BEFORE THE ILLINOIS POLLUTION CONTROL BOARD
VOLUME I
IN THE MATTER OF:
)
)
EMISSIONS REDUCTION MARKET
) R97-13
SYSTEM ADOPTION OF 35 ILL.
) (RULEMAKING)
ADM. CODE 205 AND AMENDMENTS
)
TO 35 ILL. ADM CODE 106.
)
The following is a transcript of a
rulemaking
hearing held in the above-entitled matter, taken
stenographically by LORI ANN ASAUSKAS, CSR, RPR, a
notary public within and for the County of Cook and
State of Illinois, before Chuck
Feinen, Hearing
Officer, at 100 West Randolph Street, Room 9-040,
Chicago, Illinois, on the 21st day of January,
1997, A.D., commencing at the hour of 10:00 o'clock
a.m.
** ** ** ** **
2
1 A P P E A R A N C E S :
2
HEARING TAKEN BEFORE:
3
ILLINOIS POLLUTION CONTROL BOARD,
100 West Randolph Street
4
Suite 11-500
Chicago, Illinois 60601
5
(312) 814-4925
BY: MR. CHUCK FEINEN,
6
HEARING OFFICER.
7 ILLINOIS POLLUTION CONTROL BOARD MEMBERS PRESENT:
8 Ms. Elizabeth Ann
Mr. Kevin Desharnais
9 Ms. Kathleen Hennessey
Mr. Richard McGill
10 Ms. Marili McFawn
Mr. Anad Rao
11 Mr. Hiten Soni
Mr. Joseph Yi
12
ILLINOIS ENVIRONMENTAL PROTECTION AGENCY MEMBERS
13 PRESENT:
14 Ms. Bonnie Sawyer
Mr. Richard Forbes
15 Mr. Bharat Mathur
16 OTHER AUDIENCE MEMBERS WERE PRESENT AT THE HEARING,
BUT NOT LISTED ON THIS APPEARANCE PAGE.
17
18
19
20
21
22
23
24
L.A. REPORTING - (312) 419-9292
3
1
I N D E X
2
PAGES 3
GREETING BY HEARING OFFICER................. 4 - 26 4
TESTIMONY OF DAVID KEE...................... 26 - 34 5
TESTIMONY OF JOHN SUMMERHAYS................ 34 - 37 6
TESTIMONY OF BHARAT MATHUR.................. 47 - 101 7
TESTIMONY OF RICHARD FORBES.................101 - 174 8
TESTIMONY OF PHILIP O'CONNOR................174 - 224 9
CLOSING COMMENTS BY HEARING OFFICER.........224 - 224
10
* * * * * * * *
11
12
E X H I B I T S
13
Marked for
Identification
14
Hearing Exhibit No. 1....................... 55
15 Hearing Exhibit No. 2....................... 56
Hearing Exhibit No. 3....................... 58
16 Hearing Exhibit No. 4....................... 63
Hearing Exhibit No. 5....................... 66
17 Hearing Exhibit No. 6....................... 69
Hearing Exhibit No. 7.......................104
18 Hearing Exhibit No. 8.......................106
Hearing Exhibit No. 9.......................108
19 Hearing Exhibit No. 10......................111
Hearing Exhibit No. 11......................114
20 Hearing Exhibit No. 12......................118
Hearing Exhibit No. 13......................119
21 Hearing Exhibit No. 14......................121
Hearing Exhibit No. 15......................124
22 Hearing Exhibit No. 16......................127
Hearing Exhibit No. 17......................129
23 Hearing Exhibit No. 18......................130
24L.A. REPORTING - (312) 419-9292
4
1
THE HEARING OFFICER: We are going to get
2 started today. Good morning. My name is Chuck
3 Feinen. I'm the assigned hearing officer to this
4 matter. Also here today with the board is
Marili
5 McFawn.
6
MS. McFAWN: Good morning.
7
THE HEARING OFFICER: Joseph
Yi.
8
MR. YI: Good morning.
9
THE HEARING OFFICER: Kathleen
Hennessey.
10
MS. HENNESSEY: Good morning.
11
THE HEARING OFFICER: Richard
McGill --
12
MR. McGILL: Good morning.
13
THE HEARING OFFICER: -- a new assistant to
14 Kathleen Hennessey and Kevin
Desharnais.
15
MR. DESHARNAIS: Good morning.
16
THE HEARING OFFICER: Sitting next to me is
17 Elizabeth Ann, one of our technical unit support
18 staff or member.
19
Also, in the back of the room is
Anad
20 Rao and Hiten Soni, whom we are trying to hide, but 21
they are back there too.
22
The proposal that's before the board
23 today was filed on October 7, 1996, by the agency
24 pursuant to Sections 27 and 28 of the Environmental
L.A. REPORTING - (312) 419-9292
5
1 Protection Act.
2
The proposal includes rules designed to 3
implement Section 9.8 of the act, which is entitled
4 Emissions Reduction Market System.
5
The agency has prefiled some testimony. 6
There have been prefiled questions. There have been 7
two sets of hearings set up for today, tomorrow, and 8
then again on the 3rd and 4th, all of which are as
9 of now designated for the agency to propose their
10 proposal.
11
There have been several hearing officer
12 orders dealing with
prefiled testimony and
prefiled 13
questions that spell out what's been going on, but
14 just for clarification, we were hoping to get
15 prefiled questions in for this first set.
16
Due to some late testimony filing, Chris
17 Romaine's testimony and
prefiled questions for Chris
18 Romaine will be held over for a later date. Most
19 likely, that will be the 3rd and 4th. I don't see
20 any other way around it.
21
Also, in the back, I
should note that
22 there are some handouts from the agency and from the
23 board. The handouts from the board or at least some
24 handouts from the board are a service list as of
L.A. REPORTING - (312) 419-9292
6
1 today's date. That's in the back.
2
Also, in the back, are two lists; the
3 notice list and service list. If you haven't been
4 added to the service list or notice list yet, please 5
feel free to sign your name on the appropriate list
6 in the back.
7
Before we get started, I have indicated 8
that there is a motion that wants to be presented.
9
MR. TREPANIER: Yes. I'm Lionel
Trepanier.
10 I have filed an appearance and I am coming forward
11 as a respondent requesting an extension for
prefiled
12 questions. I have my motion in support of that.
13
Could I bring that to the hearing
14 officer at this time?
15
THE HEARING OFFICER: Yes.
16
Could we go off the record for a little
17 bit?
18
(Whereupon, a discussion
19
was had of f the record.)
20
THE HEARING OFFICER: Mr.
Trepanier filed
21 a motion for an extension of time for filing
prefiled
22 questions.
23
To summarize what the motion states,
24 it's basically due to the late filing of Chris
L.A. REPORTING - (312) 419-9292
7
1 Romaine's testimony and the post office service,
2 and so forth and so on, and that Mr.
Trepanier didn't
3 receive all the testimony until about two business
4 days prior to the required
prefiled date of
5 testimony.
6
What I think the motion asks for is for 7
him to be allowed to ask questions at the February
8 3rd, and if need be, the February 4th hearings.
9
Is that correct?
10
MR. TREPANIER: Yes.
11
THE HEARING OFFICER: That's pretty much a
12 summary of the motion.
13
Bonnie, do you have anything?
14
MS. SAWYER: I'm just wondering are you
15 intending to
prefile questions prior to those dates?
16
MR. TREPANIER: I saw in the order that I
17 received from the board postmarked the 14th of
18 January where it has set a certain date for
19 submission of
prefiled questions.
20
MS. SAWYER: Right. I mean -- but you are
21 going to file it later? You're requesting to file
22 your prefiled questions later, is that correct?
23
MR. TREPANIER: Yes. The contention is that 24
it would be unconstitutional to move forward and not
L.A. REPORTING - (312) 419-9292
8
1 allow an opportunity for meaningful cross-examination
2 of the witnesses.
3
There is a certain right that's being
4 exercised and it would be a denial to not allow the
5 witnesses to be cross-examined in a meaningful way.
6 That includes looking at a proposal and having time
7 to consider that testimony.
8
MS. SAWYER: Certainly. I guess I'm just
9 wondering are you -- did you request a specific date
10 that you want to
prefile testimony on? I didn't
11 quite follow that.
12
THE HEARING OFFICER: I think that what
13 Mr. Trepanier -- do you mean
prefiled questions?
14
MS. SAWYER: Yes, I'm sorry.
15
THE HEARING OFFICER:
I guess maybe to make 16
this a little bit quicker, is there any way that you 17
could prefile questions by January 31st for the
18 witnesses that are here today so they can prepare by
19 the 3rd and 4th to respond to those questions?
20
MR. TREPANIER: That's ten days from now.
21 That seems fairly likely.
22
THE HEARING OFFICER: That's okay then?
23
MR. TREPANIER: Yes.
24
THE HEARING OFFICER: So if I were to grant
L.A. REPORTING - (312) 419-9292
9
1 the motion, you would
prefile your questions and
2 serve the service list with those questions by
3 January 31st and then --
4
MR. TREPANIER: I at least would have the
5 reservations that the agency had in the size of the
6 service list. I have even more concerns being with a
7 very limited income.
8
So I would seek that I file a copy
9 with -- of my
prefiled questions with the clerk and
10 then the clerk make those available to the
11 respondents so that they have it.
12
THE HEARING OFFICER: Unfortunately, I don't 13
think that the board is prepared to do that. Part
14 of the cost of participating in these hearings and
15 filing questions and being on the service list is
16 that you also serve other participants on the service
17 list.
18
If we were to allow participants just to
19 file one copy with the board, the board would then be
20 in the business of serving everybody eventually. We
21 just can't let that happen.
22
MR. TREPANIER: Okay. I understand wh
at
23 you're saying, then, is that you are requesting
24 that the service list be provided with the service
L.A. REPORTING - (312) 419-9292
10
1 or mailed by the 31st of January first class?
2
THE HEARING OFFICER: Excuse me?
3
MR. TREPANIER: The
prefiled questions should
4 be mailed January 31st. That's my understanding of
5 what the board would like and that it be mailed to
6 the service list?
7
THE HEARING OFFICER: That would be
8 sufficient. Of course, if there is any way you can
9 get us a copy because when you mail them on the 31st,
10 it sometimes takes four days and sometimes even
11 longer.
12
If you can give us a copy, we can
13 maybe -- if, like, the agency wants to call us up
14 for that, we can get it to them right away instead
15 of them waiting for it to come in the mail.
16
MR. TREPANIER: Okay. So if I understand
17 this, you want a copy in the office on the 31st?
18
THE HEARING OFFICER: Right, and then you
19 can mail everyone else on the service list a copy
20 of your questions also.
21
MR. TREPANIER: Okay.
22
THE HEARING OFFICER: If that's okay with you 23
and the agency doesn't have any problems with that,
24 I'll grant that motion --
L.A. REPORTING - (312) 419-9292
11
1
MS. SAWYER: That's fine.
2
THE HEARING OFFICER: -- with the condition
3 that Mr. Trepanier get a copy to the board on the
4 31st and then mail a copy to all persons on the
5 service list on the 31st.
6
Then, on the 3rd and 4th, all of the
7 agency witnesses who testify today will be back to
8 respond to those questions.
9
MS. SAWYER: There are a couple of witnesses
10 that we are going to have testify this afternoon.
11 They are not from the agency. They are members of
12 the design team.
13
It wasn't our intention to have them
14 come back on the 3rd and 4th. If you need some
15 time to take a little break to ask them questions
16 or something like that, that's fine.
17
Their testimony is going to be rather
18 general market-based introductory-type stuff. It
19 wasn't our intention, though, to have them come back.
20
THE HEARING OFFICER: Where are these people
21 from?
22
MS. SAWYER: Well, one is from the
23 Environmental Defense Fund. He is out of Washington,
24 D.C. The other two are from the Chicago area. They
L.A. REPORTING - (312) 419-9292
12
1 are from Commonwealth
Edison and --
2
THE HEARING OFFICER: I would expect the
3 people from the Chicago area would be able to --
4
MS. SAWYER: Make it back?
5
THE HEARING OFFICER:
-- make it back. Who
6 is the witness?
7
MS. SAWYER:
Joe Goffman.
8
THE HEARING OFFICER:
Will he be here today?
9
MS. SAWYER: Actually, he won't be here until
10 tomorrow.
11
THE HEARING OFFICER: Did he
prefile his
12 testimony?
13
MS. SAWYER: We prefiled overheads.
14
THE HEARING OFFICER: But you didn't
prefile
15 his testimony?
16
MS. SAWYER: Not specifically, no. He is
17 going to do more of a presentation.
18
THE HEARING OFFICER: Let's go off of the
19 record for a second.
20
(Whereupon, a discussion
21
was had off the record.)
22
THE HEARING OFFICER: Mr.
Trepanier, did you
23 want to ask something or respond?
24
MR. TREPANIER: Yes, I did want to respond
L.A. REPORTING - (312) 419-9292
13
1 to something. I believe that all of the witnesses
2 are subject to the same requirements that they be
3 available for a meaningful cross-examination.
4
I would say that even in this instance,
5 that the material that the agency desires to have the 6
witness testify upon is material that they should
7 have served in an expedited manner as they have
8 requested.
9
If there is any fault that could be
10 found in a situation that presents us where the
11 agency wants to put on testimony, where they had
12 in a timely fashion put in the
prefiled testimony,
13 that's the agency's responsibility, and that was
14 their choice.
15
Now, I th ink presented with this is that
16 we need to hear more from the agency as far as what
17 it is that makes it so important that this witness be
18 put on tomorrow and not on the next hearing when they
19 would allow for the meaningful cross-examination to a
20 person.
21
MS. SAWYER: Well, first of all, this
22 testimony -- the board's order initially required us 23
to prefile testimony by a certain date. We requested 24 a
waiver from the requirement to
prefile all portions
L.A. REPORTING - (312) 419-9292
14
1 of the testimony and for an extension.
2
We did file overheads that these
3 witnesses will be using on January 2nd and we sent
4 them overnight mail to everyone on the service list.
5
At that time you were not -- oh, no.
6 I believe we did send it overnight to you also. So
7 this isn't a portion of the testimony that was filed
8 at the later date.
9
I would like that -- what I would like
10 to happen is that the witness essentially listen to
11 the testimony and make a determination if he believes
12 that he needs additional time to
prefile questions on
13 that.
14
We already have -- the person who is
15 coming from Washington, he has already been scheduled
16 to come in from Washington. He has a flight in. It 17
may be that Mr. Goffman could be available on the
18 later dates. I don't really know.
19
THE HEARING OFFICER: Well, didn't you say
20 that he was going to testify tomorrow afternoon?
21
MS. SAWYER: No, tomorrow morni
ng.
22
THE HEARING OFFICER: Tomorrow morning. And
23 you hope that all of the cross-examination would
24 happen tomorrow?
L.A. REPORTING - (312) 419-9292
15
1
MS. SAWYER: Right. I mean, this testimony
2 is not going to be the detailed technical portions
3 of this rule. It's going to be more general market
4 information.
5
MR. TREPANIER: Well, this clearly -- this
6 information -- that market information is what would
7 be the subject of the inquiry of the board in making
8 a determination if the proposed regulations do
9 fulfill the intent of the Environmental Protection
10 Act's section that's being implemented.
11
Also, I wanted to say that the January
12 2nd filing of the overhead didn't sufficiently
13 provide an opportunity for a basis for a meaningful
14 cross-examination and that's because of the agency's 15
lack of diligence in following the rules and as it
16 says in the motion, they failed to provide the copy
17 of the proposal when the board took this matter and
18 set it for hearing.
19
At that point the rules required that
20 the proposal be available, but it was not. The
21 agency representatives left the board meeting before 22
the end of the meeting and were unavailable at the
23 end of what I believe was on or about December 5th.
24 So a copy of the proposal was not available. I
L.A. REPORTING - (312) 419-9292
16
1 didn't receive that proposal until on or after
2 January 8th.
3
As it says so in the motion, I believe
4 that this agency deliberately failed to allow this
5 rulemaking open for a public review and that's why
6 they didn't use their own mailing list to let the
7 interested parties know that the rule was now pending 8
before the board.
9
THE HEARING OFFICER: Are there any
10 other comments from the audience?
11
Mr. Harsch?
12
MR. HARSCH: I am Roy
Harsch. I think
13 that counsel for the agency has made a very good
14 suggestion. The hearing officer has deferred the
15 ruling until tomorrow when we have had an opportunity
16 to hear the testimony and ask questions from the
17 floor.
18
Perhaps there will be no need for
19 testimony -- the need for additional testimony as
20 questioning is presented and we would have the
21 opportunity then to make appropriate motions for
22 the hearing officer to rule.
23
THE HEARING OFFICER: Okay. This is
24 what I am going to rule. As far as the witnesses
L.A. REPORTING - (312) 419-9292
17
1 that can definitely show up for the 3rd and 4th, I am 2
going to grant the motion.
3
As far as Mr. Goffman's testimony, I'm
4 going to reserve ruling on that until after we hear
5 his testimony and see how much questioning there will 6
be.
7
Additionally, there is an option that
8 we might have to have several more dates for hearings 9
beyond the 3rd and 4th at which time he may be
10 required to come back and provide responses to those 11
questions if he cannot make it in for the 3rd and
12 4th. I will reserve on that until after tomorrow.
13
MS. SAWYER: Okay.
14
THE HEARING OFFICER: Are there any further
15 comments?
16
Do you understand the ruling?
17
MR. TREPANIER: Yes, sir. Thank you.
18
THE HEARING OFFICER: Okay. Let's proceed.
19
Are there any other motions before we
20 start today? Are there any other questions before we
21 start today?
22
All right. Well, then, I would like to 23
turn it over at this time to the agency for their
24 proposal on the
rulemaking.
L.A. REPORTING - (312) 419-9292
18
1
MS. SAWYER:
Good morning. My name
2 is Bonnie Sawyer. I am representing the Illinois
3 Environmental Protection Agency in this matter.
4
The Illinois EPA is proposing a rule
5 today to fulfill the rate of progress requirements
6 of Section 182(c) of the Clean Air Act, which will
7 be described in greater detail in the agency's
8 testimony.
9
The proposed rule is entitled Emission
10 Market Reduction System. It's proposed pursuant to
11 Section 9.8 of the Illinois Environmental Protection 12
Act. This section directed the Illinois EPA to
13 design a market system to meet post-1996 Clean Air
14 Act requirements.
15
There are procedural rules that have
16 been filed to accompany this proposed rule
17 additionally.
18
The agency would like to proceed with
19 questions or proceed with testimony by perhaps a
20 group of people and then ask questions after that.
21
I can describe in greater detail how
22 we would like to proceed. We are going to begin our 23
testimony with David
Kee from the U.S. EPA, Region 5.
24
Mr. Kee will provide testimony on the
L.A. REPORTING - (312) 419-9292
19
1 federal prospective for the need of reductions in
2 emissions and a little bit about the federal and
3 state relationship.
4
If anyone has questions for Mr.
Kee,
5 we would suggest that those questions could be asked
6 immediately following his testimony.
7
Next, the agency will present testimony
8 by Bharat Mathur and Richard
Forbes on the air
9 quality planning aspects on which this proposal is
10 based.
11
It's our hope that both Mr.
Mathur
12 and Mr. Forbes will testify and then we will have
13 questions -- any questions that you choose to
14 ask to them.
15
This will be followed by testimony
16 by several of the members of the team that helped
17 to design the conceptual framework of the proposed
18 rule.
19
These people will be Philip
O'Connor
20 from Palmer and Bellevue, Robert
LaPlaca from
21 Commonwealth
Edison, and Joseph
Goffman of the
22 Enviromental Defense Fund.
23
As I stated earlier, Mr.
Goffman will
24 testify tomorrow. His testimony will be followed by
L.A. REPORTING - (312) 419-9292
20
1 an overview of the proposal by -- presented by Roger
2 Kanerva.
3
After that testimony, we will follow
4 with testimony by Illinois EPA personnel on various
5 components of the rule.
6
After that, we will present an
7 economic -- testimony on the economic analysis
8 performed in support of the proposal and then we
9 will end testimony by several other members of the
10 design team and they will essentially be presenting
11 testimony on their perspective of the proposal.
12
In terms of the questions filed, in
13 some cases, I think it would probably be better to
14 wait until the agency presents its detailed testimony
15 on the various components of the rule to proceed with
16 some of the questions because just in terms of having
17 things going smoothly and the way things are ordered,
18 it would be better if the agency witnesses were there
19 as a panel to respond to the questions.
20
That's all I really had.
21
THE HEARING OFFICER: Let's go off the record,
22 please.
23
(Whereupon, a discussion
24
was had off the record.)
L.A. REPORTING - (312) 419-9292
21
1
THE HEARING OFFICER: I think that's what
2 we are going to do is proceed how the agency
3 proposed. We are going to let people ask their
4 prefiled questions as we go as they pertain to the
5 testimony or the section. At the end of the
prefiled 6
questions, of course, people with
prefiled questions
7 will be allowed some follow-up.
8
At the end of that we will allow people
9 who did not prefile to ask questions. However, we
10 will have to see how that goes. We will reserve the 11
right to move things on and tell people that that's
12 been asked and answered and move on. So if everyone 13
is okay with that, I think we will start with the
14 agency?
15
MR. TREPANIER: I have brought some
prefiled
16 questions.
17
THE HEARING OFFICER: Yes.
18
MR. TREPANIER: So I would like that
19 opportunity to have those addressed at the time of
20 the testimony when it's most appropriate.
21
THE HEARING OFFICER: Did you bring copies
22 or --
23
MR. TREPANIER: I have the originals now. So 24
before the witness comes, do I need to present that
L.A. REPORTING - (312) 419-9292
22
1 to the agency?
2
MS. SAWYER: We would appreciate it if you
3 could give us a copy as soon as possible.
4
MS. McFAWN: Have you filed a copy with the
5 clerk?
6
MR. TREPANIER: No. Having just gotten the
7 previous ruling, I have not filed these.
8
THE HEARING OFFICER: Let's go off the
9 record.
10
(Whereupon, a discussion
11
was had off the record.)
12
THE HEARING OFFICER: Mr.
Trepanier, in the
13 earlier motion this morning, we gave you an extension
14 to file those by the 31st. The agency is going to
15 have all of the witnesses that they will have testify
16 today back again on the 3rd. Maybe we will start
17 out the proceedings on that morning with the
18 questions that you will have filed on the 31st,
19 which would include those that you have there.
20
MR. TREPANIER: Well, I would offer that what 21
my preference and what I'm seeking is that I be
22 allowed to present my questions of these witnesses
23 instanter.
24
THE HEARING OFFICER: Right.
L.A. REPORTING - (312) 419-9292
23
1
MR. TREPANIER:
When I last received the
2 board's order after the 14th, this is my opportunity
3 to come in, you know, real quickly and say I have my
4 questions.
5
THE HEARING OFFICER: Right. What I'm saying
6 is we're going to give you an opportunity on the 3rd
7 to ask all of those questions of the witnesses who
8 will testify today.
9
MR. TREPANIER: I believe some of the purpose
10 of the hearing wouldn't be served if the questions
11 from someone who is coming forward from a point of
12 view claiming that this point of view has been
13 blocked out to then proceed with the testimony in
14 questions on the testimony minus that critical --
15 those critical questions which are available and I
16 do have them to give them to the agency today.
17
THE HEARING OFFICER: Mr.
Trepanier, you filed
18 a motion for an extension on
prefiled questions to
19 ask those questions. I granted the motion so that
20 you could file those at a later date and ask those
21 questions on the 3rd. I think it's sufficient -- I
22 mean, it's fair for you to be allowed to do that.
23
In all honesty, it's fair to allow the
24 agency some time to look at those questions and it's
L.A. REPORTING - (312) 419-9292
24
1 also justifiable. I think what we are going to do is 2
just let you ask your questions on the 3rd.
3
Now, after everyone else has asked their 4
prefiled questions today and there is some rebuttal,
5 we will open the floor for some questions to the
6 general public. If you feel the need to ask those
7 questions then, you can. However, you will still
8 have the right to do it on the 3rd.
9
Now, I'm not going to guarantee today
10 that we are going to have time for everyone to ask
11 questions after the people who have
prefiled
12 questions to ask questions.
13
MR. TREPANIER: Well, I would just add that
14 I would think that would be fair. The testimony is
15 punctured with questions. It would be in that area
16 that's being questioned that Mr.
Trepanier, myself,
17 has questions that he has worked on for
prefiling and
18 immediately following the receipt of this board's
19 order, he has brought them.
20
MS. McFAWN: Have those questions been
21 prefiled with the clerk of the board or are they just
22 in your possession now?
23
MR. TREPANIER: I'm seeking to present them
24 instanter.
L.A. REPORTING - (312) 419-9292
25
1
MS. McFAWN: Generally, this is a
rulemaking.
2 What we try to do is have things
prefiled so they can 3
be reviewed by the agency so that their witnesses can 4
be more responsive to those questions, more fully
5 responsive than they can if the questions are just
6 generally asked
instanter, to use your word.
7
In that way, it makes the record more
8 orderly. It answers your questions more fully. I
9 think what the hearing officer has suggested here is
10 you have several options. You can go ahead and
11 prefile those questions and they will be taken in
12 the order as they are received.
13
You also have the option of waiting
14 until or filing before January 31st and having the
15 opportunity of posing those questions to the agency's
16 witnesses at the next set of hearings in February.
17
You also have the option at the close
18 or at the time of the hearing questions are being
19 posed of the agency's witnesses to ask those
20 questions, and that will probably happen tomorrow
21 based on what I am hearing, and you can ask those not
22 even having prefiled them as time allows, as can
23 anyone else sitting in the audience that has not
24 prefiled questions as of this time.
L.A. REPORTING - (312) 419-9292
26
1
We try to make it an opportunity for
2 yourself and anyone else in the audience to ask
3 questions of the agency's witnesses at a pertinent
4 time, at a critical time, and yet keep our record
5 orderly so we can review the record because it's
6 hard to take in all that's said and it's important
7 that our written record be legible and understandable 8
as is today's proceeding.
9
So I have just laid out the three
10 options. I think the hearing officer has tried to
11 do the same. You are free to exercise any of those
12 options. Okay?
13
THE HEARING OFFICER: Do you want to start the
14 proposal, Bonnie?
15
MS. SAWYER:
Sure. I'll start by introducing
16 our first witness, David
Kee, of the U.S. EPA.
17
THE HEARING OFFICER: Woul
d you swear in the
18 witness?
19
(Witness sworn.)
20 WHEREUPON:
21
D A V I D K E
E ,
22 called as a witness herein, having been first duly
23 sworn, deposeth and saith as follows:
24
MR. KEE: Mr. Hearing Officer, members of
L.A. REPORTING - (312) 419-9292
27
1 the board and staff of the board, good morning.
2
Ladies and gentlemen, my name is
3 David Kee, K-E-E. I am the director of the Air
4 and Radiation Division of Region Five of the
5 United States Environmental Protection Agency.
6
It's a pleasure to be here this
7 morning to present testimony from the United States
8 Environmental Protection Agency on this proposed
9 rule.
10
I have been asked to give a little bit
11 of background information about myself. I will try
12 to keep this brief. I'm a native of Illinois. I
13 was born and raised in Harvey, Illinois. I majored
14 in economics at the University of Illinois.
15
In 1963, I entered federal service with 16
the United States Public Health Service, which is a
17 predecessor agency of the U.S. EPA.
18
In 1970, I actually served as an
19 assistant to the first chairman of this board, David 20
Curry.
21
Since 1979, I have served in my current 22
position, which essentially directs the
23 implementation of the Clean Air Act in the Midwest.
24
With that, I will go ahead into my
L.A. REPORTING - (312) 419-9292
28
1 testimony. Again, the U.S. EPA really does
2 appreciate the efforts that the state of Illinois
3 and other states are putting forth to improve air
4 quality.
5
In the last 25 years, we have made very
6 significant strides in improving air quality, but
7 much remains to be done.
8
U.S. EPA understands the difficulties
9 that states, industries, and our citizens face in
10 achieving greater reductions in emissions.
11
Congress also understood this difficulty
12 and it turned toward innovative emission reduction
13 methods in its 1990 amendments to the Clean Air Act.
14
The most notewort
hy example of a new
15 approach to air pollution control was the Clean Air
16 Act's acid rain programs allocation and trade
17 system.
18
Additionally, the title won
19 nonattainment provisions, authorized the use of
20 innovative approaches such as economic incentives and
21 other market-based approaches.
22
Finally, the Title 5 permit program of
23 the Clean Air Act was designed to accommodate the
24 flexibility needed to implement such programs.
L.A. REPORTING - (312) 419-9292
29
1
The federal government itself is
2 clearly turning towards using the free market to
3 control air pollution and we appreciate the
4 leadership and innovation that the state of Illinois
5 is putting forth in this area and in particular, in
6 the trading system under review in this proceeding.
7
U.S. EPA is further encouraged
8 that Illinois is moving in the right direction to
9 improve its air quality and the air quality of its
10 neighboring states.
11
As for the emissions reduction market
12 rule, U.S. EPA has had several opportunities to
13 review drafts of this rule. We are looking forward
14 to reviewing this rule formally as a state
15 implementation plan revision once it is adopted by
16 the board and submitted today to the federal
17 government by the state of Illinois.
18
On perhaps a more sober note, I should
19 have to note that the U.S. EPA has notified the state
20 of Illinois that it has obligations that it must meet
21 under the Clean Air Act or sanctions will be imposed 22
against the state.
23
The current U.S. EPA policy is that
24 states must submit a state implementation plan
L.A. REPORTING - (312) 419-9292
30
1 revision by December of this year, 1997, to meet
2 the rate of progress requirements for the next
3 three years, that is, by 1999.
4
It is, therefore, important that the
5 board act upon this
rulemaking proposal in a timely
6 manner in order to avoid any possible sanctions.
7
In turn, the U .S. EPA agrees to review
8 the final rule in an expeditious manner.
9
Those are my comments.
10
MS. SAWYER: Thank you, Mr.
Kee.
11
MR. KEE:
Thank you.
12
MS. SAWYER: Are there any questions?
13
MR. TREPANIER: Is that open for anyone to
14 ask a question?
15
THE HEARING OFFICER: Yes, go ahead. Please
16 state your name before asking a question to get it on
17 the record.
18
MR. TREPANIER: I am Lionel
Trepanier. The
19 December 1997 date that you mentioned, how was that
20 determined?
21
MR. KEE: It was 18 months from the time that 22
we notified the state of its failure to submit the
23 rate of progress -- the implementation plan revision.
24
MR. TREPANIER: So on that day, if there is a
L.A. REPORTING - (312) 419-9292
31
1 proposal that the EPA has not made a determination
2 on, that is sufficient for the U.S. EPA?
3
MR. KEE: The state will submit by that date
4 to stop what we call the sanctions clock, which is
5 currently running.
6
MR. TREPANIER: And that
sanction, is that
7 the sanction that would increase the amount of
8 offsets required when major new sources are cited in
9 the nonattainment area?
10
MR. KEE: That is one of the sanctions
11 available to the administrator of the U.S. EPA.
12
MR. TREPANIER: Thank you.
13
THE HEARING OFFICER: Are there any further
14 questions from the audience?
15
From the board?
16
MS. McFAWN: Yes. Mr.
Kee, who is with you
17 today?
18
MR. KEE: John Summerhays of our staff.
19
MS. McFAWN: Welcome.
20
MR. SUMMERHAYS: Thank you.
21
MS. McFAWN: You mentioned that the U.S. EPA
22 is using the market system. Can you tell us a little
23 bit more about that?
24
MR. KEE: Yes. Our Title 4 of the Clean Air
L.A. REPORTING - (312) 419-9292
32
1 Act, which we developed, includes the provisions of
2 the acid rain program.
3
Basically, this is, in my opinion, the
4 most successful part of the Clean Air Act. In
5 essence, Congress allocated to the large utility
6 sources of sulfur dioxide allowance for an annual
7 emission allowance for sulfur dioxide. This program
8 went into effect in its first phase in 1995 and in
9 reality, sulfur dioxide emissions -- particularly in
10 the midwest, which the utilities were still burning
11 high sulfur coal without controls prior to the
12 implementation of this program -- had seen very
13 significant reductions in SO2 emissions and it's
14 being done through a market trading program, which
15 allows individual utilities to determine on a
16 plant-by-plant basis how they meet the overall
17 reduction targets that they can get.
18
MS. McFAWN: Is there anything in that program
19 that you would tell us that would teach us something 20
about this one, any glitches that you have run into, 21 or
anything particularly useful?
22
MR. KEE: I think that that program is perhaps
23 somewhat simpler than what you are endeavoring to
24 do because the monitoring is more straightforward
L.A. REPORTING - (312) 419-9292
33
1 and these are single stacks or individual stacks at
2 each power plant where it's somewhat easier to
3 monitor emissions and thus keep track of the
4 allocations in the trading.
5
I think you are embarking on even a
6 more innovative area in terms of trying to do this
7 same type of trading program or similar trading
8 program for organic compounds.
9
I think the measurement will be the
10 key. You are creating something of value which would
11 be traded and the people who both buy and sell these 12
credits, as they are doing with the acid rain
13 program, will want the assurance that they are
14 actually buying and selling something of value and to
15 do that, there has to be good measurement.
16
MS. McFAWN: You said that you reviewed the
17 preliminary draft that the agency has been working
18 on along with others. Did you have any preliminary
19 comments on those drafts?
20
MR. KEE: I will turn to Mr.
Summerhays.
21
THE HEARING OFFICER: We will need to swear
22 him in if he is going to testify.
23
(Witness sworn.)
24
L.A. REPORTING - (312) 419-9292
34
1 WHEREUPON:
2
J O H N
S U M M E R H A Y S ,
3 called as a witness herein, having been first duly
4 sworn, deposeth and saith as follows:
5
MR. SUMMERHAYS: I'm John
Summerhays.
6
MS. McFAWN: Your position with the agency is?
7
MR. SUMMERHAYS: I'm an environmental
8 scientist in the Air and Radiation Division.
9
MS. McFAWN:
Thank you.
10
MR. SUMMERHAYS: Repeat your questi
on.
11
MS. McFAWN: Mr. Kee had mentioned that you
12 reviewed the preliminary draft that had been
13 circulated by the agency in its attempts to revise
14 this proposal and I just wanted to know if you had
15 any preliminary comments on those drafts.
16
MR. SUMMERHAYS:
In general, we have been
17 supporting the program. We certainly need a rate of 18
progress submittal and this is an innovative approach 19
for getting those reductions. We will be examining
20 the specific rules in more detail and most likely
21 will be filing comments.
22
The main thing I would say is that we
23 think it's a good innovative approach in getting the 24
reductions that are necessary.
L.A. REPORTING - (312) 419-9292
35
1
MS. McFAWN: Nothing at this time would cause
2 you significant concerns with the proposal as is?
3
MR. SUMMERHAYS: There is nothing that causes
4 significant concerns.
5
MS. McFAWN: You mentioned that you were going 6
to file comments. Do you mean with the Pollution
7 Control Board during this proceeding?
8
MR. SUMMERHAYS: We are considering filing
9 comments with you.
10
MS. McFAWN: Okay. That would be most helpful
11 if you file during our
rulemaking. It shortens up
12 our process. I should say the state's process and
13 not just the board's.
14
THE HEARING OFFICER: Please state your name.
15
MR. NEWCOMB: My names if Christopher
Newcomb 16
from Karaganis & White.
17
Are you familiar with the emission
18 reduction market system program regulations that were
19 proposed in southern California?
20
MR. KEE:
Not particularly. I don't know
21 what familiarity John has with them.
22
MR. SUMMERHAYS: I'm somewhat familiar, but
23 not real familiar.
24
MR. KEE: I'm just aware that there was a
L.A. REPORTING - (312) 419-9292
36
1 program attempted. Beyond that, I don't have any
2 specific knowledge of their program.
3
MR. NEWCOMB: So you did not compare whatever
4 that program was in southern California to the
5 proposed program here?
6
MR. KEE: I'm not aware if that's something we 7
can have done or intend to do.
8
MS. MIHELIC: I am
Tracey Mihelic from
9 Gardner, Carton & Douglas.
10
Mr. Kee, are you aware of any other
11 market programs similar to the one being proposed
12 that has been successful elsewhere in other states?
13
MR. KEE: No, I am not.
14
MS. McFAWN: Can I expand on your question?
15
Are you aware of any other states?
16
MR. KEE : Oh, I'm aware of the fact that
17 southern California, the South Coast Air Board, did
18 go down this road. Again, I think that this is the
19 definition of innovation and it is, I think, one of
20 the first.
21
There are, of course, trading --
22 Michigan has a trading rule. It's not a CAAPP and
23 trade type of a program. We are in the process of
24 evaluating that which is before us as a state
L.A. REPORTING - (312) 419-9292
37
1 implementation plan submittal.
2
So I'm aware of the attempts that
3 Michigan has made in the trading area, but again this 4
is in terms of a
nonattainment area that's using the
5 program to meet its rate of progress requirements
6 under the Clean Air Act. I'm not aware of another
7 one that's in place.
8
MS. MIHELIC: Again, I am
Tracey Mihelic.
9 Oh, were you addressing someone behind me?
10
THE HEARING OFFICER: Yes. In the back, why
11 don't you go ahead.
12
MR. BARNES: My names is Cal
Barnes. I'm with
13 Garden Container. The question that I have is you
14 allude to being aware that they went down this road. 15
They have abandoned the program. I just was curious 16 as
to whether they would have made any effort to find 17 out
why they spent all that money and then they
18 abandoned it? What's the key for Illinois going down
19 the same road?
20
MR. KEE: Again, from the prospective of the
21 federal government, I think we want to see Illinois
22 succeed in this case. Certainly, I'm sure that the
23 folks from Illinois have looked at the California
24 situation and weighed that in making their
L.A. REPORTING - (312) 419-9292
38
1 determination to move forward.
2
We are working with Illinois to try to
3 see if we can make this successful. Again, I think,
4 as I indicated, the definition of innovation is
5 someone who is going to have to make -- to step out
6 to make a program like this work. We want to work
7 with Illinois.
8
At the federal government, we are trying
9
to reinvent ourselves. We are trying to be open to
10 innovation. We are trying to find new ways to do
11 things. I would very much like to see this
12 innovative approach proven in the
midwest.
13
MR. SUMMERHAYS: If I could add an answer to
14 that question. The South Coast is continuing to
15 implement a trading program for nitrogen oxide. They
16 have been implementing that for a number of years.
17
MR. BARNES: That is true, but they have
18 abandoned the VOC.
19
MR. SUMMERHAYS: The
y are proceeding towards
20 implementing the program -- extending the program to 21
regulate VOC as well.
22
They had difficulty agreeing on how to
23 assess baseline emissions in part because of
24 recessionary circumstances and business swings.
L.A. REPORTING - (312) 419-9292
39
1 So they were unable to agree on how to set baseline
2 emissions.
3
MR. BARNES: I didn't know why they abandoned
4 it.
5
MR. SUMMERHAYS: That is why they failed to
6 proceed to complete the program.
7
THE HEARING OFFICER:
Let's try to ask
8 questions and keep it to questions instead of
9 testifying.
10
Ms. Mihelic, I think you had a question?
11
MS. MIHELIC: You had talked about the open
12 trading program in Michigan.
13
MR. KEE: Yes.
14
MS. MIHELIC: What do you mean by that term
15 as compared -- I understand the capital trade
16 program here, but what do you mean by open trading?
17
MR. KEE: John, can you help me on that a
18 little bit? I have limited understanding.
19
First of all, most of Michigan is in
20 attainment, including the Detroit metro area. So
21 they no longer have these rate of progress
22 requirements which puts sort of a CAAPP, if you will,
23 on emissions that the Chicago area can emit.
24
What they are attempting to do, as I
L.A. REPORTING - (312) 419-9292
40
1 understand it, is to just permit trading almost
2 anywhere in the state without having the concept of a 3
lid on emissions, if you will.
4
It would allow companies to trade back
5 and forth again virtually anywhere within the state
6 without having the concept of the CAAPP.
7
The acid rain program that I alluded to, 8
we are reducing the overall emissions that can be
9 admitted by utilities in this country to reach sort
10 of a target level, which is very similar to the
11 situation that you have here for VOC emissions in
12 Chicago and the metro east areas of Illinois.
13
So there is an actual CAAPP on
emissions
14 and you are using the market-based approach to help
15 meet that target. The Michigan system is not driven 16
by that kind of a target situation.
17
MS. MIHELIC: You are talking about the Title 18
4 program being similar to the one proposed here,
19 similar, not identical, I understand, but do you know
20 how trades are actually occurring under the Title 4
21 program on a yearly basis?
22
MR. KEE: No, not off the top of my head.
23 That information is really readily available from the
24 U.S. EPA from our acid rain program. It's probably
L.A. REPORTING - (312) 419-9292
41
1 on the web.
2
If I may, I'm not sure that the actual
3 number of trades are necessarily the only measure of
4 the success of a program.
5
From an environmental standpoint, we are 6
seeing a reduction in emissions. Whether companies
7 choose to trade -- first of all, utilities can trade
8 internally between their various plants and those
9 trades don't necessarily get reflected in terms of
10 certain market trades that are revealed, but there
11 are trades occurring and they are out there.
12
I think the sense of the regulatory
13 community is that the cost of the program as
14 reflected in the actual dollar value of individual
15 trades is much less than what people had speculated
16 the cost would be absent the trading program.
17
MS. MIHELIC: And you said there are
18 reductions being achieved in the emissions. Do you
19 know if those reductions are being achieved because
20 utilities have actually just reduced emissions by
21 other controls or by using the trading to obtain
22 those reductions?
23
MR. KEE: Well, trading doesn't in and of
24 itself reduce emissions. They have reduced emissions
L.A. REPORTING - (312) 419-9292
42
1 either by the installation of pollution controls or
2 likely by switching to lower sulfur coal, which is
3 the way they have chosen.
4
Of course, they have had that freedom
5 under the Clean Air Act to choose how they reduce
6 their emissions.
7
I'm not sure it's possible to take
8 apart, you know, what the actual impact of the
9 trading program is other than just sort of
10 speculating that the overall costs from an economic
11 sense, I think, are thought to be lower than through 12
a command and control system, which is the system
13 that we had used in the past where basically
14 bureaucrats are assigned to individuals -- Congress
15 assigns to individual plants what their targets are
16 and then they meet those targets individually.
17
The whole concept here is that by
18 allowing freedom of individual sources to either
19 reduce emissions or to buy from a source that has a
20 lower cost of control, that you will find for society
21 as a whole the lowest cost way of achieving the
22 goal.
23
Again, the sense that I have is that we 24
are achieving our environmental goals and the sense
L.A. REPORTING - (312) 419-9292
43
1 that I have is that we are doing it at a far lower
2 cost than through a command and control approach.
3
THE HEARING OFFICER: Mr. Burke?
4
MR. BURKE: I'm Ron Burke with the American
5 Lung Association. I have seen a summary of the
6 agency's -- EPA's outstanding --
7
THE HEARING OFFICER: Is this going to be a
8 question?
9
MR. BURKE: Yes. This is a question.
10
-- (continuing) outstanding issues
11 with the Michigan proposal. In your opinion, does
12 Illinois' proposal have any of the same problems
13 that you have identified with Michigan's proposal?
14
MR. KEE: I really am probably not in a
15 position and I don't have with me today the person
16 who is working on the Michigan rule. We do have, as 17
you indicated, some difficulties with the Michigan
18 rule.
19
It is my sense that -- and I have
20 certainly not been advised that we have those kinds
21 of issues, but again, we are going through a review
22 process and as we identify issues, we will be raising
23 those.
24
Certainly, the sense that I have is that
L.A. REPORTING - (312) 419-9292
44
1 we have not identified those kinds of concerns. It
2 may well be that many of those concerns arise from
3 the open market nature as opposed to the capital
4 trade nature of the Illinois rule.
5
THE HEARING OFFICER: You have a question?
6
MR. ELVERT: Yes. I am Bob
Elvert of Mobil
7 Oil. Just as a clarifying question, is the Michigan
8 program a voluntary program or is it not an acquired
9 program?
10
MS. SAWYER: I just want to clarify that, you 11
know, his testimony is not really about the Michigan 12
program today.
13
MR. ELVERT: Right. I just wanted to clarify 14
this so people don't think that Michigan is a
15 required control measure, that it is a voluntary
16 measure. I think he pointed that out.
17
MR. KEE: Was that a question? I think that's
18 right. I think that's sort of the nature of the open
19 market, that companies can come in as they have
20 surplus credits, which goes to the whole question of 21
the definition of what surplus is in a system where
22 you don't have a capital trade program. So it's a
23 much different type of situation in Michigan as we
24 have here in the state of Illinois.
L.A. REPORTING - (312) 419-9292
45
1
MS. HENNESSEY: Mr.
Kee, I have one question.
2
On Title 4, are there any limits to
3 the number of credits or allowances that any single
4 utility can purchase?
5
MR. KEE: Off the top of my head, I don't
6 think there is. Up to their limit of their financial 7
ability and their desire to have access credits, I
8 think there's -- really, I am not sure there is any
9 limit upon what any of us -- I mean, this is not
10 limited to utilities.
11
Anyone can go over to the Board of Trade
12 and buy these credits. I don't know what the price
13 is. It's $70 or $80 a ton. I don't think there is
14 any limit on the ability of any individual to
15 accumulate those.
16
Some environmental groups have purchased
17 allowances and retired them to take them out of the
18 system and that effectively reduces emissions. Other
19 companies can buy them and bank them. They have a
20 certain life.
21
I think the answer is that that's the
22 nature of the free market system that we are relying 23
on and, in fact, it is working rather well.
24
MS. HENNESSEY: Thank you.
L.A. REPORTING - (312) 419-9292
46
1
THE HEAR ING OFFICER: Mr.
Trepanier?
2
MR. TREPANIER: On the Title 4 program, when
3 an allowance -- when a reduction is made and an
4 allowance is created, does that allowance -- has
5 that been reflected in the Clean Air Act during the
6 process permit of the generator?
7
MS. SAWYER: I'm going to object to this line
8 of questioning because we're getting into -- he is
9 not an expert on the Title 4 acid rain program.
10
We are going to present more testimony
11 on Title 4 later on in the proceeding, but Mr.
Kee
12 is here to present a policy perspective and is not an
13 expert on the details of the Title 4 program.
14
MR. KEE: Thank you, Bonnie.
15
MR. TREPANIER: Maybe if I could just clarify 16
the information that I'm looking for regarding this
17 and how the EPA has developed their -- developed a
18 recommendation on it.
19
When you compare it with the Title 4
20 program, is the creation of an allowance -- is the
21 reduction in the Title 4 program represented by one
22 allowance or is it re-represented every year?
23
MS. SAWYER: I see this question as a detailed
24 question about the acid rain program.
L.A. REPORTING - (312) 419-9292
47
1
MS. McFAWN: Ms. Sawyer, did you think you
2 were going to have more testimony on the Title 4
3 program?
4
MS. SAWYER: Yes, we are.
5
MS. McFAWN: Would you be happy to hold that
6 question for the correct person to answer it for you?
7
MR. TREPANIER: Yes.
8
MS. McFAWN: Thank you.
9
THE HEARING OFFICER: Are there any more
10 questions? Okay. Thank you.
11
MS. McFAWN:
Thank you very much, gentlemen.
12
MS. SAWYER: We are ready to swear in the next
13 witness.
14
(Witness sworn.)
15 WHEREUPON:
16
B H A R A T
M A T H U R ,
17 called as a witness herein, having been first duly
18 sworn, deposeth and saith as follows:
19
MS. SAWYER: Would you please tell us your
20 name?
21
MR. MATHUR: Bharat Mathur.
22
MS. SAWYER: Could you tell us
a little bit
23 about your educational background?
24
MR. MATHUR: I have bachelor's and master's
L.A. REPORTING - (312) 419-9292
48
1 degrees in engineering. In addition, I have several
2 management courses from several different
3 institutions.
4
MS. SAWYER: Mr.
Mathur, could you tell us a
5 bit about your work experience?
6
MR. MATHUR: I have been with the Illinois EPA 7
for 25 years. Currently, I'm the chief of the Bureau 8
of Air. As such, I'm responsible for the development 9
and implementation of all of the air pollution
10 control programs under the Clean Air Act as well as
11 the Illinois Environmental Protection Act.
12
Prior to that, I was the deputy manager 13
in the Division of Land Pollution Control and dealt
14 with Superfund and RECRA issues.
15
Prior to that, I was in the permit
16 section in the Division of Air Pollution Control.
17 Prior to that, I had several positions in the
18 Division of Water Pollution Control.
19
MS. SAWYER: Mr.
Mathur, if you would, just
20 proceed with your presentation on air quality.
21
MR. MATHUR: Okay. Thank you. If you don't
22 mind, I'll stand.
23
MS. SAWYER: Not a bit.
24
MR. MATHUR: What I would like to present
L.A. REPORTING - (312) 419-9292
49
1 today is very briefly some of the Clean Air Act
2 requirements as they relate to ozone in Chicago and
3 also share with the board and the audience the
4 evolving policy and strategy issues as they apply to
5 the ozone and some of our policy framework of where
6 this particular proposal fits into the scheme of our
7 thinking of the Illinois EPA.
8
Could we have the next slide, Gary?
9
MR. BECKSTEAD: Yes.
10
MR. MATHUR: I first want to start by
11 emphasizing that we are talking about the Chicago
12 nonattainment area only. There are two ozone
13 nonattainment areas in Illinois. The other is the
14 metro east. That is not the subject of this
15 proposal. Our comments will be limited to our
16 strategy in Chicago.
17
Just leave it up there.
18
The Clean Air Act when adopted or passed
19 in 1990 for the very first time contained descriptive
20 mandatory control measures that states had to develop
21 and implement depending upon the severity of the
22 nonattainment problem.
23
Chicago was determined to be a severe
24 nonattainment area, which is second only to Los
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1 Angeles because of the measured ozone concentrations
2 over a certain period as defined under the Clean Air
3 Act.
4
Consequently, some of the mandatory
5 measures imposed in Chicago were fairly rigid and
6 strict.
7
In addition to these mandatory measures, 8
there were two other key requirements in the Clean
9 Air Act; one of them being that by 1996, the state
10 would develop and equip regulations and adopt
11 adequate regulations and submit to the EPA as a state
12 implementation planned revision of all those
13 requirements to show a 15 percent reduction in
14 emissions from a 1990 baseline.
15
Mr. Forbes, in his testimony after
16 mine, will provide some details on some of those
17 requirements.
18
The second provision of the Clean Air
19 Act required states to continue to provide an average
20 of three percent a year reductions in the precursors 21
of ozone. In other words, those pollutants that are 22
responsible for the formation of the ozone.
23
We are here today to talk about our
24 strategy relative to satisfying the annual three
L.A. REPORTING - (312) 419-9292
51
1 percent requirement to refer to the Clean Air Act as
2 ROP measures.
3
I would like to report that the state
4 of Illinois has performed very successfully in the
5 last five years in terms of meeting these obligations 6
that were not only mandatory, but they are
7 obligations under the 15 percent plan.
8
Our regulations are at EPA. It is my
9 information that most of them will be approved
10 imminently so that by 1996, we will not only have the
11 regulations on the books, but also actually achieve a
12 reduction in emissions. We will also be addressing
13 that later.
14
I want to recognize the cooperative
15 effort of not only the factory industry, but the
16 environmental groups, the agency, and lastly, but
17 certainly not the least, the responsiveness
18 demonstrated by the board itself in allowing Illinois
19 to be one of the forefront states in meeting its
20 obligations under the Clean Air Act.
21
Quite frankly, I'm hoping that a
22 similar approach will allow us to further achieve our
23 mandate obligations.
24
An important issue that came out of our
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52
1 analysis of the ozone air quality program was that in 2
spite of making the reductions mandated and otherwise 3
required by the Clean Air Act, we are not able to
4 demonstrate attainment for the ozone standard in
5 Chicago. That is why we are proceeding to look at
6 the additional reductions.
7
Particularly, there are two pollutants
8 that contribute to the formation of ozone. One is
9 volatile organic materials or volatile organic
10 compounds. Sometimes they are referred to
11 synonymously. For this proceeding, I will not
12 distinguish between the two. I will refer to them as
13 VOCs or VOMs. The second pollutant is nitrogen
14 oxide.
15
When the Clean Air Act was adopted in
16 1990, it was generally felt reductions of either
VOCs
17 or nitrogen oxides would lower ozone concentrations.
18
However, the state of Illinois, in
19 working cooperatively with the states of Wisconsin,
20 Michigan and Indiana, through an organization called 21
Lake Michigan Air Directors Consortium, formerly
22 referred to as LMADCO, have done extensive air
23 quality analysis which was conducted by perhaps the
24 country's most sophisticated air quality model, which
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53
1 developed or demonstrated some pollution in the
2 typical thinking when the Clean Air Act was adopted.
3
Essentially, we determined through
4 all of these studies that because of the mix of
5 the pollutants and the chemistry in the Chicago area, 6
nitrogen oxide reductions were not giving us
7 reductions in ozone.
8
I would like to refer to the next
9 chart, which is labeled Figure 2. It depicts bar
10 charts that are the result of extensive computer
11 modeling to show the impacts of VOC and
NOx
12 reductions on peak ozone concentrations.
13
What this chart shows, starting at the
14 left-hand bar, is a model of 1990 emission levels
15 in Illinois, the model predicted at peak ozone
16 concentrations of 143 parts per billion as compared
17 to the ozone standard of 120. This is clearly
18 demonstrating a violation.
19
When you applied an across-the-board
20 30 percent NOx reduction strategy, the ozone peak
21 concentration actually went up. This is the basis
22 of my earlier statement that because of the chemistry
23 in Chicago, NOx reduction, as a strategy, is not
24 available to this state.
L.A. REPORTING - (312) 419-9292
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1
The third bar shows the beneficial
2 effects of reduction of 30 percent in
VOCs. The
3 fourth chart shows what happens when you reduce
VOCs
4 and nitrogen oxide. The ozone concentration goes up
5 from just the VOC strategy.
6
The conclusions that can be drawn
7 from this analysis are, number one, that
NOx
8 reduction creates an ozone
disbenefit or an increase
9 in ozone, which is certainly not what we are trying
10 to do here.
11
Number two, the only pollutant available
12 to reduce in the Chicago
nonattainment area in order 13
to lower the ozone concentration is
VOCs. Hence, the 14
agency's strategy has to be a VOC oriented strategy
15 as much as we were looking forward to being able to
16 reduce nitrogen oxidizes to reduce the ozone.
17
Now, a --
18
THE HEARING OFFICER: Before we move on -
-
19
MR. MATHUR: Yes.
20
THE HEARING OFFICER -- I wonder if the agency 21
could enter that as an exhibit, Figure 2?
22
MS. SAWYER: Sure. All of these have been -
23
were included in the
prefiled testimony, but we can
24 enter all of the slides he is using as either one
L.A. REPORTING - (312) 419-9292
55
1 exhibit or exhibits individually, whichever you
2 prefer.
3
THE HEARING OFFICER: Well, it might be better 4
for the record if we enter them as we went so it's
5 better on the testimony.
6
MS. SAWYER: Right.
7
THE HEARING OFFICER: I think we will be a
8 better record.
9
MS. SAWYER: Okay.
10
THE HEARING OFFICER: So if you don't mind
11 doing it as we go along, unless you see a problem,
12 we'll just proceed.
13
MS. SAWYER: That's fine.
14
THE HEARING OFFICER: If you could, move to
15 have that entered.
16
MS. SAWYER:
Okay. I need the board to mark 17
this as Exhibit 1.
18
(Document marked as
19
Hearing Exhibit No. 1 for
20
identification, 1/21/97.)
21
THE HEARING OFFICER: Just so the record is
22 clear, Figure 2 was not the first overhead that
23 Mr. Mathur used. It's the third one.
24
Let's go off the record.
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56
1
(Whereupon, a discussion
2
was had off the record.)
3
THE HEARING OFFICER: I believe this is the
4 third overhead that was used. We have marked that
5 as Exhibit 1. At the end of Mr.
Mathur's testimony,
6 the agency will move that these be entered as an
7 exhibit. If there are any objections, we will take
8 care of them then.
9
MS. SAWYER: Are we on the new chart?
10
MR. MATHUR: Yes.
11
MS. SAWYER: Okay. I would like to have this 12
marked as Exhibit 2.
13
(Document marked as
14
Hearing Exhibit No. 2 for
15
identification, 1/21/97.)
16
MR. MATHUR: Okay. I'm now referring to
17 Exhibit 2 or my Figure 3.
18
One of the many significant findings
19 of the Lake Michigan Ozone Study was that there
20 was a high level of ozone entering the Chicago
21 nonattainment area. We typically measure ozone
22 at ground level through our monitoring network.
23
When we conducted the Lake Michigan
24 study, we acquired
aircrafts and balloons in order
L.A. REPORTING - (312) 419-9292
57
1 to get a profile of ozone and precursor
2 concentrations vertically at higher altitudes.
3
This is a plot of the ozone
4 concentrations at the southern boundary of the
5 nonattainment area. As you can see in Figure 3,
6 the concentration of ozone at ground level would
7 be as low as 32 parts per billion, fairly steady
8 after being 32 and 38.
9
However, if we were able to measure
10 and if we actually were able to measure ozone at
11 increasingly higher altitudes, the ozone
12 concentrations changed. They went up. This was
13 the first time that we, in the
midwest, and perhaps
14 in the country, realized that various levels of
15 ozone concentrations exist as we go up from ground
16 level.
17
As you can see, the highest
18 concentration measured on this particular evaluation 19
was 110 parts per billion. It doesn't take much to
20 conclude that if the ozone as high as 110 parts per
21 billion is entering the Chicago
nonattainment area,
22 it would not be very easy to demonstrate attainment
23 in Chicago when the standard itself is only 120.
24 It would particularly not be easy when the only
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1 strategy available is reduction of
VOCs.
2
I'm going to the next chart.
3
MS. McFAWN: Before you go on, could you just, 4
for the record, explain what LMOS is?
5
MR. MATHUR: LMOS stands for the Lake Michigan 6
Ozone Study, which was conducted by the Lake Michigan 7
Air Directors Consortium. The acronym for that is
8 LMADCO, which is a not-for-profit organization whose
9 members are of the states of Illinois, Wisconsin,
10 Michigan and Indiana.
11
MS. McFAWN: The study was conducted in '91?
12
MR. MATHUR: The study has been conducted
13 from 1990 with actual field measurements in '91.
14
MS. SAWYER: I will mark this as Exhibit 3.
15
(Document marked as
16
Hearing Exhibit No. 3 for
17
identification, 1/21/97.)
18
THE HEARING OFFICER: I'm marking what is
19 called Figure 4, "VOC Reduction at Different
20 Background Levels."
21
MR. MATHUR: Exhibit 3 or my Figure 4 is
22 intended to show the relationship between the percent
23 reduction in
VOCs with no change in the concentration
24 of boundary ozone and with a change or a lowering of
L.A. REPORTING - (312) 419-9292
59
1 boundary ozone concentrations.
2
I made the point earlier that with
3 ozone coming in as high as 110, our VOC reduction
4 target to demonstrate attainment would be high.
5 That figure is almost 93 percent.
6
We do not believe that it is technically 7
feasible to reduce the 1990 inventory of
VOCs in the
8 Chicago nonattainment area by 93 percent.
9
If we were able to reduce the incoming
10 ozone to 70 parts per billion, the VOC reduction
11 target in Chicago is lowered to just over 60
12 percent.
13
If we were able to lower the incoming
14 ozone to 60 parts per billion, the target VOC
15 reduction is lowered to just over 45 percent, closer 16
to 48 percent.
17
This kind of information was
18 instrumental in sharpening our strategy from that
19 point on. It became increasingly clear that the
20 solution to the Chicago
nonattainment problem was
21 a combination of reductions in incoming pollution
22 as well as continued reductions in the Chicago
23 nonattainment area.
24
MS. HENNESSEY: Mr.
Mathur, the base case
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1 that you have listed on this Exhibit 3 is 143 parts
2 per billion?
3
MR. MATHUR: The base case is reflecting no
4 change in incoming ozone concentration.
5
MS. HENNESSEY: Okay.
6
MR. MATHUR: So I had indicated that the
7 incoming ozone was as high as 110. For discussion
8 purposes, we could use an average incoming ozone of
9 about 90 parts per billion.
10
MS. HENNESSEY:
Thank you.
11
MR. MATHUR: Having observed phenomenon of the
12 kind I have just described and having realized that
13 Congress and the Clean Air Act had not considered
14 these kinds of phenomenon, we brought this
15 information to the attention of the U.S. EPA.
16
Our primary purpose in discussing
17 this with the EPA -- actually, there were two primary
18 purposes. One was to persuade EPA to understand that
19 even though we know that air knows no bounds, that we
20 did not know the extent of the transport of
21 pollution.
22
Secondly, we had to persuade EPA that
23 this phenomenon was not limited to the state of
24 Illinois, that perhaps this phenomenon was broader
L.A. REPORTING - (312) 419-9292
61
1 than the state of Illinois.
2
A similar phenomenon was being noticed
3 in New York and other northeastern states. Even
4 states like Georgia, as they were developing ozone
5 attainment strategies for Atlanta, they were noticing 6
high levels of ozone coming into the area.
7
This resulted in one of the more
8 significant EPA policies on ozone attainment. In
9 March 1995, Mary
Nichols, the assistant administrator
10 of Air and Radiation at U.S. EPA put out a two-phased
11 ozone policy.
12
The first phase would require that
13 states continue to make incremental reductions in
14 emissions in the
nonattainment area as required by
15 the Clean Air Act, which quite literally translated
16 to you will do your three percent a year reduction as
17 required by the Clean Air Act for as many years as
18 required by the Clean Air Act.
19
The Clean Air Act requires that three
20 percent a year reduction in 1996 through the
21 attainment year, which is 2007.
22
If you compute roughly that three
23 percent a year reduction for 11 years, it's a nominal
24 33 percent reduction beyond 1996. So the first phase
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1 of EPA's policy would require states to meet the
2 congressionally mandated targets of three percent a
3 year reduction.
4
The Clean Air Act would have allowed
5 states to use either
VOCs or NOx to meet that three
6 percent requirement. Fortunately, as I explained
7 earlier, NOx reductions are not available as a
8 strategy and we were faced with looking at a 33
9 percent reduction of
VOCs.
10
The second requirement or the second
11 phase of the EPA policy memorandum was to facilitate 12
a national discussion and analysis on the transport
13 phenomenon.
14
The Environmental Counsel of States, the
15 acronym for each is ECOS, E-C-O-S, which is made up
16 of environmental commissioners in the 50 states,
17 took on the responsibility of conducting a national
18 assessment of ozone transport.
19
The group came to be called the Ozone
20 Transport Assessment Group or OTAG. Participation in
21 OTAG was mandatory under the March '95 policy put out
22 by the EPA.
23
The EPA also allowed the state for
24 participation in this two-phased policy an extension
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63
1 of time to submit our ozone attainment strategy,
2 which otherwise would have been required by November
3 of 1994.
4
So in return for extending the
5 submission of our attainment strategy to EPA, we were 6
required to do two things. Number one,
7 make continued reductions in VOC of three percent a
8 year; and number two, participate in this national
9 ozone analysis of transport.
10
What we submitted to U.S. EPA in
11 November was an interim attainment strategy where we 12
assumed a boundary ozone of 60 parts per billion and 13
therefore, indicate to the U.S. EPA that we would
14 meet -- consequently, we would need to have
15 reductions beyond 1996.
16
I will go to the next slide.
17
MS. SAWYER: I will just have this marked as
18 Exhibit 4.
19
(Document marked as
20
Hearing Exhibit No. 4 for
21
identification, 1/21/97.)
22
THE HEARING OFFICER: I am marking what is
23 known as "Table 1, 1970-2007 Chicago VOM Emissions
24 Summary, Tons Per Ozone Season Weekday," as Exhibit
L.A. REPORTING - (312) 419-9292
64
1 No. 4.
2
MR. MATHUR: I will now describe Exhibit 4, my 3
Table 1.
4
The purpose of this table is to show
5 you how the various sectors contribute to where
6 pollutions have also contributed to emission
7 reductions since 1970.
8
We started in 1970 at approximately
9 2,000 tons a day of
VOCs from these various sectors.
10 By 1990, when the Clean Air Act was passed, we were
11 at about 1,200 tons a day.
12
Most of the reductions between 1970
13 and 1990 were due to significant improvements in
14 automobile design, reductions in automobile
15 emissions, and reductions in the stationary source
16 sector or industries in Illinois.
17
For ten years, as we now know it,
18 Illinois EPA proposed and board adopted what was
19 formally referred to as RACT regulations. They were 20
instrumental in making significant improvements in
21 air quality and reductions in emissions.
22
Between 1990 and 1996 is when we
23 implemented the mandatory Clean Air Act measures and 24
our plan to reduce emissions by 15 percent, which in
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65
1 our business is referred to as the 15 percent plan,
2 but which all of the regulations have been adopted
3 and submitted to the EPA and are pending their
4 approval.
5
If we made no further reductions after
6 1996, the numbers under the column 1999 and 2007
7 reflect the growth that would occur because all
8 sectors receive growth over time.
9
The last two columns are intended to
10 give a sense of what are the total VOC emissions the 11
Chicago area can have with the two different boundary 12
conditions that I have showed on the previous
13 exhibit.
14
So if we could achieve a
60 parts per
15 billion ozone boundary instead of the average of 90
16 that we experienced in our field study, we would have
17 a 60 or a 50 percent target depending 60 parts per
18 billion or 70 parts per billion.
19
In the most severe circumstance, VOC
20 inventory in Chicago would have to be about 480
21 before we could demonstrate attainment. In lesser
22 significant circumstances, we could do a VOC
23 inventory in Chicago of 600.
24
This is a very significant data because
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66
1 it shows you that at the end of 1996, we are nowhere
2 near where we would need to be even with all of the
3 reductions in boundary
ozones.
4
So the point that I am trying to make
5 is as we finalize the conclusion of this national
6 assessment on transport and as we come up with more
7 defined strategies of how we could lower background
8 ozone by reducing emissions outside of Chicago, we
9 have assumed the best case, which is 60 parts per
10 billion, and we still need no more than 600 tons
11 per day VOC in the Chicago area.
12
So our challenge is to go from 781 down 13
even under the best of circumstances. That is why
14 we are here today to talk partly about how to get
15 that.
16
I will now show the next one.
17
MS. SAWYER: I would like to have this exhibit
18 marked as Exhibit 5.
19
(Document marked as
20
Hearing Exhibit No. 5 for
21
identification, 1/21/97.)
22
THE HEARING OFFICER: I am marking the Figure 23
5 OTAG map as Exhibit 5.
24
MR. MATHUR: Figure 5 is a map of the eastern
L.A. REPORTING - (312) 419-9292
67
1 United States, which is the subject of this national
2 assessment of ozone transport that I have talked
3 about. Thirty-seven states are included in this
4 modeling domain.
5
The study itself is not relevant to this 6
particular proceeding at the moment. I would like to 7
point out that the initial rule as developed by the
8 agency was in response to the EPA policy statement of 9
1995 where we were seeking a 30 percent reduction
10 from stationary sources over a six-year period.
11 This was responding to the three percent a year ROP
12 requirement of the Clean Air Act.
13
The proposal before the board today
14 is significantly different. I will explain it in a
15 minute, the difference, but that is why the results
16 of OTAG at this time are not relevant. They will
17 be relevant when the agency determines that
18 conditional reductions in Chicago are necessary.
19
In June of 1996, the state of Illinois
20 again took a lead position in bringing to the
21 attention of the U.S. EPA that their first
22 requirement of their '95 policy of the
nonattainment 23
area implement a three percent reduction through
24 2007 was impractical and not feasible at the moment
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68
1 particularly because until we had the completion of
2 the OTAG study, it was premature to conclude that
3 all of the 33 percent would be necessary in Chicago.
4
Consequently, EPA revised its policy
5 position and now only is requiring that a nine
6 percent aggregate reduction over the next three years 7
be made and submitted to EPA. Based on the Clean Air 8
Act deadlines, this submission was due to EPA in the
9 middle of 1996.
10
That is why we received a threat of
11 sanction in July of 1996 informing us that we were
12 significantly behind schedule in submitting an ozone 13
attainment state implementation plan and as is
14 provided for in the Clean Air Act, we were given 18
15 months to make that submission or to face sanctions.
16
That was the 18-month period alluded to 17
by Mr. Kee. It simply means that we are required to 18
submit our nine percent ROP state implementation plan 19
on which the trading rule currently before the board 20 is
a key part to EPA by December of 1997.
21
In order to allow the agency to make
22 this submission by December, I would be looking
23 forward to the board adopting these rules no later
24 than August of 1997.
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69
1
We can go to the last slide, which will
2 be Exhibit 6?
3
MS. SAWYER: We will have this marked as
4 Exhibit 6.
5
(Document marked as
6
Hearing Exhibit No. 6 for
7
identification, 1/21/97.)
8
THE HEARING OFFICER: I am marking what -- I
9 am marking Exhibit 6, which is called "Table 2,
10 Summary of Attainment/ROP Scenario With ERMS Program 11
@ 4%, '97 - '99, Emissions of VOM Tons Per Day."
12
MR. MATHUR: Exhibit 6 from my Table 2 is
13 a summary chart that I will attempt to use to make
14 several significant policy statements that were the
15 foundation of the agency's approach to this
16 particular rulemaking.
17
I have already mentioned a change in
18 EPA policy requiring its submission of the first nine
19 percent ROP by December of '97 resulting in emission 20
reductions in '99.
21
In view of that change in policy and in 22
view of the Ozone Transport Assessment Group and
23 their work in order to determine the ultimate balance
24 between reducing ozone entering Chicago and reducing
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70
1 emissions in Chicago, the agency revised its target
2 reductions from 30 percent over six years down to
3 12 percent over the next three years for an average
4 of four percent a year.
5
I want to clarify that four percent a
6 year is a way of stating the requirement consistent
7 with the Clean Air Act language where we would be
8 seeking the 12 percent at the end of the third year
9 or at the end of 1999.
10
I would like to briefly explain what's
11 on the chart. I have the four industry sectors or
12 four sectors that typically reduce
VOCs. The point
13 refers to large stationary sources. On-road mobile
14 refers to typically automobiles and other gasoline
15 vehicles. Off-road mobile refers to lawn mowers and 16
golf carts and other similar machinery that uses
17 gasoline that is not on the road. Area refers to
18 small stationary sources like gas stations and dry
19 cleaners where each individual source has small
20 emissions, but collectively as a class, their
21 emissions are significant.
22
The first column reflects the 1990 base 23
emissions, which are the foundation of Clean Air Act 24
planning in Illinois and all other states and gives
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1 you a breakdown of the contribution of each of those
2 sectors.
3
Now, 1996 is what we expect to see when
4 everybody comes into compliance with our 15 percent
5 plan. Because of the nature of the rules and because 6
of the building contingency that is required by the
7 Clean Air Act and because of the higher effectiveness 8
in terms of our ability to enforce the rules and the
9 higher voluntary compliance that we expect from our
10 regulative community, we were able to demonstrate
11 further reductions in emissions.
12
Consequently, we have achieved more
13 reductions than the 15 percent target would have
14 required. In other words, if you look under the
15 column for 1996, our target level was 857 tons.
16 That's where we should be, but we hoped we would be
17 at 781.
The good news is that it gives us a head
18 start on our next ROP target.
19
If you look at the first row for point
20 sources, which is the subject of today's discussion, 21
we expect that all of the point sources would have
22 collectively an emission of 171 tons per day.
23
The figure in parenthesis next to 171,
24 which is 105, that is the emission level in tons
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1 per day from those sources that we believe will be
2 affected by the occurrence regulatory proposal.
3 There are certain exemptions built into this rule,
4 as the agency will testify in the next several days.
5 Now, 105 is the emission level those sources that
6 we believe will be covered.
7
Under the 1999 column, that is our best
8 attempt to show emissions from the various sectors
9 including from the point sources after the
10 application of the 12 percent reduction.
11
I might add that there were two
12 additional rulemakings necessary over and above the
13 reductions that we would already get from our 15
14 percent plan.
15
One is this trading rule. The other
16 is the regulation that would impact cold degreasing
17 operations, which is the reduction that you see under
18 the area source sectors between 1996 and 1999.
19
That rulemaking is -- has been submitted
20 to the board and that, in combination with this
21 rulemaking, are the only two outstanding regulations 22
for the state who develop its '99 SIP to be sent to
23 the EPA by December of 1997.
24
We also have indicated on this chart
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73
1 what is the ROP target beyond 1999 just for
2 reference. We obviously are not there. We have
3 also indicated on the chart what might be the
4 attainment level of
VOCs at 570-some tons, which is
5 reflective of a 70 parts per billion ozone boundary.
6 For planning purposes, the agency believes this is
7 the more realistic figure than the 60.
8
Once again, I make the point that while
9 we are only seeking the 12 percent today and will
10 await the results of the ozone transport assessment, 11
the 12 percent we seek today is well within the
12 reductions that we believe will be necessary in
13 Chicago.
14
There should be no question, and there
15 certainly isn't in our mind, whether this 12 percent 16
is being sought prematurely. We will need more
17 later.
18
The other message on this chart is
19 that it is the state's intention to maximize emission
20 reduction credits from federal measures as much as
21 we can. We do not wish to impose on our own
22 regulated community before making sure that we have
23 taken advantage of all of the federal measures that
24 are in the Clean Air Act or that EPA has required to
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74
1 promulgate.
2
Some of those are measures for cleaner
3 gasoline. There are measures for lower emission
4 standards for cars. There are several EPA measures
5 for off-road engines and for area sources. We have
6 maximized the benefits that the state can derive from 7
some of those measures.
8
Not all federal measures are going to
9 be promulgated in the next three years. Some of
10 them are going to be promulgated over the next ten
11 or 15 years. We have tried to indicate on this
12 chart, at the bottom right-hand corner of the chart, 13
what some of the future federal measures are that
14 will give us emission reduction benefits.
15
The state is not in the position to
16 take advantage of those today because we have a
17 requirement to show a nine percent reduction
18 aggregate from all the emission sectors by '99.
19
I want to make it clear that should we
20 need additional reductions beyond '99, we will first 21
depend on all of these federal measures that are
22 going to happen anyway for seeking more reductions
23 for our own community.
24
I think I will stop here. I'm open for
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1 questions.
2
THE HEARING OFFICER: Do you want to
3 take a five minute break before we do that and come
4 back and start questions for Mr.
Mathur?
5
(Whereupon, after a short
6
break was had, the
7
following proceedings were
8
held accordingly.)
9
THE HEARING OFFICER: We will go back on the
10 record at this point and proceed with the questioning
11 of Mr. Mathur.
12
Let's go with those that are
prefiled.
13
MR. SAINES: I'm Rick
Saines with Gardner,
14 Carton & Douglas. These questions are not part of
15 our prefiled questions. These questions --
16
THE HEARING OFFICER: Can we start with the
17 prefiled questions first?
18
MR. SAINES: Sure.
19
MS. FAUR: I'm Cindy
Faur from Sonnenschein,
20 Nath & Rosenthal. We have just a couple
prefiled
21 questions concerning the use of emission reductions
22 from outside the Chicago area.
23
In your testimony, you stated that there
24 was a -- that we would need to have a combination of
L.A. REPORTING - (312) 419-9292
76
1 emission reductions from inside the
nonattainment as
2 well as from outside the
nonattainment area.
3
Will the agency consider the use of
4 permanent, enforceable, real, quantifiable and
5 surplus emission reductions that occur outside
6 the nonattainment area in the ERMS system?
7
MR. MATHUR: Let me first clarify that my
8 statement that we would need emission reductions
9 inside the nonattainment area and outside, I was
10 referring to needing emissions outside, reduce the
11 boundary of concentration, or in other words, to
12 reduce transported ozone.
13
Because if we are successful in lower
ing
14 boundary ozone, the VOC reduction target inside goes 15
down towards what I believe is a more reasonable
16 level.
17
That was my context of emission
18 reductions outside and emission reductions inside.
19 This particular
rulemaking is intended to reduce
20 emissions inside as part of the overall target
21 inside.
22
So at the moment, this rule does not
23 accommodate emission reductions outside. That will
24 be done as part of the larger exercise that comes out
L.A. REPORTING - (312) 419-9292
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1 of OTAG in order to determine what are the strategies 2
that reduce transported ozone.
3
MS. FAUR: Okay. So to clarify, once the OTAG 4
findings have been released, the agency would intend
5 to take another look at this rule and make revisions
6 if suggested by the OTAG findings?
7
MR. MATHUR: That is correct.
8
MS. FAUR: Okay. I have one other question.
9
What flexibility or incentives will the
10 agency provide for companies with operations in the
11 Chicago area to consolidate operations into Chicago, 12
from source areas outside, but upwind of, the Chicago 13
nonattainment area?
14
MS. HENNESSEY: Ms.
Faur, could you identify
15 for the record the number of the
prefiled question
16 you are asking, please?
17
MS. FAUR: This is my last question.
18
MS. HENNESSEY: Okay.
19
THE HEARING OFFICER: This is Question No. 12 20
on Page 5 of their
prefiled testimony.
21
MS. HENNESSEY: Thank you.
22
MS. FAUR: It's on Page 5 of our
prefiled
23 testimony.
24
MS. HENNESSEY: Thank you.
L.A. REPORTING - (312) 419-9292
78
1
MS. FAUR: This has another part to it, but I
2 thought I would let him answer this first.
3
MR. MATHUR: We do not have a strategy that
4 will provide that kind of incentive as a part of
5 this rulemaking.
6
Let me hasten to add that we have
7 strongly pushed EPA as it develops further ozone
8 attainment strategies to allow credit from the
9 reductions of
VOCs outside or upwind of Chicago to
10 be countered towards the ROP targets inside of
11 Chicago in an effort to bring some equity into where 12
sources can reduce and thereby allow the state to
13 meet its Clean Air Act obligations.
14
MS. FAUR:
Has the agency developed any
15 criteria as to how far upwind a source may be to
16 impact the Chicago
nonattainment area?
17
MR. MATHUR: The agency has not developed any 18
criteria, but I will refer you to the U.S. EPA's
19 proposed new ozone standard in which they discuss
20 an interim transition policy between now and when
21 a possible new ozone standard is promulgated and
22 that interim transition policy proposes to allow
23 ROP credit from reductions outside the
nonattainment 24
area as far away as 100 kilometers for VOC and 200
L.A. REPORTING - (312) 419-9292
79
1 kilometers for
NOx.
2
MS. FAUR: Thank you.
3
THE HEARING OFFICER: Are there any other
4 prefiled questions for Mr.
Mathur?
5
Okay. Let's go to the other questions.
6
MR. SAINES: I'm Ric
hard Saines for Gardner,
7 Carton & Douglas.
8
Mr. Mathur, I would like to return to
9 the discussion between the interrelationship between
10 NOx, N-O-x, and VOCs or VOMs.
11
Now, you stated that reductions in
12 NOx can actually have a
disbenefit in terms of the
13 resulting ozone reduction. So as the affected
14 sources under this proposed
rulemaking are reducing
15 their VOCs, what is the agency doing to ensure that
16 there is not concurrent
NOx reductions occurring in
17 the Chicagoland nonattainment area to offset or
18 result in a disbenefit of the ozone?
19
MR. MATHUR: The agency has already done a
20 lot. By that, I mean the agency applied for and
21 obtained from U.S. EPA an exemption from the
NOx
22 reduction requirements of the Clean Air Act.
23
At the moment, we are not required to
24 meet some of the mandatory
NOx reductions like
NOx,
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1 RACT or NOx new source review requirements, and
2 thereby, we are making sure that these reductions
3 do not occur and therefore, make the ozone worse,
4 and therefore, cause us to have to make up.
5
We intend to keep pushing that point
6 with EPA as long as the air quality analysis
7 continues to show that there are
disbenefits from
8 NOx reduction inside the Chicago
nonattainment area.
9
MS. MIHELIC: I'm
Tracey Mihelic from Gardner,
10 Carton & Douglas.
11
In your Table 2 where you talk of the
12 survey of nonattainment/ROP scenarios with the ERMS
13 programs where you go through the point,
14 on-road/off-road area sources --
15
THE HEARING OFFICER: That's marked as Exhibit
16 6?
17
MS. MIHELIC: Right. In here, it shows that
18 point sources have already come up since 1990 with 45
19 percent reductions of emissions and area sources have
20 only come up with 24 percent.
21
Why did the agency choose to seek 12
22 percent reductions from point sources and not for
23 area sources?
24
MR. MATHUR: First of all, let me say that
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81
1 Mr. Forbes, in his testimony, will address the
2 issue of how the agency arrived at an emission
3 reduction strategy in more detail and he will provide 4
clarification to your question.
5
Second of all, it is my belief and my
6 strategy that the nature of area sources, very small
7 sources, a large number of them that exist in all
8 states demands that the best way to regulate these
9 sources is through national standards.
10
We are working with the EPA, who
11 already has an agenda for area source reductions, to 12
incorporate all possible area source categories in
13 their reduction strategies. I believe over the next 14
several years, we will see appropriate area sources
15 targeted for emission reductions.
16
So whereas controlling them at the state
17 level was impractical and not the appropriate and
18 equitable way to go at this time, I am confident that
19 over time, they will be asked to contribute to the
20 words cleaner air.
21
Since it is my belief that we will need 22
further reductions in Chicago, those kind of sources 23 in
Illinois will be included in the strategy over the 24 next
several years.
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82
1
MS. MIHELIC: Other than this agenda by U.S.
2 EPA, have there been other proposals by U.S. EPA to
3 regulate these kinds of sources?
4
MR. MATHUR: Yes. U.S. EPA has regulated
5 these kind of sources. If you would, refer to the
6 bottom left of Table 2.
7
MS. MIHELIC: But I'm saying from here on out, 8
in addition to the 24 percent reductions.
9
MR. MATHUR: Yes. If you look at the bottom
10 right-hand corner of Table 2, we have suggested that 11
EPA is examining new rules for stationary area
12 sources. I believe they are in the process of
13 developing a list of sources that are appropriate
14 for regulation. We would be working with them and
15 tracking their progress.
16
MS. MIHELIC: I have just one additional
17 question.
18
You talked about a change in the ozone
19 standard and the proposed change. Have you looked
20 at or has the agency looked at how this is going to
21 impact the area of the sources affected by the ERMS
22 rules or will, I guess, the agency look at that when 23
the proposed standard is actually promulgated?
24
MR. MATHUR: You are correct. We will look at
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83
1 this when the final standard is promulgated.
2
MS. MIHELIC: So will the sources
outside of
3 the current nonattainment area be subject to a
4 separate rulemaking if they become affected by the
5 new ozone standards?
6
MR. MATHUR: That will be part of our analysis 7
as we respond to the new ozone standard in our
8 obligations to develop strategies for the new ozone
9 standard.
10
It is our opinion, based on our
11 analysis, that the reductions that we are seeking in 12
this regulation are not only needed for the current
13 ozone standard, but also will be necessary for any
14 future ozone standard.
15
So we do not believe that we are
16 promulgating a regulation that will be unnecessary
17 down the road.
18
THE HEARING OFFICER: Are there any further
19 questions?
20
MR. NEWCOMB: This is Chris
Newcomb again from
21 Karaganis & White.
22
A series of these questions were asked
23 of David Kee and he indicated that he was probably
24 not the best recipient of these questions so I
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84
1 thought maybe I would address a few of them to you.
2
The first one would be whether Illinois
3 has taken a look at the other emission reduction
4 market system regulations that have been proposed and 5
identified what other problems they have had and what 6
the measures they may have taken to circumvent those
7 problems?
8
MR. MATHUR: Let me first say that the answer
9 to your question, have we looked at other mechanisms,
10 the answer is yes.
11
Let me also add that the agency intends 12
to present testimony regarding these other mechanisms 13
later in these proceedings. I would suggest that
14 that would be a more appropriate time to have that
15 discussion.
16
I would like to add that a delay in the 17
implementation of the reclaim program for
VOCs should 18
in no way be seen as a VOC trading program as not
19 suitable or cannot be implemented in Illinois.
20
Our program, in my opinion, is
21 simpler. It is, at the moment, targeted for a very
22 finite emission reductions, pending an analysis of
23 the need for further reduction, and it is not at the 24
moment targeted for attainment.
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85
1
We have the opportunity to learn from
2 how it works over the next several years and come
3 back and improve it should it be necessary. We have
4 taken a more practical view of some of the monitoring 5
requirements that Mr.
Kee alluded to.
6
Lastly, I believe it's time for
7 Illinois to show California how to do it.
8
MR. NEWCOMB: The woman who proceeded me asked 9
about area sources. Could you be a little more
10 definite or explain some of the other sources that
11 fit into this category of area sources? It wasn't
12 clear from your very short list on the exhibit that
13 you presented.
14
MR. MATHUR: Let me defer that to Mr.
Forbes
15 as he goes through the agency's analysis and shares
16 with you what are typically the area source
17 categories.
18
MR. NEWCOMB: Has the agency also identified
19 specifically where the ozone is coming in from? I
20 know you talked several times about incoming ozone.
21
MR. MATHUR: That is exactly one of the
22 objectives of the ozone transport assessment group
23 of its evaluation based on the 37 states.
24
I'm hoping that whenever that study is
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1 completed, we will make sure that its results are
2 comprehensively discussed with all interested parties 3
and that before any future strategies are developed,
4 a clear explanation of the kind of issues that you
5 have raised will be available for any subsequent
6 problems of reductions that we may be seeking.
7
MR. NEWCOMB: Finally, I have a question
8 about indirect source for review programs. Is that
9 best directed to you or Mr.
Forbes?
10
THE COURT REPORTER: Could you repeat that
11 question?
12
MR. NEWCOMB: Is any question about indirect
13 source review programs, as they may apply to area
14 sources, apply to other sources besides the point
15 sources that eventually will be regulated?
16
Is that a question better directed to
17 you or Mr. Forbes?
18
MR. MATHUR:
Obviously, Mr. Forbes.
19
MR. NEWCOMB: Thank you.
20
THE HEARING OFFICER: Go ahead.
21
MR. HARSCH: I'm Roy
Harsch from Gardner,
22 Carton & Douglas.
23
I can't help but to ask this question.
24 You testified today that your current state of
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1 knowledge shows that increases in -- excuse me --
2 that decreases in
NOx emissions has an adverse effect 3
on ozone levels.
4
Has anyone run the model to see what
5 would happen if
NOx emissions actually increase?
6
MR. MATHUR: Let me first clarify this
7 phenomenon where if you decrease
NOx, the ozone goes
8 up, and it has been modeled inside the Chicago
9 nonattainment area and it has been observed in other
10 parts of the country. I want to make it clear I'm
11 talking about inside Chicago
nonattainment data and
12 not necessarily outside.
13
As far as your second question has
14 anyone modeled the impacts of increase in
NOx
15 emissions, yes, we have. They have been modeled with
16 respect to growth in
NOx emissions that occur over
17 time. That has been an extensive part of the
18 analysis that is ongoing in OTAG.
19
Whenever the OTAG results are available,
20 we will be addressing issues surrounding the
21 increases in
NOx, what is the impact of those
22 increases on ozone air quality, and other questions.
23
MR. HARSCH : Do the results show an increase
24 in NOx emissions leading to a decrease of ozone
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1 levels in the Chicago
nonattainment area?
2
MR. MATHUR: The final work on that is not
3 complete, but preliminary results do not allow any
4 such conclusion to be made.
5
MR. HARSCH: Thank you.
6
THE HEARING OFFICER: Are there any further
7 questions?
8
MS. HENNESSEY: I have a quick follow-up
9 question.
10
Mr. Mathur, has the Lake Michigan Ozone 11
Study been published or subjected to any kind of peer 12
review?
13
MR. MATHUR: Yes. Let me explain why I say
14 yes. The Lake Michigan Ozone Study was the
15 foundation for the state submitting some of its SIP
16 revisions to the EPA. In that, all SIP revisions to 17
EPA undergo a public hearing. From that perspective, 18
it has been subject to peer review.
19
Other than that, since there has been
20 no other use of the results of Lake Michigan Ozone
21 Study, the only other peer review was through the
22 formation of an advisory committee, Lake Michigan Air
23 Directors Consortium, made up of industry and
24 environmental groups and other experts who provide
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1 ongoing peer review.
2
So those have been the mechanisms with
3 which the work has been reviewed by others outside of 4
the study group itself.
5
MS. HENNESSEY: Are you aware of anyone having 6
criticized the methodology used in the Michigan Lake
7 Ozone Study?
8
MR. MATHUR: Except for detailed questions
9 that don't come up in this field, I'm not aware of
10 any broad criticism.
11
In fact, I might add that the model that
12 was developed as a result of the Lake Michigan Ozone 13
Study is the model that was selected by the 37 states 14
as they do their OTAG evaluation.
15
MS. HENNESSEY: Thank you.
16
THE HEARING OFFICER: Are there a
ny further
17 questions?
18
MR. TREPANIER: This is Mr.
Trepanier. In
19 part of your testimony, you testified that there were
20 efforts and actually you had a relationship with some
21 environmental groups in the development of the rule.
22
Did the reaching out for criticisms or
23 for assistance in developing this program, did that
24 go as far as the agency using the mailing list that
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90
1 they established for this proposal? Was that mailing 2
list used in 1996?
3
MR. MATHUR: Let me answer it two ways.
4 First, I don't believe in my direct testimony that
5 I alluded to who we consulted with respect to their
6 development of this particular rule.
7
The testimony that I gave was that as
8 Illinois finds itself in a leadership role across
9 the country through the development of programs
10 through 1996, we worked
extensivley with all state
11 holders including environmental groups.
12
As far as the second part of your
13 question, I don't believe I have the answer as to
14 procedurally what mailing lists were used.
15
MR. TREPANIER: So if I understand, then,
16 what you just said is that when you refer to your
17 testimony working with environmental groups, you
18 weren't referring to this proposal?
19
MR. MATHUR: That's correct.
20
MR. TREPANIER: I have a question regarding
21 one of the exhibits and that's Exhibit No. 2, your
22 Figure 3. Is there something here -- was there
23 evidence that showed that this ozone that was
24 detected was entering the Chicago ozone
nonattainment
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1 area?
2
That seemed to be the presumption of
3 your testimony. I was just wondering was there and
4 where is the evidence that this ozone was entering
5 rather than staying?
6
MR. MATHUR: The word entering was used to
7 suggest that as we monitored ozone at the boundary
8 of the nonattainment area, meaning that we were
9 measuring ozone not necessarily inside the
10 nonattainment area, but sometimes outside. Since
11 we were measuring high levels of ozone outside, our
12 presumption was that the air mass that had the high
13 ozone outside did enter the Chicago
nonattainment
14 area and hence, the use of the word entering Chicago 15
nonattainment area.
16
MR. TREPANIER: Do I understand now what you
17 are saying is that you did measure up to 110 outside 18
the nonattainment area and that that was not compared 19
to what was -- there was no gradient leading out and 20
there was no indication that that material is coming 21
in?
22
MR. MATHUR: Let me answer your question this 23
way. Exactly what was the scientific evaluation and 24
what were the techniques and methodologies used and
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1 how the gradients were developed, I'm not in a
2 position to discuss that.
3
My understanding is that this chart
4 depicts ozone concentrations at varying altitudes
5 from ground level going up and that these
6 measurements were done at the southern boundary
7 of the Chicago
nonattainment area.
8
My purpose in referring to this chart
9 was simply to show that as we gained the tools to
10 measure ozone at higher levels, we found that the
11 ozone concentrations at all levels are not the same
12 and we should not lose site of the fact that simply
13 because we measured ozone at low concentrations at
14 the ground that there is an ozone at higher
15 concentrations and at higher levels, which does
16 create problems for the Chicago
nonattainment area.
17
MR. TREPANIER: The next exhibit, Exhibit 3,
18 when it assumes a 30 percent reduction for precursors
19 at the boundary, now, is that referring to the type
20 of a reduction in the numbers that are showing on
21 Exhibit No. 2?
22
MR. MATHUR:
Generally, that is correct.
23 Precursors to ozone include
NOx and VOCs and what
24 that statement in Figure 4 means is that together
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1 with a presumed ozone concentration of either 60 or
2 70, the model input also included a presumption that
3 there would be a concurrent reduction of 30 percent
4 in the levels of
VOCs and NOx at the boundary.
5
So that to achieve a model lower target
6 as indicated by the second two bar charts, one would
7 have to not only see a reduction in ozone, but a
8 reduction in the precursors of at least 30 percent
9 before the model would predict what it predicts in
10 the second and third bar charts. That's what it
11 means.
12
MR. TREPANIER: I believe I'm having trouble
13 understanding that, but maybe more testimony will
14 answer that question and I will ask another question 15
if I might.
16
On Exhibit 4, I'm recalling your
17 testimony was to the effect that it is here showing
18 nowhere near where we need to be. Is there something
19 on Exhibit 4, Table 1, that shows where we need to
20 be?
21
MR. MATHUR: Yes. If you look at the last
22 two columns on Table 1 marked target 50 percent,
23 target 60 percent, if we are able to achieve
24 reductions in boundary ozone down to 60 parts per
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1 billion, our proximate target for reduction in
2 emissions in the Chicago
nonattainment area is
3 50 percent and 50 percent is applied to the 1990
4 emission level and that's how we arrived at
5 approximately 600 tons per day as the final emission
6 level likely to show attainment.
7
Similiarly, if all we were able to
8 achieve is a boundary ozone of 70 or a lesser
9 reduction than 60, then, our target for reduction in
10 Chicago would be 60 percent meaning we would need
11 the emission levels to go down in Chicago to 480.
12
The point I was making is whether it's
13 480 or 600, we are not there yet. Therefore, we need
14 continued reductions in Chicago to achieve either of 15
those two numbers.
16
That was my point made earlier about
17 achieving a balance between emission reductions
18 outside of Chicago to lower the boundary ozone on
19 the one hand and then lowering emissions inside of
20 Chicago on the other to take both of those efforts
21 to allow Chicago to meet the ozone standard.
22
MR. TREPANIER: As a question on Exhibit
23 No. 6, in the table, in the column for point sources,
24 and there are numbers within the parenthesis, I
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1 wanted to ask a question regarding number 92 that's
2 in parenthesis.
3
Now, does this number reflect
4 anticipated new construction that would be cited by
5 1999, and additionally, does that number reflect what 6
would -- under my reading of the rules is likely
7 going to be a baseline allotment level that's higher
8 than the current actual emissions?
9
MR. MATHUR:
Could I defer that to
10 Mr. Forbes because he is going to go into detail on
11 some of these numbers?
12
But I do want to point out that the 92
13 number is less than 105. So I don't see your
14 statement that the actual emissions will be higher.
15
MR. TREPANIER:
That's what I'm asking. I'm 16
asking when you develop that number of 92, did you
17 consider that the baseline determinations under the
18 rules would most likely seem to have to be higher
19 than what is actually the current emissions and does 20
that number 92 reflect that because the rules allow
21 for new construction to emit without allotments for
22 the year of 1999?
23
MR. MATHUR: I will let Mr.
Forbes respond to 24
that as he gives his detailed testimony on numbers.
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1
THE HEARING OFFICER: Go ahead.
2
MR. SAINES: Thank you. I'm Richard
Saines.
3 It is my understanding based on my previous question
4 regarding the interrelationship between
NOx and VOCs
5 that the agency had taken steps to ensure that
NOx
6 was not going to be further reduced in the Chicago
7 area.
8
As a follow-up to the previous speak
er's 9
question, it appears that the graph, I believe, in
10 Figure 4 indicates that you are assuming a 30 percent
11 reduction of precursors at the boundary. Could you
12 clarify whether that includes both reduction -- a
13 concurrent reduction of
NOx and VOCs?
14
MR. MATHUR: Yes, it does. And it refers
15 to reductions of
NOx and VOCs outside the Chicago
16 nonattainment area and upwind of Chicago.
17
MR. SAINES: Okay. Thank you.
18
THE HEARING OFFICER: Ms.
Rosen?
19
MS. ROSEN: I'm Whitney
Rosen from Illinois
20 Environmental Regulatory Group.
21
I just wanted to clarify one of your
22 responses to an earlier question. Is it not correct 23
that representatives of the environmental community
24 and environmental groups did participate on the
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1 design team which developed the basis for this
2 proposal?
3
MR. MATHUR: Yes. As we have discussed, one
4 of them will be testifying tomorrow.
5
MS. ROSEN: Oka y. Thank you.
6
MR. CHARI: I am
Desi Chari with
7 Safety- Kleen.
8
I have a question on the inventory --
9 all the baseline emissions are based on 1990 baseline
10 emissions. We have shown reduction in 1996 if you
11 are looking at Table 1. Is it based on the rules
12 that have been enacted so far or that is actually we 13
have achieved that level right now?
14
MR. MATHUR: Let me defer this to Mr.
Forbes
15 who has developed these numbers. He is better
16 prepared to respond after his testimony.
17
THE HEARING OFFICER: Are there any further
18 questions?
19
MS. MIHELIC: You stated in your testimony in 20
answering some of the questions just asked that 12
21 percent is not the amount of reductions that's going 22
to be needed to achieve attainment overall in the
23 Chicago nonattainment area, is that correct, that
24 additional reductions are going to be needed after
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1 1999?
2
MR. MATHUR: Yes. Twelve percent, I do not
3 believe, will be sufficient to show attainment.
4
MS. MIHELIC:
And you said 12 percent by
5 point sources or by all sources?
6
MR. MATHUR: We haven't done that kind of
7 analysis. After we see all of
OTAG's results and
8 form a strategy regarding reduction outside of
9 Chicago and what is left to do inside, that would
10 be a better time to have a discussion on what is
11 remaining to be done in Chicago.
12
MS. MIHELIC:
So it's possible that more than
13 12 percent will be required for point sources after
14 1999?
15
MR. MATHUR: It is possible.
16
THE HEARING OFFICER: Okay.
17
MR. TREPANIER: This is Mr.
Trepanier.
18
Your testimony was that the agency would
19 like to see this adopted no later than August of
20 1997. Earlier, EPA testified they wanted to have the
21 proposal in their hand in December of 1997.
22
What concerns does the agency have that 23
they would need to have this approved by the board in 24
three or four months prior to its submission to
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99
1 federal EPA?
2
MR. MATHUR: Let me give you a program
3 perspective and not give you a legal response since
4 I'm not a lawyer.
5
Typically, from the time that a board
6 puts out its final notice and when all of the
7 documentation that the agency needs to put together
8 is a state implementation package, it's two to three
9 months. That was the basis of my statement that in
10 order to beat the sanction deadline, and at the break
11 I was corrected that the sanction deadline is January
12 3, 1998.
13
In order to submit to EPA by the end of 14
the year the state implementation plan, I would like 15 to
see this rule come out of the board by August to
16 allow us to meet our demands.
17
MR. TREPANIER: Is it your position, then,
18 that from your view, the agency could then meet the
19 requirements that are on them in their regular course
20 of business?
21
MR. MATHUR: That's correct.
22
THE HEARING OFFICER: Are there any further
23 questions?
24
At this time I would like the agency
L.A. REPORTING - (312) 419-9292
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1 to move to have the six exhibits entered into
2 evidence.
3
MS. SAWYER:
The agency moves to have
4 exhibits 1 through 6 admitted into evidence?
5
THE HEARING OFFICER: Is there any objection
6 having these exhibits entered into the record?
7
Hearing none, then, I will note that
8 Exhibit 1 is Figure 2 -
NOx Disbenefit Effect;
9 Exhibit 2 is Figure 3 - Ozone Concentrations Measured
10 at the Southern LMOS Boundary; Exhibit 3 is Figure
11 4 - VOC Reduction at Different Background Levels;
12 Exhibit 4 is Table 1, 1970 to 2007 Chicago VOM
13 Emissions Summary; Exhibit 5 is Figure 5 - OTAG Map;
14 Exhibit 6 is Table 2, Summary of the Attainment/ROP 15
Scenario with ERMS Program. With that, those will be 16
entered into the record.
17
I think this will be a good time to tak
e
18 a lunch break for an hour and we will be back here at
19 2:00 o'clock to start in again.
20
(Whereupon, after a short
21
lunch break was had, the
22
following proceedings were
23
held accordingly.)
24
THE HEARING OFFICER:
Why don't we go back
L.A. REPORTING - (312) 419-9292
101
1 on the record.
2
We will start with, I believe, the
3 testimony of Dick
Forbes from the agency?
4
MS. SAWYER:
That's right. Do we want to
5 just swear in the witness?
6
THE HEARING OFFICER: Yes.
7
(Witness sworn.)
8 WHEREUPON:
9
R I C H A R D
F O R B E S ,
10 called as a witness herein, having been first duly
11 sworn, deposeth and saith as follows:
12
MR. FORBES: My name is Richard A.
Forbes. I
13 am employed by the Illinois Environmental Protection
14 Agency as the manager of the Ozone Regulatory Unit in 15
the Air Quality Planning Section, Bureau of Air. I
16 have been employed by the IEPA in this capacity for
17 approximately 11 years.
18
Prior to that, I served as an analysis
19 unit manager and new source review manager both in
20 the permit section of
IEPA's Bureau of Air.
21
Prior to that I served as an
22 environmental protection engineer in the Bureau of
23 Water. In all, I have been employed by IEPA for
24 approximately 24 years.
L.A. REPORTING - (312) 419-9292
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1
My educational background includes a
2 Bachelor of Science degree in environmental
3 engineering from the University of Illinois at
4 Champaign- Urbana. I have a Master's of Science
5 degree from Southern Illinois University at
6 Carbondale.
7
I hold a professional engineering
8 license and I am registered in the state of
9 Illinois.
10
My testimony today deals with VOM
11 emissions in the Chicago
nonattainment area and
12 IEPA's basis for planning proposals to satisfy Clean
13 Air Act requirements. I am going to do this more as
14 a presentation on overheads.
15
MS. SAWYER:
Could I just interrupt for one
16 moment?
17
Mr. Forbes has two types of overheads;
18 one is just kind of bullet points of what he is
19 going to talk about and others that are tables
20 and figures. I would rather not interrupt the
21 presentation to mark the bullet point overheads
22 as exhibits. We will do that for the figures and
23 tables.
24
Is that okay?
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1
THE HEARING OFFICER:
That sounds
2 reasonable.
3
Does anyone have any concerns with
4 that? Okay.
5
MR. FORBES: The 1990 Clean Air Act amendments
6 require that states develop new inventories for
7 nonattainment areas in each of their respective
8 states and identify the base year for those
9 inventories to be 1990. This inventory is the basis
10 for most Clean Air Act requirements and provisions.
11
IEPA completed this new 1990 inventory
12 in 1992. U.S. EPA approved that inventory in 1995.
13 The inventory includes estimates of volatile organic
14 material, or VOM, nitrogen oxides, or
NOx,
15 carbon monoxide, or CO, emissions from point area
16 and mobile sources.
17
The state implementation plan, or SIP
18 inventory, includes all
anthropogenic and
biogenic
19 emissions from sources in the
nonattainment area and
20 for major sources within 25 miles from the
21 nonattainment area.
22
This inventory is used for a variety of
23 purposes, but primarily for air quality modeling and
24 for air quality analysis.
L.A. REPORTING - (312) 419-9292
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1
The breakdown by category is point
2 sources contributing 26 percent; area sources, 20
3 percent; biogenic sources, 8 percent; on-road mobile,
4 36 percent; and off-road mobile sources, 10 percent
5 of the emissions to this 1990 inventory.
6
The total VOM for the Chicago
7 nonattainment area is 1,363 tons per ozone season
8 weekday, and that is information that's contained in
9 the inventory submittal that IEPA made to the U.S.
10 EPA and which has since been improved.
11
Figure 1 depicts the
distribution of
12 these emissions in the form of a pie chart and
13 supplies the specific emissions to each category
14 and the percentages that I just mentioned are the
15 percentages that are shown in a more exact way on
16 this figure.
17
MS. SAWYER:
Could I mark this as Exhibit 7?
18
(Document marked as
19
Hearing Exhibit No. 7 for
20
identification, 1/21/97.)
21
THE HEARING OFFICER:
We are now marking
22 Figure 1 the 1990 Chicago SIP Inventory of VOM
23 Emissions as Exhibit 7.
24
I have a quick question of
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1 clarification. When you are referring to
VOMs, are
2 you also referring to
VOCs too?
3
MR. FORBES:
Yes. In our -- in my
4 presentation, they should be considered as
5 interchangeable for purposes of our testimony today.
6
In addition to calculating the SIP
7 inventory, which includes all the emissions and
8 sources, we also are required to calculate what is
9 termed the rate of progress inventory.
10
That inventory includes only the
11 anthropogenic or VOM emissions within the
12 nonattainment area only. This inventory is used
13 for rate of progress calculations and its breakdown
14 by point sources is 26 percent; area sources, 22
15 percent; on-road mobile, 40 percent; off-road mobile, 16
12 percent.
17
The total VOM emissions in the Chicago
18 nonattainment area for just the rate of progress
19 purposes is only 1,217 tons per ozone season
20 weekday.
21
Figure 2 then provides a --
22
MS. SAWYER:
Hold on. I would like to mark
23 Figure 2 as Exhibit 8.
24
L.A. REPORTING - (312) 419-9292
106
1
2
(Document marked as
3
Hearing Exhibit No. 8 for
4
identification, 1/21/97.)
5
THE HEARING OFFICER:
I will now mark this as
6 Exhibit 8. Figure 2 is 1990 Chicago ROP Inventory
7 Summary for VOM Emissions. This has been marked as
8 Exhibit 8.
9
MR. FORBES: This figure also provides
10 graphical representation of the distribution of
11 emissions by point area on-road/off-road mobile
12 sources and Figure 2 contains the more specific
13 emission totals for each category and the specific
14 percentages that I just summarized.
15
The 15 percent rate of progress plan
16 that is required under Section 182(b)(1) of the
17 Clean Air Act required to be prepared and submitted
18 for moderate areas and above where there is
19 nonattainment of the ozone standard. This plan was
20 due in November of 1993 and was completed by IEPA in
21 that year, 11/1993.
22
U.S. EPA is currently reviewing and
23 IEPA believes that it's likely that U.S. EPA will
24 approve Illinois' ROP plan.
L.A. REPORTING - (312) 419-9292
107
1
The board has adopted all of the various
2 15 percent rate of progress rules over the last
3 several years.
4
U.S. EPA has proved all of the Illinois
5 15 percent rules that are contained in that plan.
6 The 15 percent plan itself goes further than RACT did
7 and tightening many of our existing RACT rules.
8
It also includes
nonstationary source
9 rules like marine vessel loading as well as auto body
10 refinishing. The total reduction achieved by this
11 plan is approximately 318 tons per day or we estimate 12
a 1996 emissions level with these regulations
13 included 781 tons per day.
14
The required rate of progress reduction, 15
using U.S. EPA's criteria, is 282 tons per day or we
16 have to achieve a 1996 target level of 857 tons per
17 day.
18
The excess reductions that have been
19 achieved from the 15 percent plan are being applied
20 to the three percent ROP plan to the 1997 to 1990
21 time frame.
22
In other words, the additional reduction 23
that has been achieved or will be achieved through
24 the end of '96 will help to lessen the requirements
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1 needed under the three percent plan.
2
The ERMS technical support document
3 summarizes the various rate of progress measures and
4 their reduction quantities.
5
MS. SAWYER:
I'll mark this Table 1 as
6 Exhibit 9.
7
(Document marked as
8
Hearing Exhibit No. 9
9
for identification, 1/21/97.)
10
THE HEARING OFFICER:
Table 1 is a 15 Percent 11
Plan Breakdown Creditable Reductions chart that will
12 be marked as Exhibit No. 9.
13
MR. FORBES: Table 1 provides a summary of the 14
distribution of the emissions achieved under the 15
15 percent rate of progress plan.
16
If we look under the state measures
17 column, we can see that 98 tons per day are coming
18 from point source categories, 45 tons per day are
19 coming from area source categories, 32 tons per day
20 are coming from mobile source categories for a total
21 of 175 tons per day of reduction or approximately 55
22 percent of the total plan are coming from state
23 measures.
24
Moving to the federal measures column,
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1 approximately one ton a day are coming from point
2 sources, 30 tons per day are coming from area
3 sources, and 111 tons per day are coming from mobile
4 sources for a total of 143 tons per day or in other
5 words, the federal measures are providing
6 approximately 45 percent of the 15 percent rate of
7 progress plan reductions.
8
If we look horizontally across, we can
9 see the percentages that are coming from each of the
10 major emission sectors.
11
For point sources, we are getting a
12 total of 99 tons per day or about 31 percent, area
13 sources are a total of 75 tons per day or 24 percent, 14
and mobile sources are a total of 143 tons per day or 15 45
percent of the 15 percent rate of progress plans
16 are coming from those three sectors.
17
Next, I would like to illustrate for
18 you by way of a graph sort of a progress that has
19 been made so far since we started in 1970 and the
20 board has been adopting RACT regulations since that
21 time up through the latest 15 percent rate of
22 progress plan measures.
23
As you can see, we started at about
24 2,000 tons per day in 1970 making a substantial
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1 reduction beginning in 1990 with most of that being
2 attributed to the various RACT regulations adopted by
3 the board.
4
From 1990 through 1996, we again have
5 made progressive reductions in the overall pool of
6 emissions in the Chicago area with those reductions
7 being attributed to our 15 percent rate of progress
8 plan, those rules having been adopted by the board.
9
MS. SAWYER:
Just a moment. I would like to
10 mark this as Exhibit 10.
11
(Document marked as
12
Hearing Exhibit No. 10
13
for identification, 1/21/97.)
14
THE HEARING OFFICER:
Marked as Exhibit 10
15 is Figure 3, Chicago VOM Emissions: 1970 - 1996.
16
MR. FORBES: Section 182(c)(2) of the Clean
17 Air Act now requires Illinois to develop a three
18 percent rate of progress plan and we are focusing on
19 the period of 1997 to 2007 with right now the
20 emphasis being on the first three-year period, 1997
21 to 1999.
22
U.S. EPA criteria determines the target
23 levels that have to be achieved for each three
24 percent rate of progress for each three-year period.
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1 Target levels are based on 1990 rate of progress
2 inventory. That determines the 1996 target level
3 and subsequently determines the various rate of
4 progress milestone levels that have to be achieved.
5
Those milestone levels are calculated
6 for 1999, 2002, 2005, and then the attainment year,
7 which is 2007.
8
Again, the ERMS technical support
9 document provides details on the procedure for EPA's
10 calculations that states have to do to determine the
11 target levels.
12
U.S. EPA has issued a SIP call to
13 Illinois on July 10, 1996. That SIP call was later
14 contained in a federal register, 61 FR 36 292. The
15 provided of this federal register requires that a SIP 16
revision for the first ROP milestone, that is, 1997
17 through 1999, has to be provided no later than
18 January 3, 1998, in order to avoid sanctions.
19
Failure to submit a SIP revision could
20 result in a number of federal sanctions that have
21 been identified at various times in previous
22 proceedings.
23
The remainder of the three percent ROP
24 plan will be required along with the attainment plan.
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112
1 The calculations that IEPA has used in order to help
2 it assess it's requirements under the three percent
3 ROP period for 1997 through 1999 determine that a 46
4 tons per day reduction for 1996 VOM levels is needed
5 in order to meet the ROP milestone level.
6
That is the 781 tons per day we project
7 1996 emissions to be and then comparing that to the
8 ROP level of 735 tons per day with the difference
9 being 46.
10
The approach that IEPA has used in
11 developing its plan to achieve this three percent
12 requirement was to first evaluate all of the
13 available control measures that have been scheduled
14 for implementation.
15
We wanted to then account for all
16 federal measures plus ongoing benefits from existing
17 measures. After projecting emissions and
18 incorporating growth and controls for all categories, 19
we then wanted to determine the reduction shortfall
20 needed -- that would be needed from state measures.
21
Now, the federal measures that have been 22
considered for the post-'96 time frame are off-road
23 engine standards, motor vehicle control standards for 24
on-road vehicles, on-board diagnostics for on-road
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1 vehicles, the national low emission vehicle standards
2 for on-road vehicles, clean fuel fleet standards, and
3 consumer product limitations.
4
All of these are federal measures which
5 are ongoing and at various stages of implementation
6 and approval and we feel confident that these
7 measures will be implemented and will result in
8 reductions that will improve air quality in Chicago.
9
The projected 1999 VOM emissions with
10 growth in all of these federal measures, we estimate
11 to be 745 tons per day.
12
Looking at the 1999 ROP target level of
13 745 tons per day, the difference shows us a shortfall 14
of about 20 tons per day not including any
15 contingency. This would be the exact amount.
16
This next figure that I have, Figure 4,
17 helps to illustrate where we think we are going with
18 all of the measures that are in place, plus all of
19 the expected federal measures, without the ERMS
20 program, without the other command and control
21 proposal that's part of our ROP plan, you can
22 visually see the difference.
23
If you look at Figure 4, you will notice 24
the smaller of the two lines, the one that has the
L.A. REPORTING - (312) 419-9292
114
1 triangles as the markers, is the projected emissions
2 level that I was describing. In 1999, you can see
3 that it is about 754 tons per day.
4
The heavier indicative line, which is
5 the ROP target level, which has the square markers,
6 is the federally defined ROP target milestones that
7 we have to achieve in order to meet our various three
8 percent ROP requirements.
9
So without doing anything at this point
10 in time, but including all of the various 15 percent
11 measures that have been adopted, and accounting for
12 all federal measures, you can see we had a shortfall
13 and we calculate that to be approximately 20 tons per 14
day.
15
MS. SAWYER:
I would like to mark Figure 4 as 16
Exhibit 11.
17
(Document marked as
18
Hearing Exhibit No. 11
19
for identification, 1/21/97.)
20
THE HEARING OFFICER: Exhibit 11 is Figure 4,
21 entitled, "Projected Chicago VOM Emissions: 1996 -
22 2007."
23
MR. FORBES: IEPA has reviewed area and m
obile 24
source categories for available control options.
L.A. REPORTING - (312) 419-9292
115
1
We could only find after our review one
2 area source measure, which we felt would be a
3 reasonable measure that we could hopefully go after
4 and try to reduce emissions from that category, and
5 that is an area called cold cleaning degreasing.
6
We were not able to identify any other
7 mobile source measures, ones that were not already
8 earmarked for control by the U.S. EPA.
9
IEPA has also reviewed point source
10 categories to try and define or determine if there
11 are any other potential reductions that could be
12 achieved.
13
However, since all of the RACT rules
14 have been applied and we have tightened most of those 15
RACT rules beyond what the existing requirements call 16
for, we could identify few traditional control
17 options that would be available in a command and
18 control manner.
19
There are a number of reasons for this,
20 but this next slide identifies the main ones. First
21 of all, it's difficult at this point in time to
22 identify traditional category-specific control
23 methods, ones that could be -- or that would lend
24 themselves to standard command and control type
L.A. REPORTING - (312) 419-9292
116
1 regulations across the board, very difficult to meet,
2 very tight regulations that we know would achieve the
3 reductions needed.
4
Secondly, cost effectiveness for the
5 traditional methodologies have gotten much higher.
6
Then lastly, trading provides more
7 flexibility than rules of general applicability,
8 those kinds of rules that tend to be very
9 fundamentally rigid and are generally identified as
10 command and control type measures.
11
The next table that I have here is a
12 listing of the various Chicago area source categories 13
that make up the 1990 inventory and their 1996
14 inventory.
15
On this chart, what we have tried to do
16 is identify that in 1990, there were several
17 categories that were already controlled by previously 18
adopted RACT regulations.
19
Those were stage one, gasoline tank
20 truck leaks. We already had a simple cold cleaning
21 degreaser regulation. That was one of the first RACT 22
regulations adopted. Asphalt paving, that was a RACT 23
regulation. Open burning is generally prohibited
24 under the Environmental Protection Act.
L.A. REPORTING - (312) 419-9292
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1
In 1996, we adop ted a number of measures
2 that targeted area source categories. One was VOL
3 transfer for ships and barges. Stage two, was
4 vehicle refueling. We also had underground storage
5 tank breathing, which was another category.
6
As you can see, there are several others
7 that are federal -- federally driven reductions such
8 as architectural coatings, traffic and maintenance
9 painting and auto refinishing, although that one, we
10 initiated at the state level on our own.
11
In addition to that, U.S. EPA adopting
12 consumer and commercial solvent regulations. The
13 way they are approaching this, they are doing it
14 product-by-product and they intend to continue to
15 regulate as many products as they can as it becomes
16 feasible.
17
They had a certain group in 1996 that
18 they were going to regulate and we took credit for
19 those reductions as well.
20
After looking this table over and trying 21
to identify categories that would remain, that we
22 think we could regulate, we were not able to identify 23
any other than cold cleaning degreasing. We went
24 back and revisited that category and believe it is
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118
1 reasonable to ask for further reductions in controls
2 in that area.
3
If we haven't already filed, we will be
4 filing very soon a board regulation to further
5 tighten and achieve reductions in that particular
6 category.
7
MS. SAWYER:
I would like to have Table 2
8 marked as Exhibit 12.
9
(Document marked as
10
Hearing Exhibit No. 12
11
for identification, 1/21/97.)
12
THE HEARING OFFICER:
Thank you. I'm going
13 to mark as Exhibit 12, "Table 2, Chicago Area Source
14 Category Summary, 1990 Area Source Emissions of
15 Volatile Organic Compounds." That has been marked as 16
Exhibit 12.
17
MR. FORBES: As on-road mobile sources are
18 generally regulated by and -- generally, U.S. EPA
19 and the federal government have granted rights to
20 regulate on-road sources.
21
We focused on off-road sources to see if 22
there were categories there that we might be able to
23 further go on and regulate, that there might be a
24 command and control type rule that we could
L.A. REPORTING - (312) 419-9292
119
1 investigate.
2
As you can see in this column, we have
3 1990 emissions listed and then regulatory status.
4 Most of those categories that have any
sizeable
5 emissions amounts to them are either controlled now
6 by U.S. EPA through their most recent small engine
7 regulation or are in the process of being regulated
8 or will be regulated in the very near future by
9 additional engine standards that U.S. EPA will be
10 proposing.
11
After looking at this information, the
12 agency really could not identify a specific category
13 that it felt it would be possible to go after to
14 regulate from this group. There weren't very much
15 the categories left. The ones that were available
16 had very small emissions and it did not seem that
17 this was the way to go either.
18
MS. SAWYER:
I would like to mark this Table
19 3 as Exhibit 13.
20
(Document marked as
21
Hearing Exhibit No. 13
22
for identification, 1/21/97.)
23
THE HEARING OFFICER: I will be marking Table
24 3, "Chicago Off-Road Mobile Category Summary, 1990
L.A. REPORTING - (312) 419-9292
120
1 Non-Road Emissions of Volatile Organic Compounds" as
2 Exhibit 13.
3
MR. FORBES: In the process of trying to
4 identify various categories of emission sources that
5 might be possible to regulate, IEPA went back to
6 review the cost effectiveness that it has seen over
7 the years starting with RACT I up to the latest 15
8 percent rate of progress plan.
9
What I have done is summarized that
10 information and superimposed from what we learned
11 from our trading development on this rule. I
12 summarized what the cost per ton is for each of these 13
various measures.
14
As you can see back in 1975, when we
15 first adopted RACT I, we ended up with a dollar per
16 ton figure of approximately 600.
17
I should also point out that all of
18 these figures have been adjusted to be on the same
19 basis. They are all in 1990 dollars so they can be
20 compared.
21
RACT II, in 1980, is about $720 per ton. 22
As you can see going up to our 15 percent rate of
23 progress rules, the latest is set at approximately
24 $6,600 per ton.
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121
1
That's a substantial increase over the
2 original measures that were adopted.
We estimate
3 based on data that will be presented later that the
4 cost effectiveness of the ERMS program that's being
5 proposed is in the neighborhood of $2,500 per ton.
6
MS. SAWYER:
We will mark Table 4 as Exhibit
7 14.
8
(Document marked as
9
Hearing Exhibit No. 14
10
for identification, 1/21/97.)
11
THE HEARING OFFICER: I will mark as Exhibit
12 14 the document entitled, "Table 4, Illinois VOM
13 Reductions Program."
14
MR. FORBES:
So given this information and
15 the difficulty in trying to identify categories that
16 we think would lend themselves to being regulated
17 under command and control scenarios, we identified
18 the one category of area source, cold cleaning
19 degreasing, and we looked further at the ERMS for
20 trading concept.
21
With the cold cleaning degreasing rule,
22 we expect that we can achieve about 11 and a half
23 tons per day in 1999.
24
We estimate that the trading program as
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122
1 proposed could achieve about 12 and a half, 12.6 tons
2 per day, in 1999.
3
These two measures together will provide
4 around 24 tons per day of reduction, which is a
5 little in excess of the 20 that I mentioned earlier
6 that we needed to just barely meet our requirements.
7
We think that we do need and the EPA
8 requires that we have some small amount of
9 contingency just as a safety measure to ensure that
10 when we get to 1999, that we have, in fact, made and
11 met our target.
12
Figure 5 hopefully will illustrate some 13
of the information that I have been going through
14 here and some of the information that Mr.
Mathur
15 provided testimony on earlier.
16
This is a graph which provides a view
17 between '96 and 2007 of how we think emissions will
18 go without a trading, without a command and control
19 rule, with just the federal measures that are already 20
earmarked and plus the 15 percent measures that are
21 already adopted.
22
The dark line again represents the rate
23 of progress. It represents the total projected
24 emissions with the proposed ERMS program and the
L.A. REPORTING - (312) 419-9292
123
1 one command and control rule that we are proposing,
2 the cold cleaning degreasing program. The thin line
3 with the triangle markers represents the rate of
4 progress levels.
5
Now, what I have done is also imposed
6 the attainment levels that we have spoke of earlier
7 with regard to achieving -- if we were to achieve a
8 60 part per billion background ozone concentration
9 or a 70 part per billion background ozone
10 concentrations. Those two lines represent attainment 11
levels.
12
So as you can see, if we were able to
13 achieve a background level down to 60 parts per
14 billion with the assumptions
Bharat Mathur explained
15 in his earlier testimony, we think we would be very
16 close, although not there, but very close to being
17 able to achieve attainment with the plan that we have 18
proposed.
19
On the other hand, if it's 70 parts
20 per billion and we achieve that, you can see from the 21
graph that we still have a ways to go to reach
22 attainment.
23
We believe this is a reasonable program, 24
that the two measures that we have identified will
L.A. REPORTING - (312) 419-9292
124
1 provide us with a very good prospectus on being able
2 to both meet our rate of progress requirement for the
3 first three-year period as well as getting us in the
4 right direction for reaching attainment in the
5 Chicagoland area.
6
MS. SAWYER:
I would like to mark Figure 5 as
7 Exhibit 15.
8
(Document marked as
9
Hearing Exhibit No. 15
10
for identification, 1/21/97.)
11
THE HEARING OFFICER:
Figure 5 is a document
12 entitled, "1996 - 2007 VOM Emissions For Chicago,"
13 and we will be marking that as Exhibit 15.
14
MR. FORBES: Section 9.8 of the act requires a 15
portion of reductions for each emission sector in
16 order to attain the ozone standard.
17
IEPA is proposing a plan for only the
18 first three percent ROP milestone. However, we have
19 still attempted to look at what the proportional
20 reduction shares are with respect to the plan that
21 we have proposed.
22
Based on 1996 emissions, the
23 contribution from each of the main emission sectors,
24 point area and mobile, is 22, 26, and 52 percent
L.A. REPORTING - (312) 419-9292
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1 respectively.
2
We believe this represents the
3 proportional share for each sector. In other words,
4 we would need 22, 56 and 22 percent of the required
5 reductions from each of those sectors in order for it
6 to be a proportionate share of reduction.
7
IEPA's plan proposes that with ERMS and
8 the one command and control rule identified will
9 provide production shares of 20, 22 percent, and 58
10 percent respectively.
11
Although we don't believe it's required
12 at this point since we are only going to try to
13 satisfy the first three percent ROP milestone period, 14
we believe it does meet the intent of the act in
15 trying to regain proportionate shares from each of
16 these sectors.
17
I would like to take just a minute to
18 address an air quality consideration. Unlike other
19 air pollutants, ozone is formed in the atmosphere.
20 It is not emitted directly as a pollutant.
21
Depending on conducive weat
her
22 conditions, which are hot, sunny days with little
23 wind and no rainfall, we see the formation of ozone.
24 The ozone attainment strategy, therefore, should be
L.A. REPORTING - (312) 419-9292
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1 designed with a seasonal phenomenon in mind.
2
The IEPA reviewed IEPA monitoring data
3 from 1988 through 1994 to review the number of
4 exceedances and frequency and occurrence of those
5 exceedances.
6
What we found was that all of the
7 exceedances or the .12
ppm standard fall within the
8 May through September period.
9
Table 5, which will be difficult to see
10 on this overhead, is a distribution of what those
11 window exceedances have occurring and what we have
12 shown here is from April through September and the
13 25th of April is a questionable date.
14
I'm not sure that we have invalidated
15 that data, but there was some other strange
16 information that went along with it so we don't
17 believe it's a valid reading on that particular day.
18
But as you look through here, you can
19 see that all of the occurrences are primarily
20 occurring in June, July, and August with a few
21 outliers in May and September.
22
MS. SAWYER: I would like to mark Table 5 as
23 Exhibit 16.
24
L.A. REPORTING - (312) 419-9292
127
1
(Document marked as
2
Hearing Exhibit No. 16
3
for identification, 1/21/97.)
4
THE HEARING OFFICER:
We will mark the
5 document entitled, "Table 5, Ozone
Exceedances:
6 1988 - 1994" as Exhibit 16.
7
MR. FORBES: This data, after having reviewed
8 it, indicates to us that the concern for ozone -- for
9 the programs that we're currently working on, we
10 should be focused on the May through September time
11 frame. Therefore, in designing ERMS, these were
12 quality concerns that were addressed.
13
First, we wanted to make reductions when 14
it was most advantageous for air quality. We wanted
15 to do it in a way that would provide the most
16 flexibility for sources. We wanted to minimize the
17 extent possible on sources for further reductions.
18
Consequently, based on air quality data, 19
we proposed that the ERMS be limited to a seasonal
20 unit control period of VOM emissions from May through 21
September 30th.
22
Next, I would like to touch on just a
23 summary of the ERMS participating sources. In order
24 to try and assess how much production the program
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1 would achieve and who would be involved in the
2 sources, we did an analysis of the participating
3 sources based on the rule that's been proposed.
4
Initially, we relied on the projected
5 1996 SIP revisions in order to assess the breakdown
6 of sources. As you can see here, we have about a --
7 a little over 1,900 sources, about almost 9,000
8 emission units. Seasonal emissions were
9 approximately 2,000 tons. A 15 percent ROP plan
10 estimated it would reduce '96 emissions to about
11 22,000 tons per season.
12
Next, what we did was analyze
13 that information with respect to a range of breakdown 14
by size basically. As you can see here, we started
15 with those sources that were greater than 100 tons
16 per season and then 15, 25, ten, all the way down to
17 zero. Essentially, we reviewed where we thought a
18 reasonable cutoff would be for applicability in this
19 program.
20
Basically, at the ten-ton or gre
ater ton 21
per season level, we would achieve the goal of about
22 90 percent of the emissions as you can see on this
23 particular table.
24
Based on the recommendation of the
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1 design team helping and assisting IEPA in developing
2 this program, IEPA shows a draft applicability level
3 at the 90 percentile equivalent to sources being
4 greater than ten tons.
5
MS. SAWYER:
I would like to mark Table 6 as
6 Exhibit 17.
7
(Document marked as
8
Hearing Exhibit No. 17 for
9
identification, 1/21/97.)
10
THE HEARING OFFICER:
The document entitled
11 "Table 6, VOM Sources in Chicago, Grouped by Emission 12
Category (1996 Estimates)," is marked as Exhibit 17.
13
MR. FORBES: This initial count indicated
14 there would be approximately 283 participating
15 sources, but during the outreach period, when we
16 started actually getting into drafting the specifics
17 of the rule and looking at the language and the
18 various provisions, a number of recommendations and
19 suggestions were made.
20
Based on the final proposal
21 incorporating all of these various suggestions, IEPA
22 went back and looked at the 1994 annual emissions
23 report data to try and get a little more accurate
24 assessment of the number of participating sources
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1 that would be in the ERMS program. These results
2 were contained in Exhibit 7.
3
MS. SAWYER:
Let's mark Table 7 as Exhibit
4 No. 18.
5
(Document marked as
6
Hearing Exhibit No. 18 for
7
identification, 1/21/97.)
8
THE HEARING OFFICER:
Exhibit 18 is "Table 7,
9 Analysis of ERMS Participating Sources."
10
MR. FORBES: Basically, in summarizing this
11 table, what we found out is of about 17,600 tons
12 of emissions, 12,500 would be attributable to ERMS
13 sources.
14
We determined that there were
15 approximately 244 participating sources and about
16 4,100 emission units that would be subject to the
17 program and that's after removing various exemptions
18 and exempt units and accounting for other sources
19 such as Non-CAAPP/CAAPP or FESOP facilities.
20
Some of the late editions to our
21 proposal that required us to go back and review
22 information contained in Table 7 was a 15-ton per
23 season CAAPP or seasonal limit option available to
24 sources as well as the 18 percent early reduction
L.A. REPORTING - (312) 419-9292
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1 option.
2
IEPA evaluated the 15-ton per season
3 option concluding that if all available sources opted
4 for this provision, a reduction loss of only 115 tons
5 per season or about .75 tons per day would occur.
6 Regarding the 18 percent option, it was not possible
7 to estimate how many sources might choose that.
8 However, using this option, we believe we would
9 achieve actually greater reductions than what was
10 projected and therefore, it would not adversely
11 affect the outcome of the results of Table 7.
12
That concludes my presentation.
13
THE HEARING OFFICER:
Let's go off the record 14
for a second.
15
(Whereupon, a discussion
16
was had off the record.)
17
THE HEARING OFFICER:
Let's go through the
18 prefiled questions that pertain to the testimony of
19 Mr. Forbes, if there are any.
20
Seeing none, we will go on the floor.
21 Mr. Saines?
22
MR. SAINES: Yes. We agree with Bonnie that
23 we have agreed to defer certain questions. However,
24 these questions are part of our
prefiled questions.
L.A. REPORTING - (312) 419-9292
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1 This is referring on Page 2 of our
prefiled
2 questions, Section B, regarding Appendices A through
3 E of the technical support document.
4
Question number two is why did the
5 agency designate sources with greater than 25 tons
6 per year of emissions as non-CAAPP sources in Table
7 12 of Appendix C?
8
MR. FORBES: The agency listed sources in
9 Table 11 of Appendix B.
10
MR. SAINES : I believe it's Table 12 of
11 Appendix C. It's Roman numeral twelve.
12
MR. FORBES: The agency lists its sources in
13 Table 12 of the appendix entitled non-CAAPP sources.
14 We identify -- we listed sources, which are
15 identified through an evaluation of CAAPP
16 applications as being non-CAAPP sources, primarily
17 sources which have requested
FESOPs and sources which 18
notified the agency that they were closing and
19 withdrew their state operating permits after 1994.
20
These company CAAPP applications were
21 received in late 1995 and 1996. Emissions listed for 22
these sources were from the year 1994 as contained in 23
the 1994 annual emissions report.
24
Since the later information for these
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133
1 sources indicated that these sources would be CAAPP
2 sources when the ERMS program begins, the agency
3 identified and removed them from the potential list
4 of ERMS participating sources.
5
MR. SAINES:
Thank you. The next question is
6 question number three. In Table 13 of Appendix D, it
7 discusses sources. How is the source defined? Is
8 the source defined as the facility as a whole or
9 specific emission units within the particular
10 facility, Table 13 of Appendix D?
11
MR. FORBES: The definition of source in
12 Table 13 of Appendix D is consistent with the CAAPP
13 application. That is, it means the facility as a
14 whole. However, the title of this table may be
15 confusing. Perhaps a better title would be exempt
16 units and ERMS sources. That is what is represented
17 in the table.
18
MR. SAINES: Thank you.
19
Okay. Next question, question number
20 five, what was the agency's basis for placing sources 21
on the "ERMS Participating Sources List" in Table 14
22 of Appendix E?
23
MR. FORBES: The basis for the agency placing
24 sources on the ERMS participating sources list in
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1 Table 14 of Appendix E was the proposed ERMS rule
2 applicability criteria, which requires CAAPP sources
3 having season emissions greater than ten tons to
4 participating ERMS and excluding those emission units
5 identified in proposed Section 205.405, which are
6 exempt from further reductions.
7
MS. MIHELIC: I'm going to ask the next set
8 of questions. Going to Page 6 of our
prefiled
9 questions under Section 3, Section 205.110, regarding
10 the purpose, we withdraw Question 1 under Section A,
11 but going to Question 2, what findings of the
12 National Ozone Transport Assessment Group being
13 coordinated by the Environmental Council of States
14 that was discussed earlier has the Agency taken into
15 account?
16
MR. MATHUR:
I'll answer that one.
17
There are no findings of OTAG.
18 Therefore, none have been taken into account. As I
19 testified earlier in response to an earlier question, 20
I don't believe any OTAG issues need to be taken into 21
account since we have reduced the time period from
22 these reductions to three years.
23
MS. MIHELIC: As a follow-up question to your
24 response, does the agency intend to withdraw the
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1 language stated in the purpose regarding the findings
2 of the OTAG assessment -- the OTAG group that the
3 stated purpose is to take into account those findings
4 in Section 205.110?
5
MR. MATHUR:
I don't believe it's necessary
6 to take it out. When the agency began the process,
7 it fully intended to take
OTAG's findings into
8 account.
9
Since the legislation requires us to
10 take the findings into account, we will take them
11 into account. Probably in the next revision to this
12 rule, it should be determined that additional
13 reductions are necessary.
14
As the agency has previously indicated,
15 before it requires reductions beyond the 12 percent,
16 it will come back to the board, explain the findings
17 of OTAG and justify the increased level of
18 reductions.
19
MS. MIHELIC: Going to Section B on Page 7,
20 Question 2, we will withdraw that question from the
21 record. Actually, we withdraw Questions 4, 5, 6 and
22 7 at this time.
23
We are reserving the right to ask the
24 remaining questions at a later date and to have
L.A. REPORTING - (312) 419-9292
136
1 follow-up questions regarding the testimony after
2 all of the other
prefiled questions have been asked.
3
THE HEARING OFFICER:
Okay. Are there any
4 other prefiled questions?
5
Are there any questions of Mr.
Mathur
6 generally? Mr.
Newcomb?
7
MR. NEWCOMB: I'm Christopher
Newcomb from
8 Karaganis & White.
9
What are the sources that you have
10 identified as exempt sources to date and is there
11 a list of those that were included in the technical
12 document?
13
MR. FORBES: Could you clarify which --
14
MR. NEWCOMB: You identified certain sources
15 as being exempt already. Could you identify what
16 those sources actually are and where those sources
17 are?
18
MR. FORBES: Okay. Are you referring to one
19 of the tables that I showed as an overhead?
20
MR. NEWCOMB: Table 7, which I believe was
21 Exhibit 18.
22
MR. FORBES: On Table 7, you are referring to
23 the category listed as exempt sources?
24
MR. NEWCOMB: That's correct.
L.A. REPORTING - (312) 419-9292
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1
MR. FORBES: Those are sources that we
2 identified as bakery resources.
3
MR. NEWCOMB: As what sources? I'm sorry.
4
MR. FORBES: As bakery sources.
5
MR. NEWCOMB: Has the agency to date
6 identified other sources that may fall under the
7 exemption proposed in Section 205.405?
8
MR. FORBES: We have attempted to identify
9 those particular units, those emission units. I
10 believe you have an appendix that identifies those.
11 Those are the boilers, fuel combustion units,
12 sources that are complying with MACT and NESHAP.
13
MR. NEWCOMB: Additionally, there is a
14 category which is best available technology. Has the 15
agency identified certain sources that may debate
16 that standard?
17
MR. FORBES: No, we have not. Not at this
18 point.
19
MR. NEWCOMB: Has the agency done any
20 follow-up to estimate what emissions reductions
21 won't be obtained due to sources meeting that
22 standard?
23
MR. FORBES: No. We haven't made an estimate
24 at this time because it is a site-specific
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1 determination and we do not know, you know, who will
2 apply for such an exemption and who may be granted
3 such an exemption.
4
MR. NEWCOMB: Under the categories of
5 sources; the point sources, area sources, mobile
6 sources, under all of those categories, is the ERMS
7 program only really applicable to point sources at
8 this point?
9
The only thing you have identified that
10 I can see is one area source category. Other than
11 that, it seems like the entire program is falling on
12 point sources alone, is that correct?
13
MR. FORBES: The ERMS program is intended to
14 pertain to stationary point sources. The rule that
15 I was referring to as a command and control rule, the 16
solvent degreasing rule is for a specific regulation
17 that we would propose just for cold cleaning
18 degreasers.
19
In the ERMS rule, however, we have
20 provided for
intersector types of trading and
21 reductions to take place so that area and mobile
22 source reductions can be accounted for and utilized
23 in the trading program.
24
MR. NEWCOMB: I s that trading program only
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1 involuntary for other participants?
2
MR. FORBES: Yes, it would be.
3
MR. NEWCOMB: In addition, has the agency
4 considered indirect source or complex source programs
5 as another method to meet greater rate of progress
6 obligations under the Clean Air Act?
7
MS. SAWYER:
Could we get some further
8 clarification on what you mean by this.
9
What do you mean by indirect source?
10
MR. NEWCOMB: Indirect sources and complex
11 sources is a particular term for such facilities
12 as airports, highways, parking
facilitis, and the
13 like. Under Section 110(a) of the act, these are
14 sources which cannot be required to be regulated
15 by the EPA, but which states are free to regulate
16 in any of their SIP requirements.
17
MR. FORBES: The agency has reviewed all of
18 those various sectors. I don't think at this time
19 we have identified any specific programs. We would
20 be -- that's something that we would propose for
21 those indirect sources at these various locations
22 that you have identified.
23
However, most of the equipment and the
24 various mobile units that would be involved either
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1 vehicles or diesel trucks or off-road engines,
2 forklifts, baggage handling equipment, all are
3 currently being controlled or will be controlled by
4 engine standards that the U.S. EPA is proposing.
5
So we believe the primary source of the
6 emissions is already being identified and will be
7 controlled.
8
MR. NEWCOMB: Thanks.
9
MR. CHARI: This is
Desi Chari with
10 Safety- Kleen.
11
You're emission inventory for point
12 sources have included fugitive emissions within the
13 point sources?
14
MR. FORBES: Yes. We've included fugitives
15 to the best of our ability and source's abilities to
16 quantify those emissions.
17
MR. CHARI: How would the actual versus
18 potential emissions maybe rule on the emission
19 trading program for fugitive emissions cause most of
20 the fugitive emissions are based on potential and
21 real factors? So how would that be used in the
22 actual emission trading?
23
MR. FORBES: It sounds really like your
24 question is a quantification question.
L.A. REPORTING - (312) 419-9292
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1
MR. CHARI: Uh-huh, yes.
2
MR. FORBES: Possibly. I could give you
3 an example. Currently, the board has regulations
4 that limit the amount of equipment leaks from SOCMI
5 facilities. It requires certain kinds of testing at
6 a certain prescribed frequency.
7
Standard EPA emission factors are used
8 to calculate that and to determine whether sources
9 are complying. The trading option could possibly be
10 to make more inspections at more frequent intervals
11 or include more valve fittings, flanges, whatever the 12
equipment that's being regulated is.
13
So that would be one way where a source
14 could use emissions trading to either meet their own
15 requirement or to provide
ATUs or emission reductions 16
to another source.
17
MS. SAWYER:
And additionally, we are
18 providing more testimony on quantification methods at 19
a later point in the hearing.
20
MR. TREPANIER:
My question, Mr.
Forbes,
21 refers to Table 2. I believe that is Exhibit No. 6.
22 This is a question that I asked earlier and it was
23 deferred to you.
24
That has to do with the column or the
L.A. REPORTING - (312) 419-9292
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1 line for point sectors and they are numbered --
2 there is in parenthesis 92. I have a question about
3 that and that's does this number reflect a new
4 construction that's anticipated under these rules
5 that the construction that's been permitted or in
6 other ways somehow deemed to be in progress in 1999
7 and also does that number 92 include the likelihood
8 under the proposed rules that the baseline
9 determination is going to be at a level that's higher
10 than the existing levels of emissions -- the existing 11
actual levels?
12
MR. FORBES: Okay. That table that you are
13 referring to is Table 2 of Mr.
Mathur's testimony?
14
MR. TREPANIER:
Yes.
15
MR. FORBES: Okay. To address your first
16 question, the 92-ton per day number is intended
17 to -- we did include growth for those point source
18 emissions that would be smaller than the
19 applicability requirements for ERMS.
20
We did include a growth factor because
21 there will be no such limitation for that. They
22 could continue to grow pursuant to their existing
23 requirements or regulations.
24
For the ERMS participating sources, we
L.A. REPORTING - (312) 419-9292
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1 did not include growth amount for that because their
2 allotment will be based on 92 to 94. Any future
3 growth would have to be obtained through the trading
4 program.
5
I'm trying to remember your other
6 question.
7
MR. TREPANIER: It's my understanding that
8 your testimony is saying that a facility that's under
9 construction in 1999, when they open, they will be
10 required to have an allotment?
11
MR. FORBES: It would depend on the size and
12 circumstances and the timing of when they actually
13 got their construction permit and when they would
14 start operating.
15
The clearest one -- the clearest issue
16 is a new source constructed after the program begins
17 would not receive an allotment.
18
MR. TREPANIER:
But my question refers to
19 this number 92. And I'm asking if this number 92, is 20
that including what those -- that construction that
21 the agency, by their rule, is anticipating that is
22 going to be occurring in 1999?
23
MR. FORBES: I guess my answer is we have
24 attempted to try and do that by providing a small
L.A. REPORTING - (312) 419-9292
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1 amount of growth in our calculations.
2
MR. TREPANIER:
Specifically, to fit, as I
3 understood what you said, that growth that was
4 included was fit to grow in those sectors that's not
5 included in the ERMS program?
6
MR. FORBES: Well, that's primarily what we
7 had in mind, but it would also cover any of the
8 additional possible growth that might occur between
9 now and 1999. It's our best estimate as to what that
10 amount would represent.
11
MR. TREPANIER:
How was that determined?
12
Is there a place in the documentation
13 that shows what was the agency's expectation on how
14 many facilities are going to be under construction in 15
1999?
16
MR. FORBES: We don't estimate growth on that
17 basis. We base it on growth projections that we
18 obtain from the U.S. EPA program that's called EGAS.
19 It uses economic factors to project growth in various 20
nonattainment areas and we use that to help develop
21 or projection, growth projection.
22
MR. TREPANIER:
Do you know that that model
23 that you are using to project the growth, does that
24 include the factor that the growth in that model,
L.A. REPORTING - (312) 419-9292
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1 people are going to be gaining a pollution --
2 sellable pollution allotment?
3
Is that a factor considering that that's
4 going to actually drive construction of polluting
5 facilities?
6
MR. FORBES: I would have to say that I'm
7 not -- I'm not familiar with all of the factors that
8 are included in that model. It is a U.S. EPA model
9 that's designed and built by them and provided to the
10 states to obtain the growth numbers. So I'm not sure 11
if that factor was incorporated into that model.
12
MR. TREPANIER:
And it may not be since, as
13 we heard from the OCP, this was something new, this
14 type of a trading program?
15
MR. FORBES: Yes.
16
MR. TREPANIER: I have a question regarding
17 Table No. 2. I'm sorry I'm not able to say which
18 exhibit it was. It was a Chicago area source
19 category section. It was your Table 2.
20
THE HEARING OFFICER:
It was Exhibit 12, I
21 think.
22
MR. TREPANIER:
I think you presented this
23 as an overhead slide. It's my memory that you -- you 24
had reported that you found that it's reasonable to
L.A. REPORTING - (312) 419-9292
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1 visit one of these categories and I apologize that I
2 didn't hear clearly which category it is that the EPA
3 is intending to visit.
4
MR. FORBES: This is Table 2, the Chicago area
5 source category summary?
6
MR. TREPANIER:
Yes.
7
MR. FORBES: I think I was referring to the
8 consumer versus solvent category. The U.S. EPA has
9 identified specific products that they are going to
10 regulate under the general heading of consumer and
11 commercial solvents. They have indicated that they
12 will continue to study that group of products -- the
13 thousands of product that make up consumer products
14 and as they find solutions to further reduce the
15 solvent content, that they will continue to regulate
16 those products as time goes on.
17
MR. TREPANIER:
Did the state EPA find any
18 of these categories -- find something in any of these 19
categories that maybe a command and control rule is
20 going to be looked at in the future?
21
MR. FORBES: Not really because most of these
22 consumer commercial products are being manufactured
23 throughout the United States. It is difficult to
24 control projects made in our states, but sent in
in a
L.A. REPORTING - (312) 419-9292
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1 commercial manner and sold to various drug stores and
2 department stores, it's difficult. It requires some
3 different kind of regulation on the product and
4 policing those kinds of products and making sure that
5 everyone in the facility that's selling them
6 maintains that the proper solvent content --
7
MR. TREPANIER:
I understand that, that I
8 did improperly hear your testimony earlier, but in
9 all the categories on Table 2, the stake you paid is
10 not intending on visiting any of those categories?
11
MR. FORBES: No, we are. Cold cleaner
12 degreasing under other solvent use, as I mentioned,
13 we went back and reviewed these categories and
14 identified them because we felt that there were
15 additional requirements and controls that we could
16 specify for that category. We will be -- if we
17 haven't already filed the rule -- filing a rule
18 for that particular one.
19
MR. TREPANIER:
Do you know the number of
20 what you expect is going to be a reduction in VOM
21 emissions with that regulation?
22
MR. FORBES: Yes. That's
about 11.5 tons per
23 day approximately.
24
MR. TREPANIER: On the Figure 5, I also don't
L.A. REPORTING - (312) 419-9292
148
1 have the exhibit number. I'm sorry. This was Figure
2 5, 1996, 2,000 VOM emissions for Chicago.
3
THE HEARING OFFICER:
Exhibit 15?
4
MR. TREPANIER: It has three lines across the
5 first page.
6
THE HEARING OFFICER:
Yes.
7
MR. FORBES: Yes.
8
MR. TREPANIER:
Would it be a correct
9 interpretation of this -- of the information on this
10 page to be that -- that the projected emissions and
11 the reductions that will be accomplished under ERMS
12 as they are estimated now, it's just making
13 compliance in 1999 as the program -- as the agency
14 is forecasting how this is going to work, its
15 just going to make it in 1999?
16
MR. FORBES: Well, we -- according to the
17 figure, Figure 5, what is included here is the ERMS
18 program along with the solvent degreasing rule. Both 19
of those together would allow us to just make our ROP 20
target level in 1992.
21
MR. TREPANIER: Okay. So Figure 5 includes
22 that regulation?
23
MR. FORBES: The cold cleaning, yes.
24
MR. TREPANIER: Okay. And then with that, if
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1 that's showing that -- that would just make it if it
2 works as anticipated, is that correct?
3
MR. FORBES: I'm sorry. I didn't understand
4 that.
5
MR. TREPANIER:
You're not projecting an
6 over-compliance in the year of 1999, are you? You're
7 projecting that it's going to meet compliance?
8
MR. FORBES: Well, we're -- no. We are
9 projecting that we would be somewhere between four
10 and five tons under the target.
11
MR. TREPANIER: That's less than a percent?
12
MR. FORBES: Yes. It's very small.
13
MR. TREPANIER:
Yes, but it does provide some 14
contingency.
15
Would you say -- what can you tell me
16 about the ability that you can forecast in that model 17
that was used in projecting the growth?
18
What's the reliability
of that model?
19 Is the reliability of that model greater than the
20 half of a percent or so that we're going to -- that
21 we're shooting for on target? How reliable is that
22 model compared to what the end result is looking for?
23
MR. FORBES: I'm sorry. I'm not familiar
24 enough with the model itself to be able to tell you
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1 what that variability is.
2
MR. TREPANIER:
Do you know who is familiar
3 with that model and how it works?
4
MR. FORBES: Well, probably someone at U.S.
5 EPA. They are the ones that developed that growth
6 model. I'm not aware. I have not seen any of the
7 information of that nature in any of the
8 documentation. They would be the source of the
9 model.
10
THE HEARING OFFICER: Go ahead.
11
MS. MIHELIC: I'm
Tracey Mihelic from Gardner, 12
Carton & Douglas. You stated earlier that from the
13 years 1970 to 1990, there were reductions in
14 emissions and significant amounts of reductions.
15
Do you know what percentage of
16 reductions came from point sources during that period 17
of time, what percentage of the overall reductions
18 came from point sources?
19
MR. FORBES: I do not have the percentages,
20 but in Table 1 of Mr.
Mathur's testimony, it does
21 provide the numbers from 1970 and 1990 through 1996.
22 It could be calculated.
23
MS. MIHELIC: Okay.
24
MR. FORBES: I haven't done that.
L.A. REPORTING - (312) 419-9292
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1
MS. SAWYER:
That should be Exhibit 5.
2
MS. MIHELIC: You stated before that the
3 U.S. EPA had a SIP that required a 50 percent ROP
4 plan by January 3rd of 1996 and in your overhead, it
5 said it could result in sanctions if this plan is not
6 provided to U.S. EPA at that time. Is it an absolute
7 that U.S. EPA will impose sanctions if this plan is
8 not submitted by January 3, 1998?
9
MS. SAWYER:
Just for clarification, you said
10 for the 15 percent ROP by 1996. It was for the nine
11 percent ROP by --
12
MS. MIHELIC: By 1999.
13
MR. MATHUR:
Let me address that question. I 14
won't even begin to guess what EPA will or will not
15 do. So your question would better aimed at the U.S.
16 EPA. ?
17
MS. SAWYER: And it's somewhat of a legal
18 question also on what they're required to do.
19
MR. MATHUR: But under the Clean Air Act and
20 the sanction notice, the state will be under threat
21 of sanctions. What they actually will do, only they
22 know.
23
MR. WAKEMAN: I'm Jim
Wakeman of Tenneco.
24
Going back to Exhibit 15, Figure 5,
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1 the model that you have referenced here or talked
2 about makes the assumption that in order to make
3 or to get to attainment, we are assuming that
4 background levels are dropped.
5
What happens if those targets aren't
6 met? In other words, the background don't drop, what
7 are the contingencies and what likely impact is that
8 going to have on our --
9
MR. MATHUR:
Let me address that.
10
As I mentioned in my testimony, those
11 are planning targets, backdrop levels, only after
12 OTAG is finished would we be able to model what might 13
be the impact on ozone background.
14
The backgrounds don't drop to 60 or 70.
15 They only drop from 98. That's the best that can be
16 done based on OTAG. The immediate conclusion is we
17 need more VOC reductions in the Chicago
nonattainment 18
area. That's the relationship that I had established 19 in
one of my earlier bar charts.
20
That is why I had testified that once
21 OTAG is completed and we have the results, we will be 22
in a position to come back and talk about what
23 additional reductions, if any, are necessary in the
24 Chicago nonattainment area for
VOCs.
L.A. REPORTING - (312) 419-9292
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1
MR. WAKEMAN: That doesn't give me the answer
2 on the contingency, I understand where you're coming
3 from.
4
THE HEARING OFFICER: Are there any further
5 questions?
6
MS. MIHELIC: You referred -- going back to
7 the federal measures that will be imposed for mobile
8 and area sources, in Exhibit 6 from Mr.
Mathur's
9 testimony, I just want to clarify what the exhibit
10 actually says here and that currently there have been 11
promulgated ROP controls. It says -- and I'm looking 12 in
the bottom left-hand corner -- plus FMVCP,
D.A.
13 Gasoline, RFG I, E I/M, all of those have been
14 actually proposed and enacted for on-road mobile?
15
MR. MATHUR:
They are all in regulations
.
16
MS. MIHELIC:
Have they been enacted?
17
MR. MATHUR:
No, not all have been enacted.
18
MS. MIHELIC: Do you know when the deadlines
19 for enactment are?
20
MR. MATHUR:
The only one that has not been
21 enacted, as far as I know, is E I/M in Illinois.
22
MS. MIHELIC:
And is there a deadline by
23 which Illinois will enact that regulation?
24
MR. MATHUR:
No. There isn't a deadline
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154
1 that we have imposed on ourselves, but it is our
2 expectation that the program will be fully in place
3 by the end of '98.
4
MS. MIHELIC:
And for off-road and area
5 sources, have all of those regulations been enacted?
6
MR. FORBES:
The solvent degreasing is one
7 that we have been talking about. That one will be
8 filed with the board.
9
The federal off-road small engine
10 standards has been adopted and is in place. Consumer 11
solvents, that also has been, at least the first
12 phase. The U.S. EPA's consumer solvent rules have
13 been adopted. I think that might have been a
14 regulatory --
15
MS. MIHELIC: Is that a consumer -- is that
16 the consuming product regulation?
17
MR. FORBES: Yes.
18
MS. MIHELIC: Is that also going to apply to
19 point sources potentially?
20
MR. FORBES: Well, it really applies to
21 commercial projects. I think the way it -- my
22 understanding is it limits the solvent content of
23 various products that are manufactured so it --
24
MS. MIHELIC: So could it apply --
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1
MR. FORBES: -- could indirectly affect those
2 facilities that are manufacturing those products.
3
MS. MIHELIC: And those facilities could be
4 point sources?
5
MR. FORBES: They could be point sources.
6
MS. MIHELIC: For solvent decreasing
7 regulations, do they have to be enacted also by
8 September of this year in order to consider them with
9 the 15 percent plan being submitted to U.S. EPA?
10
MR. FORBES: Three percent.
11
MS. MIHELIC: Sorry, three percent.
12
MR. FORBES: Yes. Both rules would be needed
13 to be submitted to U.S. EPA as a SIP revision,
14 as a package.
15
MS. MIHELIC: Have they been proposed in
16 Illinois yet?
17
MR. MATHUR:
Yes. They have been submitted
18 to the board as of last week. They are downstairs
19 somewhere.
20
MS. McFAWN:
Actually, they are upstairs.
21
MR. MATHUR: They are upstairs.
22
MS. MIHELIC: Okay. Moving over to the left
23 side of the page, which one of the on-road mobile
24 sources have been proposed or adopted?
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1
MR. MATHUR: RFG II will come into effect in
2 2000. I believe the National LEV negotiations are
3 very near closure and that there we will be a
4 national clean vehicle act. Clean Fuel Fleets
5 is on the books. On-board controls is on the books.
6
MS. MIHELIC: When you say "on the books," on
7 the state's books or on the federal books?
8
MR. MATHUR:
Federal.
9
MS. MIHELIC: For off-road and area sources,
10 which one of those are on the books or have been
11 closed?
12
MR. FORBES: In terms of this particular part
13 of the table, measures beyond 1999, those are both
14 proposals or at least indications by EPA that they
15 will regulate aircraft,
watercraft. They will be
16 studying those particular classes of off-road vehicle 17
engines.
18
MS. MIHELIC: I'm just trying to figure out
19 which ones have been actually proposed and which ones 20
are still just being investigated.
21
MR. FORBES: That last one would be still
22 being investigated.
23
MS. MIHELIC: All on the off-road and area
24 sources, that whole group?
L.A. REPORTING - (312) 419-9292
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1
MR. FORBES: Correct.
2
MS. MIHELIC: You stated during your testimony
3 that the proportionate share of point sources was 22
4 percent, is that correct?
5
THE HEARING OFFICER: Is that for the ROP?
6
MS. MIHELIC: That's my next question.
7
What is the 22 percent proportionate
8 share?
9
MR. FORBES: The point source is 22 percent.
10
MS. MIHELIC:
And that's to meet the three
11 percent deadline in 1999?
12
MS. SAWYER: 1999?
13
MR. FORBES: 1999.
14
MS. MIHELIC: Okay. And what is the
15 proportionate share to meet the attainment
16 standard -- to meet attainment? Is that the 33
17 percent discussed earlier today?
18
MR. MATHUR:
We don't know attainment target
19 yet. Once we have an overall target, we will be able 20
to determine what the strategy should be.
21
MS. MIHELIC: So you're not sure what the
22 proportionate share of point sources is to meet the
23 attainment standard?
24
MR. MATHUR:
No.
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1
MS. MIHELIC: How, then, can the agency meet
2 the requirements of the statute that these rules
3 adopted by the board shall include provisions that
4 are sure that sources subject to the program will
5 not be required to reduce emissions to the extent
6 that it exceeds the proportionate share of the total
7 reductions required of all emission sources including
8 mobile and area sources to attain and maintain the
9 national air quality standards for ozone in the
10 Chicago nonattainment area?
11
MR. MATHUR:
It's our belief that once we
12 have determined what is the fullest extent of VOC
13 reduction is necessary to show attainment, we will
14 then do the analysis to meet that provision in the
15 legislation when we come back the next time for
16 additional reductions.
17
MS. MIHELIC: What are the provisions in the
18 rules that assure that the proportionate share will
19 not be exceeded?
20
MS. SAWYER: I think this is really a legal
21 question. It's in the legislation. It certainly is
22 a -- takes precedence over the ruling in providing
23 that assurance.
24
MS. MIHELIC: Are you saying that the rules --
L.A. REPORTING - (312) 419-9292
159
1 it specifically states that the rules adopted by the
2 board shall include such provisions. I'm just
3 wondering what provisions of the rule is assured that
4 the proportionate share will not be exceeded by point
5 sources?
6
MR. MATHUR:
The 12 percent and our
7 explanation of how we arrived at the 12 percent.
8
MS. MIHELIC:
So the 12 percent figure is
9 what assures your proportionate share?
10
MR. MATHUR:
Mr. Forbes' testimony
11 demonstrated that while we look at proportionality
12 issue, it could be a longer term attainment based
13 analysis. We felt that even at this moment where
14 we are simply doing a portion of the attainment
15 demonstration through an initial nine percent
16 reduction, the reductions that we have sought from
17 the stationary sources based on their contribution
18 seems to fit the proportionality interpretation.
19
When we come back with additional
20 reductions based on a more final target of
21 attainment, we will revisit the issue of what is
22 appropriately proportional for each segment.
23
MS. MIHELIC: Right now, area sources are
24 now being required to reduce their emissions by
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1 their proportionate share by 1999, is that
2 correct?
3
MR. MATHUR:
In our opinion, they are.
4
MS. MIHELIC:
And how are they?
5
MR. MATHUR:
Because we believe proportionate
6 share doesn't necessarily translate to exactly the
7 same percentage necessarily.
8
MS. MIHELIC:
I thought you stated earlier
9 that their proportionate share was 22 percent
10 reduction.
11
MR. MATHUR:
We demonstrated that based on
12 their contribution to the total emissions pie.
13
MS. MIHELIC:
I 'm a little confused right
14 now. I thought that their share was 22 percent
15 reductions? Is that correct that their share of
16 reduction is 22 percent?
17
MR. MATHUR:
What Mr. Forbes indicated was
18 that based on the makeup of the emissions as
19 to what is causing the emissions, the percentage
20 reductions that we have assigned for '99 seems to
21 be proportionate to their contribution.
22
MS. MIHELIC:
So they are being required to
23 reduce their 1996 emissions by 22 percent by 1999?
24
MR. MATHUR:
Where is Table 2?
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1
Table 2 has a 24 percent reduction for
2 regular sources from 1996 to 1999.
3
MS. MIHELIC: And what are the --
4
MR. FASANO: Twenty-four percent from 1990.
5
MR. MATHUR: I'm sorry. From 1990.
6
MR. FORBES: If I could maybe refer back to
7 one of the charts I went though, we calculated or
8 determined what we thought would be the proportionate
9 share as 22, 26, and 52 percent based on each of
10 those sectors' contribution for their portion of
11 emissions in 1996.
12
The plan that we are proposing would
13 achieve a 20 percent reduction by point sources and
14 we said their fair share was 22. We said that area
15 sources would get 22 percent and their fair share
16 was that.
17
Mobile sources would achieve 58 percent
18 and their proportionate share, it was said, is 52
19 percent.
20
MS. MIHELIC: I guess I'm just asking where is 21
the 22 percent reduction coming from, area sources?
22
Is that all in the consumer products
23 regulations? Is it all coming from that regulation
24 because that's the only one connected?
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1
MR. FORBES: It's from the -- actually, there
2 is a very small amount coming from consumer versus
3 solvent federal measure. There is a particular
4 product that they are regulating in that time frame
5 and it's very small. The majority of emissions
6 are -- would be coming from the degreaser rule.
7
MS. MIHELIC: They are not being considered
8 point sources, the degreasing operations?
9
MR. FORBES: No. That's an area source.
10
THE HEARING OFFICER:
Are there any other
11 questions?
12
MR. DESHARNAIS: Chuck, I have one.
13
THE HEARING OFFICER: Okay.
14
MS. MIHELIC: I have one more qu
estion.
15
MR. DESHARNAIS: Go ahead and finish up.
16
MS. MIHELIC: I have two more questions.
17
After 1999, what's the next year that
18 Illinois will have to show further reductions toward
19 attainment to U.S. EPA?
20
MR. FORBES: 2002.
21
MS. MIHELIC: And if the federal measures that 22
you have set forth in that Exhibit 5, I believe, the
23 left-hand side that sets forth those measures that
24 should be promulgated or attempt to be promulgated
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163
1 are not promulgated by that time, what assurance can
2 the agency give to the point sources that it will not
3 require further reductions only from point sources at
4 that time?
5
MR. MATHUR:
I don't think the agency at this
6 point can discuss what its strategy might be between
7 1999 and 2002. One of the biggest factors is what is
8 the result of OTAG.
9
As Mr. Forbes has testified, and as I
10 have testified, if OTAG can give us ozone boundary
11 of 60 and sufficient precursor reductions, we might
12 demonstrate attainment in Chicago with emission
13 levels at 99.
14
On the other hand, if OTAG cannot
15 achieve the required level of reductions, we would
16 have to re- evalute the level of reductions of
VOCs
17 in Chicago.
18
So consistent with our commitment to
19 seek only the first ROP reductions, we are not
20 prepared to discuss what the agency strategy should
21 be or could be or will be until we come back seeking
22 further reductions if that's what we need.
23
MR. NEWCOMB: This is Chris
Newcomb again.
24
To try and clarify
Tracey's earlier
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164
1 question, under the ERMS program with the single
2 exception of consideration of the cold clean air
3 degreasing operations, all the emission reductions
4 that are being required, these regulations will be
5 from point sources, that there was not a proportional
6 reduction required in the different categories that
7 you have described, is that correct?
8
MR. FORBES: No, that's not correct. In order
9 to achieve our three percent ROP plan, we are getting
10 reductions from mobile sources. Most of those -- in
11 fact, all of those measures are coming from federal
12 requirements, but they will require global source
13 emissions to reduce, as we sit here, 58 percent.
14
MR. NEWCOMB: How did the federally
15 implemented programs mesh with ERMS programs?
16
My understanding right now is that under 17
these regulations, point sources are being -- will be 18
required to conduct further reductions.
19
However, federal reductions in part
20 are going to be reductions that you expect from
21 categories such as area sources and mobile sources
22 and it doesn't seem as though proportionate shares
23 are being considered in this connection, but it is
24 perhaps being considered in the larger plan, is that
L.A. REPORTING - (312) 419-9292
165
1 correct?
2
MR. MATHUR:
Your last statement is correct.
3 We are conducting a review of the proportionate area
4 wide reductions.
5
The ERMS rule applies to point sources
6 because for the other sectors, reductions are being
7 sought either through federal measures or through
8 other kinds of regulations. So there is really no
9 relationship between ERMS and other sectors and their
10 reductions.
11
ERMS is the method that the agency is
12 proposing to seek reductions on the point source
13 category.
14
MR. NEWCOM B: Thank you for the clarification.
15
I don't mean to be redundant about this, 16
but it is your perception, then, that the regulations 17 as
proposed are to meet the statutory requirements in 18
Section 9.8(c)(3)?
19
MR. MATHUR:
That is correct.
20
MR. NEWCOMB: Thank you.
21
MS. MIHELIC: To that question, you stated
22 you considered federal measures for the mobile and
23 area sources. What about federal measures such as
24 MACT standards that will apply to the point sources?
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1
Have you considered those in the
2 reductions that point sources will have to attain
3 by 1999 or thereafter?
4
MR. MATHUR:
Yes, we have. In fact, our 15
5 percent plan specifically had a line item for MACT
6 reductions.
7
MS. MIHELIC:
And you're talking about the 15
8 percent plan for 1996?
9
MR. MATHUR:
Between 1990 and 1996. In this
10 ERMS program, as people meet their MACT obligations
11 that are mandatory, they can apply those towards
12 their satisfaction of the ERMS report. So they have
13 heads up, if you will, by meeting a mandatory federal 14
rule and they will also be satisfying the VOC aspects 15 of
this rule if the MACT pollutant is a VOC.
16
MS. MIHELIC:
Okay.
17
MR. TREPANIER:
I would like to refer again
18 to Table 2, Exhibit 6. Again, the numbers in
19 parenthesis -- I understand that during Mr.
Mathur's
20 testimony, these numbers in the parenthesis were
21 identified as tons per day, sources affected by these 22
rules. Specifically, I had that attached to 105.
23
Now, I see that the next numbers in the
24 parentheses is 92 by 1999 and a 92 by the year 2002.
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1 Can that fairly be read to signify that the agency
2 expects that there will not be an increase in the
3 amount of allotments that are issued in 1999 versus
4 the amount of allotments that are issued in the year
5 of 2002?
6
MR. MATHUR:
That is correct.
7
MR. TREPANIER:
And in that instance, is that
8 based on an assumption that there would not be any
9 other -- there would be no sources added between 1999
10 and the year 2002?
11
MR. MATHUR:
That is correct too.
12
MR. TREPANIER:
Okay. And does the rule
13 contain a provision that a source under construction
14 and without an allotment in the year 1999 will
15 receive their allotment once they have completed
16 construction and they have operated for three years?
17
MR. MATHUR:
Yes. May I suggest that as you
18 asked questions on the substantive provisions of the
19 rule that we defer it to the appropriate time?
20
MR. TREPANIER:
I wanted to understand these
21 92s because it seems to be -- this table seems to
22 say that there will not be any growth in the number
23 of regulated sources under this program between 1990
24 and 2002. So I wanted to confirm that this --
L.A. REPORTING - (312) 419-9292
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1 although the rule doesn't provide that there could be
2 more regulated sources in the year 2002 than 1999,
3 this table doesn't show that.
4
MR. MATHUR:
Let me explain the purpose of
5 the 92 number showing up twice on this table. The
6 ERMS is limited to meeting the ROP requirements in
7 1999. With 92 being repeated again for 2002, it is
8 just a demonstration that this particular rule at the
9 moment is not seeking any further reductions.
10
Since the sources that make up the 92
11 tons will be capped at 92, no increases will be
12 allowed and we haven't shown a change in that number
13 because we don't have a strategy yet for further
14 deductions beyond 1999. That's the only purpose of
15 showing 92 next to the 161 under the 2002 column.
16
MR. TREPANIER:
I understand that as the
17 rules are written, that 92 could well be a 95 in
18 the year 2000, that that could be anticipated?
19
MR. MATHUR:
It's my strongest hope and
20 belief that it will not go up over 92 because that
21 is the whole purpose of these rules.
22
MR. TREPANIER:
But the rule does allow that
23 a source under construction in 1999 could receive
24 their first allotment in the year 2002?
L.A. REPORTING - (312) 419-9292
169
1
MR. MATHUR:
The rule does allow that
2 flexibility, but the rule also limits it to actual
3 emissions once it has operated for three years.
4
We can further discuss the provisions --
5 substantive provisions of the rule after we have had
6 an opportunity to present direct testimony on those
7 provisions.
8
MS. SAWYER:
Right. And we are going to
9 have more testimony on that specific area of the
10 rule.
11
MR. TREPANIER:
Are you anticipating
12 testimony that's going to support that number 92
13 in the year 2002?
14
MR. MATHUR:
No, but it's going to support
15 the concept that you have just raised as perhaps
16 impacting the 92 number. We will have testimony that
17 will address issues relative to resources under
18 construction, when they begin operation, and how the
19 process includes their emissions.
20
MS. SAWYER:
Well, I think we would like to 21
respond more fully to your question. Hopefully, we 22
can do so tomorrow.
23
MR. WAKEMAN: I'm Jim
Wakeman from Tenneco.
24
Going back to the model, if the
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1 transport of air during the ozone season tends be
2 northward, I'm curious as to why the ERMS program
3 isn't being applied to, say, St. Louis or
downstate,
4 whatever the terminology is, because that would help
5 to get to that 60 or 70 number in the charts?
6
MR. MATHUR:
As I mentioned earlier, there
7 are two issues relative to the ozone strategy. One
8 is what pollutant and where it should be reduced
9 outside and upwind of Chicago in order to reduce
10 transported ozone.
11
A second issue is once we have an idea
12 of what level the ozone reductions we can achieve
13 by this upwind strategy, we may still need further
14 reductions in Chicago.
15
This program at the moment is limited
16 to achieving further reductions in Chicago. When
17 the OTAG process is finished, it will have examined
18 all of the possible strategies that will help reduce
19 transported ozone, which will have include possible
20 reductions of VOC and/or
NOx.
21
Once those decisions have been fully
22 reviewed, the agency intends to put regulations into
23 place to achieve the appropriate reductions.
24
If we determine at that point that we
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1 need further reductions in
VOCs in the metro east,
2 that certainly similar approach will be looked at.
3
MR. WAKEMAN: Thank you.
4
MR. FORCADE: I have just one short question.
5
Mr. Forbes used a series of bullet
6 overheads which weren't introduced as exhibits.
7 Would it be possible for the agency to provide copies
8 of those tomorrow so that we could have that?
9
MS. SAWYER:
Sure.
10
MR. FORCADE: Just the bullet overheads.
11
MS. SAWYER: We may have copies here.
12
THE HEARING OFFICER:
I ask that we take a
13 five-minute break. When we get back, I know there
14 are some questions that the board still has to
15 ask most likely.
16
(Whereupon, after a short
17
break was had, the
18
following proceedings were
19
held accordingly.)
20
THE HEARING OFFICER: I think we are going to
21 try to go until 5:00 o'clock tonight and then stop
22 there.
23
The agency has one more witness they
24 would like to try to get in tonight. Maybe we might
L.A. REPORTING - (312) 419-9292
172
1 just get his testimony and carry him over for
2 questions tomorrow.
3
There is also an issue of where we are
4 going to be tomorrow. This room is not reserved for
5 us tomorrow. Hopefully, we will find out shortly
6 where we will be at tomorrow. If not, I think the
7 best thing is for everyone to just come by here and
8 we will leave the notice on the door.
9
I believe we were finishing up
10 questions with Richard
Forbes. Were there any other
11 questions?
12
I have one question, then. We use a lot 13
of the 1996 projections. Is there any way that the
14 numbers from '96 are going to be finalized before,
15 let's say, August of '97?
16
MR. FORBES:
Probably not because the --
17 we're trying to rely on the annual emission reports
18 and those reports are not due until I believe May of
19 '97 for the '96 period. It does take some time to
20 go through and have quality
assurity data. So it
21 probably will not be available by that date.
22
THE HEARING OFFICER: Okay. I don't believe
23 there are any other questions.
24
MS. SAWYER:
The agency would like to call
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173
1 Philip O'Connor.
2
THE HEARING OFFICER:
Oh, before we go on to
3 the next witness, we have marked Exhibits 7 through
4 18, but I don't believe they were moved into
5 evidence.
6
MS. SAWYER:
Oh, right. The agency moves
7 that Exhibits 7 through 18 to be admitted into
8 evidence.
9
THE HEARING OFFICER:
Are there any
10 objections to enter those exhibits into the record?
11
Hearing none, then, I will enter into
12 the record Exhibits 7 through 18, which have been
13 marked previously.
14
MS. SAWYER:
We have five slides for this
15 testimony. Would you care to mark them as exhibits
16 in advance just go through each of them?
17
(Documents marked as
18
Hearing Exhibit Nos. 19 - 23
19
for identification, 1/21/97.)
20
THE HEARING OFFICER:
Sure, I can do that.
21
I'm going to ma rk as Exhibit 19 an
22 overhead that's going to be entitled, "Key events in
23 the Development of the SO2 Trading Program."
24
I will mark as Exhibit No. 20 a document
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1 entitled "Clean Air Act Amendments of 1990, effect on
2 Acid Deposit in North America."
3
I'm going to mark as Exhibit 21 a
4 document entitled, "Cost of SO2 Emissions Control, Is
5 It Much Lower Than Expected?"
6
I'm going to mark as Exhibit 22 a
7 document entitled, "IEPA 1993 Pre-feasibility Study
8 for Ozone Precursor Trading."
9
I'm going to mark as Exhibit 23 a
10 document entitled, "Key Principal Shared by SO2 and
11 ERMS Trading."
12
(Witness sworn.)
13 WHEREUPON:
14
P H I L I P
R.
O ' C O N N O R ,
15 called as a witness herein, having been first duly
16 sworn, deposeth and saith as follows:
17
MR. O'CONNOR: I'm told this is a -- the
18 five different slides that I will be using will
19 be Exhibits 19 through 23 in that order.
20
My name is Philip
O'Connor. I'm a
21 principal with Coopers &
Lybrand Consulting. My
22 role here is really pretty straightforward. I'll try 23
to keep this short.
24
It's to really describe why it is that
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1 the experience of the acid rain trading system under
2 the Clean Air Act amendments of 1990 ought to be
3 encouraging with respect to our expectations about
4 the ERMS trading system that is suggested through
5 this proposal or through this proposed rule.
6
My perspective on this is having served
7 as a representative during the debate over the 1990
8 Clean Air Act on behalf of Commonwealth
Edison.
9 What that was
was bringing the first major utility
10 in the country to the table to negotiate with the
11 U.S. EPA on the idea of an SO2 trading program.
12
Subsequently, I chaired the subcommittee 13
that the U.S. EPA established to design the trading
14 program. This was part of a larger group which was
15 set up to expedite the
rulemaking subsequent to the
16 passage of the legislation.
17
The first slide really just touches on
18 the events that ultimately produced the trading
19 program. The essence of this is that it has pretty
20 respectable roots starting with Ronald
Coase, the
21 nobel prize winning economist at the University of
22 Chicago.
23
Basically, in 1960, he developed the
24 idea that he might be able to deal with a variety of
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1 problems of externalities, including pollution, by
2 assigning property rights or the equivalent of
3 property rights so that people could find ways to
4 trade among themselves either the damages or
5 compensation relating to pollution.
6
The earliest experiment really out of
7 the federal and environmental regulatory apparatus
8 was that for the -- to get the lead out of gasoline.
9
Fundamentally, it was just a program of
10 assigning to the different refiners in the country
11 different levels of lead on a declining basis that
12 could be in gasoline and they tried it amongst one
13 another.
14
Essentially, we have gotten down to the
15 point of a pretty lead-free gasoline system out there 16
and that was achieved largely by a trading program.
17
The point is that there are going to
18 be some emitters who have a lower cost of reducing
19 their emissions than others and why not get the
20 efficiencies of that and in addition, it doesn't
21 require as much in the way of government
preapproval
22 of technology for reductions. There will be more
23 innovation and more willingness by emitters to adapt
24 new means of control and experiment with it.
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1
This evolved in 1988 into a Harvard
2 study group which the late Senator Heinz and
3 Senator Tim Wirth at the time on a bipartisan basis
4 suggested that there should be a trading system for
5 SO2 to address this problem for the acidification of
6 lakes in the northeast and Canada.
7
That resulted pretty quickly in the
8 agreement between the White House and the U.S. EPA
9 on the one side and the
Enviromental Defense Fund on
10 the other to include a trading system for acid rain
11 into the Clean Air Act amendments that were being
12 prepared for the 1990 Clean Air Act Amendments.
13
During the course of that debate, what
14 happened is most of the electric utility industry --
15 which, of course, was the subject and the target of
16 this regulation -- moved from the point of, first of
17 all, fought out opposition to any kind of acid rain
18 program first, but second, moved from having a mind
19 set about a very standard format for regulation and
20 that is each and every plant being regulated and the
21 technology being used and being certified in some
22 fashion by the government from that to a system in
23 which there was trading.
24
One of the key elements of that change
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1 of heart was that there was an enormous conflict
2 among the utilities once they realized there was
3 going to be a program. Some utilities, essentially
4 demanded subsidies that would flow from the
5 non-emitting or the low emitting utilities to the
6 high emitting utilities to pay for scrubbers.
7 That was sort of once they realized there was going
8 to be a reduction program.
9
The thinking evolved to the point of
10 adopting a trading program because that was actually
11 a very efficient way of having a kind of subsidy
12 system, one that did not pick up money or move it
13 involuntarily from one player to another because it
14 could allow those who were very high emitters who
15 probably had low cost control and get those
16 reductions down and in turn, sell the emissions of
17 allowances that they had been granted.
18
The U.S. EPA in 1991, after the bill
19 passed, created the advisory committee and that was
20 the one that I referred to where I chaired the
21 trading committee with the time and trading system.
22
The important thing about that is it
23 really did expedite the
rulemaking and it's been
24 somewhat replicated in this process, kind of up
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1 front, however, in the effort to get as many of the
2 interested parties together as possible to agree on a
3 way of doing things.
4
In 1993, there was the first SO2
5 allowance auction and that was conducted by the
6 Chicago Board of Trade on behalf of the U.S. EPA
7 and really produced the first numbers as to what
8 these allowances were worth.
9
Ultimately, during this period in the
10 past several years, there has been such a widespread
11 acceptance and recognition of the success in the
12 program and the way in which it has operated
13 smoothly, but the idea of trading program has been
14 applied now to these other more complex situations
15 dealing with ground level ozone and so forth.
16
Most eve ry one, I think, as I said,
17 agrees that it's been an extraordinarily successful
18 effort. The U.S. EPA -- I think you have copies of
19 the color slides there. Essentially, this blue area
20 you see, which is exactly the area that was targeted
21 for reduced acidification in the lakes and the
22 streams and so forth, it has indeed experienced a
23 significant reduction as much as 25 percent in many
24 of the areas for acid rain.
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1
Some of the areas where it's gone up
2 had relatively low acidification as it was. So from
3 the point of intended result of the policy, it's been
4 exactly that which was targeted by the Congress and
5 the U.S. EPA at the time.
6
So from the standpoint of asking the
7 question, well, okay, maybe it worked smoothly, but
8 does it actually accomplish that which it was
9 intended the answer was yes.
10
In fact, some of the more recent
11 information from the U.S. EPA indicates the target
12 for the 1995 period, which was the first year for
13 the program, where the target was about 8.7 million
14 tons among the 445 Phase 1 units, the actual
15 emissions had been 3.4 million tons less.
16
So there was a dramatic reduction --
17 early reduction below the original target. No one
18 says that the trading program is exclusively
19 responsible for that. Other things such as lower
20 western -- low sulfur coal prices, and the like
21 contributed to that significantly, but the MIT work
22 has indicated that one of the things that the
23 allowance system has done was to make those prices
24 much more apparent and to make
midwestern and eastern
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1 utilities much more willing to go out into the market
2 and purchase low sulfur coal from the west rather
3 than thinking they had to stay with a particular form
4 of compliance to get a particular plant's emissions
5 down.
6
Now, the other thing -- well, let me go
7 back to this point of what's really being done is the
8 selling of pollution reduction as opposed to the
9 selling of pollution.
10
What's really being done is that a lower 11
price or a lower cost of control by one party is
12 being sold to another so, in essence, they are
13 splitting the difference.
14
When one goes back to the actual
15 language in the text of the Clean Air Act amendments
16 in the sulfur -- in the SO2 program, what one finds
17 are two numbers, which reflect what the belief was
18 by the congress and by the U.S. EPA, just about
19 everybody, as to what the marginal cost of control
20 is going to be.
21
It is somewhere between $750 and $1,500
22 per ton of SO2. Those numbers are actually in the
23 statutes because they are set as kind of default
24 numbers, but at which parties can purchase allowances
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1 from the government from a reserve.
2
What this slide shows, and I wish it
3 showed it more clearly, but the line is pretty darn
4 clear, which is as of today, the marginal cost of
5 control if you see that in terms of the price of an
6 allowance, instead of being $750, it is more on the
7 order of $65 to $75.
8
So we are running somewhere one-tenth
9 what the anticipated cost of control was at the
10 time the debate was taking place.
11
Now, we can say that the utilities
12 exaggerated at the time or whatever it was, but
13 this is considered a very startling difference
14 in the business.
15
You can also see that in '94, some of
16 the auction numbers at that time were up in the $150
17 or $160 range and they have come down. Now, there
18 are people who believe that these numbers will begin
19 to go up somewhat as we get to Phase 2 in 2000, but 20
who knows? That will take an enormous climb to get 21
anywhere up near the marginal costs that was expected 22
at the time of the debate.
23
Again, while these declines in cost
24 and control cannot be attributed exclusively to
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1 the trading system, one of the things it does is the
2 trading system makes it clear that you can get to the
3 least cost of form of control in order to achieve the
4 results.
5
Again, I would reiterate the results
6 are much better today than we had thought going in --
7 in terms of going in and in terms of the amount of
8 early reductions.
9
This sort of developing knowledge and
10 experience encouraged the Illinois EPA to undertake
11 an effort to see whether this basic format might be
12 worthwhile to pursue with respect to ozone.
13
So Director Gade put together kind of a
14 design team of various players. The
Enviromental
15 Defense Fund was involved and people from my office
16 were involved; I was and it was my experience, people 17
from the EPA, people from a number of major sources
18 of emitters and so forth.
19
Now, what's interesting about this, to
20 show you how thinking can change in a modest period
21 of time, we originally started out to design a
NOx
22 trading system because that's what was believed at
23 the time to be the pollutant that was the problem.
24
During the course of the work of the
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1 design team, it became more clear to the science
2 that it was the
VOMs. Now, what I know in that
3 particular field, you can put in a thimble. So I
4 take the fifth when it comes to what the science is
5 on this. I'm happy to listen to the scientists.
6
But the point is that it was -- barely
7 a beat was missed in moving from talking about a
8 NOx trading system to being able to talk about a VOM
9 trading system. That's how versatile and flexible
10 the approach is. That, I think, is something that
11 actually recommends this to you.
12
Again, you have already talked earlier
13 this afternoon about the focus on the Chicago
14 metropolitan air shed.
15
One of the problems is what kind of
16 liquidity do you have? Do you have enough players
17 to make it a liquid system? Indeed, with several
18 hundred emitters available to be in the program,
19 that's more than sufficient for liquidity in the
20 program.
21
The early design also proposed the use
22 of the fixed percentage allocation of allowances
23 against a baseline period emissions of
encumbents as
24 simple, fair and efficient.
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1
Now, let's go back to the roots of the
2 trading system. One of the things that Professor
3 Coase would tell us if he were here would be that if
4 you want an effective trading system for pollution,
5 we could just as easily take all of the allowances or
6 credits we were going to use and we could go over to
7 the Ogden school in my neighborhood and hand it out
8 to the first graders and within a fairly brief period
9 of time we would have an efficient trading system
10 because they are worth something.
11
So you don't have to give them to the
12 encumbents. You don't have to keep them in a reserve 13
and auction them off to whoever wants them.
14 Theoretically, you can do anything.
15
The reason that the suggestion was made
16 for allocating these on a fixed percentage basis
17 against a baseline so you could get the baseline and
18 say well we need this much reduction and we can give
19 everybody who is already in the game a certain amount 20
is that's the fastest way to get agreement and to get 21 to
a system that works. You deal with the
22 encumbents.
23
True, there are people who come along
24 later and need to buy them, you find a way to deal
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1 with that, but they are not here. They are not part
2 of the current system.
3
So this is a very pragmatic sort of
4 decision. It could be done other ways, but this gets
5 it off and running quite quickly.
6
The other thing it does, it satisfies
7 the question of let's call it a subsidy or assistance
8 or where you find the resources to make the
9 current reductions. It answers the same question
10 that was answered with the utility back with the SO2
11 program. If you have an allowance system and
12 somebody is a big emitter, you probably have a lower
13 cost of control and sell that lower cost of control
14 to people who are already suffering from a long
15 diminishing return.
16
Banking was proposed. Now, it's true
17 that in a smog situation, you have a shorter life
18 span for a bank allowance. In the SO2 program, it's
19 essentially forever. In this kind of program, a more 20
seasonal, kind of intermittent sort of thing. You
21 probably don't want to have a very long period for
22 banking.
23
The point is if you don't use one today, 24
you can use some tomorrow. That may be a definite
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1 period or an indefinite period. That reduces the
2 incentive to essentially ignore controls because if
3 it's worth only something right today, you're
4 probably going to spend it. If you can find a way to
5 transfer it to someone else and get value out of
6 that, you'll do it, and that means again that you are
7 engaging in control.
8
The other point is that new sources
9 would have to obtain these offsets at 1.31. So you
10 will be getting reductions right out of the box and
11 then be able to demonstrate they can secure
12 allowances for three seasons and that way, if they
13 were given a license or certification to emit again
14 at a lower ratio they would, nonetheless, still have
15 to show that they could get emissions allowances for
16 the subsequent three periods after they began
17 emitting.
18
The trading units are relatively
19 small -- mechanically a relatively small number of
20 tons. Therefore, you have more liquidity. So rather 21
than dealing with thousand dollar bills, you are
22 dealing with five-dollar bills.
23
Finally, there was a recognition that
24 there might be atypical situations and some thought
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1 should be given to some allowance for excursions
2 and exactly how you're going to deal with those.
3
So the allowances, unlike the SO2
4 system, are not necessarily the exclusive remedy,
5 but it accounts for 99 percent of all of the
6 situations set forth for emissions.
7
The point I would like to conclude with,
8 and I've already really touched on it, is that there
9 are a number of key principals that are shared by
10 the SO2 and the ERMS -- proposed ERMS trading
11 system.
12
There is a cap on total emissions, which 13
is fundamentally important because the big shift in
14 thinking in the SO2 program is away from a reduced
15 rate of emission down to an actual cap on total
16 emissions. So you actually have improvement as
17 opposed to simply the very short-term improvement
18 and then an increase of pollution all the time.
19 That's the same with this.
20
Again, we share the idea of an
21 allocation of baseline allowances to the
encumbent
22 emitters. It would be an open ownership trading
23 system so that, in essence, anybody can own these
24 allowances and you find that there's greater
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1 liquidity and greater innovation if you allow,
2 theoretically, non-emitters to own these, if they
3 would like to. They can only be used to retire
4 or to satisfy emissions from a licensed source.
5
There would be banking of allowances
6 permitted. There would be a reserve of allowances
7 so that new players come into the market -- new
8 sources would have access.
9
Now, to be honest with this, that is
10 something that is really done to satisfy skepticism
11 about a trading system working. The reality is, as
12 far as I know, nobody has ever gone to the U.S. EPA
13 to buy out a new reserve account. They may or they
14 may not in this situation, but it is essentially a
15 safety valve for those who believe
16 the market might not work.
17
It relies on established protocols for
18 measuring and estimating emissions so that
19 essentially the ways in which Illinois EPA today
20 goes about measuring emissions and pollutants and
21 so forth, they would continue to rely on those same
22 measurement techniques to decide who is emitting
23 how much and therefore, how many allowances would
24 have to be retired.
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1
There would be an annual reconciliation.
2 So you would take simply an annual period and then at
3 the end of that, having once set these measurement
4 criteria, you would know exactly how many allowances
5 had to be turned in to satisfy how many -- how much
6 there had been in the way of emissions.
7
Finally, one of the other things is in
8 an effort to try to reach a very high degree of
9 agreement among the interested parties at the
10 outset so that a rather complex idea could be
11 brought forward in as mature a state as possible for
12 the board's consideration.
13
So let me stop there. I will try to
14 answer any questions that I can.
15
THE HEARING OFFICER:
Let's go off the record 16
for a second.
17
(Whereupon, a discussion
18
was had off the record.)
19
THE HEARING OFFICER:
I guess if there are
20 prefiled questions for Mr.
O'Connor, we will start
21 with those and go through our normal routine.
22
Are there any prefiled questions? No
23 prefiled questions. Are there any other questions?
24 No questions. Well, I have a question.
L.A. REPORTING - (312) 419-9292
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1
Go ahead.
2
MR. TREPANIER:
This is Mr. Trepanier.
3 My question of Mr.
O'Connor has to do with on Page 5,
4 the last statement of that page. I'm interested in
5 whose statement is that?
6
Who is saying that and who are these
7 interested parties that it's referring to?
8
MR. O'CONNOR: What I'm speaking to really is
9 the process that at least we participated in
in the
10 design effort.
11
So those would be the members of the
12 design team and a variety of people who had an
13 opportunity to comment. So that covers the range
14 from some of the oil refineries to the Environmental
15 Defense Fund.
16
So while it may not have been each and
17 every interested party, there was a fairly broad
18 spectrum of opinion and experience that probably
19 brings this rule, I would think, to a fairly high
20 degree of development at this stage of the game.
21
MR. TREPANIER:
Is it your contention that
22 what you are saying that the critique of the proposal 23
from an environmentalist point of view was provided
24 by the Enviromental Defense Fund?
L.A. REPORTING - (312) 419-9292
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1
MR. O'CONNOR: That would be my opinion having
2 dealt with EDF over the past what would be now six
3 years through the course of the 1990 amendments, I
4 would certainly think that, yes.
5
MR. TREPANIER: So you would feel that the
6 Enviromental Defense Fund could be designing these
7 emission trading programs since 1989, but yet remain
8 objective and provide an environmental critique?
9
MR. O'CONNOR: Yes. They were probably hard
10 nosed, I thought, during the design phase and the
11 discussions on the rule as it developed over this
12 several-year period.
13
MR. TREPANIER:
Were you aware of how the
14 mailing list was used? Earlier, I has asked the
15 question if the mailing list that the agency
16 developed for the proposal was used in 1996 and the
17 answer was deferred. Would you be the person who
18 would answer that question?
19
MS. SAWYER:
No, he wouldn't. It would have
20 to be someone from the agency. Mr.
O'Connor is not
21 aware of what the agency's mailing list is.
22
MR. O'CONNOR: That's true.
23
MR. TREPANIER:
Regarding your testimony on
24 that overhead that was presented as Page 4, was there
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1 a reason for allocating the allowances to
encumbents
2 beyond that it was quick?
3
MR. O'CONNOR: No, not really. I mean, it
4 is a pragmatic consideration. You know, one could
5 devise a variety of means for the allocation and the
6 allowances.
7
As I said, one could take what might
8 be the absurd, but still nonetheless theoretically
9 acceptable, which would be to hand them out to first
10 graders at the school. One could auction them off
11 simply as brand new items from the government or one
12 could do something akin to what is being suggested
13 here, which is to take the incumbents, give them a
14 cap in the aggregate and therefore, cap individually
15 and hand out the allowances in that way.
16
So there are different ways in which it
17 could be done. Again, if one believes in the market, 18
eventually the efficiencies would find their way
19 through.
20
MR. TREPANIER:
These allocations would need
21 to be given to people who were doing the pollution
22 because otherwise, they wouldn't know how to reduce
23 by 12 percent, wouldn't that be correct?
24
MR. O'CONNOR: As I said, there are
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1 alternatives. Again, let's take the most absurd
2 example, but nonetheless theoretically acceptable,
3 if we were to go over to the first grade class at
4 Ogden school and hand them out to all the children
5 walking out the door at recess, the folks in this
6 room that represent emitters would very quickly find
7 their way over to the Ogden school and they would be
8 buying these emissions either from the children or
9 their parents. So the emission allowances would find
10 their way into the hands of those, in the first
11 place, who needs them? Then, they would go about the 12
normal process, which would be to either buy or sell
13 them among themselves based upon their cost of
14 control.
15
MR. TREPANIER:
Was there any environmental
16 criticism that you received -- when you participated
17 on the design team, was there any other criticism
18 coming from an environmentalist not associated with
19 the Environmental Defense Fund?
20
MR. O'CONNOR: I wouldn't call it criticism.
21
MR. TREPANIER:
That's what I'm asking. I'm
22 asking if you did receive criticism?
23
MR. O'CONNOR: Well, let me put it into
24 context. This was a several-year process. The
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1 rule not spring fully grown from the head of Phil
2 O'Connor or anybody else. It was a general idea and
3 an effort.
4
So most of the criticism was carried out
5 of the context of the effort to see if one could
6 devise a trading system that was applicable to the
7 ozone problem.
8
So that was the objective. So most of
9 the criticism that took place was really in that
10 context. Frankly, most of the skepticism about a
11 trading system came from current emitters.
12
The resistance i nitially came from folks 13
who frankly were concerned about changing from the
14 way that things had been done in the past and doing
15 them somewhat differently.
16
MR. TREPANIER: Do you believe that with this
17 system that it will be able to effect the 12 percent
18 reduction from the point sources by 1999?
19
MR. O'CONNOR: What I would say is that it's
20 much more likely that one would effect that reduction 21
or any other using this system than to go about it in 22 a
more conventional way.
23
MR. TREPANIER:
Then, in 1999, if granted
24 we've gotten that 12 percent reduction and granted
L.A. REPORTING - (312) 419-9292
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1 also that no further reductions were necessary, is
2 there any purpose, then, to continue in a market
3 system?
4
MR. O'CONNOR: Probably all the reason in the
5 world because one of the great values of it is it
6 would be much easier to maintain an absolute cap
7 because if you had a fixed -- taking your proposition
8 that we now have reached a level that we were
9 satisfied with and for the sake of argument, there
10 were one million units of emission that were
11 tolerable, a market system would actually maintain
12 that much more efficiently than any other way than
13 I can think of because you have a fixed number of
14 emission units to trade and therefore, they would
15 trade among all of those people who had emissions
16 and therefore, had to come into the Illinois EPA and
17 demonstrate that they were in compliance. So
18 actually, it would be a fairly efficient system to do 19
it in contrast, let's say, to one in which you were
20 running out trying to achieve a total cap on
21 emissions by regulating rates of emissions for
22 people.
23
MR. TREPANIER:
But under this program, when
24 that 12 percent reduction is effected, through all of
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197
1 the regulated sources which right now is projected to
2 be 92, those levels of emissions will be secured by
3 the Clear Air Act permitting process permits, would
4 they not?
5
MS. SAWYER:
That's really a procedural
6 question. Mr.
O'Connor probably isn't the best
7 person to ask how we are going to handle it and
8 respect permitting.
9
MR. TREPANIER:
I think that there is some
10 knowledge here, though, that as an expert, we can
11 learn from.
12
Let's look at the SO2 program that when
13 there was a reduction -- when one utility is selling
14 their allowance of SO2s, now is the selling utility,
15 then, required under a permit to maintain that lower
16 level of emissions?
17
MR. O'CONNOR: Absolutely.
18
MR. TREPANIER:
And you understand that under 19
this program, that's also the system?
20
MR. O'CONNOR: Well, wait. Let's stand back
21 here. You are giving me a proposition about a future 22
that doesn't yet exist.
23
MR. TREPANIER:
No. I'm talking about the
24 trades that have already occurred in SO2 programs.
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1
MR. O'CONNOR: Okay. Let's just talk about
2 SO2.
3
For every ton of SO2 that you emit, you
4 must then retire an allowance at the end of the year
5 for that SO2 ton.
6
If I were to sell every last allowance
7 that I have, if I were Commonwealth
Edison and I
8 sold all of my allowances to American Electric Power,
9 I have to turn off. I cannot emit a ton unless I had
10 an allowance to retire against it.
11
Now, if I were to --
12
MR. TREPANIER:
What about next year? Could
13 you turn your machine back on the next year?
14
MR. O'CONNOR: Only if I have allowances.
15
MR. TREPANIER:
If you went out into the
16 market and then repurchased allowances?
17
MR. O'CONNOR: Right. I even have the right
18 to sell on a forward basis allowances that are not
19 good until next year. I'm entitled to them now. So
20 in 1999, I know that I have allowances for 1999. I
21 can't use them until 1999. I could sell them today,
22 but if I want to run my plant and submit sulfur in
23 1999, I better go find some allowances to replace the 24
ones that I sold.
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1
MR. TREPANIER:
How is it that you know
2 you're going to have an allowance in 1999?
3
MR. O'CONNOR: Because the Congress of the
4 United States told me that I will and for this
5 purpose, I will believe them.
6
MR. TREPANIER:
So you are saying under
7 the SO2 program, occasionally allotments are
8 distributed by Congress?
9
MR. O'CONNOR: In fact, in Phase 1, the
10 allotments or the allowances were specified
11 plant-by-plant in the statute.
12
Then, for Phase 2, which brought in
13 other lower emitting plants, there was a general
14 description of how the U.S. EPA had to go about
15 doing that.
16
U.S. EPA then calculated what each of
17 the Phase 2 plants would get and that was
18 non- appealable decision on the part of the U.S. EPA.
19 So everybody today who has a Phase 1 or Phase 2 plant 20
knows exactly how many allowances it has forever and
21 ever, amen.
22
MR. TREPANIER:
Unless they sell their
23 allowances?
24
MR. O'CONNOR: Right. Then, they have the
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1 money.
2
MR. TREPANIER:
Okay. Now, let's take
3 this -- what we have learned about the SO2 program
4 and then as you have done it with your presentation,
5 look at the similarities with the ERMS trading.
6
When we reach 1999 and the chairs around
7 the table have been readjusted so reductions are made
8 where they are most economically available, now has
9 the program accomplished its goal?
10
MR. O'CONNOR: Well, the goal is up to the
11 policymakers. If the
policymakers have decided that
12 enough has been achieved, then, a goal has been
13 reached. If the
policymakers say, no, there must
14 be more reductions, then, there will be more
15 reductions.
16
MR. TREPANIER:
You're saying sources say the 17
five-ton source can be brought in at that point in
18 1999?
19
MS. SAWYER:
That's kind of speculative.
20 We're not really sure what would happen at that
21 point.
22
MR. O'CONNOR: That's correct. But the
23 trading system is flexible.
24
THE HEARING OFFICER:
Okay. Are there any
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1 additional questions?
2
MS. MIHELIC: I'm
Tracey Mihelic on behalf of
3 Gardner, Carton & Douglas and the ERMS Coalition.
4
What are the sources regulated by Title
5 4?
6
MR. O'CONNOR: Essentially, coal fire
7 boilers.
8
MS. MIHELIC:
So one type of source is
9 regulated?
10
MR. O'CONNOR: Fundamentally, although they
11 make different kinds of boilers.
12
MR. WAKEMAN: I'm Jim
Wakeman on behalf of
13 Tenneco.
14
What is meant by the ability to secure?
15 Is that the financial backing or the ability to go
16 out and identify the sources for the future?
17
MR. O'CONNOR: You're talking about the
18 current rule?
19
MR. WAKEMAN: No. I'm talking about as it
20 applies to ERMS.
21
MS. SAWYER:
Ability to secure? I'm not
22 quite sure I understand the question.
23
MR. WAKEMAN: Well, in your presentation, you
24 said that new sources should obtain offsets at a 1.3
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1 to one ration and demonstrate the ability to secure
2 allowances for three seasons.
3
MR. O'CONNOR: Right. I have to lag that
4 question to EPA folks. While I have been involved in
5 helping to design the rule and so forth, my daily
6 wick right here is an SO2 experience. So I'm
7 assuming it would have to be something satisfactory
8 to EPA.
9
MS. SAWYER:
That question would be better
10 directed to Chris Romaine during his testimony.
11
MS. MIHELIC: Going back to that, utilities
12 are essentially the type of sources regulated. Of
13 the sources that have had to comply with Title 4
14 and come up with reductions, how many sources have
15 modified their operations in order to reduce the
16 number of sources regulated?
17
MR. O'CONNOR: I don't have a specific number
18 for you, of course, and then that would depend on
19 what one meant by modify.
20
For instance, a modest number of Phase 1 21
plans have installed new scrubbers. That's probably
22 just a handful.
23
Others have switched their fuel from
24 higher sulfur to lower sulfur. Others have actually
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1 just made adjustments in their burning process.
2 Others have had additives of various kinds to coal.
3 Some have thrown in chopped up tires, as an example.
4
So there is a wide variety of mechanisms
5 apparently that utilities and independent power
6 producers -- well, really utilities in Phase 1.
7 They are the only ones with the older and dirtier
8 plants have used to reduce. Some have actually
9 somewhat reduced operation.
10
MS. MIHELIC: How many of these sources
11 actually rely upon the ability to purchase SO2
12 allotments in the market in order to come up with
13 reductions required?
14
MR. O'CONNOR: Oh, a very large number. Much
15 of the trading is done, however, within utility
16 systems so that American Electric Power, for
17 instance, will move allowances from the account of
18 one plant to the account of another plant.
19
But there are other more involved
20 things. I serve as a common designated
21 representative for two rural coops in the south who
22 have made reductions and they, in turn, operate as
23 kind of a virtual utility system with a plant owned
24 by Baltimore Gas and Electric which then uses the
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1 savings of those two rural coop plans in the south
2 to satisfy some of their requirements.
3
Those plants basically in the south have
4 opted into the program. They would not have been
5 covered under Phase 1 originally. They volunteered
6 to come in and they have made early reductions. It's
7 a large number of different situations.
8
MS. MIHELIC: But is the majority of the
9 trading going on between basically a company that
10 owns a number of utilities trading amongst its own
11 companies?
12
MR. O'CONNOR: Within its own system, yes.
13
MS. MIHELIC:
And this is a nationwide
14 program, is it not?
15
MR. O'CONNOR: It's nationwide, but for Phase
16 1, almost all of the plants are east of the
17 Mississippi.
18
MS. MIHELIC: So it's half of the nation?
19
MR. O'CONNOR: Yes, half.
20
MS. MIHELIC: It's not basically limite
d to
21 one small area in the United States?
22
MR. O'CONNOR: No. It's a national program.
23
MS. MIHELIC: What are the number of sources
24 subject to Phase 1?
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1
MR. O'CONNOR: I believe 445 units.
2
MS. MIHELIC: What are the total number of
3 sources subject to this program?
4
MR. O'CONNOR: I believe it's close to 2,000.
5 It's here somewhere.
6
MS. MIHELIC: What are the key differences
7 between the Title 4 program and the ERMS program
8 being proposed?
9
MR. O'CONNOR: The key differences would be
10 variations, really, on details that are designed
11 to accommodate the difference in the nature of the
12 problem.
13
A good example being that while there
14 is a shared principal of banking, the banking on the
15 SO2 side is, in effect, internal while the banking
16 for the ERMS program is basically a two-season
17 banking.
18
MS. MIHELIC: Okay. Just so I understand
19 you, the banking -- I bank an SO2 allotment, that's
20 forever?
21
MR. O'CONNOR: If it's a 1997 vintage SO2
22 allotment and I don't use it for '97, then, I can use 23
it for any year in the future.
24
MS. MIHELIC: So you could use it 2010?
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1
MR. O'CONNOR: At any time, yes.
2
MS. MIHELIC: Are there any other differences
3 between the programs?
4
MR. O'CONNOR: Oh, there are. I'm just trying
5 to think about the extent to which it might be
6 significant.
7
Yes, I mean, there is one -- the
8 treatment of what I would call exceptions or
9 excursions is somewhat different.
10
Under the SO2 program, to the extent
11 that one has emissions above the number of allowances 12
that you have to retire against them, there are no
13 ifs, ands or buts, it is a $2,000 fine or time and
14 then a deduction from a subsequent allotment of
15 allowances would be coming down the pipeline.
16
In this situation, which is a good deal
17 more complex, there is a recognition that there could 18
be some kind of a situation that would argue for
19 judgment to be applied and some other enforcement
20 mechanism going to be used that may not cover every
21 situation.
22
So that might be a difference as well as 23
a shared principal that the allowances be the
24 overwhelming mechanism for compliance.
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1
In this particular case, there is a
2 modest opportunity for some judgment to be applied
3 when the circumstances would warrant.
4
MS. MIHELIC: Who could enforce for
5 non-compliance with the Title 4 program?
6
MR. O'CONNOR: Do you mean who has some sort
7 of right to come and litigate or something of that
8 nature?
9
MS. MIHELIC:
Yes.
10
MR. O'CONNOR:
Oh, I know this would
11 disappoint all the lawyers in the room, but the whole
12 point is that it pretty much dispenses with
any of
13 those kind of problems.
14
You are either in compliance or you are
15 not. If you are not, then, you've got a big problem
16 because you have to pay a lot of money and you don't
17 get to increase your emissions in any event because
18 you have to satisfy with the deduction of allowances.
19
MS. MIHELIC: But you know what that penalty
20 is today if you don't comply next year?
21
MR. O'CONNOR: Yes.
22
MS. MIHELIC: In a sense, then, only U.S. EPA 23
is the person who can enforce against those sources?
24
MR. O'CONNOR: Well, I mean, certainly there
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1 are criminal penalties, as an example, for the
2 willful false filing of information. I suppose in
3 that regards, someone who knew about someone making a
4 false filing would go and report them.
5
MS. MIHELIC: We're just talking about not a
6 criminal type operation or just a failure to have --
7
MR. O'CONNOR: Yes. I don't believe there is
8 any particular -- I mean, I can't think of -- I mean,
9 there may be something in the statute that addresses
10 that, but I don't recollect it.
11
MS. MIHELIC: Here, it's been -- there's been
12 some testimony before that this program here -- the
13 ERMS program is being developed because there aren't
14 necessarily other alternatives in command and
15 control.
16
With respect to the Title 4 program,
17 what were the reductions required by utilities prior
18 to the Title 4 -- trading program being implemented?
19
MR. O'CONNOR: Well, first of all, let me ask
20 you, I never heard anyone say that there is no other
21 way of doing it.
22
MS. MIHELIC: Right. I'm just saying that --
23
MR. O'CONNOR: The contention is that it's a
24 far more preferable way of doing it. So I think just
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1 as with -- I think the point of your question is what
2 other ways were there for SO2?
3
MS. MIHELIC: Well, what were the reductions
4 required prior to the trading program?
5
MR. O'CONNOR: That's just the point. There
6 were required reductions in the rate of emissions
7 from specific locations. So if a new power plant was
8 being built, you had to put a scrubber on it.
9 However, the total amount of SO2 emitted in the
10 country was continuing to rise.
11
MS. MIHELIC: And was that -- were those
12 reductions only required at new facilities?
13
MR. O'CONNOR: That applied only to new
14 facilities, yes.
15
MS. MIHELIC: That didn't apply to facilities
16 already existing at the time the --
17
MR. O'CONNOR: That's right.
18
MS. MIHELIC: And you talked earlier about a 19
subsidy program that had been discussed during the
20 Title 4 adoption process, that the very high emitters
21 could get reductions down and the cost would be
22 spread amongst all the sources. Was that considered
23 during the ERMS development?
24
MR. O'CONNOR: No, I don't think it was. If I
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1 can express an opinion, I think that notion was so
2 terribly discredited during the course of the Clean
3 Air Act amendment debate, the idea that you would go
4 and take money away and essentially tax some other
5 producer of product and give the money to his
6 competitors was pretty thoroughly discredited.
7
On the other hand, the pragmatic
8 determination was made that the best way to satisfy
9 the concerns about financing reductions would be to
10 make the allocations to the
encumbents based on some
11 kind of baseline.
12
MR. SAINES: I'm
Richard Saines.
13
Getting back to some of the distinctions 14
between the SO2 program and the VOM program, is it
15 true that under the SO2 program, fundamentally, all
16 of the effective sources can essentially utilize the
17 option of low sulfur coal as a means to reduce their
18 SO2 emissions?
19
MR. O'CONNOR: Theoretically, they could buy
20 low sulfur coal and bring it by train, but that might 21
not be the most economical solution.
22
MR. SAINES: But low sulfur coal is an option
23 that's available or one type of way to reduce
24 emissions under it?
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1
MR. O'CONNOR: Yes.
2
MR. SAINES: Based on your knowledge of the
3 VOM trading program, there is no corresponding
4 methodology by which the effected sources under VOM
5 can just rely on changing one particular type of
6 process, isn't that true?
7
MR. O'CONNOR: I don't want to fight with your
8 question, but I think the way to look at this is that
9 the whole point of a trading system is that it does
10 not preclude any conceivable method of compliance.
11
That's what it avoids whereas in the
12 past, we have had a tendency instead to have the
13 government prescribe a particular means of coming
14 into compliance.
15
So basically the government in this sort 16
of situation is going to say, hey, look, I'm not
17 going to get into the business of telling you exactly 18
what you have to do to come into compliance. I'm
19 going to do everything I can to give you as much
20 freedom as possible to choose the most economical and 21
most efficient methods. I'm not trying to avoid your 22
question, but I think it's not --
23
MR. SAINES: Well, the question is really more 24
factual and that is that utilities have an extra
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1 option that is across-the-board. All the SO2
2 affected sources can rely on a similar type of option
3 that really doesn't exit under the VOM program.
4
MR. O'CONNOR: I don't know that. I mean,
5 there may be a variety of chemicals that can be
6 developed. The whole point of these things is that
7 the innovation begins to come forward as soon as
8 there is flexibility.
9
If the main job of the engineer is to
10 sit around and figure out how to satisfy some guy in
11 the government, it's a completely different process
12 of invention that if he is being told let's find the
13 most economical and creative way of satisfying a
14 problem. I would say that that may be a misplaced
15 concern all together.
16
MR. SAINES: I have one more follow-up. I
17 guess we are not really --
18
MR. O'CONNOR: I know what you are asking me.
19 I'm just saying it's not the right question.
20
MR. SAINES: As it currently exists with the
21 VOM program, there isn't a recognized option out
22 there similar to -- I mean, it's something that may
23 have to be developed.
24
MR. O'CONNOR: I don't know. ?
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1
MS. SAWYER:
I don't think Mr.
O'Connor,
2 first of all, in his capacity as theoretical analyst
3 on this program is familiar with all of the VOM
4 sources in Chicago and is capable of answering that
5 question.
6
MS. McFAWN: I don't know that you have
7 established that the feasibility of low sulfur coal
8 is one that is available to all utilities. You might
9 have had contractual restrains that would prohibit
10 the use of that, the price of coal could go up.
11
You could probably testify that that is
12 available to all utilities, but I'm not convinced
13 that it is.
14
THE HEARING OFFICER: Mr.
Newcomb?
15
MR. NEWCOMB: I'm Chris
Newcomb of Karaganis & 16
White.
17
The operational changes that facilities
18 were allowed to undergo to meet emission reductions,
19 did they have to go through the agency for approval
20 of operational changes?
21
MR. O'CONNOR: No.
22
MR. NEWCOMB: So that was one of the big
23 flexibility features before these facilities came
24 into play?
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1
MR. O'CONNOR: That's one of the features.
2
MR. NEWCOMB: So the regulatory burden under
3 the SO2 program is actually much lighter than command
4 and control?
5
MR. O'CONNOR: In many of the utilities,
6 in case one has engaged in these changes in which
7 emissions, in any event, were to change to low sulfur
8 coal or to a variety of things that they
9 are doing today, the point is they have been
10 incentivized to do these things, and have indeed
11 found ways to -- actually, many would tell you the
12 negative cost of compliance. Having thought about
13 it, they realize they could do something different
14 to actually improve the operation and in addition,
15 reduce their emissions.
16
MS. MIHELIC: I have one last question.
17
Isn't it true that one of the
18 differences between the types of sources regulated
19 in the SO2 -- in the Title 4 program and the
the
20 types of sources regulating in the ERMS program is
21 that the existing sources under the Title 4 program,
22 as you said earlier, had not in the past been
23 required to reduce emissions whereas in the ERMS
24 program, they had in the past been required to obtain
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1 reductions in emissions and there are additional
2 reductions being sought through this?
3
MR. O'CONNOR: Yes. I think that's the case
4 in terms of the initial conditions, yes.
5
MR. FASANO: I'm Ralph
Fasano from White Cap.
6
Mr. O'Connor, based on your expertise in
7 Title 4, but also on your knowledge on ERMS, could
8 you comment on the similarities of baseline
9 development as far as whether it would be based on
10 actuals or based on allowable emissions or if there
11 was a lot of -- if it was a tough go in the beginning 12
on Title 4 and then the second part of that is after
13 the baselines were finally agreed upon, I assume, in
14 the reconciliation period similar to ERMS, how that
15 went as far as, you know, was it easy for companies
16 to work with the agency or to agree on the existing
17 regulations --
18
MR. O'CONNOR: The first part of your question 19
about the baselines was fundamentally, a legislative
20 debate, but it was predicated on an enormous amount
21 of available monitoring information that had been
22 developed over the period of time of the acid
23 precipitation study that the U.S. EPA conducted,
24 which I believe was about a ten-year study.
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1
Most or all of these units had
2 contributed information. So it was a very -- and
3 because of just the nature of the data key being
4 at the power plants with heat rates and fuel
5 consumption and so forth, you could pretty easily
6 arrive at what the emissions were. So there were
7 protocols that were there.
8
That was largely fought out in the
9 legislative arena and decided, and as I think I noted
10 earlier, the EPA determination of the Phase 2 unit
11 baselines was a non-
appealable decision by the U.S.
12 EPA.
13
The second part, I think you were
14 talking about the reconciliation period. That was
15 left to rulemaking by the U.S. EPA and the timing
16 that came out on that was a function of the process
17 I described of the advisory committee.
18
Naturally, it started off with the folks 19
that had to do the complying wanting a longer period
20 and some other people wanting a shorter period and it 21
ended up somewhere in the middle, which should not be 22 a
surprise.
23
I have not yet heard of any complaints
24 about that reconciliation period, at least for SO2,
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1 being too short. In part, because of the nature of
2 the data collection, CEM, continuous emission
3 monitoring, and the quarterly reporting and the
4 testing of the monitoring equipment, there is a high
5 degree of confidence in the data within days after
6 the end of the year.
7
MR. FASANO: So then you would probably agree
8 with me that because of the nature of the SO2 and the
9 large amount of good data for all of these years that
10 it was fairly easy to come up with baselines as
11 opposed to the ERMS --
12
MR. O'CONNOR: Well, easier -- I think easier
13 in the SO2 program.
14
Remember, one of the things the trading
15 program does is that because it makes reductions
16 valuable, not the emissions -- in the old system,
17 it's the emission that's valuable. In a trading
18 system, it is the reduction that is valuable.
19
That encourages emitters to improve
20 their data and their monitoring in order to get more
21 precise information about what they are emitting in
22 order to make their reductions valuable.
23
THE HEARING OFFICER:
I have a couple of
24 questions.
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1
The first question is it sounds to me,
2 in your opinion, that the trading program forces
3 technology or, for a lack of a better term, it
4 creates more economical ways to bring about
5 reduction?
6
MR. O'CONNOR: Yes, that's right.
7
THE HEARING OFFICER:
And then the other
8 question that I have was dealing with the market
9 reserve aspect of the trading program, is there a
10 danger of having a large market reserve in the
11 trading program that causes the allotments to
12 possibly not trade freely and somewhat know that
13 I can go to this reserve and get what I need as a
14 person tries to drive the price down?
15
MR. O'CONNOR: Oh, if the reserve were very
16 large, but in this case, the EPA has been, I think,
17 very conservative in designing the size of the
18 allotment.
19
I don't think any of us felt -- even
20 those of us who aren't wild about reserves, but
21 acknowledged them as important to deal with
22 skepticism, felt that this level of reserve that
23 the Illinois EPA was designing was, you know,
24 perfectly reasonable under the circumstances.
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1
THE HEARING OFFICER:
Did you have anything?
2
MS. HENNESSEY: I may have a question, which
3 may have been defined at the beginning as an economic
4 answer, but are there market forces or any
5 constraints that prevent disproportionate local
6 effects of pollution that may arise from these kind
7 of emission trading systems?
8
I'm thinking of a situation where I
9 might live on the north side of the city next to a
10 factory and it buys up a lot of allowances from a
11 factory on the south side. That's great for the
12 factory on the south side, but for someone living
13 next door to the factory on the north side, I'm
14 now being exposed to more pollution than I was before 15
this kind of system went into effect.
16
MS. SAWYER: I would suggest that this is
17 probably an air quality question that may be --
18
MS. HENNESSEY: Well, I understand we may
19 have a scientific question, but I don't know if
20 there are also environmental forces that may effect
21 that.
22
MS. SAWYER: Okay.
23
MR. O'CONNOR: That's a perfectly reasonable
24 question and it has been one that has come up in a
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1 number of contexts both with respect to the SO2
2 program and to this.
3
The honest answer is nobody, I think,
4 provides an assurance, an absolute assurance, that
5 the kind of situation you have just described won't
6 occur.
7
My advice on that, though, would be that
8 rather than having to tail wag the dog, that we
9 recognize that such an occurrence might possibly
10 develop and cross that bridge when we come to it.
11
The reason that it is probably unlikely
12 to occur is that most emitters of these products
13 today are already licensed to emit at some certain
14 level and that level was associated in some
15 reasonable way with its capacity to produce the
16 product that it's interested in producing.
17
In most cases, the emissions associated
18 with most products, you really are not in a position
19 to go out and acquire these large number of
20 allowances and somehow change your operation as such
21 that you are going to be encouraged to produce that
22 much more of the product resulting in some widely or
23 dramatic increase in the emissions.
24
I think the economics actually argue
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1 against the expectation that there has been this
2 highly localized, very adverse effect.
3
I think we have to allow for the
4 theoretical possibility that it could happen in some
5 way, but I would urge you to consider that as kind of
6 an exception problem and may be something that would
7 require readdressing at a later date just given the
8 expected benefits for reducing the overall problem
9 that you are concerned with right now, which is the
10 ozone problem.
11
You may actually be referring to some
12 associated pollutant that comes along with the
VOMs
13 or something. I would urge you to treat that as an
14 exception and think about a special way of dealing
15 with it down the road.
16
MS. HENNESSEY: Are you aware of that type of
17 situation that I have described in coming up in the
18 SO2 program?
19
MR. O'CONNOR: No, not in the SO2 program, no.
20
THE HEARING OFFICER:
We will have one more
21 question from the audience and then we'll break for
22 the day.
23
MR. WAKEMAN: You mentio
ned in your testimony
24 several hundred sources. I think that's one of the
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1 varying differences in SO2 and ERMS right now. It's
2 estimated 240 sources. You are saying in SO2 that
3 it's 4,000. At what point are there not enough to
4 make it a viable program?
5
MR. O'CONNOR: Oh, I mean, a couple of hundred
6 is more than enough. If you get down to ten or 12 or
7 something, I think you can start to worry.
8
I don't think that will be your problem
9 here. I think you probably will have more than
10 enough sources for liquidity.
11
MR. WAKEMAN: Thank you. ?
12
MS. SAWYER:
Could I ask a question -- two
13 quick questions?
14
THE HEARING OFFICER: Okay.
15
MS. SAWYER:
You stated earlier in response
16 to a question from Ms.
Mihelic that utilities
17 regulated under the SO2 program were not previously
18 regulated?
19
MR. O'CONNOR: Well, the Phase 1 units, as a
20 general manner, were uncontrolled units.
21
MS. SAWYER:
Isn't that true for purposes of
22 controlling them for acid rain deposition?
23
MR. O'CONNOR: Yes, with respect to sulfur,
24 yes.
L.A. REPORTING - (312) 419-9292
223
1
MS. SAWYER:
Isn't it possible -- I mean,
2 isn't it true that some of these units were regulated
3 for the SO2 air quality standard although not for --
4
MR. O'CONNOR: Oh, yes, yes, absolutely. I'm
5 sorry. I should have noted that. They were for
6 local reasons, yes.
7
MS. SAWYER:
Thank you.
8
MS. MIHELIC: Is he going to be available for
9 further questioning tomorrow?
10
MR. O'CONNOR: Actually, I have to go teach a
11 class tonight.
12
THE HEARING OFFICER:
You can move the
13 exhibits.
14
MS. SAWYER:
At this point, I would move that 15
Exhibits 19 through 23 be admitted into evidence.
16
THE HEARING OFFICER:
Any objection?
17
Hearing none, those will be entered into 18
the record.
19
Are you going to be available tomorrow.
20
MR. O'CONNOR: I'll tell you what, if y
ou need 21
me back, I will be over in my office just a block
22 away. Just have somebody give me a call and I'll run 23
right over here.
24
THE HEARING OFFICER:
Why don't we go off the
L.A. REPORTING - (312) 419-9292
224
1 record for a second.
2
(Whereupon, a discussion
3
was had off the record.)
4
THE HEARING OFFICER:
We can go back on the
5 record now.
6
So if you are called, you're called.
7 I will also let you know that although it was not
8 marked on the outside of the room, we are going
9 to be in this room tomorrow. There is a question
10 of whether or not we will start at 9:00 or 10:00.
11 I was wondering if there were any problems if we
12 did start at 9:00 tomorrow instead of 10:00 o'clock.
13
I don't see anyone having a problem
14 with that so let's start at 9:00 o'clock tomorrow
15 instead of 10:00 o'clock in this room.
16
If there is nothing further, I think
17 that will be it and we will continue this on the
18 record tomorrow at 9:00.
19
(Whereupon, the proceedings held
20
in the above-entitled cause were
21
adjourned to be reconvened at
22
9:00 o'clock a.m. on January 22,
23
1997.)
24
L.A. REPORTING - (312) 419-9292
2251 STATE OF ILLINOIS )
) SS.
2 COUNTY OF C O
O K )
3
I, LORI ANN ASAUSKAS, CSR, RPR, notary
4 public within and for the County of Cook and State
5 of Illinois, do hereby certify that the testimony
6 then given by all participants of the
rulemaking
7 hearing was by me reduced to writing by means of
8 machine shorthand and afterwards transcribed upon
9 a computer, and the foregoing is a true and correct
10 transcript.
11
I further certify that I am not counsel
12 for nor in any way related to any of the parties to
13 this procedure, nor am I in any way interested in the 14
outcome thereof.
15
In testimony whereof I have hereunto set 16
my hand and affixed my
notarial seal this 27th day of 17
January, A.D., 1997.
18
_______________________________
Lori Ann Asauskas, CSR, RPR
19
Notary Public, Cook County, IL
Illinois License No. 084-002890
20
21 SUBSCRIBED AND SWORN
before me this 27th
22 day of January, 1997.
23
_____________________
24
Notary PublicL.A.
REPORTING - (312) 419-9292