly who will seek
    2 that. In that range, there are 75 sources between 10
    3 and 20 tons per season. It's possible that all or
    4 none of those may choose that option.
    5 MR. TREPANIER: And that goes to Question
    6 21, if you can answer this question.
    7 Based upon your answer to No. 20, what is
    8 the total current emissions from these sources that
    9 would not be subject to the 12 percent reduction now
    10 proposed?
    11 MR. FORBES: Okay. The total current emissions
    12 from the reduction exempt units that I earlier gave
    13 percentages for is 9.73 tons per day.
    14 And just to clarify, that's the total
    15 current emissions as you asked the question.
    16 MR. TREPANIER: And those are the -- and those
    17 are the emissions for those who the Agency expects to
    18 seek an exemption under 205.405?
    19 MR. FORBES: Correct; except that for BAT, we
    20 have no idea as to the number or emission level for
    21 those. It includes -- that estimate includes our
    22 estimate for fuel combustion, exempt, MACT, FESOP,
    23 and LAER sources.
    24 MR. TREPANIER: What would be the -- what would
    L.A. REPORTING - (312) 419-9292

    1275
    1 be the greatest amount of emissions that could be
    2 exempted from the reductions given the exemptions
    3 that are provided in the proposal?
    4 MR. FORBES: Well, as I said, we really have no
    5 idea in terms of BAT at this point who might choose
    6 that route, so I can't answer that. We do not have a
    7 number for that. We do know that the total
    8 emissions, as I just stated, 9.73, would be from
    9 sources that seemed to currently meet the provisions
    10 of the exemption part of the ERMS rule.
    11 MR. TREPANIER: Okay. Moving on to Question
    12 22, for sources that opt to accept the voluntary
    13 15-ton limit, what's the potential pollution increase
    14 over current emissions that these sources in
    15 aggregate could make without purchasing a single ATU?
    16 MR. FORBES: Okay. The potential increase over
    17 current emissions from all 75 of these sources
    18 choosing this option would be .69 tons per day.
    19 MR. TREPANIER: How has this been factored into
    20 the Agency's projection or analysis that the program
    21 will reduce emissions to allow the 1999 ROP to be
    22 met?
    23 MR. FORBES: As previously stated, the Agency
    24 is determined that the maximum loss to ERMS from all
    L.A. REPORTING - (312) 419-9292

    1276
    1 75 sources relying on this option is .75 tons per
    2 day. A small amount of contingency of reductions has
    3 been included in the program between three to four
    4 tons per day to account for some of the
    5 uncertainties in the projection such as the degree of
    6 participation by sources with this option.
    7 MR. TREPANIER: Okay. And to follow up on
    8 that, is it then your estimate that it could be an
    9 increase in .75 tons per day contingent on a scenario
    10 that some 20-ton emitters are going to opt for a
    11 15-ton limit?
    12 MR. FORBES: Right. If we are talking
    13 emissions, not emission reductions, that was an
    14 increase of .75 -- or, no .69 -- excuse me -- for all
    15 of the sources participating in the program.
    16 MR. TREPANIER: What would you anticipate --
    17 what would be the -- what's the potential increase
    18 over current emissions if none of the emitters who
    19 currently exceed 15 were to choose to go below 15?
    20 What if just the emitters that are under 15 chose to
    21 take the 15 CAAPP and then emitted at the 15 CAAPP?
    22 MR. FORBES: In other words, not taking the
    23 full range of 10 to 20, but simply looking at 10 to
    24 15?
    L.A. REPORTING - (312) 419-9292

    1277
    1 MR. TREPANIER: Yes.
    2 MR. FORBES: I don't recall the exact number,
    3 but it was not much different than, as I said, .69
    4 tons per day increase. It was -- about 90 percent of
    5 that number would reflect the 10- to 15-ton per
    6 season group.
    7 MR. TREPANIER: A 90 percent greater number?
    8 MR. FORBES: Yes. The emissions from those
    9 sources, okay, over the current emission level would
    10 be about 90 percent of the .69 number, and 90 percent
    11 of .69 would represent that group between 10 and 15
    12 tons per season.
    13 MR. DESHARNAIS: Does the Agency have any
    14 additional response?
    15 MR. FORBES: No, I don't think so.
    16 MR. TREPANIER: Did you say that there were
    17 53 emitters between 10 and 15 tons?
    18 MR. FORBES: I didn't say the specific number.
    19 There's 75 in total between 10 and 20. And I don't
    20 recall exactly how many were between 10 and 15, but
    21 the majority were within that range, you know. That
    22 was not specifically -- that was not specifically
    23 asked in the
    prefiled questions, so I didn't retain
    24 that particular number; but the majority of the
    L.A. REPORTING - (312) 419-9292

    1278
    1 sources were between the 10- and 15-ton level.
    2 MR. TREPANIER: I think a fair reading of my
    3 Question No. 22, the first question, is that that's
    4 the information that's sought. The question asks for
    5 sources that opt to accept the voluntary 15-ton
    6 limit; what is the potential pollution increase over
    7 the current emission that these sources in aggregate
    8 could make without purchasing a single ATU?
    9 And the number that you gave me was one
    10 that assumed that somebody that was emitting at 20
    11 tons is now going to accept what amounts to a 25
    12 percent reduction when this program offers them to
    13 accept an 18 percent reduction and opt up.
    14 MR. FORBES: You know, we could re-figure
    15 that. I think there's two points here.
    16 First of all, there's a lot of
    17 uncertainty as to what sources are going to choose.
    18 We have no idea what a particular decision is by a
    19 source, whether they will participate or they won't.
    20 We've had sources in the small range say they will
    21 participate, and they won't choose the 15. We've had
    22 others that are slightly higher than that that say
    23 they will participate. So it's a matter of
    24 trying to choose, you know, a conservative approach.
    L.A. REPORTING - (312) 419-9292

    1279
    1 We thought we were choosing a conservative approach.
    2 We could re-calculate it.
    3 The point is the loss of productions from
    4 not including those sources is at a maximum around
    5 .75 and .8 tons per day. That's very small in
    6 comparison to the total reduction that we are getting
    7 of 12.64, I believe, which was in the TSD.
    8 MR. TREPANIER: Okay. My question is going to
    9 what is the potential pollution increase over current
    10 emissions that these sources in aggregate could make
    11 without purchasing a single ATU? They are not
    12 polluting at 15 tons now. They may be polluting at
    13 10, and they may increase their pollution level by 15
    14 percent by selecting that without purchasing a single
    15 ATU. So I think the question actually, you know, is
    16 very clear, you know.
    17 The information that I am seeking is, you
    18 know, how much total could these sources that opt for
    19 this exemption increase their pollution?
    20 MR. FORBES: I think I was answering your
    21 question, but the range I used was 10 to 20. If your
    22 question is from 10 to 15, we can provide that
    23 information. I don't have that broken out that way,
    24 so I can't tell you what that number is. But, again,
    L.A. REPORTING - (312) 419-9292

    1280
    1 I will just restate that the pollution increase,
    2 potential increase, over current emissions from all
    3 of those sources choosing that option we calculated
    4 to be .69 tons per day without getting a single ATU.
    5 MR. TREPANIER: And that includes some type of
    6 a -- you are figuring in some type of reduction
    7 pollution at the same time, are you not, in that
    8 figure from the 20-ton emitter reducing their
    9 pollution 15-tons?
    10 MR. FORBES: Correct. From the 15 to the 20,
    11 they would be going down. So there's a slight
    12 decrease. But, as I mentioned, what I recall the
    13 numbers to be, the majority of it, was an increase,
    14 that is, a .69 ton increase was a majority from 10 to
    15 15. But to get that specific, that narrow range,
    16 I'll have to re-calculate those numbers for you.
    17 MR. TREPANIER: And is there any reason to
    18 believe that a polluter with -- a 20-ton polluter
    19 would accept a 15-ton limit rather than doing the 18
    20 percent reduction?
    21 MR. FORBES: Well, as I have already stated,
    22 during the course of our outreach meetings, there
    23 were sources in that size range who indicated they
    24 would prefer to opt out of the program to take that
    L.A. REPORTING - (312) 419-9292

    1281
    1 kind of reduction to avoid the complications of the
    2 trading system. So we have to believe that there are
    3 sources that will do that.
    4 MR. TREPANIER: And just shortly, maybe if you
    5 could explain in what way is it easier for that
    6 person who takes a 15-ton limit rather than an 18
    7 percent reduction?
    8 MR. FORBES: I can't answer that. I'm not sure
    9 that it would be easier one way or another. I think
    10 it would depend on the sources' situations as to
    11 which they would prefer.
    12 MR. TREPANIER: Is either of them actually
    13 opting out of the program, either of these
    14 exemptions?
    15 MR. FORBES: Well, yes, both. Either one would
    16 be opting out of the options that are contained in
    17 the ERMS rule.
    18 MR. TREPANIER: And both are comparable in
    19 opting out; they both opt out in a comparable way?
    20 MR. FORBES: I believe so.
    21 MR. TREPANIER: So there would be no reason for
    22 someone to take the lower limit than the 18 percent?
    23 MS. SAWYER: Objection; argumentative.
    24 MR. SUTTON: I think I got an answer to his
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    1282
    1 question, if you want to give it a shot.
    2 The person is somewhere between 15 and
    3 20 tons who just comes in as part of his baseline
    4 determination says I am going to accept a 15-ton
    5 limit, he doesn't have to go back and look at what
    6 his
    actuals were to do his 18 percent reduction. He
    7 just basically says I am willing to live with a 15
    8 percent reduction. If that's a level of work he
    9 wants to take, he could do that.
    10 And then we will incorporate that in his
    11 Title 5 permit and make him live with that 15-ton
    12 limit; but in the alternate, he would have to go back
    13 and determine what his baseline was and then show
    14 the 18 percent reduction was achieved and then go
    15 forward. So there's a difference in level of the
    16 flexibility of his application.
    17 MR. TREPANIER: I would like if the Agency
    18 would provide that information that I think Question
    19 22 sought, and that's for those who could -- who have
    20 emissions under 15-ton who opt into this program and
    21 if they emit at their maximum level, what would be
    22 the total increase then?
    23 MR. DESHARNAIS: Mr.
    Forbes, would you be able
    24 to provide that information?
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    1283
    1 MR. FORBES: Yes.
    2 MR. DESHARNAIS: Thank you.
    3 MR. TREPANIER: That was Question 22.
    4 MR. DESHARNAIS: Moving on to the next set of
    5 pretrial questions, we have, again, from Mr.
    6 Trepanier, your prefiled questions, handwritten pages
    7 -- Page 11, Questions 1, 2, and 3. Have these been
    8 previously addressed?
    9 MR. TREPANIER: Okay. Taking my question from
    10 the second to the last page of my
    prefiled questions,
    11 regarding Exhibit 6, which also is referred to as
    12 Table 4-4, Page 35 of the technical support document,
    13 does the Agency's projection of 105 tons per day in
    14 line one reflect the number of sources that would
    15 variously opt out the exclusions?
    16 MS. SAWYER: We already answered that.
    17 MR. DESHARNAIS: Yes. I had asked the
    18 question, have these already been asked and
    19 answered. I have them marked.
    20 MS. MCFAWN: Did you ask these yesterday? We
    21 are looking at No. 6 yesterday.
    22 MR. TREPANIER: I believe I asked about these,
    23 and they were deferred to the technical support
    24 document until we deal with the technical support
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    1284
    1 document. I had asked some questions earlier, and
    2 they started to lead to this point, and then they
    3 were deferred.
    4 MR. FORBES: I'll just answer the question.
    5 The projection of 105 tons per day of
    6 emissions for ERMS represents only those
    7 participating sources and their emission units
    8 subject to the reduction program. It does not
    9 include -- the 105 number does not include MACT,
    10 LAER, FESOP, or fuel combustion units excluded per
    11 the ERMS rule.
    12 MR. TREPANIER: And does the 105 -- does that
    13 represent that no sources would accept the 15-ton
    14 limit or exemption?
    15 MR. FORBES: That's correct.
    16 MR. TREPANIER: Second question, does the
    17 92-ton per day figure in line one assume that every
    18 source subject to the rules will reduce their
    19 emissions in aggregate above 12 percent?
    20 MR. FORBES: It assumes that the group of
    21 participating sources in aggregate will reduce the
    22 total emissions by 12 percent. It makes no
    23 assumptions as to who specifically will reduce their
    24 emissions by 12 percent, who will reduce in excess of
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    1285
    1 the 12 percent, and who will not reduce the purchased
    2 ATUs from the market.
    3 MR. TREPANIER: In clarification, earlier when
    4 you mentioned the .69, the numbers that were
    5 developed regarding expectation on the 15-ton limit
    6 per day, that number is not reflected in the 92?
    7 MR. FORBES: That's correct.
    8 MR. TREPANIER: So for your best -- to your
    9 best knowledge, that number would properly be at 91?
    10 MR. FORBES: Would it probably be 91?
    11 MR. TREPANIER: Properly be 91 given your
    12 expectation at a .69-ton per day, reduction is not
    13 going to occur because of the 15-ton exemption?
    14 MR. FORBES: I would say no. We don't know
    15 what that number is going to be just like we are not
    16 sure who is going to choose 18 percent reductions,
    17 which would be in excess of the 12 percent that we
    18 are asking for in the ERMS rule, which would provide
    19 even greater reductions than what we have included
    20 here.
    21 So those two options are options that
    22 exist, and it's really not possible to identify
    23 which ones or who is interested or will choose them.
    24 On the aggregate or the whole, we don't believe it
    L.A. REPORTING - (312) 419-9292

    1286
    1 typically changes the estimates that we have included
    2 here.
    3 MR. TREPANIER: Would it be true that even if
    4 one 10-ton -- even if one emitter between 10 and 15
    5 tons were to take the 15-ton exemption, then that 92
    6 number would be smaller?
    7 MR. FORBES: It would be slightly, very
    8 slightly smaller.
    9 MR. TREPANIER: And for each emitter that
    10 further selects that exemption, that number would
    11 also become smaller again? Or that number would
    12 become larger, actually, wouldn't it, that 92?
    13 MR. FORBES: Because the reductions would be
    14 less, we would see less reduction. It would go down
    15 slightly because that's the emissions from sources
    16 that would be subject to the ERMS program, the
    17 participating sources excluding emission units
    18 excluded under the provisions of the ERMS rule. So
    19 if they opted out, then that would -- the reduction
    20 for them would be very slight. It would be 12
    21 percent of a very small number, which would go down
    22 very small.
    23 MR. TREPANIER: Does the 160 under the 1999
    24 calling for point sources, does that number reflect
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    1287
    1 the potential for those who accept the 15-ton limit
    2 exemption to emit at 15 tons?
    3 MR. FORBES: Could you be specific as to what
    4 table you are referring to and what --
    5 MR. TREPANIER: This is Table 4-4 on page 35 of
    6 the TSD and was entered as Exhibit No. 6.
    7 MR. FORBES: Okay. So you are referring to the
    8 point source sector, the 190 tons per day under the
    9 1999 year?
    10 MR. TREPANIER: Yes. My chart says 160 under
    11 1999.
    12 MR. FORBES: Right. It's 160 for the year 1999
    13 and it's for point sources?
    14 MR. TREPANIER: Yes.
    15 MR. FORBES: Could you ask me your question
    16 again?
    17 MR. TREPANIER: Does that number 160 reflect
    18 the potential emissions from those sources that can
    19 opt in for the 15-ton limit?
    20 MR. FORBES: Yes. This includes all point
    21 sources.
    22 MR. TREPANIER: Does it include their actual
    23 emissions and what year?
    24 MR. FORBES: It's our estimate of those
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    1288
    1 emissions in 1999.
    2 MR. TREPANIER: And when you are estimating
    3 emissions in 1999, is that your best estimate as to
    4 what you believe their emissions will be or the
    5 potential that they could be given their 15-ton
    6 limit?
    7 MR. FORBES: It's our best projection of what
    8 actual emissions will be for those sources in 1999,
    9 actual emissions.
    10 MR. TREPANIER: So I understand that if those
    11 with a 15-ton limit were to in great number emit at
    12 an amount higher than they do now and even up to
    13 their 15-ton limit, that 160, that that number would
    14 climb?
    15 MR. FORBES: Well, no. There is already
    16 applied in that category some growth we discussed the
    17 other day for growth and emissions between 1996 and
    18 1999.
    19 MR. TREPANIER: The Agency said they were going
    20 to provide that information. Have you made progress
    21 on that?
    22 MR. FORBES: As a matter of fact, I looked last
    23 night; and what we have included between 1996 and
    24 1999 is approximately three tons per day of emissions
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    1289
    1 growth over and above existing emission levels.
    2 MR. TREPANIER: The three tons per day, what's
    3 that as a percentage of the total emissions from
    4 this?
    5 MR. FORBES: Total emissions of point
    6 sources --
    7 MR. TREPANIER: Yes.
    8 MR. FORBES: -- total emissions of
    9 nonattainment areas?
    10 MR. TREPANIER: What is the number of the total
    11 emissions from point sources than in 1999?
    12 MR. FORBES: It's 160 tons per day as shown in
    13 the chart.
    14 MR. TREPANIER: And then three tons per day of
    15 growth, is that where the Agency has made allowances
    16 for the likelihood, the eventuality, that as the
    17 emitters select their highest polluting years, the
    18 highest two of the past three, and receive allotments
    19 greater than their average pollution, is that where
    20 the Agency is accounting for that in that three tons
    21 per day growth?
    22 MR. FORBES: That number that we have included
    23 is a typical inventory required element in all SIP
    24 inventories. You have to account for expected growth
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    1290
    1 in the area. And so that number is our best estimate
    2 for growth in stationary sources in the Chicago
    3 nonattainment area, and that's a quantity that we
    4 have estimated that that will amount to. And it
    5 could be for minor source growth; it could be for
    6 non-major modifications; it can be for all sorts of
    7 things that would tend to increase emissions. That's
    8 what that estimate represents.
    9 MR. TREPANIER: Okay. I have a question that
    10 earlier was missing that's specifically on this issue
    11 on that growth, and that was Question 18. I don't
    12 believe that's been reflected in the outline, but I
    13 would like to ask that question.
    14 MS. SAWYER: Question 18 from what?
    15 MR. TREPANIER: My
    prefiled questions.
    16 MR. DESHARNAIS: I'm sorry, Mr.
    Trepanier.
    17 Have you asked the questions that were listed? Did
    18 you get through Question 3? I lost track.
    19 MR. TREPANIER: I think there is just one
    20 question remaining there on Page 13.
    21 MR. DESHARNAIS: So you wish to go back to
    22 this question before we go on to that?
    23 MR. TREPANIER: Well --
    24 MS. SAWYER: You already asked No. 18.
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    1291
    1 MR. TREPANIER: As you would have me, I am
    2 willing to. I don't believe that No. 18 has been
    3 asked nor answered.
    4 MS. SAWYER: You asked it.
    5 MR. TREPANIER: I think that the Agency just
    6 now gave that information regarding the answer we
    7 just received regarding the three tons per day of
    8 growth. I don't know how Question 18 could have been
    9 answered when that -- when the three tons per day
    10 answer wasn't available previously.
    11 MS. SAWYER: The question doesn't even ask
    12 that.
    13 MR. DESHARNAIS: Mr.
    Trepanier, before we go
    14 on, could we finish the questions that are on the
    15 list, and then we will take any remaining questions
    16 on the section that are not reflected on the list.
    17 So we would finish out your Question 3 on Page 11 and
    18 then move on to your Question 10 on Page 12. Okay.
    19 Then we will take any remaining questions at that
    20 time that have not yet been addressed.
    21 MR. TREPANIER: Okay.
    22 Okay. Does the 105 tons per day
    23 accurately reflect each source selecting their worst
    24 polluting years as baseline?
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    1292
    1 MR. FORBES: Well, I think we provided an
    2 answer yesterday. You asked this question, but let
    3 me try to answer it again.
    4 As stated in the TSD, an accurate ERMS
    5 emissions baseline will not be known until all
    6 participating sources have filed their ERMS
    7 applications and have the baselines established
    8 accounting for the variables of the program.
    9 The Agency believes that the estimates it
    10 has made are sufficiently accurate to demonstrate the
    11 benefits of the program and to show that ERMS along
    12 with the other reduction measures proposed for the 3
    13 percent ROP plan in the first ROP target level for
    14 1999. The Agency has afforded some contingency in
    15 its plans to account for the uncertainty in its
    16 baseline estimates, but we believe these are
    17 representive emissions for what baselines will be.
    18 MR. TREPANIER: And that contingency, is that
    19 the three tons per day?
    20 MR. FORBES: No. The contingency that I am
    21 referring to is the small additional amount of
    22 reduction over and above what is absolutely needed to
    23 meet the ROP target level. I think we stated that
    24 between 4 and 5 tons per day if we achieve all of the
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    1293
    1 reductions from all the various point area and local
    2 source reduction measures.
    3 MR. TREPANIER: Is the 4 to 5 tons per day
    4 contingency, that's on top of the 3 tons per day that
    5 you have already estimated for growth?
    6 MR. FORBES: Yes.
    7 MR. TREPANIER: And that 4 to 5 tons per day,
    8 is that contingency contained in that the Agency is
    9 seeking a 12 percent reduction?
    10 MR. FORBES: Yes.
    11 MR. TREPANIER: Since 1 percent is going to the
    12 ACMA, does that mean that the 2 percent is -- that
    13 2 percent of the reductions is 4 to 5 tons per day?
    14 MR. FORBES: I'm sorry. I didn't hear the last
    15 part of that, that 2 percent is --
    16 MR. TREPANIER: Since the proposal seeks a 12
    17 percent reduction, the ROP is for 9 percent, 1
    18 percent is going into ACMA, does that mean the 2
    19 percent -- does that reflect -- is that the 4 to 5
    20 tons per day?
    21 MR. FORBES: Okay. I think -- yes. I think
    22 that would reflect that.
    23 MR. DESHARNAIS: Okay. We are not addressing
    24 the final questions on the technical support document
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    1294
    1 from Mr.
    Trepanier.
    2 As an advance notice, I am just letting
    3 you know, we are going to change the order of the
    4 questions somewhat. Before going on to the questions
    5 on proportionate share and the general questions
    6 listed on the Agency's sheet, we are going to go back
    7 and finish up the questions on Section 205.320 that
    8 were held over from yesterday. So this will be after
    9 we finish Mr.
    Trepanier's questions.
    10 Mr.
    Trepanier, I believe you were on your
    11 Question 3. Was there anything additional on that or
    12 have we finished up your Question 3?
    13 MR. TREPANIER: Which question did we leave off
    14 on?
    15 MR. DESHARNAIS: I believe we were up to your
    16 prefiled question handwritten Page 11, No. 3.
    17 MS. SAWYER: We went past No. 3. We are on
    18 10, right?
    19 MR. DESHARNAIS: Okay. We finished 3. We are
    20 up to 10; is that your understanding?
    21 MR. TREPANIER: Was the answer to the question
    22 regarding the 105 aggregate by the source's slightly
    23 worse polluting baseline; was that a no?
    24 MR. FORBES: Well, I answered the question. I
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    1295
    1 think the answer -- the best answer I could give is
    2 if you want a yes or no would be yes. We believe
    3 that 105 reasonably represents the emissions for
    4 baseline considering the fact that we don't know what
    5 the baseline is and will not know until the ERMS
    6 applications are submitted.
    7 MR. TREPANIER: So that the No. 105 -- just to
    8 be clear because this information is important for
    9 the case, for the presentation that I want to make,
    10 this 105 does not account for the fact that the
    11 emitters are directed to choose their worst polluting
    12 years; is that right?
    13 MR. FORBES: 105 represents our best
    14 calculation of what emissions will be from those
    15 participants.
    16 MR. TREPANIER: That's from 1996, right?
    17 That's current levels of emissions?
    18 MR. FORBES: Yes.
    19 MR. TREPANIER: And 105 actually is -- that's
    20 emissions from sources that are subject to this rule?
    21 MR. FORBES: That's correct.
    22 MR. TREPANIER: So where does a projection get
    23 made? Where is the uncertainty that you are bringing
    24 into that number? From where arises the uncertainty?
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    1296
    1 MR. FORBES: I think you asked the question
    2 regarding uncertainty of your concern for selecting
    3 their worst polluting years as baseline.
    4 MR. TREPANIER: So does the 105 reflect current
    5 emission levels for those affected sources?
    6 MR. FORBES: 105 tons per day reflects our
    7 estimate of what ERMS participating sources
    8 emissions, actual emissions, would be in 1996.
    9 MR. TREPANIER: Okay. I am finished with that
    10 question.
    11 MR. DESHARNAIS: That was Question 3?
    12 MR. TREPANIER: That was Question 3.
    13 MS. MCFAWN: Mr.
    Trepanier, you have to speak
    14 up. We have the
    el going behind us.
    15 MR. TREPANIER: Okay. That was Question 3.
    16 MR. DESHARNAIS: Also, just before we go on, as
    17 a general matter, because we are running short on
    18 time, it may be necessary today to limit follow-up
    19 questions in order to enable us to get through the
    20 questions that have been
    prefiled which are entitled
    21 to priority. So if I do limit questions, that's the
    22 reason because we are going to try to get through the
    23 pretrial questions today, if possible.
    24 Mr.
    Trepanier, your Question 10 on your
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    1297
    1 Page 12, please.
    2 MR. TREPANIER: What assurance is there that
    3 the target level of VOM emissions from point sources
    4 will be met if the cap is not known?
    5 MR. FORBES: As in the case with historical
    6 conventional tool based SIP plans such as the 15
    7 percent progress plan, there is no assurance or
    8 guarantee that the target level of emissions will be
    9 reached. However, the Agency's analysis is shown
    10 that point source emissions have continued to
    11 decrease from 1970 through 1990 and beyond.
    12 Since baselines must reflect recent
    13 actual emissions adjusted to represent the latest
    14 emissions through 1996, emission baselines will
    15 not -- are not expected to exceed the actual
    16 emissions. Again, the Agency has afforded some
    17 contingency in its plan to account for the
    18 uncertainties in its baseline estimates.
    19 MR. TREPANIER: Did you just say you expect
    20 that the baseline is not going to exceed the actual
    21 emissions?
    22 MR. FORBES: It's our estimate that it would
    23 not. But as I also said, that there are
    24 uncertainties in all of the various provisions of the
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    1298
    1 rule. So to the best of our ability, that's what our
    2 firm hopes it will be.
    3 MR. TREPANIER: See, your summary of attainment
    4 scenario, that scenario doesn't figure in BAT
    5 exemptions, does it?
    6 MS. SAWYER: We answered that.
    7 MR. SUTTON: BAT.
    8 MR. FORBES: Right. It does not take into
    9 account BAT, B-A-T.
    10 MR. TREPANIER: Should I go back and pick up
    11 Question 18 regarding that modeling of growth?
    12 MS. SAWYER: Okay. Didn't you ask that
    13 question yesterday?
    14 MR. TREPANIER: Yesterday, we did -- I asked
    15 Question No. 17 yesterday.
    16 MS. SAWYER: And then you went on to ask 18.
    17 MS. MCFAWN: Did Mr. Romaine answer that
    18 question yesterday?
    19 MS. SAWYER: Yes, Mr. Romaine did.
    20 MS. MCFAWN: Could he give a brief synopsis?
    21 Thank you, Mr. Romaine.
    22 MR. DESHARNAIS: Mr.
    Trepanier, could you
    23 please read the question into the record before
    24 Mr. Romaine's summary?
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    1299
    1 MR. TREPANIER: Okay. Question 18 is a
    2 continuation of Question 17.
    3 No. 17 asks, does the Agency believe that
    4 no new sources subject to the proposed rule will be
    5 cited in Chicago prior to the year 2003 and what is
    6 the basis of this belief?
    7 I go on to Question 18. If your belief
    8 is based upon an analytical model, why do you believe
    9 this model reliably can forecast the citing of VOC
    10 emitting facilities?
    11 MR. ROMAINE: My belief is not based on a
    12 model. My belief is based on my experience.
    13 MR. TREPANIER: In your experience, has there
    14 been a situation -- I am modifying my question -- has
    15 there been a circumstance where a sellable right
    16 might be granted for a facility that's cited after
    17 the rule is adopted?
    18 MR. ROMAINE: I think that's obvious. We are
    19 discussing a program where
    ATUs are a commodity and
    20 ATUs may be transferred between sources. And the
    21 most common way to transfer things in our economy is
    22 by selling them and buying them.
    23 MR. TREPANIER: My question is going to --
    24 since your belief is not based on a model, but on
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    1300
    1 your own experience, has your experience included a
    2 situation, a circumstance, such as this where a
    3 sellable right might be granted for a facility done
    4 after the rule is adopted?
    5 MR. ROMAINE: Well, I don't have any experience
    6 after the rule is adopted. The rule isn't adopted.
    7 MR. TREPANIER: What I'm talking about here
    8 when I say a rule is adopted, I am speaking to those
    9 experiences that you are speaking of. I am referring
    10 to your experiences, in your experience, when you
    11 built up, you know, your experience in forecasting
    12 these citing of VOC emitting facilities.
    13 MR. ROMAINE: Well, my experience is extended
    14 to today's date.
    15 Under the historical program resource
    16 review, there is conceivably circumstances where
    17 emission offset credits could be transferred between
    18 facilities, yes. That has not been a common case. I
    19 don't know that it's ever occurred with an actual new
    20 source review project coming forward with the
    21 construction permit where they actually had to rely
    22 on those offsets that they attained from another
    23 party.
    24 MR. DESHARNAIS: Okay. We are going to move on
    L.A. REPORTING - (312) 419-9292

    1301
    1 at this point.
    2 The next question that we are going to
    3 address in order to finish up the questions directed
    4 to particular sections, I believe that the ERMS
    5 Coalition had questions deferred from yesterday on
    6 Section 205.320.
    7 MS. MIHELIC: Correct. And could we go off the
    8 record for a second?
    9 (Discussion had off the
    10 record.)
    11 MS. MIHELIC:
    Tracey Mihelic with the ERMS
    12 Coalition.
    13 Question No. 1 in our questions that were
    14 filed yesterday on February 10th, if in December 1995
    15 a facility removed a piece of equipment which had 55
    16 tons of actual emissions per ozone season during 1994
    17 and 1995 with new equipment which has 40-ton
    18 potential annual emissions which by 1999 had three
    19 years of actual emissions data which were for 7 tons
    20 on average per ozone season, how would this source
    21 calculate its baseline allotment emissions?
    22 And I guess a clarifying question that
    23 we have discussed is, would the source be given
    24 ATUs based upon 55 tons, 7 tons or both?
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    1302
    1 MR. ROMAINE: Well, you have described a
    2 circumstance where I believe this new emission would
    3 be considered a pending project. I think you are
    4 suggesting that this new unit received its
    5 construction permit prior to January 1, 1998. As a
    6 pending project, the new unit would receive an
    7 allotment based on its emissions after it had been
    8 operational for three complete ozone seasons. It
    9 would have a permit that would limit it to 24 and a
    10 half tons. On an annual basis, that would convert to
    11 some seasonal equivalent limit. If you did it simply
    12 on a straight proportion, it would be 10.2 tons per
    13 season. So at most, a new emission would receive
    14 baseline emissions of 10.2 tons per season. And the
    15 actual amount of baseline emissions would be
    16 determined on how it operates during the first three
    17 years.
    18 As we have set up the proposal, there is
    19 no requirement in this case to adjust the emissions
    20 from the existing emission unit. You have described
    21 the existing emission unit as having 55 tons of
    22 actual emissions, so the baseline emissions would be
    23 at least 55 tons converted -- no -- 55 tons. I don't
    24 know if we have described yet whether there is
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    1303
    1 voluntary over compliance involved yet.
    2 MS. MIHELIC: That would be under question --
    3 MR. ROMAINE: If there were voluntary over
    4 compliance, then the number would be higher than 55
    5 tons.
    6 MS. MIHELIC: Which takes us into Question
    7 (b).
    8 If the old piece of equipment controlled
    9 emissions beyond that required by applicable rules in
    10 1996 so that it would have emitted 65 tons on average
    11 per ozone season, then simply complied with the rules
    12 and the over-controlled was achieved after 1990,
    13 could the source obtain
    ATUs based upon this 65 tons
    14 per season from the old equipment?
    15 MR. ROMAINE: Yes. Assuming that there is, in
    16 fact, voluntary over compliance that there was an
    17 improvement made to that existing emission unit since
    18 1990 that has resulted in an emission level that
    19 goes beyond the applicable rules effective in 1996.
    20 MS. MIHELIC: Question (c), what if the new
    21 equipment also over-controlled emissions so that
    22 actual emissions at 1996 RACT levels and the same
    23 level production would be
    24 65 tons per season?
    L.A. REPORTING - (312) 419-9292

    1304
    1 And to clarify this question, could it
    2 receive
    ATUs based upon 65 tons per season?
    3 MR. ROMAINE: No, it could not.
    4 MS. MIHELIC: Why not?
    5 MR. ROMAINE: As I have explained, it is
    6 constrained by the construction permit; and the
    7 construction permit effectively imposes a seasonal
    8 limit on the emissions of the new unit to make sure
    9 that that new unit would not constitute a major
    10 modification.
    11 MS. MIHELIC: So it would be constrained to the
    12 10.5 tons we talked about earlier if that were truly
    13 the seasonal emission allotted?
    14 MR. ROMAINE: That's correct. It would be
    15 constrained -- I think it was to 10.2 tons per season
    16 at most as the baseline emissions from that unit.
    17 MS. MIHELIC: Going on to Question (d), if the
    18 same facility also removed similar equipment in 1997
    19 which had ozone seasonal emissions of 35 tons,
    20 replaced it with new equipment -- and for the purpose
    21 of this question, replaced it and rebuilt the new
    22 equipment in 1997 -- which in 2000 has 6 tons average
    23 ozone seasonal emissions and has potential annual
    24 emissions of 40 tons per year; and in order to avoid
    L.A. REPORTING - (312) 419-9292

    1305
    1 new source review, took a construction and operating
    2 permit limit of 24.5 tons per year, how would this
    3 permit emission limitation affect the source's
    4 baseline allotment, if at all?
    5 MR. ROMAINE: Okay. I think we have to look at
    6 this example a little bit more closely. You are
    7 describing a circumstance where the facility
    8 originally had a construction permit for one more
    9 unit that allowed it to emit 24 and a half tons.
    10 It's now coming with a second new unit also allowed
    11 to emit 24 and a half tons or which it's pursuing a
    12 24 and a half ton limit. The combination of those
    13 two projects would be a total of 49 tons per year.
    14 You have described those two projects so that they
    15 are contemporaneous.
    16 So the simple, I guess, thing that
    17 becomes apparent is that the source would not have
    18 received this construction permit simply to emit 24
    19 and a half tons per year. It would have had to rely
    20 upon netting. It would have had to provide some
    21 contemporaneous decreases in emissions at the source
    22 so that the net increase in emissions, just these two
    23 projects, would be less than 25 tons per year. My
    24 assumption would be that, in fact, they did rely on
    L.A. REPORTING - (312) 419-9292

    1306
    1 netting based on the emission or the equipment that
    2 they removed in 1997, which has been described as
    3 having seasonal emissions of 35 tons.
    4 If I go through the netting exercise, 24
    5 and a half tons of annual emissions is equivalent to
    6 10.2 tons of seasonal emissions. Presumably then
    7 this source committed to reducing the emissions from
    8 the similar equipment by at least 10.2 tons. That is
    9 necessary to get the permit to use this equipment, so
    10 it would not be entitled to the full 35 tons of
    11 emissions from existing unit as baseline.
    12 Playing with those numbers, it would only
    13 be entitled to 24.8 tons of seasonal emissions. So
    14 it will receive 24.8 tons of seasonal emissions as
    15 the baseline for that existing piece of equipment
    16 that has been replaced. Then it would, again, go
    17 through the pending project analysis for the new
    18 unit. At most, the new unit would receive baseline
    19 emissions of 10.2 tons. That's the seasonal
    20 equivalent assuming that's the production, 24 and a
    21 half tons per year.
    22 MS. MIHELIC: So I guess (e) is answered in the
    23 sense that the source would lose some
    ATUs from the
    24 removal of the old equipment under the netting
    L.A. REPORTING - (312) 419-9292

    1307
    1 exercise?
    2 MR. ROMAINE: I think in the way you are
    3 looking at it, yes. The fact that they come in with
    4 a new project that relies upon netting does have
    5 consequences for the baseline emissions from the
    6 existing emission that would not be entitled to
    7 receive the full historical emissions from that
    8 equipment that has been eliminated if, in fact, you
    9 have accepted a commitment pursuant to the new source
    10 review to reduce some or all of these emissions.
    11 MS. MIHELIC: Can I ask one quick follow-up
    12 question to his answer?
    13 MR. DESHARNAIS: Go on.
    14 MS. MIHELIC: What if the source's baseline
    15 emissions from the old unit were 40 tons considering
    16 any over compliance of that unit with applicable
    17 rules in 1996, would the source get credit for the 5
    18 tons of over-compliance in its allotment?
    19 MR. ROMAINE: In the scenario you've
    20 described, I would say no; that effectively the new
    21 source review netting exercise resets or establishes
    22 a new level of emissions that is required for that
    23 existing unit. It would not be possible at that
    24 point in time to try to pick up voluntary
    L.A. REPORTING - (312) 419-9292

    1308
    1 over-compliance. It's no longer recognized as a
    2 consequence of a new source review.
    3 MS. MIHELIC: Question (f), if a source
    4 replaces equipment after 1996 with new equipment
    5 which emits significantly less emissions per season,
    6 will the source lose 20 percent of emissions from
    7 the replacement of the old equipment?
    8 MR. ROMAINE: Because you have mentioned 20
    9 percent, I assume you are asking a question
    10 concerning the shutdown provision?
    11 MS. MIHELIC: Right. Is this considered a
    12 shutdown, I guess Question (a), even if the change in
    13 equipment is a true replacement project?
    14 MR. ROMAINE: No.
    15 MS. MIHELIC: So it would not lose the 20
    16 percent?
    17 MR. ROMAINE: The shutdown provision would not
    18 be relevant.
    19 MS. MIHELIC: And just Question (g), when the
    20 rules refer to source shutdowns, is the Agency
    21 referring to the facility as a whole or individual
    22 emission units?
    23 MR. ROMAINE: We are referring to the facility
    24 as a whole.
    L.A. REPORTING - (312) 419-9292

    1309
    1 MS. SAWYER: Are we now moving to the
    2 questions that you held over for Dave
    Kolaz?
    3 MS. MIHELIC: No, not to my understanding.
    4 Are we?
    5 MR. DESHARNAIS: Let's go off the record for a
    6 minute.
    7 (Discussion had off the
    8 record.)
    9 MR. DESHARNAIS: Ms.
    Mihelic?
    10 MS. MIHELIC: Yesterday I was asking questions
    11 regarding permit limitations for major new sources.
    12 In attempts to clarify my questions and not put in
    13 specific numbers, I am trying to ask more general
    14 questions today.
    15 With respect to the questions deferred
    16 from yesterday, if a participating source has made a
    17 major modification at its facility and has taken an
    18 annual plant-wide emissions CAAPP in a new source
    19 review permit to avoid LAER having internally offset
    20 the emissions from the new unit, will the Agency
    21 convert this annual limit to a seasonal limit when
    22 issuing
    ATUs?
    23 MR. ROMAINE: You have described a situation
    24 where the new source review permit establishes a
    L.A. REPORTING - (312) 419-9292

    1310
    1 constraint on the operation of the plant. It would
    2 be a 1996 effective requirement. It would have to be
    3 addressed and established on the baseline emission.
    4 MS. MIHELIC: And how will the Agency conduct
    5 this conversion or how will it be done?
    6 MR. ROMAINE: The conversion would have to
    7 consider, first, what limits are placed in the
    8 permit, whether there are, in fact, any limits that
    9 exist on a monthly basis. If there are not limits on
    10 a monthly basis, then the question would be what is
    11 the distribution of emissions between the ozone
    12 season and the non-ozone season. We are assuming
    13 that to be determined by looking at the emissions
    14 and the plant as generally provided for the baseline
    15 emissions determination.
    16 MS. MIHELIC: If a source has monthly limits
    17 due to new source review -- due to the new source
    18 review permit rules, will the Agency be willing to
    19 convert monthly permit limits issued in new source
    20 review permits to seasonal limits; to clarify the
    21 question, to be more consistent with the ATU seasonal
    22 emission allotment?
    23 MR. ROMAINE: I think the simple answer is no.
    24 That we will consider changes for new source review
    L.A. REPORTING - (312) 419-9292

    1311
    1 purposes as related to what is necessary for federal
    2 enforceability of potential emit requirements for the
    3 construction permit, but we have not contemplated
    4 simply changes for purposes of simplifying operation
    5 in the ERMS.
    6 MR. SUTTON: And going along with that,
    7 historically, the U.S. EPA has not accepted the year
    8 limits as source review, and they have been at a
    9 minimum monthly. So you probably add and will
    10 continue to see monthly limits if not more
    11 frequently.
    12 MS. MIHELIC: With respect to the questions we
    13 just asked about permit limits, they were with
    14 respect to offsetting, internally offsetting.
    15 If a source took similar limits because
    16 it netted out a new source review, would the answers
    17 be the same, that we took a plant-wide emissions
    18 CAAPP because you netted out; that would be converted
    19 to seasonal emissions?
    20 MR. ROMAINE: Yes.
    21 MS. MIHELIC: Would allowing the source to
    22 internally offset emissions as required or as allowed
    23 in Section 203.301 on a seasonal basis be consistent
    24 with the Agency's position that offsets under other
    L.A. REPORTING - (312) 419-9292

    1312
    1 sections of the new source review rules need only be
    2 on a seasonal basis?
    3 MR. ROMAINE: It would be consistent with the
    4 general interpretation we have been taking to the
    5 Clean Air Act. However, that is not something we
    6 have discussed with the U.S. EPA, so we are not sure
    7 how they would respond.
    8 MS. MIHELIC: If a source has obtained in
    9 internal offsets to avoid LAER or has taken
    10 reductions in emissions for netting purposes from
    11 specific individual units at the facility, could the
    12 source have separate permit limits for the units from
    13 which the reductions were obtained in the new
    14 source -- let's refer that as a group A source --
    15 and a separate limit for other units at the facility,
    16 group B sources?
    17 MR. ROMAINE: That's a possibility. It really
    18 depends how the new source review permit was actually
    19 crafted. My experience at least in terms of offset
    20 type permits is that the offset permits that we have
    21 dealt with, the ones that specifically come to mind,
    22 did address total plant emissions. I am not quite as
    23 familiar with netting permits. There are more of
    24 them, and there may be more of a variety of those the
    L.A. REPORTING - (312) 419-9292

    1313
    1 way those have been prepared.
    2 MS. MIHELIC: And if a source had these types
    3 of permit limits, one for the group I was calling the
    4 group A sources and one for the group B sources,
    5 could a source obtain separate allotments for these
    6 separate groups of sources?
    7 MR. ROMAINE: We haven't contemplated a system
    8 where there would be any distinction made between
    9 allotment trading units from different sources or
    10 different emission units. We are simply saying
    11 allotment trading is allotment trading.
    12 MS. MIHELIC: So if this source -- if the group
    13 A sources, which are the sources from which the
    14 reductions are obtained in the new source, that it
    15 met its permit limit, but the group B sources
    16 exceeded their -- exceed the allotment of
    ATUs for
    17 the facility or something as a whole -- I'm trying to
    18 separate out that if you had an allotment for one
    19 source and an allotment for another source, the new
    20 source review type units met their emission limits,
    21 but the other sources exceeded, I guess, their
    22 emission limits or exceeded their allotment, could
    23 they go purchase
    ATUs and be considered in
    24 compliance?
    L.A. REPORTING - (312) 419-9292

    1314
    1 MR. ROMAINE: In the hypothetical situation
    2 explained, yes. If they instruct that, we could
    3 carry that through.
    4 MR. SUTTON: I think as a point of
    5 clarification, the whole facility will assign
    ATUs.
    6 There will be various ways that you have to show your
    7 actual emissions for all the units, but you can use
    8 the
    ATUs assigned you in any fashion that you want.
    9 So you don't have to carve them from group A to group
    10 B.
    11 So, in your example, if your group A
    12 group had less emissions than they needed, actually
    13 projected, and your group B had higher ones, but were
    14 still within the permit limits, they could in
    15 combination be resolved with the
    ATUs assigned to
    16 you.
    17 MS. MIHELIC: May a source net out of resource
    18 review by netting its seasonal emissions only?
    19 MR. ROMAINE: No.
    20 MS. MIHELIC: Why not?
    21 MR. ROMAINE: The procedures for netting are
    22 specified by the Clean Air Act in terms of tons per
    23 year. There are also specific U.S. EPA regulations
    24 that establish what is credible or not credible. The
    L.A. REPORTING - (312) 419-9292

    1315
    1 provisions deal with contemporaneous time periods.
    2 We do not believe it's going to be possible to try to
    3 convert the provisions for netting that apparently
    4 explicitly set forth in federal regulations on a
    5 seasonal basis.
    6 MS. MIHELIC: And have you discussed this issue
    7 with U.S. EPA?
    8 MR. ROMAINE: U.S. EPA Has discussed this issue
    9 with me. They expressed concern that the
    10 applicability provisions for new source review not be
    11 changed as a consequence of the emission reduction
    12 market system.
    13 MS. MIHELIC: No further questions. Thank you.
    14 MR. DESHARNAIS: Thank you.
    15 Okay. The next questions that we are
    16 going to address are questions for Mr.
    Kolaz which
    17 are due to our understanding that he will not be here
    18 for the next set of hearings.
    19 Is that correct?
    20 MS. SAWYER: We weren't planning him to be
    21 here.
    22 MR. DESHARNAIS: We are going to start with
    23 questions from Ms. Elizabeth Ann from the Board
    24 staff.
    L.A. REPORTING - (312) 419-9292

    1316
    1 MS. ANN: I was just wondering if you could
    2 tell me the difference between lapsed, retired,
    3 pending, and expired
    ATUs.
    4 MR. KOLAZ: Well, an expired ATU is one in
    5 which its life has come and gone and has not been
    6 used to retire excess emissions from a seasonal
    7 allotment period.
    8 As stated in the regulations, the normal
    9 age of an ATU is two seasons. So in that particular
    10 circumstance, if a source or a participant does not
    11 choose to retire that ATU, then it will expire. It
    12 will no longer be available.
    13 And a lapsed ATU -- and maybe a
    14 clarifying question would be, are you referring to a
    15 specific part of my testimony?
    16 MS. ANN: Yes. On Page 8, you reference lapsed
    17 ATUs, so I was just wondering what they were.
    18 MR. KOLAZ: Let's see. Give me just a moment
    19 to refresh my memory here.
    20 That particular term is not used in the
    21 rule specifically; but in the part of the rule
    22 dealing with the ACMA, it does allow -- it does allow
    23 the Agency to enter into transactions that are not
    24 allowed by normal participants.
    L.A. REPORTING - (312) 419-9292

    1317
    1 For example, we can use expired
    ATUs to
    2 reconcile withdrawals of
    ATUs from the special access
    3 component of the ACMA. And that term lapsed is the
    4 term that we really use to apply to expired
    ATUs.
    5 MS. ANN: That you are going to use when you
    6 need more
    ATUs in the ACMA for special access?
    7 MR. KOLAZ: Right.
    8 MS. ANN: So then are retired
    ATUs just ones
    9 that anyone, either a company or facility has or
    10 someone purchases, either an environmental group or
    11 school or something, and they just decide those are
    12 not to be used anymore?
    13 MR. KOLAZ: That's correct.
    14 MS. ANN: And then pending
    ATUs?
    15 MR. KOLAZ: Well, pending ATUS would be an ATU
    16 that has been designated as one that is going to be
    17 the subject of a transfer agreement. So, in other
    18 words, two parties have entered into a buying and a
    19 selling arrangement. Prior to the time that that
    20 transaction actually occurs, we will flag
    ATUs as
    21 pending the actual transfer so they are not the
    22 subject of any other transfer agreement.
    23 MR. DESHARNAIS: Okay. My understanding now
    24 is that the ERMS Coalition also had questions
    L.A. REPORTING - (312) 419-9292

    1318
    1 specifically
    refiled and directed to Mr.
    Kolaz.
    2 MR. SAINES: That's correct.
    3 MR. DESHARNAIS: We will address those now.
    4 MR. SAINES: These questions are in Section 23,
    5 testimony of Agency members, and they start right at
    6 the bottom of Page 22.
    7 MS. MCFAWN: Before you begin, my notes
    8 indicate that Questions 5 through 11 have been
    9 answered.
    10 MS. SAWYER: Questions 5 through 12.
    11 MR. SAINES: That is correct. And, in fact, we
    12 are going to be withdrawing Questions 2 and 3, so we
    13 are really asking Questions 1(a) and (b) and
    14 Questions 13 through 16 here.
    15 Okay. Question 1, where in the proposed
    16 regulations is the, quote, account reconciliation
    17 elapsed period from January 1 through March 31 of
    18 each year, end quote; define or explain?
    19 MR. KOLAZ: That term is not defined or
    20 explained in the regulations.
    21 MR. SAINES: Okay. Then that leaves me to sub
    22 (a), if not, define or explain in the proposed rules,
    23 what is it?
    24 MR. KOLAZ: Well, that's a term that I used in
    L.A. REPORTING - (312) 419-9292

    1319
    1 my testimony to describe the period of time that
    2 immediately follows the reconciliation period where
    3 no further transactions are allowed to reconcile
    4 emissions from the previous season, and it's the time
    5 that the Agency will be working to issue excursion
    6 compensation notices and entering into -- validating
    7 transactions that occurred late in December as we
    8 discussed earlier today.
    9 The Agency will allow transfer agreements
    10 up through the end of the day on December 31st, so we
    11 will be reconciling those transaction agreements.
    12 MR. SAINES: Okay. Sub (b), does the Agency
    13 intend to amend the proposed rules to include a
    14 definition or explanation of the, quote, account
    15 reconciliation lapsed period, end quote?
    16 MR. KOLAZ: I don't believe that any
    17 modification is needed.
    18 MR. SAINES: Okay. As I stated earlier, we
    19 are going to withdraw Question Nos. 2 and 3. In
    20 addition, we'd like to withdraw Question No. 4, and
    21 we will proceed to Question No. 13 of Page 24.
    22 On Page 7 of your testimony under the
    23 Section entitled, quote, baseline allotment
    24 allocation, end quote, what is an, quote, emission
    L.A. REPORTING - (312) 419-9292

    1320
    1 rate for each component year?
    2 MR. KOLAZ: That phrase was intended to refer
    3 to the specific amount of emissions from each of the
    4 years that are used to establish the baseline. So
    5 each of those years is referred to a component year,
    6 that is, a component of the baseline.
    7 MR. SAINES: Okay. Question 14, on Page 10 of
    8 the testimony under the section entitled, quote, ACMA
    9 account, end quote, is direct access equivalent to
    10 regular access as defined in Section 205.610(b) of
    11 the proposed rules?
    12 MR. KOLAZ: Yes.
    13 MR. SAINES: Question No. 15, what are the,
    14 quote, designated sources, end quote, mentioned in
    15 the above section?
    16 MR. KOLAZ: Those are sources that have been
    17 given approval to have regular access to the ACMA
    18 account.
    19 MR. SAINES: Question 16 on Page 9 of the
    20 testimony under the section entitled, quote, account
    21 officers, end quote, what is an expedited tracking
    22 plan?
    23 MR. KOLAZ: In the Section 205.520 of the
    24 rules, there is a provision that allows a source to
    L.A. REPORTING - (312) 419-9292

    1321
    1 request an expedited processing of an application for
    2 an account officer, and it's our intention to flag
    3 those situations where a source is asking us to
    4 expedite our approval of an account officer.
    5 MR. SAINES: Just a quick clarification, when
    6 you say flag, what do you mean by flag?
    7 MR. KOLAZ: Some type of indication that this
    8 particular application request has been asked to be
    9 expedited.
    10 MR. SAINES: Okay. Thank you.
    11 MR. KOLAZ: I'll mention maybe to provide a
    12 little clarification that the expedited provision is
    13 under 205.520 paragraph (d), and that might explain
    14 it a little bit more in detail.
    15 MR. SAINES: Thank you.
    16 MR. DESHARNAIS: Okay. That concludes the
    17 remaining questions directed to Mr.
    Kolaz. We will
    18 now go back to the Agency's list of
    prefiled
    19 questions, those questions concerning proportionate
    20 share beginning with questions from Tenneco.
    21 Mr.
    Forcade?
    22 MR. FORCADE: Yes. Thank you.
    23 Question No. 1 on Page 37 of our January
    24 27th submission, does the emission data in Table I
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    1322
    1 titled 1970 to 2000 Chicago VOM Emissions Summary of
    2 the Exhibits for the Illinois EPA's Air Quality
    3 Strategy Presentation Table 1 include only sources
    4 within the Chicago
    nonattainment area or does Table I
    5 include all sources within 25 miles of the Chicago
    6 nonattainment area?
    7 MR. FORBES: Table I includes only
    8 anthropogenic VOM emissions within the Chicago ozone
    9 nonattainment area.
    10 MR. FORCADE: It includes none outside of the
    11 Chicago ozone
    nonattainment area?
    12 MR. FORBES: None.
    13 MR. FORCADE: I would strike Question 2, strike
    14 Question 3, strike Question 4, strike Question 5,
    15 strike Question 6.
    16 On Question 7, I would ask the question
    17 itself, but not the subparts.
    18 What are the 1990 emissions from non-ERMS
    19 participating point sources?
    20 MR. FORBES: The 1990 emissions for non-ERMS
    21 participating point sources is 112.
    22 MR. FORCADE: One
    one two?
    23 MR. FORBES: One
    one two tons per day.
    24 MR. FORCADE: Tons per day. And I would strike
    L.A. REPORTING - (312) 419-9292

    1323
    1 the remainder and go to Question 8.
    2 What are the 1990 emissions from ERMS
    3 participating point sources?
    4 MR. FORBES: 201.
    5 MR. FORCADE: 201 tons per day?
    6 MR. FORBES: Tons per day.
    7 MR. FORCADE: I would strike the remainder of
    8 Question 9 -- excuse me -- of Question 8.
    9 And Question 9, what were the 1970 and
    10 1990 emissions and 1996, '99, and 2007 emissions
    11 generated by direct combustion units designed and
    12 used for comfort heating purposes, fuel combustion
    13 emission units, and internal combustion engines in
    14 the Chicago
    nonattainment area?
    15 MR. FORBES: The 1990 emissions from such units
    16 in the entire Chicago
    nonattainment area is 5.17 tons
    17 per day. The '96 emissions are estimated to be 5.50
    18 tons per day. The 1999 emissions are estimated to
    19 be 5.62 tons per day. The 2007 emissions are
    20 estimated to be 5.94 tons per day. And data is not
    21 available for us to determine the 1970 emissions from
    22 those units.
    23 MR. FORCADE: Fine. Thank you.
    24 Did the Agency perform -- this is
    L.A. REPORTING - (312) 419-9292

    1324
    1 Question 10 -- did the Agency perform an analysis of
    2 the proportionate share of direct combustion units
    3 designed to be used for comfort heating purposes,
    4 fuel combustion emission units, and internal
    5 combustion engines?
    6 MR. FORBES: No, we did not.
    7 MR. DESHARNAIS: Okay. The next
    prefiled
    8 questions concerning proportionate share comes from
    9 the ERMS Coalition, Questions 2, 3, 4, 5, 6, 7, 8,
    10 and 9.
    11 MS. MIHELIC: At this time, I'd also like to
    12 ask Question 1 because that question was deferred.
    13 MS. SAWYER: No, that question was objected
    14 to, and the objection was sustained.
    15 MS. MIHELIC: On Page 394 of the transcript
    16 from the first two days --
    17 MS. SAWYER: But then when you asked it again,
    18 we objected and it was sustained.
    19 MS. MIHELIC: As to what does proportionate
    20 share mean?
    21 MS. SAWYER: Yes.
    22 MS. MIHELIC: I have in here that it was
    23 directed to Mr.
    Mathur.
    24 MS. SAWYER: You asked the question on -- I am
    L.A. REPORTING - (312) 419-9292

    1325
    1 trying to think of the date -- the 2nd or 3rd -- or
    2 3rd or 4th, and it was objected to, and the objection
    3 was sustained. We answered the question, and you
    4 were asking it again and again. And it was --
    5 MR. DESHARNAIS: Okay. Let's see.
    6 MS. MCFAWN: Are you talking about --
    7 MR. DESHARNAIS: Is this Question 1, general
    8 concerns, sub (a), traditional forms of regulatory
    9 relief, Question 1?
    10 MS. MIHELIC: No.
    11 MR. DESHARNAIS: Okay. What's the page number?
    12 MS. MIHELIC: This is on Page 7, Section (b).
    13 It's in Section 4(b), Question 1 -- or 3(b) -- I'm
    14 sorry, I was looking down the row -- 3(b), Page 7,
    15 (b)1.
    16 MS. MCFAWN: Can we just go off the record for
    17 a minute?
    18 (Discussion had off the
    19 record.)
    20 MS. MIHELIC: These are not our
    prefiled
    21 questions. These are the questions that have been
    22 revised, so they are Questions 2 through 9 in
    23 Section -- that have been modified in Section (b),
    24 3(b).
    L.A. REPORTING - (312) 419-9292

    1326
    1 Question No. 2, did the Agency calculate
    2 proportionate share based upon a level of zero
    3 controls on all sectors, the controls existing at
    4 stationary sources in 1996 or some other baseline
    5 year?
    6 MR. FORBES: The Agency based its calculation
    7 of the proportionate share on the level of emissions
    8 for sectors, all sectors, in 1996, inclusive of all
    9 projected controls required through 1996.
    10 MS. MIHELIC: Can you read back that answer?
    11 I'm not sure I understand it.
    12 (Record read as requested.)
    13 MS. MIHELIC: To clarify your answer, so the
    14 proportionate share was based on 1996 forward, not
    15 1994 forward; correct? The proportionate share
    16 numbers you have given in the past were based upon
    17 1996 controls forward?
    18 MR. FORBES: 1996.
    19 MS. MIHELIC: Question No. 3 has been asked and
    20 answered.
    21 Question No. 4, what are the emission
    22 reductions in terms of ton per season required in
    23 immobile area sources from 1996 to 1999?
    24 MR. FORBES: Okay. The Agency has not
    L.A. REPORTING - (312) 419-9292

    1327
    1 calculated immobile area source emissions on a tons
    2 per season basis since their quality in the Clean Air
    3 Act rate of
    progess requirements are based on ozone
    4 season weekday emission units expressed in tons per
    5 day.
    6 The ERMS program is unique in its use of
    7 a seasonal control period. Consequently, the Agency
    8 has converted the ERMS program reductions to a tons
    9 per day basis to evaluate and demonstrate that ROP
    10 requirements are being met.
    11 On that basis, the area immobile source
    12 reductions called for in the ROP plan are 13 and 34
    13 tons per day respectively from 1996 through 1999.
    14 MS. MIHELIC: What is the proportionate share
    15 of immobile sources for meeting the 1999 goals in
    16 terms of tons per season? That's Question No. 5.
    17 MR. FORBES: As stated, we have not calculated
    18 the emissions on a tons per season basis; but on the
    19 basis of tons per day, the proportionate share for
    20 immobile sources based on the 1990 rate of progress
    21 goal is 31 tons per day.
    22 MS. MIHELIC: And if you just multiplied that
    23 out by the days in the season, would you get a tons
    24 per season number?
    L.A. REPORTING - (312) 419-9292

    1328
    1 MR. FORBES: No.
    2 MS. MIHELIC: Why not?
    3 MR. FORBES: Because mobile sources don't
    4 act
    uniformally from hour-to-hour, day-to-day,
    5 season-to-season.
    6 MS. MIHELIC: Question No. 6, your answer would
    7 be the same as 4 and 5, is that correct?
    8 MR. FORBES: No. 6?
    9 MS. MIHELIC:
    Uh-huh.
    10 MR. FORBES: With respect to tons per season,
    11 that's correct; but as previously answered by Mr.
    12 Mathur on I think it was Page 157 of the January 21st
    13 transcript, the Agency does not know what the
    14 attainment target is yet. Once the Agency has an
    15 overall target, it will be able to determine what the
    16 strategy for attainment should be and thus determine
    17 the proportionate share for attainment.
    18 MS. MIHELIC: We submit that Questions 7 and 8
    19 have been answered by Mr.
    Forbes' previous answers.
    20 Question No. 9, how would the Agency
    21 assure that stationary sources will not be required
    22 to reduce emissions to an extent that exceeds their
    23 proportionate share?
    24 MR. FORBES: The Agency believes that by
    L.A. REPORTING - (312) 419-9292

    1329
    1 design, the ERMS rule will only require a 12 percent
    2 reduction from stationary sources. As previously
    3 stated, the ERMS source's contribution to -- well,
    4 actually because we changed questions, I should say
    5 the ERMS source's contribution to regional
    6 nonattainment contributions is over 13 percent;
    7 therefore, the 12 percent reduction required in the
    8 rule, the ERMS rule, along with the Agency's
    9 demonstration of the proportionality of the
    10 reduction, we believe it provides this assurance.
    11 MS. MIHELIC: And this assurance is only for
    12 the 1999 goals; it is not the assurance for the
    13 attainment; is that correct?
    14 MR. FORBES: That's correct.
    15 MS. MIHELIC: And so how will the Agency assure
    16 that stationary sources will not be required to
    17 reduce emissions to an extent that it exceeds the
    18 proportionate share to attain the national ambient
    19 air quality standard for ozone?
    20 MR. FORBES: At the time that the Agency
    21 completes its attainment demonstration, that whatever
    22 requirements, whatever further reductions are
    23 proposed will be reviewed with respect to
    24 proportionate share to assure that that is met at
    L.A. REPORTING - (312) 419-9292

    1330
    1 that time.
    2 MR. DESHARNAIS: We'll go off the record for a
    3 minute.
    4 (Discussion had off the
    5 record.)
    6 MR. DESHARNAIS: Ms.
    Mihelic, you indicated you
    7 wished to ask your Question No. 1. What we are going
    8 to do is let you ask that the Agency give your
    9 response, and that will be the end of it. No further
    10 follow-up, and we'll put the question to rest.
    11 MS. MIHELIC: Okay. What does proportionate
    12 share mean?
    13 MS. MCFAWN: Can you read those two questions
    14 together?
    15 MS. MIHELIC: What does proportionate share
    16 mean? And then a follow-up question to that was,
    17 does it reflect one-third reductions from stationary
    18 area immobile sources respectively?
    19 MR. FORBES: I'll answer that.
    20 The Agency believes this to mean the
    21 amount of reduction needed from each emission sector
    22 based on each sector's percent contribution,
    23 projected emissions, and the reductions being sought
    24 from those emissions. It does not mean equal shares
    L.A. REPORTING - (312) 419-9292

    1331
    1 of reductions or one-third and one-third and
    2 one-third for point area immobile source sectors
    3 respectively.
    4 Further in context of Section 9.8(c) of
    5 the Act, the Agency believes that proportionate share
    6 should not reduce emissions for ERMS participants to
    7 an extent greater than their relative contribution
    8 for
    nonattainment area emissions needed for
    9 attainment.
    10 The relative contribution of ERMS
    11 participating sources for a total 1996 emissions is
    12 13.4 percent. The ERMS rule which is not being
    13 sought for attainment purposes, but only for the
    14 first 3 percent rate of progress period, requires a
    15 12 percent reduction from ERMS participating sources.
    16 MR. DESHARNAIS: Ms.
    Mihelic, if you have any
    17 further follow-up on that question, if you are
    18 unhappy with it, you can address it further in
    19 testimony or in subsequent comments.
    20 MS. MIHELIC: I have no further questions at
    21 this time.
    22 MR. DESHARNAIS: Thank you.
    23 We'll go on to the general questions
    24 beginning with questions from Tenneco, questions 1
    L.A. REPORTING - (312) 419-9292

    1332
    1 through 14.
    2 MR. FORCADE: Right. We would move to strike 1
    3 through 5. I think they have been answered.
    4 No. 6, there are state rules in other
    5 parts of the country addressing area sources. Why is
    6 the Agency not attempting to adopt similar rules in
    7 conjunction with ERMS?
    8 MR. FORBES: I'll answer that. Actually, the
    9 Agency is seeking to adopt additional area source
    10 regulations. We have filed a rule that will control
    11 emissions from cold cleaner greasing operations, and
    12 those are our area sources.
    13 MR. FORCADE: Why have you not proposed more
    14 than just the one area source regulation?
    15 MR. FORBES: As stated in our technical support
    16 document, we have reviewed various categories of
    17 emissions that we believe would be available for
    18 control; and considering the fact of those that have
    19 already been controlled either in the 15 percent rate
    20 of progress plan or those that are currently being
    21 controlled through federal regulations programs, we
    22 could identify only this particular -- that is the
    23 cold cleaning greaser rule as being the only readily
    24 available category for reductions at this time.
    L.A. REPORTING - (312) 419-9292

    1333
    1 MR. FORCADE: We'd like to strike Question 7
    2 and slightly modify Question 8.
    3 Mr.
    Kanerva stated that the ERMS program
    4 is set up such that the facilities know exactly what
    5 the strategy is and where they stand. And I'm going
    6 to break this into three parts.
    7 Am I correct that a few days ago, the
    8 U.S. EPA published a notice in the federal register
    9 announcing that the results of the OTAG group would
    10 not be available in their term in recommending some
    11 action that U.S. EPA was going to take on future
    12 reduction in states?
    13 MR. MATHUR: Your understanding is correct.
    14 MR. FORCADE: All right. Rather than me
    15 attempting to read it, can you briefly summarize what
    16 you believe is stated?
    17 MR. MATHUR: I think it will help Mr.
    Forcade
    18 and the Board if I explain the relationship between
    19 OTAG and ERMS because from the questions you have
    20 withdrawn from other questions, it is becoming
    21 apparent that there's a lot of misunderstanding and
    22 misconceptions about OTAG.
    23 As I explained in my testimony on the
    24 first day of these proceedings, OTAG is an off-shoot
    L.A. REPORTING - (312) 419-9292

    1334
    1 of a realization in the Chicago area and elsewhere
    2 that there is substantial transport of pollution into
    3 nonattainment areas. Therefore,
    nonattainment areas
    4 by themselves are not in a position to provide the
    5 necessary level of emission reductions to demonstrate
    6 attainment.
    7 Consequently, a national air quality
    8 controlled strategy that is evolving is that to
    9 demonstrate attainment for ozone, there would have to
    10 be a combination of regional pollution reductions and
    11 reductions of emissions within the
    nonattainment
    12 areas.
    13 OTAG is the process that is being
    14 utilized nationally to determine what might be the
    15 strategy that can be put into place on a regional
    16 basis. After there is some understanding of what can
    17 or cannot be accomplished by OTAG, the Agency will
    18 then re-evaluate the degree of emission reductions
    19 still necessary in the Chicago
    nonattainment area.
    20 As I have also testified previously, the
    21 only pollutant that we believe will provide ozone
    22 reductions in the Chicago area is
    VOCs, VOMs.
    23 So the bottom line really is once OTAG
    24 makes its recommendations, we will be in the position
    L.A. REPORTING - (312) 419-9292

    1335
    1 to determine how much VOC reduction is necessary in
    2 Chicago.
    3 Depending on federal policy, it is our
    4 strategy that once we have established the levels of
    5 reductions and their impact in Illinois, we will
    6 assume that those reductions will go into place based
    7 on either state or federal action and will then focus
    8 our attention on the remaining VOC reductions
    9 necessary in Chicago.
    10 What EPA has done in the last several
    11 weeks is to inform states that they intend to send
    12 states SIP call notices which is essentially a letter
    13 to the state telling the state that their ozone
    14 attainment plan is deficient; and that based on OTAG
    15 and any other information that EPA has, they will be
    16 requiring of states the necessary reductions to
    17 achieve the regional pollutant reduction strategies
    18 that hopefully are the ones that have been developed
    19 by OTAG.
    20 So what Mr.
    Forcade referred to was an
    21 EPA advance notice of proposed rulemaking that is
    22 providing the states with notice that such SIP calls
    23 should be expected in the future.
    24 MR. FORCADE: Do you have any information as to
    L.A. REPORTING - (312) 419-9292

    1336
    1 what U.S. EPA's intentions are in the SIP call letter
    2 with respect to the amount of VOC reductions that
    3 will be required in the Chicago ozone
    nonattainment
    4 area or any other area nationally?
    5 MR. MATHUR: Mr.
    Forcade, as I explained, the
    6 SIP calls would be for the purposes of addressing
    7 regional emission reductions and reduce boundary
    8 ozone. What needs to be done in the Chicago
    9 nonattainment area will not be a part of that SIP
    10 call. It will be left for the state to determine
    11 after it has understood the impact of these regional
    12 reductions.
    13 MR. FORCADE: Do you have any indication from
    14 U.S. EPA in any form whatsoever as to the nature of
    15 the VOC reductions that would be necessary and the
    16 boundary areas?
    17 MR. MATHUR: No.
    18 MR. FORCADE: Are there any written documents
    19 describing what is going to be in the SIP call letter
    20 that you are aware of except those contained in the
    21 federal register notice?
    22 MR. MATHUR: No.
    23 MR. FORCADE: Do you have any guidance from
    24 U.S. EPA on what states can do to achieve whatever
    L.A. REPORTING - (312) 419-9292

    1337
    1 reductions are likely to be predicated or described
    2 in the SIP call letter?
    3 MR. MATHUR: No.
    4 MR. FORCADE: Is there any additional
    5 information circulating within OTAG to help explain
    6 how this policy that U.S. EPA has announced will be
    7 implemented?
    8 MR. MATHUR: No. Those policies will come
    9 from.
    10 MR. FORCADE: But as of now, there are no
    11 written documents that you are aware of?
    12 MR. MATHUR: That's correct.
    13 MR. FORCADE: Okay. We would like to strike 9
    14 through 14 and have our final question next.
    15 MS. SAWYER: Your final question --
    16 MR. FORCADE: It's called final question.
    17 MS. MCFAWN: On Page 14 of his
    prefiled
    18 questions.
    19 MS. SAWYER: We didn't include that because we
    20 thought it had an economic spin to it, and we wanted
    21 to hold it over for the economic testimony.
    22 MR. FORCADE: Fine.
    23 MR. DESHARNAIS: We'll move on to the
    prefiled
    24 questions from Dart, Questions 4, 6, and 11.
    L.A. REPORTING - (312) 419-9292

    1338
    1 MR. NEWCOMB: Mr.
    Newcomb on behalf of Dart.
    2 Questions 4, 6, and 11 have either
    3 been asked and answered or I am going to voluntarily
    4 actually withdraw Question No. 6 for the Agency's
    5 benefit.
    6 MR. DESHARNAIS: Thank you.
    7 Okay. Continuing with the Agency's list
    8 of
    prefiled questions, we have the questions from
    9 Mr.
    Trepanier, Questions 1, 2, 3(c), 4, 5, 6, 20.
    10 MR. TREPANIER: Okay. I am going to withdraw
    11 Question No. 26 and those two that follow that, and
    12 I'll ask 1, 2, 3(c), 4, 5 and 6.
    13 Question 1, did the Agency hold a general
    14 public meeting during the development of this
    15 proposal to invite public environmental concerns
    16 regarding this proposal; if not, why not?
    17 MR. ROMAINE: As explained by Mr.
    Kanerva,
    18 during the development of the training program
    19 within the last several years, the Agency has met
    20 with various interested persons and groups at
    21 different times in different forums.
    22 Over the last year while we were
    23 developing our rules, we distributed drafts of the
    24 proposal to the interested parties. These activities
    L.A. REPORTING - (312) 419-9292

    1339
    1 were part of the Agency's outreach efforts on the
    2 emission reduction market system, and they were
    3 focused on obtaining feedback and suggestions on the
    4 proposal. These activities did not include holding a
    5 general meeting at which the Agency would be present
    6 to hear public comments on the Agency's draft
    7 proposal. This was because the Agency's outreach is
    8 not the same as rulemaking.
    9 Rulemaking is what the Board is doing
    10 with the Agency's proposal. They are formal
    11 requirements for the public participation activities
    12 associated with rulemaking, including specific
    13 requirements for notice, holding of hearings,
    14 scheduling of comment periods. These activities are
    15 mandated by state and board rules.
    16 Agency outreach, on the other hand, is a
    17 less formal process of seeking input and feedback on
    18 a proposed Agency action.
    19 MR. TREPANIER: The Agency provided various
    20 interested groups. How did the Agency describe
    21 these?
    22 MR. ROMAINE: We have compiled lists as part of
    23 our Clean Air Act forum of people that were
    24 interested in ozone attainment planning in this area.
    L.A. REPORTING - (312) 419-9292

    1340
    1 MR. TREPANIER: And besides the list for the
    2 Clean Air Act forum, is there another mailing list
    3 developed for this proposal?
    4 MR. ROMAINE: I am not specifically sure how
    5 the outreach mailing list was developed. That is the
    6 outreach mailing list for initial distribution for
    7 the proposal to interested parties.
    8 MR. TREPANIER: Earlier in the proceeding, the
    9 Agency was asked to bring forward the mailing lists
    10 that were developed during the rulemaking. Has that
    11 been accomplished?
    12 MS. SAWYER: I don't remember agreeing to
    13 that. I remember it coming up, but I don't remember
    14 the actual resolution of the issue.
    15 MR. TREPANIER: My recollection is the first
    16 days of hearing, the Board member of the forum asked
    17 that the Agency would bring forward these mailing
    18 lists to resolve the question of what mailing list
    19 was used.
    20 MS. MCFAWN: Well, I don't have the transcript
    21 here with me. Let me interject here.
    22 Does the Agency have an objection to
    23 bringing those mailing lists to this proceeding?
    24 MS. SAWYER: We don't have an objection. I'm
    L.A. REPORTING - (312) 419-9292

    1341
    1 not sure that it's particularly relevant.
    2 MS. MCFAWN: I question the relevancy of it
    3 too, but maybe you would just like to supply it to
    4 Mr.
    Trepanier.
    5 MS. SAWYER: Okay. That's fine.
    6 MS. MCFAWN: Would that be satisfactory?
    7 MR. TREPANIER: Thank you.
    8 Question 2, is it Agency policy to notify
    9 those who request notice during the development of a
    10 certain proposed regulation when and if the proposal
    11 is presented to the Pollution Control Board; if not,
    12 what is the Agency's policy upon public involvement
    13 and rulemaking?
    14 MR. ROMAINE: As a procedural matter, we are
    15 not required to notify people when we file a
    16 repertory proposal with the Board. This is because
    17 the Board's formal procedures serve to notify people
    18 that the Board has taken on work on a regulatory
    19 proposal. However, if individuals specifically ask
    20 the Agency to notify them when we file the proposed
    21 rule with the Board, we will attempt to accommodate
    22 them. This will be done as a common courtesy.
    23 However, such a request would be a special request.
    24 By that, I mean that there may not be a specific
    L.A. REPORTING - (312) 419-9292

    1342
    1 notice list like the service list for the Board's
    2 rulemaking. Instead, the Agency will be relying on a
    3 list or lists really of names put together by
    4 individual staff members.
    5 Because of this, to minimize a possible
    6 misunderstanding, I would certainly recommend that
    7 individuals who do ask to be notified of a filing of
    8 a proposed rulemaking make that request in writing to
    9 the Agency.
    10 MR. TREPANIER: In Question 3, did the Agency
    11 follow their policy of common courtesy for myself,
    12 Lionel
    Trepanier, in this case; if not, why not?
    13 MR. ROMAINE: I don't know. By your question,
    14 apparently you were notified by the Agency when we
    15 filed the proposal. I don't know whether you asked
    16 in writing to be notified.
    17 In any event, I apologize if we
    18 overlooked a particular request and you weren't
    19 notified and you asked to be notified.
    20 MR. TREPANIER: Question 3(b), did the Agency
    21 distribute a fourth draft honor of this proposal on
    22 or about July 23rd to whom was the ERMS mailing list
    23 notified?
    24 MR. ROMAINE: Yes, we did. We distributed --
    L.A. REPORTING - (312) 419-9292

    1343
    1 or it's my understanding that we distributed the
    2 fourth draft to a list of companies, trade
    3 associations, environmental groups, and it provided
    4 detailed feedback where it otherwise demonstrated
    5 significant interests in the proposal. We did not,
    6 however, notify the total outreach mailing list.
    7 MR. TREPANIER: Question 4, does the Agency's
    8 supporting documentation filed with the proposal
    9 state that environmental groups are, quote,
    10 substantially in agreement with the Agency, unquote,
    11 on this proposal?
    12 MR. ROMAINE: I think that's what could be read
    13 into the supporting documentation. I think I'd have
    14 to clarify that we are not necessarily saying that
    15 they are in agreement with all the details.
    16 For example, as notified in my -- as
    17 noted in my own testimony, certainly there is not
    18 agreement on the concept of shutdowns and how those
    19 would be dealt with. I think, however, that we would
    20 believe that there is general agreement that the
    21 emission reduction market system does provide a
    22 viable approach to further reduce VOM emissions and
    23 that it cannot be used to relax or undo existing
    24 control requirements.
    L.A. REPORTING - (312) 419-9292

    1344
    1 MR. TREPANIER: Thank you.
    2 Question 5, what organizations are these?
    3 MR. ROMAINE: The ones that come to mind for me
    4 that I definitely know were involved were the
    5 Environmental Defense Fund. They were involved in
    6 the design team. And I also believe there have been
    7 ongoing discussions with the American Lung
    8 Association.
    9 MR. TREPANIER: Following up, is that the
    10 environmental group referred to that was
    11 substantially in agreement with the Agency on the
    12 proposal?
    13 MR. ROMAINE: I think those were the two
    14 specific groups that we were referring to. Citizens
    15 for a Better Environment I think was involved as
    16 well. I don't think they played as significant a
    17 role in the discussion as those two groups.
    18 MR. TREPANIER: Did Citizens for a Better
    19 Environment give a comment on the proposal?
    20 MR. ROMAINE: I don't remember seeing written
    21 comments from them.
    22 MR. TREPANIER: Okay. I'll withdraw Question
    23 No. 6. That's not necessary. Thank you.
    24 MR. DESHARNAIS: Mr.
    Trepanier, it also lists
    L.A. REPORTING - (312) 419-9292

    1345
    1 Question 26. Has that been addressed?
    2 MS. SAWYER: Yes. He just withdrew that.
    3 MR. DESHARNAIS: Oh, I thought that was No. 6.
    4 MR. SUTTON: He withdrew that earlier.
    5 MS. SAWYER: Earlier.
    6 But there was another question that -- or
    7 two other questions we have here from Mr.
    Trepanier.
    8 One is, I believe, starts in your testimony on Page
    9 7.
    10 MR. TREPANIER: I withdraw that question.
    11 MS. SAWYER: Okay. Then the final one we have
    12 is I think from handwritten questions. There is a
    13 question, where is Appendix A.
    14 MR. TREPANIER: What I could do, I could maybe
    15 address that off the record because I'd like to get a
    16 copy of it.
    17 MS. MCFAWN: Maybe at the close.
    18 MR. TREPANIER: Yes.
    19 MS. SAWYER: I do have a revised copy of
    20 Mr.
    Kanerva's example.
    21 MR. DESHARNAIS: You want to substitute this
    22 for the previous?
    23 MS. SAWYER: Yes, that would be fine.
    24 MR. DESHARNAIS: Is there any objection to
    L.A. REPORTING - (312) 419-9292

    1346
    1 substituting the revised version of Mr.
    Kanerva's
    2 testimony for example -- for Exhibit 47?
    3 Okay. We will make that substitution.
    4 Are there any other matters that need to
    5 be addressed at this time?
    6 Okay.
    7 MR. FORCADE: Is there going to be a revised
    8 errata sheet? I understood the errata sheet had some
    9 minor corrections.
    10 MS. SAWYER: Yes, there is going to be one. We
    11 had a little difficulty with the computer.
    12 MR. DESHARNAIS: Okay. I believe that there
    13 are some additional questions for the Agency's
    14 witness from Elizabeth Ann.
    15 MS. ANN: Just a couple questions.
    16 For the 1999 target level, how are you
    17 going to know if you've met that level considering
    18 that most of the emissions from facilities are in
    19 tons per season when target levels are tons per day?
    20 Are you just going to add up the tons per day with
    21 rule effectiveness or without as is listed in
    22 Appendix E? Does that make sense?
    23 MR. FORBES: Yes. I think the answer to your
    24 question is we would -- stationary sources in the
    L.A. REPORTING - (312) 419-9292

    1347
    1 ERMS program, not all point sources will be in the
    2 ERMS program; but for those that are participating,
    3 we will as in Index E convert their emissions from
    4 tons per day and take the rest of the emissions of
    5 the
    stationary's point source category in tons per
    6 day along with mobile source estimates for 1999 and
    7 areas estimates for 1999.
    8 We will be required to carry out a new
    9 inventory. Part of the Clean Air Act requirements
    10 are that the states do milestone demonstrations to
    11 demonstrate that they do, in fact, meet their target
    12 levels. What EPA has typically been requiring is
    13 that states have somewhere between a year and a half
    14 to two years after the end of the target year to
    15 compile that new inventory and then demonstrate that
    16 they have achieved their target level. So that's
    17 what we would anticipate.
    18 MS. ANN: So you are just going to add up the
    19 tons per day to get the tons per season to get in the
    20 target level?
    21 MR. FORBES: Right.
    22 MS. ANN: Okay. Let's say you've met the 1999
    23 target level, figured out that you've met that level,
    24 so then to meet the target level that was calculated
    L.A. REPORTING - (312) 419-9292

    1348
    1 for 2002, would you then have to reduce again
    2 baseline emissions?
    3 MR. FORBES: What you are asking really is more
    4 to the solution to the attainment demonstration
    5 requirement.
    6 Once we do know all of the things that
    7 Mr.
    Mathur described as needing to be done with
    8 regard to OTAG background levels, the final
    9 determinations for attainment for Chicago, we will
    10 have to re-assess what that target -- well, the
    11 target level essentially is set, but we will have to
    12 re-assess what emissions are and what the remaining
    13 reduction requirements will be at that time and
    14 develop a new submittal that will include all the
    15 necessary further reductions needed.
    16 MS. ANN: Okay. Also, Mr.
    Kolaz, when I was
    17 talking about lapsed
    ATUs, you said that they
    18 referred to possibly using expired
    ATUs for special
    19 access into ACMA.
    20 When would you use expired
    ATUs for a
    21 special access?
    22 MR. KOLAZ: Well, in my testimony -- I don't
    23 have the page number in front of me -- but in my
    24 testimony, I mentioned that at the end of each ozone
    L.A. REPORTING - (312) 419-9292

    1349
    1 season, we would transfer expired
    ATUs into the
    2 ACMA. And under the proposed rule under -- on Page
    3 51, it's 205.610(e) -- Section E generally, but
    4 paragraph (e)(1) specifically, it mentions that one
    5 of the options the Agency has to offset
    ATUs
    6 forwarded from the following seasonal allotment is to
    7 offset these by crediting expired
    ATUs.
    8 So in the example that Mr.
    Kanerva gave,
    9 he gave an example of finding 30 tons of new
    10 reductions. But, for example, if we found at the end
    11 of the reconciliation period that there were the
    12 equivalent of 30 tons of expired
    ATUs that were not
    13 used to retire
    ATUs, we could also offset that credit
    14 amount by those expired
    ATUs.
    15 MS. ANN: Okay. I think I'm a little confused.
    16 MR. KOLAZ: Okay. Let's use Mr.
    Kanerva's
    17 example where we had requests for special access to
    18 the ACMA, and the circumstance, let's assume, is one
    19 where everyone met -- the person met their criteria.
    20 I mean, they showed that they needed these to
    21 reconcile their emissions from the preceding year,
    22 they made all the proper showings, and they asked for
    23 a credit of 550
    ATUs. We would advance those 550
    24 ATUs from the following seasonal allotment.
    L.A. REPORTING - (312) 419-9292

    1350
    1 MS. ANN: Okay.
    2 MR. KOLAZ: Under that Section (e)(1) I
    3 mentioned to you, it says we can offset these
    ATUs by
    4 crediting any expired
    ATUs from the transaction
    5 account from all ERMS participants to the ACMA after
    6 the end of the reconciliation period.
    7 So there might be a company who had
    ATUs
    8 that would expire December 31st if not otherwise
    9 retired. So what we are going to do is take all
    10 these expired
    ATUs after December 31st and use those
    11 to offset any advances to this ACMA under the special
    12 access provision, if you see what I mean.
    13 MS. ANN: Okay. So instead of looking for a
    14 new way to reducing emissions someplace else as in
    15 Mr.
    Kanerva's example, you would have just taken 300
    16 ATUs that were expired and put them for special
    17 access for the following year that you took the
    ATUs
    18 from?
    19 MR. KOLAZ: That's correct.
    20 MR. ROMAINE: If I may interject, that that act
    21 should be sufficient to make the special access to
    22 restore the system so that it isn't necessary to
    23 debit the next year's allotment to the ACMA. You
    24 would still be under a general obligation to take
    L.A. REPORTING - (312) 419-9292

    1351
    1 whatever funds we got from special access to also
    2 take those funds and also acquire additional emission
    3 reductions. That note would excuse us from the
    4 obligation to use whatever funds were required.
    5 MS. ANN: So if you went and took all the
    6 monies from ACMA and you couldn't find any ways to
    7 reduce emissions elsewhere, then you would use the
    8 expired
    ATUs to, let's say, replenish the amount for
    9 regular access for the following year that you took
    10 out for special access for the prior year?
    11 MR. KOLAZ: You know, I think actually that
    12 confuses two things. There could be a situation --
    13 and several of the questions over the last day or two
    14 talk about this -- there could be a situation where a
    15 company chooses for whatever reason not to sell their
    16 excess
    ATUs. The situation I use, I mean, the more
    17 ideal situation would be that the company with the
    18 300 excess
    ATUs would sell them to that person that
    19 needed them to reconcile their emissions. One of the
    20 provisions of acquiring the special access to the
    21 ACMA is that the company demonstrate that they could
    22 not acquire them on the market.
    23 So certainly one of the things we would
    24 do would be to look to the electronic bulletin board
    L.A. REPORTING - (312) 419-9292

    1352
    1 of the ACMA, and we might even choose to actually put
    2 out a notice that, you know, here's a company that
    3 needs 300
    ATUs; is someone willing to sell them. So
    4 hopefully that would be enough to get those
    ATUs
    5 before they would expire.
    6 But my point is if a company for whatever
    7 reason chooses not to sell, but at the end of the
    8 season we have forwarded the equivalent of 300
    ATUs
    9 from the following season, I mean, the season coming
    10 up, then we would take those expired
    ATUs that a
    11 company could have sold to that company, put them
    12 into the ACMA, and sell them ourselves to this person
    13 who needed them.
    14 MS. ANN: Okay. When a company at the end of
    15 the season, you know, says we have 100
    ATUs, and it
    16 reconciles with their emissions, those
    ATUs are then
    17 expired?
    18 MR. KOLAZ: They are retired.
    19 MS. ANN: They are retired?
    20 MR. KOLAZ: They are retired.
    21 MS. ANN: Okay. So any
    ATUs that are used are
    22 retired?
    23 MR. KOLAZ: Yes.
    24 MS. ANN: And
    ATUs that are expired are never
    L.A. REPORTING - (312) 419-9292

    1353
    1 used?
    2 MR. KOLAZ: Those are the ones that have gone
    3 unused.
    4 MS. ANN: Okay.
    5 MR. DESHARNAIS: Any additional matters at this
    6 time?
    7 Okay. This hearing will be continued on
    8 the record until March 10th at 9:00 a.m. That
    9 hearing is expected to continue also on March 11th.
    10 This will be for the purposes of the Agency's
    11 presentation of its economic presentation.
    12 Additionally, hearings are anticipated to
    13 be scheduled for beginning April 21st for other
    14 participants to present their testimony as
    15 anticipated at the comment period, and these hearings
    16 will extend through May 16th.
    17 And there are no other matters?
    18 Ms.
    Mihelic?
    19 MS. MIHELIC: There are a lot of questions that
    20 the Agency has stated it will answer in written
    21 comments, and I'm not sure if we ever decided upon a
    22 date by which those would be submitted.
    23 MS. SAWYER: I don't think we did.
    24 I'm just looking for my calendar.
    L.A. REPORTING - (312) 419-9292

    1354
    1 Is it your preference that it's done so
    2 before the next hearing?
    3 MR. FORCADE: Yes.
    4 MS. SAWYER: How about Friday the 21st of
    5 February?
    6 MS. MIHELIC: That's fine with me.
    7 MR. FORCADE: Yes.
    8 THE HEARING OFFICER: Okay. Thank you.
    9 There are no other matters?
    10 This hearing is continued on the record
    11 until March 10th, 9:00 a.m. Thank you.
    12
    13 (Which were all the proceedings
    14 had at this time.)
    15
    16
    17
    18
    19
    20
    21
    22
    23
    24
    L.A. REPORTING - (312) 419-9292

    1355
    1 STATE OF ILLINOIS )
    ) SS.
    2 COUNTY OF C O
    O K )
    3 I, MICHELLE M. DOSE,
    C.S.R., a Notary
    4 Public in and for the County of Cook and State of
    5 Illinois, do hereby certify that the testimony then
    6 given by all participants of the rulemaking hearing
    7 was by me reduced to writing by means of machine
    8 shorthand and afterwards transcribed upon a computer,
    9 and the foregoing is a true and correct transcript.
    10 I further certify that I am not counsel
    11 for nor in any way related to any of the parties to
    12 this procedure, nor am I in any way interested in the
    13 outcome thereof.
    14 In testimony whereof, I have hereunto set
    15 my hand and affixed my
    notarial seal this 24th day of
    16 February, 1997.
    17 ___________________________________
    Certified Shorthand Reporter
    18 Notary Public, Cook County, Illinois
    C.S.R. License No. 084-003420
    19
    20 SUBSCRIBED AND SWORN to
    before me this 24th day
    21 of February, 1997.
    22 ______________________________
    Notary Public
    23
    24
    L.A. REPORTING - (312) 419-9292

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