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
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                                                                    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
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             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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             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?
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             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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             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.
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             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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             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
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             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.
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             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
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             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
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             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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             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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             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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             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
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             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
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             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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             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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             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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             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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             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
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             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
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                                                                    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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             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
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                                                                    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?
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             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.
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                                                                    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
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                                                                    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
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             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.
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             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
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                                                                    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.
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             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,
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                                                                    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
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             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?
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                                                                    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
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                                                                    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.
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                                                                    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
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                                                                    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.
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                                                                    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?
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                                                                    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.
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                                                                    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.
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                                                                    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.
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                                                                    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.
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                                                                    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.
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                                                                    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
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                                                                    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
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                                                                    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?
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                                                                    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
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                                                                    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
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                                                                    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
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                                                                    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.
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                                                                    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
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                                                                    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).
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                                                                    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
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                                                                    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
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                                                                    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
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             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
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             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 --
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             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
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             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?
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                                                                    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
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                                                                    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.
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                                                                    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
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                                                                    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
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                                                                    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 --
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                                                                    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.
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                                                                    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
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                                                                    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
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                                                                    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
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                                                                    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
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                                                                    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.
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                                                                    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
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                                                                    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?
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             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
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             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.
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                                                                    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
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                                                                    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.
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                                                                    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
 L.A. REPORTING - (312) 419-9292
                                                                    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
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                                                                    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.
 L.A. REPORTING - (312) 419-9292
                                                                    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
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                                                                    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
 L.A. REPORTING - (312) 419-9292
                                                                    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
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                                                                    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
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             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
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                                                                    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.
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                                                                    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.
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                                                                    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
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                                                                    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
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                                                                    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
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                                                                    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
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                                                                    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.
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                                                                    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.
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                                                                    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.
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                                                                    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
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                                                                    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
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                                                                    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?
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                                                                    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
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                                                                    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
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                                                                    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?
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             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?
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                                                                    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
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                                                                    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
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                                                                    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?
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             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).
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                                                                    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
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                                                                    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
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                                                                    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
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                                                                    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
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                                                                    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.
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                                                                    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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             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
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                                                                    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.
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                                                                    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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             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
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                                                                    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
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                                                                    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
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                                                                    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
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                                                                    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
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             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
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                                                                    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
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             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
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                                                                    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
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             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
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                                                                    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
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                                                                    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
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                                                                    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
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                                                                    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
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                                                                    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
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                                                                    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.
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                                                                    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 --
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                                                                    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
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             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
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                                                                    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
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             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
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                                                                    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
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                                                                    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.
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                                                                    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
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                                                                    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
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                                                                    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
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                                                                    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.
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                                                                    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.
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                                                                    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
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                                                                    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.
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                                                                    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.
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                                                                    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
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                                                                    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.
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                                                                    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,
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                                                                    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
 L.A. REPORTING - (312) 419-9292
                                                                    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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             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
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             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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             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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             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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             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
 L.A. REPORTING - (312) 419-9292
                                                                    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
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                                                                    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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             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?
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             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
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             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
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             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
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                                                                    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
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                                                                    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.
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                                                                    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
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                                                                    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
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                                                                    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?
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                                                                    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
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                                                                    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.
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                                                                    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.
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                                                                    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
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                                                                    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?
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             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
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                                                                    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
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                                                                    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
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                                                                    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
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                                                                    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.
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             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
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                                                                    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
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                                                                    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
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                                                                    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
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                                                                    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.
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                                                                    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
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                                                                    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.
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                                                                    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
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                                                                    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
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                                                                    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 --
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                                                                    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.
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                                                                    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
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                                                                    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
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                                                                    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
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             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
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                                                                    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
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             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.
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             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
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             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
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             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
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                                                                    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.
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                                                                    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
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                                                                    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
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