1 BEFORE THE ILLINOIS POLLUTION CONTROL BOARD
    2
    3
    IN THE MATTER OF: )
    4 )
    EMISSIONS REDUCTION MARKET )
    5 SYSTEM ADOPTION OF 35 ILL. ) R97-13
    ADM. CODE 205 AND AMENDMENTS ) (RULEMAKING)
    6 TO 35 ILL. ADM. CODE 106. )
    )
    7
    8
    9 The following is a transcript of a
    10 rulemaking hearing held in the above-entitled
    11 matter, taken
    stenographically by LISA H. BREITER,
    12 CSR, RPR, CRR, a notary public within and for the
    13 County of DuPage and State of Illinois before
    14 CHUCK FEINEN, Hearing Officer, at the James R.
    15 Thompson Center, 9-040, 100 West Randolph Street,
    16 Chicago, Cook County, Illinois on the 19th day of
    17 August 1997, commencing at 10:15 o'clock a.m.
    18
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    L.A. REPORTING - (312) 419-9292
    1

    1 ILLINOIS POLLUTION CONTROL BOARD MEMBERS PRESENT:
    2 MS. KATHLEEN HENNESSEY
    MS. MARILI MC FAWN
    3 MR. JOSEPH YI
    MR. RICHARD MC GILL
    4
    ILLINOIS ENVIRONMENTAL PROTECTION AGENCY MEMBERS
    5 PRESENT:
    6 MS. BONNIE SAWYER
    MR. RICHARD FORBES
    7 MR. BHARAT MATHUR
    MS. SARAH DUNHAM
    8 MR. CHRISTOPHER ROMAINE
    MR. GALE NEWTON
    9 MR. RICHARD FORBES
    MR. ROGER KANERVA
    10 MR. GARY BECKSTEAD
    11
    OTHER AUDIENCE MEMBERS WERE PRESENT AT THE HEARING
    12 BUT NOT LISTED ON THIS APPEARANCE PAGE.
    13
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    L.A. REPORTING - (312) 419-9292
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    1 I N D E X
    2 PAGE
    3 TESTIMONY:
    BHARAT MATHUR (IEPA)....................... 6
    4 RICHARD FORBES (IEPA)...................... 9
    CHRISTOPHER ROMAINE (IEPA)................ 14
    5 ROGER KANERVA (IEPA)...................... 23
    6 QUESTIONS:
    ANAND RAO (Board)......................46, 94
    7 CHRIS NEWCOMB (Dart Container)............ 54
    RICHARD SAINES and TRACEY MIHELIC
    8 (ERMS Coalition).................... 56
    LIONEL TREPANIER.......................57, 62
    9 BILL FORCADE (Tenneco).................... 61
    RON BURKE (American Lung Association)..... 89
    10
    TESTIMONY: SIDNEY MARDER (IERG).............. 96
    11 QUESTIONS:
    LIONEL TREPANIER (Blue Island Greens).... 103
    12 KATHLEEN HENNESSEY (Board Member)... 106, 114
    13 TESTIMONY: JAMES WAKEMAN (Tenneco)........... 108
    QUESTIONS: BONNIE SAWYER (IEPA).............. 109
    14
    TESTIMONY: LIONEL TREPANIER.................. 116
    15 QUESTIONS: BONNIE SAWYER (IEPA).............. 133
    16 TESTIMONY: RON BURKE (American Lung Assoc.) 135
    QUESTIONS:
    17 ROGER KANERVA (IEPA)..................... 148
    LIONEL TREPANIER (Blue Island Greens).... 150
    18
    19
    E X H I B I T S
    20
    IN EVIDENCE
    21
    Exhibit No. 72............................ 8
    22 Exhibit No. 73........................... 14
    Exhibit No. 74........................... 23
    23 Exhibit No. 75........................... 27
    Exhibit No. 76.......................... 103
    24 Exhibit No. 77 (not received in evidence)
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    3

    1 HEARING OFFICER FEINEN: Good morning.
    2 My name is Chuck
    Feinen, the assigned Hearing
    3 Officer to R97-13, Emissions Reduction Market
    4 System Adoption, 35 Illinois Administrative Code
    5 205.
    6 I'd like to point out at this time that
    7 at first notice, the board did not adopt the first
    8 notice of the amendments to 35 Ill. App. 106.
    9 Therefore, the caption should be changed at second
    10 notice. With me here today from the board is, far
    11 right, board member
    Marili McFawn.
    12 MS. MC FAWN: Good morning.
    13 HEARING OFFICER FEINEN: Next to
    Marili
    14 McFawn is Richard
    McGill, board member Kathleen
    15 Hennessey's assistant. Next to Richard is Board
    16 Member Kathleen
    Hennessey.
    17 MS. HENNESSEY: Good morning.
    18 HEARING OFFICER FEINEN: Next to me is
    19 Anand Rao, our technical unit advisor, person. He
    20 recently got a promotion so I don't know what to
    21 call him anymore, and to my left is Board Member
    22 Joseph
    Yi.
    23 We went to first notice and established
    24 this hearing for today to tie up some issues and
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    4

    1 questions that the board had. I think today we'll
    2 start out with the agency presenting their
    3 witnesses and questions for them. Then we'll
    4 proceed to
    ERG's testimony and questions for
    ERG's
    5 testimony. Then we'll go on to Tenneco's
    6 presentation and questions of Tenneco. Then
    7 Lionel
    Trepanier's presentation and questions for
    8 Lionel
    Trepanier and anyone else who has any
    9 testimony will provide it at the end of the day,
    10 time permitting. I'm hopeful that we'll get done
    11 either by today or noon tomorrow, but don't hold
    12 me to that. Why don't we go off the record for a
    13 second.
    14 (Discussion off the record.)
    15 HEARING OFFICER FEINEN: Could the court
    16 reporter swear in the witnesses that are going to
    17 present testimony. Let's do it at all at once
    18 from the agency. Who is going to testify from the
    19 agency?
    20 MS. SAWYER: Everyone but me sitting up
    21 here. Well, Sarah
    Dunham is not going to testify,
    22 but she's here to respond to questions so we might
    23 as well swear her in.
    24 (Witnesses sworn.)
    L.A. REPORTING - (312) 419-9292
    5

    1 HEARING OFFICER FEINEN: One real quick
    2 thing before we go on, I'd also like to point out
    3 another board employee, Chuck
    Kaig (phonetic) is
    4 sitting in the audience with us. He is the new
    5 assistant to
    Marili McFawn. He's right behind
    6 Mr.
    Marder raising his hand. Thank you. I'll turn
    7 it over to the agency.
    8 MS. SAWYER: Okay, we have testimony
    9 today of
    Bharat Mathur, Richard Forbes,
    10 Christopher Romaine and Roger
    Kanerva. I believe,
    11 as we pointed out off the record, some people are
    12 just going to introduce their testimony
    13 essentially.
    14 Mr.
    Forbes and Mr. Romaine have a
    15 little bit more clarifying information that
    16 they're going to provide as a summary, and we will
    17 begin with Mr.
    Mathur, who will simply introduce
    18 himself and then Mr.
    Forbes, Mr. Romaine and
    19 Mr.
    Kanerva. We'll take them in that order, and
    20 then we're hoping after we conclude that, that we
    21 could respond to questions at that point.
    22 MR. MATHUR: My name is
    Bharat Mathur.
    23 I'm the chief of the bureau of air of the Illinois
    24 EPA. I had testified earlier on the Ozone
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    6

    1 Transport Assessment Group and its ongoing work
    2 and answered questions regarding the objectives of
    3 that group.
    4 The board, in its first notice, had
    5 requested some responses and clarifications on
    6 OTAG since the OTAG process has concluded. So my
    7 testimony, as provided in writing, provides in
    8 summary fashion the recommendations and findings
    9 of OTAG, and in my testimony, I have attempted to
    10 emphasize two points.
    11 Number one, that OTAG was intended to
    12 be an exercise to determine regional emission
    13 reductions in order to help areas like Chicago
    14 develop ozone attainment strategies that were
    15 reasonable, and number two, that OTAG has
    16 demonstrated that in spite of significant regional
    17 reductions, reductions of emissions in
    18 non-attainment areas will continue to be
    19 necessary, which was a major premise that we have
    20 put forth as justification for proceeding with the
    21 emission reductions included in the present
    22 regulatory proposal.
    23 I believe I'll be happy to answer any
    24 questions from the board since there were none
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    1 apparently submitted by anybody else.
    2 MS. SAWYER: At this point if we could
    3 just proceed with Mr.
    Forbes.
    4 HEARING OFFICER FEINEN: Do you want to
    5 move his testimony?
    6 MS. SAWYER: Oh, yes.
    7 HEARING OFFICER FEINEN: I believe we
    8 left off with Exhibit No. 72.
    9 MS. SAWYER: I'd like to move that
    10 Bharat Mathur's testimony is marked as Exhibit 73
    11 and entered into evidence.
    12 HEARING OFFICER FEINEN: I'm sorry, 71
    13 was the last one. 72 is the first available.
    14 MS. SAWYER: As 72 then.
    15 HEARING OFFICER FEINEN: Thank you.
    16 What I have is -- what's been handed to me is the
    17 testimony of
    Bharat Mathur that was dated August
    18 8th, 1997. If there's no objections to entering
    19 that into the record as if read, I'll do so.
    20 Seeing none, it is entered into the record as
    21 Exhibit No. 72. That is
    Bharat Mathur's testimony
    22 dated August 8th, 1997.
    23 (Document received
    24 in evidence.)
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    8

    1 MS. SAWYER: At this time we will
    2 proceed with the testimony of Richard
    Forbes.
    3 MR. FORBES: Good morning. My name is
    4 Richard
    Forbes, and I am employed by the Illinois
    5 Environmental Protection Agency. I prepared
    6 prefiled testimony which was submitted to the
    7 board on August 8, 1997.
    8 My testimony was prepared in response
    9 to the board's first opinion and order regarding
    10 the proposed rulemaking R97-13, Emissions
    11 Reduction Market System. The board requested the
    12 Illinois EPA respond to six specific items
    13 identified in its opinion and order dealing with
    14 volatile organic material or VOM emissions
    15 information.
    16 To summarize my
    prefiled testimony, I
    17 first discussed three updates to the data
    18 submitted previously as part of the Illinois EPA's
    19 technical support document or TSD. These updates
    20 address, one, a recent proposed final action taken
    21 by USEPA on Illinois' 15 percent rate of progress
    22 state implementation plan revision; two,
    23 completion of the cold cleaning degreasing rule
    24 that was adopted as final by the board; and three,
    L.A. REPORTING - (312) 419-9292
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    1 revisions by USEPA to its guidance on credits
    2 associated with federal off-highway vehicle engine
    3 standards.
    4 I then provided background information
    5 on how emissions data are handled with regard to
    6 federal rate of progress requirements pursuant to
    7 the Clean Air Act. That discussion was followed
    8 by an explanation of the revised ROP tables
    9 containing the updated data which were attached to
    10 the testimony.
    11 Finally, I addressed the six specific
    12 items requested by the board. These six items
    13 address specific clarifications requested by the
    14 board regarding VOM emissions data and terms of
    15 reference in the technical support document.
    16 This information is based on the
    17 Illinois EPA's best estimates of the 1990 VOM
    18 emissions from point area and mobile sources in
    19 the Chicago ozone non-attainment area projected to
    20 future years as necessary to address federal Clean
    21 Air Act requirements. These data have been
    22 carefully prepared, analyzed and quality assured
    23 according to USEPA inventory procedures and
    24 requirements.
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    10

    1 Illinois' 1990 inventory was approved
    2 by the USEPA on March 14th, 1995. It has had
    3 extensive external review by contractors for the
    4 Lake Michigan Air Directors Consortium or LADCO as
    5 part of the Lake Michigan states which includes
    6 Illinois, Indiana, Michigan and Wisconsin. Lake
    7 Michigan Ozone Study referred to as LMOS and
    8 Illinois has pursued improvements in the emissions
    9 data subsequent to the submittal of the 1990 base
    10 year emissions inventory based on LMOS
    11 recommendations.
    12 As part of this evaluation, the effect
    13 of cyclical operations was considered but found to
    14 not significantly affect typical ozone season
    15 weekday emission rates. This emissions inventory
    16 has been validated against monitoring data
    17 collected during the LMOS. These emissions data
    18 have been used by LADCO in the Lake Michigan Ozone
    19 Control Program referred to as LMOP, which is the
    20 modeling analysis conducted to identify emission
    21 control measures, assess the merits of such
    22 measures as well as the VOM versus
    NOx controls
    23 and to assist in the determination of attainment
    24 requirements.
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    1 The inventory data agreed favorably
    2 with monitoring data, and this emissions data has
    3 also been evaluated by participants in the Ozone
    4 Transport Assessment Group referred to as OTAG,
    5 and urban air shed modeling conducted by OTAG has
    6 found satisfactory model performance using
    7 Illinois' inventory for purposes of air quality
    8 analysis and control strategy development.
    9 Illinois EPA will continue to review,
    10 evaluate and update emissions data as it develops
    11 future ROP milestone year inventories, and that
    12 concludes my summary.
    13 HEARING OFFICER FEINEN: I just at this
    14 point want to ask one real quick question in
    15 clarification. On page 2, what's been numbered as
    16 page 2 of the
    prefiled testimony at the bottom, I
    17 guess, of the third full paragraph you talk of,
    18 "additional guidance provided by USEPA for states
    19 to use in estimating emission reductions from
    20 federal off-road engine standard program has
    21 necessitated a revision to the previous estimate
    22 of reductions used by the Illinois EPA," and
    23 there's no citation to that guidance or what
    24 guidance you're referring to, and I couldn't find
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    1 that. You haven't supplied it to us, and I was
    2 wondering if the agency would be willing to supply
    3 that text.
    4 MR. FORBES: Yes, we would.
    5 HEARING OFFICER FEINEN: If you could do
    6 that prior to the public comments maybe after this
    7 hearing and file it.
    8 MS. SAWYER: Sure, sure.
    9 MR. FORBES: Sure.
    10 MS. SAWYER: We can do so and serve the
    11 service list.
    12 HEARING OFFICER FEINEN: Yes.
    13 MS. SAWYER: Sure.
    14 HEARING OFFICER FEINEN: Thank you.
    15 Sorry about that interruption.
    16 MS. SAWYER: At this point I would like
    17 to move to have the testimony of Richard
    Forbes
    18 admitted into evidence as Exhibit 73.
    19 HEARING OFFICER FEINEN: I've been
    20 handed what's been the testimony of Richard
    Forbes
    21 dated on August 8, 1997. It includes his
    22 testimony plus attachment 1, which is a Federal
    23 Register, volume 62, No. 134 dated Monday, July
    24 14th, 1997; attachment 2, which includes USEPA
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    1 references for federal rate of progress
    2 requirements; and attachment 3, which is a series
    3 of tables.
    4 Table 1 is emission reductions required
    5 by 1999 for Chicago non-attainment area. Table 2
    6 is calculation of post 1996 VOM target levels.
    7 Table 3 is 1999 ROP control measures for the
    8 Chicago non-attainment area. Table 4 is 1990
    9 through 1999 tons VOM emissions per day for
    10 Chicago (1). Table 5 is the breakdown of sector
    11 emissions contributions.
    12 If there's no objections to entering
    13 this into the record as read as Exhibit No. 73, I
    14 will do so. Hearing none, that's entered into the
    15 record as Exhibit No. 73 which is Mr. Richard
    16 Forbes' testimony dated August 8, 1997.
    17 (Document received
    18 in evidence.)
    19 MS. SAWYER: At this point we'll proceed
    20 with the testimony of Christopher Romaine.
    21 MR. ROMAINE: Good morning. My
    22 testimony responds to six topics discussed by the
    23 board in its opinion. The first is new source
    24 review. The board has posed two questions with
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    1 respect to new source review. One is whether a
    2 source should be able to argue that it should be,
    3 quote, "exempt from new source -- I'm sorry -- the
    4 ERMS program new source review offset
    5 requirements."
    6 The answer to that is
    is that a source
    7 should only be able to make this argument if it
    8 has properly satisfied the current offset
    9 requirements for a major new source or major
    10 modification. The other question posed by the
    11 board is whether a source should be able to argue
    12 that its baseline should be increased to achieve
    13 new source review offsets.
    14 To answer this question, it's important
    15 to understand what's meant by achieved new source
    16 review offsets. If it's assumed that this term is
    17 used to refer to emission reductions that have
    18 been formally produced or cashed in under part 203
    19 in exchange for a construction permit for a new
    20 project, then the answer to this question is that
    21 a source cannot argue that its baseline should be
    22 increased due to achieved emission offsets. Those
    23 emission offsets have been used but are no longer
    24 available. On the other hand, the source can argue
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    1 that emission reduction credits that have been
    2 obtained but not relied upon could increase its
    3 baseline, as they would contribute to voluntary
    4 compliance.
    5 The next topic is landfills. The
    6 agency generally opposes applicability of the
    7 trading program to only landfill gas control
    8 equipment as proposed by Waste Management in its
    9 comments rather than to the entire landfill
    10 source. Clearly a landfill is a source as a
    11 whole. It needs to be addressed in an appropriate
    12 way. We think that the various arguments put
    13 forth in the comments are flawed.
    14 Certainly landfills have similarities
    15 to other activities where each unit of production,
    16 there's a certain amount of emissions that
    17 certainly has to be held accountable for. Now, a
    18 landfill is different certainly, as those
    19 emissions come from each ton of waste deposited in
    20 the landfill, and those emissions occur much,
    21 much, much more gradually than typically occurs
    22 with operations, but they are not inherently of an
    23 entirely different nature.
    24 Also, landfills do have the ability to
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    1 control their emissions. They have controlled
    2 their emissions in the past. They can improve
    3 those control systems. They may in fact result in
    4 voluntary
    overcompliance for past efforts. There
    5 may be future improvements to those control
    6 systems, comply with new federal requirements, of
    7 which landfills might obtain credit under the
    8 trading program. So the situation for landfills
    9 is not as simple as Waste Management suggests as
    10 to simply only address one part of a source.
    11 Certainly we're not responding favorably to those
    12 comments.
    13 The next topic addressed was exemption
    14 based on the 18 percent reduction, and we're just
    15 restating our position that exemption from the
    16 trading program based on an emission reduction
    17 should not occur at a level less than the 18
    18 percent reduction from baseline emissions. We're
    19 not changing our position in light of the comments
    20 that have been filed.
    21 The comments correctly observed that
    22 setting the exemption level at 18 percent may
    23 discourage sources from pursuing this exemption.
    24 The sources may instead decide to accept status as
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    1 participating sources so that they can receive
    2 benefit for any surplus reductions beyond 12
    3 percent. We're fully aware of this consequence.
    4 That's part of the reason we set the exemption
    5 level at 18 percent.
    6 We're only prepared to exempt a program
    7 from a full trading program at 18 percent or
    8 beyond because at that point, the air quality
    9 benefit is such that the Illinois EPA is prepared
    10 to forego the benefit of such a source directly
    11 participating in the trading program.
    12 Next, the board requested comments on
    13 emission determination methods, the language of
    14 the proposed rules, in particular Section 205.330
    15 dealing with emission determination methods and
    16 Section 205.337 dealing with changes in the
    17 emission determination methods and associated
    18 practices. Those two sections have very different
    19 roles and functions.
    20 Section 205.330 generally addresses VOM
    21 emission determination methods for the purposes of
    22 a trading program. It sets forth a general
    23 obligation that sources determine VOM emissions
    24 for the purpose of the program and generally
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    1 addresses the methods used to determine emissions.
    2 Section 205.337 dealing with changes in
    3 methods and the practices has a distinctly
    4 different role, as it deals with changes.
    5 Underlying this section is the principle that
    6 stability and certainty and the emission
    7 determination methods and practices used for a
    8 source are important for the trading program.
    9 It also confirms that, notwithstanding
    10 the goal of stability, it may be necessary to
    11 change the established methods and practices for a
    12 source under the trading program, particularly as
    13 events make the established methods and practices
    14 outdated.
    15 The fifth topic is a numerical standard
    16 for best available technology or BAT. In
    17 particular, the Illinois EPA's opposed to
    18 amendments to the BAT provisions that would deem a
    19 particular level of capture and control to satisfy
    20 the obligation to have BAT. Setting an upper
    21 limit for BAT would be a significant change to the
    22 BAT provisions. It is very different than setting
    23 a lower limit for BAT, as present in the current
    24 definition of BAT.
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    1 The current definition simply requires
    2 that BAT be at least as stringent as the
    3 applicable NSPS for an emission unit if it is in a
    4 category for which
    USEPA's adopted a NSPS for new
    5 source requirements. NSPS represents a level of
    6 control that is readily achievable for a category
    7 of emission units on a national basis.
    8 It's very different than a case-by-case
    9 determination of control, and in particular, the
    10 comment suggested that 95 percent capture and
    11 control be deemed acceptable as best available
    12 technology. Such provision would not be
    13 appropriate because there are emission units for
    14 which overall capture and control of VOM emission
    15 units is greater than 95 percent. In this regard,
    16 for example, Tenneco has an afterburner at its
    17 Frankfort plant which has demonstrated greater
    18 than 98 percent destruction. At the same time,
    19 however, a provision deeming 95 percent control
    20 best available technology would also set
    21 unrealistic standards for other emission units.
    22 From a technical perspective, a single
    23 control level cannot be deemed to be best
    24 available technology. Best available technology
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    1 determination should be made on a case-by-case
    2 basis during permitting if this is the appropriate
    3 forum for these determinations.
    4 Finally, the board has asked for
    5 comments on establishing an exclusion from further
    6 reductions based on best available control
    7 technology. The Illinois EPA is opposed to such
    8 an exclusion. It is true that the Illinois EPA
    9 has indicated that in general terms, best
    10 available technology is intended to be a less
    11 stringent standard than best available control
    12 technology.
    13 However, what this means is when
    14 conducting a case-by-case best available
    15 technology determination, the result can be less
    16 stringent than if a case-by-case best available
    17 control technology determination were being
    18 conducted. However, this does not mean that best
    19 available technology would be no more stringent
    20 than any historical best available control
    21 technology determination that has ever been made
    22 for a similar emission unit under the PSD program
    23 or any other state program.
    24 As already stated, BAT must be
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    1 determined on a case-by-case basis for the
    2 emission unit in question. That concludes a brief
    3 summary of my
    prefiled testimony.
    4 MS. SAWYER: At this point I'd like to
    5 move to have the testimony of Christopher Romaine
    6 moved into evidence as Exhibit 74.
    7 HEARING OFFICER FEINEN: When I was
    8 reading through the
    prefiled testimony, I noticed
    9 some typos, and the one that I'll raise, just
    10 mention now is in numerical No. 5, it states
    11 numerical standard for BACT, best available
    12 technology
    parens. Should I strike the BACT in
    13 the exhibit so there's no confusion?
    14 MR. ROMAINE: Please strike that.
    15 HEARING OFFICER FEINEN: With that,
    16 what's been handed to me is testimony of
    17 Christopher Romaine dated August 8th, 1997. It's
    18 16 pages long is what he's handed me which is
    19 roughly it looks to be the same as the
    prefiled
    20 testimony copy.
    21 If there's no objections to entering
    22 this as Exhibit No. 74 with the correction to the
    23 title of section 5, I shall do so. Seeing none,
    24 this is entered into the record as Exhibit No. 74.
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    22

    1 It's the testimony of Christopher Romaine dated
    2 August 8th, 1997.
    3 (Document received
    4 in evidence.)
    5 MS. SAWYER: At this point we'll proceed
    6 to the testimony of Roger
    Kanerva.
    7 MR. KANERVA: I'm Roger
    Kanerva,
    8 environmental policy advisor for the Illinois EPA.
    9 My testimony is directed at a specific issue
    10 basically, and it stems from the comments or
    11 claims made by Tenneco that we based the design of
    12 the ERMS program on the SO2 program basically, and
    13 that that has a permanent life span for the SO2
    14 allowances unless they're turned in for compliance
    15 purposes and that we hadn't adequately qualified
    16 or explained why we had a two-season lifetime for
    17 ATUs.
    18 I think the board also asked the
    19 participants and the agency to provide more
    20 explanation regarding that. So I think we have
    21 done that in this testimony. What we tried to
    22 point out basically is that it is true that we use
    23 the acid rain program as a general model of CAAPP
    24 and allocation approaches, but there are clear
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    1 differences in both the environmental problem and
    2 the regulatory structure that are involved in
    3 resolving acid rain and in reducing and overcoming
    4 the ozone problem that make a huge difference in
    5 the way you design the trading unit.
    6 So really there's three -- what we
    7 point out in here is that there's three basic
    8 reasons that the ozone control program is
    9 dramatically different. First of all, the
    10 standard is a short -- is based on short term
    11 exceedences that can have the adverse impact, not
    12 on a long term,
    multi-decade gradual build-up or
    13 reduction of the level of acidity in entire
    14 ecosystems, which is really the scientific subject
    15 of dealing with acid rain.
    16 The second major difference is the
    17 ozone control program and the Clean Air Act have
    18 rate of progress requirements. We've got targets
    19 to hit every three years, and that is not the case
    20 in the acid rain program. It's basically a
    21 two-step program aimed at a total mass reduction
    22 ultimately at the end over a very more than a
    23 decade long program.
    24 And a third point really is that the
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    24

    1 emissions that can lead to the formation of ozone,
    2 their impact on ozone concentrations tends to be
    3 intense and fairly short term, I mean, episodic,
    4 days or weeks at a time, not multiple years and
    5 very long periods of time that are involved with
    6 acid rain build-up.
    7 So that led us to be very careful in
    8 how much -- how long the lifetime of
    ATUs could be
    9 and how much of those therefore can be built up
    10 and banked and carried over from one season to
    11 another. It is our feeling that a two-year
    12 lifetime would be kind of a nice balance between
    13 giving people the benefits of emissions banking
    14 and being able to have that capability for their
    15 compliance strategies and not winding up having a
    16 huge amount, unlimited amount of emissions banked
    17 that years later might all be used at one time,
    18 and we would essentially have a flood of emissions
    19 occur. While it would be in compliance, it
    20 certainly wouldn't help for our ozone control
    21 program, and it might cause us to violate our rate
    22 of progress requirements.
    23 So I think it's a pretty clear-cut case
    24 that we're dealing with a much different situation
    L.A. REPORTING - (312) 419-9292
    25

    1 than the acid rain program. And then we've
    2 attached an example that just sort of lays out
    3 what the banking possibilities are for a two-year,
    4 two-season lifetime for
    ATUs versus unlimited.
    5 It's pretty obvious that you just keep
    6 accumulating
    ATUs at a very extensive rate.
    7 The other advantage of the two-year
    8 lifetime is we think it will make for a more
    9 active market because after they've accumulated up
    10 to one total -- or they've banked as much as their
    11 total allotment allows, then they've either got to
    12 use them in the market or essentially they lose
    13 them. So that's an incentive to get out there and
    14 do some trading and find some partners in the
    15 market. End of summary.
    16 MS. SAWYER: Thank you, Mr.
    Kanerva.
    17 I'd like to move to have the testimony of Roger
    18 Kanerva entered into evidence as Exhibit 75.
    19 HEARING OFFICER FEINEN: I've been
    20 handed the testimony of Roger A.
    Kanerva dated
    21 August 8th, 1997, six pages long, which seems to
    22 reflect what was filed in the
    prefiled testimony.
    23 The
    prefiled testimony looks only like it's five
    24 pages, but that may be formatting.
    L.A. REPORTING - (312) 419-9292
    26

    1 If there's no objections to entering
    2 this into the record as Exhibit 75, I shall do so.
    3 Hearing none, that's entered into the record as
    4 Exhibit No. 75 which is Mr. Roger
    Kanerva's
    5 testimony dated August 8, 1997.
    6 (Document received
    7 in evidence.)
    8 HEARING OFFICER FEINEN: Let's go off
    9 the record for a second.
    10 (Discussion off the record.)
    11 MS. SAWYER: That concludes the agency's
    12 presentation of the testimony today, and we're now
    13 available for any questions.
    14 HEARING OFFICER FEINEN: Well, let's
    15 open the floor to the
    prefiled questions first,
    16 and I believe you received
    prefiled questions from
    17 the ERMS Coalition for the agency.
    18 MR. SAINES: Thank you. My name is
    19 Richard
    Saines. I'm representing the ERMS
    20 Coalition. Good morning. The first group of
    21 questions we have relate to proportionate share,
    22 and they pertain to Mr.
    Forbes' testimony. Good
    23 morning, Mr.
    Forbes.
    24 Question 1, which of the mobile source
    L.A. REPORTING - (312) 419-9292
    27

    1 emission reduction measures identified in table 3
    2 of attachment 3 to Mr.
    Forbes' prefiled testimony
    3 has the agency relied on for purposes of
    4 satisfying Illinois' 1996 ROP goals or prior goals
    5 under the Clean Air Act?
    6 MR. FORBES: The following mobile source
    7 measures included in table 3 of my
    prefiled
    8 testimony are being relied upon as part of the 15
    9 percent rate of progress plan: Post 1994 Tier 1
    10 vehicle emission rates, 1995 reformulated gasoline
    11 phase 1, federal detergent additive gasoline, base
    12 inspection and maintenance program, conventional
    13 transportation control measures, National Energy
    14 Policy Act of 1992, federal non-road small engine
    15 standards.
    16 Emission reductions from these programs
    17 that occurred through 1996 were included in
    18 Illinois' 15 percent rate of progress plan.
    19 Emission reductions from these programs that have
    20 occurred after 1996 have not been relied upon in
    21 the 15 percent plan or prior goals under the Clean
    22 Air Act.
    23 MR. SAINES: So can I ask a follow-up to
    24 that. So you're saying that some of them have
    L.A. REPORTING - (312) 419-9292
    28

    1 been begun prior to 1996 and have been accounted
    2 for
    for 1996, but the continuing emission
    3 reductions after 1996 were not accounted for in
    4 1996 and will be accounted for in 1999 ROP?
    5 MR. FORBES: That's correct.
    6 MR. SAINES: Yes. No. 2 -- and I think
    7 it's a related question then. Which of the mobile
    8 source emissions reduction measures identified in
    9 table 3 of attachment 3 of Mr.
    Forbes' prefiled
    10 testimony is the agency relying on to achieve the
    11 1999 ROP goals?
    12 MR. FORBES: The Illinois EPA is relying
    13 on all of the mobile source reduction measures
    14 identified in the mobile source measures section
    15 of table 3 of my
    prefiled testimony as part of the
    16 9 percent rate of progress plan. Emission
    17 reductions from all of these programs in 1999 are
    18 creditable under USEPA and Clean Air Act
    19 provisions.
    20 MR. SAINES: The next questions or
    21 question relates to the
    overcompliance date. The
    22 question is why has the agency designated the
    23 ozone season for purposes of the ERMS rules as
    24 being from May 1 to September 30 of each year?
    L.A. REPORTING - (312) 419-9292
    29

    1 MR. FORBES: I'll answer that one. The
    2 Illinois EPA has proposed the ozone season for
    3 purposes of ERMS to be May 1st to September 30th
    4 of each year. The reason for this is as explained
    5 in the TSD on pages 41 to 43.
    6 Essentially, Illinois EPA reviewed the
    7 occurrences of ozone
    exceedences over the last
    8 several years and determined that the majority of
    9 such occurrences fell in the period of May 1st to
    10 September 30th and that it was unlikely that
    11 exceedences would occur during April or October
    12 which are part of the USEPA officially designated
    13 ozone season.
    14 Consequently, Illinois EPA proposed to
    15 use the shorter ozone period as May 1st to
    16 September 30th for post 1996 emission reduction
    17 purposes under the ERMS. For 1990 base year
    18 inventory purposes, however, Illinois EPA relied
    19 on all activity occurring during the official
    20 ozone season in preparing that inventory.
    21 MR. SAINES: Thank you. The next series
    22 of questions pertain to the cost effectiveness.
    23 Question 1, what information regarding the cost
    24 effectiveness of the ERMS rules versus traditional
    L.A. REPORTING - (312) 419-9292
    30

    1 regulatory control will the agency be required to
    2 present if the agency seeks further emission
    3 reductions from stationary sources pursuant to
    4 revised Section 205.400(d)?
    5 MR. MATHUR: I'm going to respond to
    6 that, Mr.
    Saines. The nature of your question
    7 suggests that it should be addressed to somebody
    8 else since you are asking what will the agency be
    9 required to present. So I'm wondering by whom?
    10 MR. SAINES: By Section 9.8 of the Act
    11 that ensures -- mandates that these rules assure
    12 that they will be at least as cost effective as
    13 traditional regulatory control, and now Section
    14 205.400(d) incorporates that requirement.
    15 MR. MATHUR: If you're asking what would
    16 be the agency's response as it prepares the next
    17 round of reductions, my answer is, as always, we
    18 will comply with all applicable requirements,
    19 whether it be Section 9.8, Section 27 or 28 of the
    20 Act.
    21 MS. MIHELIC:
    Tracey Mihelic. As a
    22 follow-up question to that, we're specifically
    23 asking here what is the evidence that you as the
    24 agency believes it will have to present to the
    L.A. REPORTING - (312) 419-9292
    31

    1 board in order to obtain further reductions under
    2 this specific section?
    3 MR. MATHUR: Is your question what
    4 evidence we will present to justify additional
    5 reductions?
    6 MS. MIHELIC: Yes.
    7 MR. MATHUR: So it's not a cost
    8 effectiveness question.
    9 MS. MIHELIC: In addition to that, also
    10 what do you believe you have to demonstrate to the
    11 board to show that it is as cost effective as
    12 requiring traditional regulatory controls?
    13 MR. MATHUR: Let me answer your first
    14 question then. In order to justify additional
    15 reductions, we will present the necessary
    16 technical analysis that will demonstrate that
    17 reductions beyond the current levels are necessary
    18 to show attainment.
    19 In response to your second question,
    20 the detail and depth of cost effectiveness
    21 analysis will be determined by, number one, the
    22 degree of additional reductions; number two, by
    23 the success of the current program; and number
    24 three, the nature of the reductions in the sectors
    L.A. REPORTING - (312) 419-9292
    32

    1 from which we seek those reductions. I think it's
    2 sufficient to say that we will comply with
    3 whatever the requirements are on the agency to
    4 show that its regulatory proposal meets all the
    5 requirements.
    6 MR. SAINES: I think what we're trying
    7 to understand is what those requirements are. Let
    8 me just -- I'll ask the question No. 2, and I
    9 think maybe we can flesh it out.
    10 If the agency seeks further reductions
    11 from stationary sources after 1999, will the
    12 agency be required to show the cost effectiveness
    13 of achieving only the reductions sought from 1999
    14 levels with the ERMS rules versus implementing
    15 traditional regulatory controls at that time or
    16 the cost effectiveness of achieving all of the
    17 reductions from 1996 levels forward with the ERMS
    18 rules versus implementing traditional regulatory
    19 controls?
    20 MR. MATHUR: Historically when the
    21 agency comes before the board with a regulatory
    22 proposal, it has been required to show that that
    23 particular proposal meets all the tests, and that
    24 is what we will intend to do.
    L.A. REPORTING - (312) 419-9292
    33

    1 MS. MIHELIC: So are you saying that if
    2 you were to come forward in 2001 and ask for
    3 further reductions, you would only be showing --
    4 let's say a 10 percent further reduction, you
    5 would only be showing the board the need for that
    6 10 percent further reduction and the cost
    7 effectiveness of obtaining that 10 percent further
    8 reduction?
    9 MR. MATHUR: That is correct.
    10 MS. MIHELIC: You would not be showing
    11 perhaps the 22 percent -- the cost effectiveness
    12 of requiring a 22 percent reduction?
    13 MR. MATHUR: That is correct, and that
    14 is consistent with how we have come before the
    15 board in the past with each successive rulemaking.
    16 We have not been asked to go back to 1970.
    17 HEARING OFFICER FEINEN: I'm going to
    18 interject. It seems to me you're asking what the
    19 board's standard is going to be for them to
    20 demonstrate a rulemaking, and I don't believe the
    21 agency can answer that question for you. I mean,
    22 basically that's going to be up to the board to
    23 decide whether or not they demonstrated that
    24 rulemaking meets the requirements of 9.8 or
    L.A. REPORTING - (312) 419-9292
    34

    1 Section 27 or 28 of the Act.
    2 MR. SAINES: What we're responding to is
    3 the agency's testimony that says that they can
    4 rely in large measure on demonstration that
    5 they've provided in this rulemaking in future
    6 rulemakings. So I'm just curious as to what
    7 additional things the agency thinks they should
    8 present.
    9 HEARING OFFICER FEINEN: I'm going to
    10 just say one last statement then, and we'll move
    11 on. In all rulemakings in all cases before the
    12 board, parties can rely on other matters that were
    13 entered into the record of another rulemaking and
    14 ask for that to be incorporated into this
    15 rulemaking.
    16 I don't know what the agency meant by
    17 that statement, and that's something they can
    18 answer, but if you want to ask them questions
    19 pertaining to what their statements were and what
    20 they meant by them versus what they think they're
    21 going to be required, you can ask it in that
    22 sense, but what is required is going to be
    23 determined by the board.
    24 MR. SAINES: Okay. Question No. 4, is
    L.A. REPORTING - (312) 419-9292
    35

    1 it possible that the cost of an ATU will increase
    2 as further reductions are required?
    3 MR. KANERVA: Well, sure, it's possible
    4 that they might increase, and it's also possible
    5 -- equally possible, if not more so, that they'll
    6 decrease because of innovations, technology
    7 advances creating reductions that people can come
    8 across that's been the historical pattern in the
    9 operation of these market systems in the past.
    10 Irrespective of whether it increases or
    11 decreases, we've shown that being able to trade
    12 will make a market style program actually more
    13 cost effective than you'd have with traditional
    14 command and control, certainly at least as, but
    15 most likely more, and we'll know for sure after
    16 the first round of reductions and the first round
    17 of operation in the market. There's an annual
    18 report required. The price information will all
    19 be public, and we'll know how it worked.
    20 MR. SAINES: Withdraw question No. 5.
    21 We'll also withdraw question No. 6 and question
    22 No. 7, and the next group of questions pertain to
    23 new source review. Question No. 1, what does the
    24 new Section 205.320(g)(2) mean, and if you could,
    L.A. REPORTING - (312) 419-9292
    36

    1 please provide an example how it will be
    2 implemented.
    3 MR. ROMAINE: As it specifically states,
    4 this section requires that emission reduction
    5 credits carried over into the trading program not
    6 have been relied upon for attainment demonstration
    7 purposes. This is actually a requirement for any
    8 emission reduction credit under the new source
    9 review program which we're proposing to repeat in
    10 part 205.
    11 This means that an emission reduction
    12 included either specifically or categorically in
    13 any formal attainment demonstration including a
    14 reasonable further progress plan cannot be carried
    15 over into a trading program. For example, a
    16 source could not claim that use in a particular
    17 area of lower VOM highway market
    codings for an
    18 emission reduction credit because this is a
    19 reduction that we have relied upon in our 15
    20 percent plan.
    21 MR. SAINES: Question No. 2, please
    22 explain how the ERMS rules will alter the new
    23 source review offset requirements as stated on
    24 page 2 of Mr. Romaine's
    prefiled testimony.
    L.A. REPORTING - (312) 419-9292
    37

    1 MR. ROMAINE: The ERMS program would
    2 alter the new source review requirements in the
    3 Chicago ozone non-attainment area for emissions of
    4 volatile organic material, and the effects would
    5 be first that offsets would be applied or
    6 satisfied with
    ATUs, that is, the trading unit
    7 under the trading program.
    8 Consistent with the principles of the
    9 trading program, the offsets would be applied on a
    10 seasonal basis consistent with the market
    11 mechanism of the trading program. Each seasonal
    12 source must hold
    ATUs for the actual VOM emissions
    13 of the major project, and finally, to satisfy the
    14 offset ratio 1.3 tons of
    ATUs would have to be
    15 held per ton of actual emissions.
    16 MR. SAINES: Does the agency intend to
    17 revise the new source review rules to reflect that
    18 offsets are only required during the ozone season?
    19 MR. ROMAINE: No. The provisions in the
    20 trading program are sufficient to alter the
    21 implementation of the new source review rules.
    22 MR. SAINES: Will a source under the
    23 ERMS rules be able to satisfy the new source
    24 review offset requirements by achieving either
    L.A. REPORTING - (312) 419-9292
    38

    1 internal or external offsets in the ATU market?
    2 MR. ROMAINE: Simple answer, no. But to
    3 answer this question fully, it's necessary to
    4 explain the difference between so-called external
    5 offsets and internal offsets. I consider the
    6 general obligation under new source review to
    7 provide offsets for a major project to be a
    8 requirement for external offsets.
    9 In particular the person with a major
    10 project needs to provide surplus reductions and
    11 emissions from other sources that is offset so the
    12 project will not interfere with efforts to achieve
    13 attainment. This general offset requirement is
    14 the one major VOM projects in the Chicago area
    15 that are developed after the trading program is in
    16 place will have to address under the trading
    17 program providing
    ATUs at a 1.3 to 1 ratio.
    18 The term internal offsets has a
    19 specialized meaning relating to the special rules
    20 for modifications in serious and severe ozone
    21 non-attainment areas as set forth in Sections
    22 182(c)(6) -- or (c)(7) and (c)(8) of the Clean Air
    23 Act. In particular, these provisions give special
    24 treatment for major modifications in these areas
    L.A. REPORTING - (312) 419-9292
    39

    1 to the extent that certain emission reductions
    2 occur at the source itself. That is, there are
    3 internal offsets.
    4 These specialized provisions cannot be
    5 addressed with trading units under the trading
    6 program. Internal offsets will have to be
    7 addressed on a case-by-case basis by appropriate
    8 conditions in the construction permit for a source
    9 that is taking advantage of the special rules.
    10 MS. MIHELIC: So just to clarify, so you
    11 are only allowing under the new source review
    12 external offsets to be obtained by trading?
    13 MR. ROMAINE: That is correct. The
    14 trading program cannot be used to address internal
    15 offsets because the trading program does not make
    16 any distinction about where ATU come from so as
    17 distinguished between ATU originating in the
    18 source's own allotment, an ATU obtained from other
    19 sources.
    20 Moreover, even if such a distinction
    21 were made, it would not assure that a source was
    22 providing internal offsets, that is, emission
    23 reductions at the source itself as required by the
    24 special rules. This is because a source would
    L.A. REPORTING - (312) 419-9292
    40

    1 still have access to external ATU from other
    2 sources, and these external ATU could be used for
    3 other operations of the source other than the
    4 major modification, circumventing the reductions
    5 required at the source for an internal offset.
    6 MS. MIHELIC: Is it correct that the
    7 distinction between internal and external offsets
    8 was made under the new source review rules in part
    9 because there were no caps on emissions for an
    10 area, basically area-wide caps similar to what's
    11 occurring here in the Chicago area?
    12 MR. ROMAINE: I don't believe so. I'm
    13 not particularly sure why the Congress decided to
    14 adopt the special rules for modifications. I have
    15 my pet theory.
    16 MS. MIHELIC: But in theory, isn't it
    17 correct that if the source is reducing emissions
    18 -- is obtaining reductions in emissions internally
    19 or externally now, emissions area-wide are being
    20 reduced? And there's a cap on all emission
    21 sources in this area based upon the ERMS programs,
    22 is that correct? There will be a cap on all
    23 emissions in this area?
    24 MR. ROMAINE: There is a series of
    L.A. REPORTING - (312) 419-9292
    41

    1 questions here, and I'm not following which one
    2 you want a "yes" to.
    3 (Laughter.)
    4 MS. MIHELIC: After this program has
    5 been enacted, there will be a cap on all VOM
    6 emissions in Chicago non-attainment area from
    7 stationary sources?
    8 MR. ROMAINE: That's correct. We'll be
    9 establishing a budget or total ceiling on the
    10 total emissions from the participating sources
    11 covered by the trading program.
    12 MS. MIHELIC: Whether reductions occur
    13 internally or externally from the source, on the
    14 new source review program there will be reductions
    15 in this area that are quantifiable?
    16 MR. ROMAINE: That is correct.
    17 MS. MIHELIC: Reducing the amount of
    18 emissions under this cap?
    19 MR. ROMAINE: That is correct. On a
    20 point, though, that still doesn't guarantee
    21 whether you've satisfied what the Clean Air Act
    22 requires as far as internal offsets.
    23 MR. SAINES: Question 5, what is the
    24 status of the agency's efforts to modify Illinois'
    L.A. REPORTING - (312) 419-9292
    42

    1 new source review language to be consistent with
    2 the federal new source review provisions with
    3 respect to a source's ability to net out of new
    4 source review?
    5 MR. ROMAINE: My understanding is that
    6 that proposal is waiting to sign off in the
    7 director's office as we're sitting here today.
    8 It's even already been signed.
    9 MR. SAINES: Question 6, once Illinois'
    10 new source review netting provisions are modified
    11 to be consistent with the federal new source
    12 review netting provisions, will the participating
    13 source under the ERMS rules be able to modify
    14 previous permit limits in accordance with the
    15 revised Illinois new source review rule and
    16 thereby calculate its emissions baseline?
    17 MR. ROMAINE: That is certainly the
    18 purpose of that rulemaking. We would expect that
    19 sources will apply to us for revised permits, and
    20 we'll process them consistent with the revised
    21 rules to establish new provisions for them.
    22 MS. MIHELIC: I have a quick follow-up
    23 question to the same section, as to why the ERG
    24 and agency agreed upon a 24 percent reduction.
    L.A. REPORTING - (312) 419-9292
    43

    1 MR. ROMAINE: That's actually fairly
    2 easy to explain. We're talking about emission
    3 reductions that were obtained under the current
    4 regime with the intent of using them as emission
    5 offsets. They haven't been used as emission
    6 offsets. However, if they were going to be used
    7 as emission offsets, they would have been subject
    8 to a 1.3 to 1 offset ratio. That 1.3 to 1 offset
    9 ratio equates to a 24 percent reduction in the
    10 total amount of emissions.
    11 MS. MIHELIC: We may have some more
    12 follow-up questions on that, how they obtain the
    13 24 percent from 1.3 to 1 later.
    14 MR. SAINES: The next group of questions
    15 pertain to the exclusion for maximum available
    16 control technology or MACT.
    17 Question 1, has the agency conducted a
    18 MACT analysis for each source category and
    19 subcategory listed pursuant to Section 112(c) of
    20 the Clean Air Act?
    21 MR. FORBES: We're not sure what you
    22 mean by a MACT analysis, if you could explain
    23 that.
    24 MR. SAINES: An individual analysis of
    L.A. REPORTING - (312) 419-9292
    44

    1 what MACT is for those listed source categories.
    2 MR. FORBES: Maybe I should explain.
    3 MR. ROMAINE: I can jump in. It's meant
    4 by that term, no, we're relying on USEPA to
    5 perform the MACT analysis to determine what MACT
    6 is.
    7 MR. SAINES: Question No. 2, if a MACT
    8 standard is adopted after 1999 and it is
    9 determined at that time that a source already
    10 complies with the standard based on its
    11 operations, is it possible that the source has
    12 already obtained emission reductions?
    13 MR. ROMAINE: That's a hypothetical
    14 question so hypothetical answer. Yes, it is
    15 possible that a source may have already obtained
    16 reductions in such a situation. It's also
    17 possible that the source has not yet achieved any
    18 reductions or at least not any reductions since
    19 1990.
    20 MR. SAINES: We will withdraw our
    21 question related to best available control
    22 technology, and that concludes the
    prefiled
    23 questions.
    24 HEARING OFFICER FEINEN: I think the
    L.A. REPORTING - (312) 419-9292
    45

    1 board has one question dealing with the exclusion
    2 of best available control technology.
    3 MR. RAO: I had a question for
    4 Mr. Romaine concerning the response to both
    5 questions relating to best available control
    6 technology. On page 15 of your
    prefiled
    7 testimony, you state that without further
    8 qualifications on BACT that it may not be
    9 appropriate to even consider the exclusions to
    10 sources which meet BACT. Could you elaborate a
    11 little bit more as to what you think are these
    12 qualifications?
    13 MR. ROMAINE: What I was considering at
    14 that point was whether there would be some way to
    15 define a particular best available control
    16 technology determinations that could in some way
    17 be used in a simplified manner for best available
    18 technology determination in terms of somehow
    19 limiting them in terms of identical pieces of
    20 equipment, period of time, jurisdiction which was
    21 determined, whether it was made by USEPA or by a
    22 state, whether it was made under an actual PSD
    23 program or parallel state program.
    24 I was unable to come up with any
    L.A. REPORTING - (312) 419-9292
    46

    1 particular qualifications that would satisfy that
    2 purpose, and I think in fact you really have to
    3 come back to a case-by-case determination. In
    4 that circumstance, somebody may be able to come
    5 forward and show that in fact there have been best
    6 available control technology for that particular
    7 unit that can be relied upon as one of many pieces
    8 of evidence to support a best available technology
    9 determination, but I couldn't come up with any way
    10 to do it in a regulatory context.
    11 HEARING OFFICER FEINEN: Are there any
    12 other questions for the agency?
    13 MS. HENNESSEY: No one today addressed
    14 the discussion about what happens to
    ATUs that are
    15 applied for and there's a disagreement between the
    16 agency and the source as to what the baseline
    17 should be. The board had some concern about
    18 allowing sources to use
    ATUs that were disputed,
    19 and both the agency and ERG has told us that this
    20 is an agreement that they came to, that the board
    21 should reconsider its position.
    22 One question I have is
    is there any
    23 mechanism in the rule or do you propose any
    24 mechanism in the rule to allow -- suppose the
    L.A. REPORTING - (312) 419-9292
    47

    1 source applies for 200
    ATUs and it's later
    2 determined three years later that it really only
    3 should have gotten 100
    ATUs for each of those
    4 three years. Is there any mechanism for that
    5 source to make up those excess
    ATUs that it had
    6 enjoyed for three years?
    7 MS. SAWYER: You're saying this is a
    8 source that is going through a permit appeal?
    9 MS. HENNESSEY: Right.
    10 MS. SAWYER: They've applied for 200,
    11 they're only entitled to 100.
    12 MR. KANERVA: The answer at the moment
    13 is no, there isn't, but it's corrected at that
    14 point so it doesn't continue to be an ongoing
    15 problem. In effect, you've netted out at that
    16 point so you have two seasons where -- if they
    17 can't trade it and it's just sitting there, which
    18 is the way our approach was, there's no harm done.
    19 They use whatever they need for compliance and
    20 that's it.
    21 MS. HENNESSEY: Suppose you've got two
    22 companies similarly situated. One company only
    23 applies for 100, gets 100. The other applies for
    24 200, but should have only gotten 100. Hasn't that
    L.A. REPORTING - (312) 419-9292
    48

    1 company that got to use the 200 for three years
    2 had an unfair competitive advantage?
    3 MR. KANERVA: I thought your example was
    4 it was under appeal.
    5 MS. HENNESSEY: If it's under appeal,
    6 they do get to use all 200, correct?
    7 MR. KANERVA: But not for purposes of
    8 trading. All they can use it for is compliance.
    9 MS. HENNESSEY: But otherwise, they
    10 would have to go out and purchase, if their actual
    11 emissions were going to be 200. That company
    12 would not need to go out and purchase, whereas the
    13 first company that only applied for 100 would have
    14 to go out and purchase
    ATUs.
    15 MR. KANERVA: If you could come up with
    16 a way to avoid someone misrepresenting their
    17 situation, that would be great. Other than
    18 rectifying it at the end, I don't know how you
    19 would retroactively sort of recoup from them
    20 something. I mean, they didn't harm anyone else
    21 necessarily. I mean, they didn't change somebody
    22 else's economic circumstances. They got a bit of
    23 a windfall for a couple of seasons. It saved them
    24 from purchasing some
    ATUs.
    L.A. REPORTING - (312) 419-9292
    49

    1 MS. HENNESSEY: If I were a competitor,
    2 I guess I might not feel that I'd get to spend a
    3 lot of money buying extra
    ATUs.
    4 MR. KANERVA: Well, that's one reason
    5 that we -- one way to try and deal with that
    6 really was our approach to go with a preliminary
    7 determination, I mean, to try and get this cleared
    8 up absolutely as quickly as possible, all right,
    9 so that we didn't have these going on for a long
    10 period of time.
    11 I hope appeals won't take two or three
    12 years to resolve, okay. If they have to know in
    13 the first 120 days what their preliminary is and
    14 we know we got a disagreement or not, then we're
    15 going to probably push that through quickly and
    16 get it heard. If half the sources in this system
    17 have appeals pending when we start this program
    18 out, we got a serious problem, and in effect
    19 that's what they learned at South Coast.
    20 We spent a lot of time out there when
    21 they were in essence negotiating with literally
    22 100 sources at a time to work out these baselines,
    23 and they realized they had to get that all
    24 resolved in the beginning or they would have a
    L.A. REPORTING - (312) 419-9292
    50

    1 complete tangled mess on their hands, and they got
    2 most of it done.
    3 They were down to a handful of small
    4 sources that they hadn't worked it out. So
    5 between us and what work we do and the board's
    6 hearing whatever contested situations arise, we
    7 just have to clean this stuff up at the start.
    8 MS. HENNESSEY: Do you think that this
    9 could have an impact on the ability of the agency
    10 or the state to meet ROP requirements?
    11 MR. KANERVA: Well, if the process drags
    12 on, it's always possible, but I think our effort
    13 would be to clean it up as quickly as we could on
    14 the front end.
    15 MS. MC FAWN: We might actually be
    16 frustrated by the appellate court level as well.
    17 Even if we did our jobs as expeditiously as you
    18 predict, you could run into a two or three year
    19 time. So I think the question was have you guys
    20 thought about what should happen? We had proposed
    21 that --
    22 MR. KANERVA: And your point there is
    23 that you had proposed sort of embargoing those, in
    24 effect, I mean, making them unusable by the
    L.A. REPORTING - (312) 419-9292
    51

    1 source, putting them in limbo.
    2 MS. HENNESSEY: Right.
    3 MR. KANERVA: That was your solution.
    4 There's a downside to that -- and I don't know,
    5 maybe we didn't articulate it all that clearly.
    6 But let's say the source legitimately needs
    7 somewhere between the 100 and 200. Maybe the 200
    8 isn't the exact right number, but 100 is too
    9 extreme, and we've misunderstood something.
    10 They're really in a bad spot.
    11 I mean, if they are literally frozen
    12 and limited to only using 100, then they're
    13 penalized. Let's say they have to go out and use
    14 the other 50, and they've got 100 sitting there
    15 embargoed or unusable.
    16 MS. MC FAWN: During that first 120
    17 days, wouldn't that come out and we'd modify your
    18 decision?
    19 MR. KANERVA: No, this is on the
    20 assumption that they'd go ahead and appeal the
    21 filing permit and disagree to agree (sic) all the
    22 way through to the end, I'm assuming you're
    23 saying.
    24 MS. MC FAWN: Well, you had said maybe
    L.A. REPORTING - (312) 419-9292
    52

    1 the agency didn't quite understand things, and so
    2 maybe there was a number between 100 and 200.
    3 MR. KANERVA: Hopefully, that will be
    4 what happens in the majority of cases, that we
    5 work our way through it. We'll find some common
    6 ground, and we can complete it. That's been the
    7 history of doing this permitting process type of
    8 thing.
    9 We work our way through these,
    10 otherwise, the board would have a monster pile of
    11 appeals constantly that you're dealing with, and I
    12 think you find that it's really the exception.
    13 MS. HENNESSEY: Did you consider putting
    14 in the regulation some kind of
    payback mechanism?
    15 You allow someone to use the
    ATUs that they
    16 believe that they're entitled to, allow them to
    17 use the 200 for three years. It's later
    18 determined by the appellate court they really only
    19 were entitled to 100.
    20 Did you consider putting in some kind
    21 of mechanism to require that source to in effect
    22 payback the excess
    ATUs that it actually used in
    23 the following years after the appeal is concluded?
    24 MR. KANERVA: Not really, not really.
    L.A. REPORTING - (312) 419-9292
    53

    1 MS. HENNESSEY: Do you have any -- can
    2 you 0comment on that suggestion now?
    3 MR. KANERVA: Off the cuff. Well, some
    4 of these things are not going to be so clear-cut
    5 that it's going to be obvious exactly what that
    6 payback ought to be. I just -- you can get into
    7 some real complications here. I think we're
    8 willing to think about it a little and comment on
    9 it.
    10 MS. SAWYER: We can certainly file
    11 written comments about that issue.
    12 MS. HENNESSEY: I'm not suggesting that
    13 that's the perfect solution. I mean, one problem
    14 might be with that the price of
    ATUs is going to
    15 vary from year to year. So if you require someone
    16 to pay back, they may be having to pay a lot more
    17 for
    ATUs than they would have originally, but I
    18 would like to hear some further comment.
    19 HEARING OFFICER FEINEN: Chris.
    20 MR. NEWCOMB: My name is Chris
    Newcomb,
    21 for the court reporter's benefit. On a related
    22 point, where is the draft of permit application
    23 process right now? When the hearing started, we
    24 first heard that the draft applications would be
    L.A. REPORTING - (312) 419-9292
    54

    1 submitted to the public by July. Where does that
    2 stand now?
    3 MR. MATHUR: The agency was hoping that
    4 this rulemaking would be successfully concluded so
    5 we wouldn't have to come up with multiple drafts.
    6 There is a draft set of applications that we will
    7 make available to a large number of people for
    8 their view I'm hoping soon.
    9 We didn't want to have the board come
    10 out with changes which would necessitate a change,
    11 but as soon as we know that there is some
    12 stability in the language of the rule, we'll make
    13 it available to all interested parties and work
    14 very closely with them in order to go from draft
    15 to a final stage, and as I have said before, I
    16 welcome companies to start talking to the agency
    17 now on what their baselines might be and what the
    18 calculation should be.
    19 MR. NEWCOMB: A quick follow-up, will
    20 the large number of people you will be giving that
    21 to include everyone on the current service list
    22 for the ERMS rulemaking?
    23 MR. MATHUR: It could. I have no
    24 problem making it to everybody on the service
    L.A. REPORTING - (312) 419-9292
    55

    1 list. Typically we would make it available to
    2 people who have immediate use for it, but yes, if
    3 you want to put it to everybody on the service
    4 list, it could be.
    5 HEARING OFFICER FEINEN: Ms.
    Mihelic.
    6 MS. MIHELIC: I have a follow-up
    7 question to Board Member
    Hennessey's questions
    8 about the paying back if you lose your appeal.
    9 Under the current permit appeal procedures -- and
    10 I just want to see how they interact with the
    11 procedures in appealing on an ERMS baseline.
    12 Is it correct that a source can
    13 continue to operate as it is while it's appealing
    14 a previous permit condition?
    15 MS. SAWYER: Continue to operate?
    16 MS. MIHELIC: Under it's old permit
    17 condition while it's appealing a new permit
    18 condition.
    19 MS. SAWYER: It's really a legal
    20 question. It's my understanding that unless the
    21 board specifically stays the new condition in the
    22 permit, the source has to comply with it for
    23 purposes of the existing state air permit program.
    24 MS. MIHELIC: Okay.
    L.A. REPORTING - (312) 419-9292
    56

    1 HEARING OFFICER FEINEN: Anything
    2 further, Ms.
    Mihelic? I think Mr.
    Trepanier, you
    3 had your hand up.
    4 MR. TREPANIER: Yes, thank you. My
    5 first -- this is Lionel
    Trepanier. My first
    6 question was on
    overcompliance date. Has the
    7 agency considered the likelihood that the
    8 emissions -- the emissions regimen over a year in
    9 the state of Illinois is going to be shifted by
    10 this rulemaking and that the two months that the
    11 agency -- two months designated by the federal
    12 EPA, the state EPA has chosen to leave out of this
    13 program are going to see a substantial increase in
    14 VOM emissions on those two months?
    15 MR. ROMAINE: We haven't considered
    16 that. However, that is not likely. I don't think
    17 it's possible because existing control
    18 requirements remain in place. Nothing relaxes
    19 requirements that now apply through the rest of
    20 the year including those two months of the ozone
    21 season and including RACT requirements that apply
    22 year-round.
    23 So that that should be the status quo
    24 for those two months, and to the extent that
    L.A. REPORTING - (312) 419-9292
    57

    1 companies put in control devices that in fact are
    2 suitable for year-round operation, we would expect
    3 that those months would see the benefits of those
    4 control devices as specifically installed for the
    5 ozone season. So that is not the direction that
    6 emissions would go.
    7 MR. TREPANIER: Further on that same
    8 question, doesn't this program allow that a
    9 polluter could meet the requirements of reducing
    10 their emissions during the season by shifting
    11 production to months not included under the
    12 program, specifically April and October?
    13 MR. ROMAINE: That's correct. That is
    14 one of the flexibility or one of the options that
    15 is possible under this program. It is an option
    16 that may be feasible for some companies. It is an
    17 option that probably isn't feasible for a lot of
    18 companies.
    19 MR. TREPANIER: Has the agency done any
    20 analysis to determine what portion of the total
    21 regulated emissions that is feasible for?
    22 MR. ROMAINE: No, we have not.
    23 MR. TREPANIER: So could it be all of
    24 the emissions are subject to being shifted from
    L.A. REPORTING - (312) 419-9292
    58

    1 the summer months to these off months?
    2 MR. ROMAINE: Only if people would be
    3 prepared to stockpile gas and buy it in April.
    4 No, operations continue throughout the season.
    5 You cannot transfer everything out of the summer
    6 months.
    7 MR. TREPANIER: To use your example
    8 then, we would expect under this program -- could
    9 we expect under this program that on May 1st, all
    10 the gas tanks at the refineries will be full, and
    11 that on September 30th, they are likely to be near
    12 empty?
    13 MR. ROMAINE: I think that's improbable.
    14 I think refineries have to operate to produce
    15 gasoline in a consistent fashion, and to
    16 manipulate their production in such a manner
    17 wouldn't be consistent in supplying their markets
    18 and demands and their operating characteristics.
    19 MR. TREPANIER: Would you say that
    20 currently refineries don't manipulate their
    21 production and have a larger production at certain
    22 months of the year than at other months?
    23 MR. ROMAINE: Refineries respond to
    24 market demands, and there are demands for
    L.A. REPORTING - (312) 419-9292
    59

    1 different products during different parts of the
    2 year.
    3 MR. TREPANIER: What is the storage
    4 potential at the refineries that are in the
    5 non-attainment area and how that stored potential
    6 relates to how much gas they do ship a month?
    7 MR. ROMAINE: I don't know that
    8 information.
    9 MR. TREPANIER: Has the agency
    10 considered the potential that the ozone season
    11 will be -- in the future is likely to be longer
    12 than they've selected because of the global
    13 warming trend?
    14 MR. FORBES: Could you repeat the
    15 question.
    16 (Record read.)
    17 MR. FORBES: I guess the answer is no,
    18 we haven't considered that or at least I'm not
    19 aware that that is a potential, that the ozone
    20 season would be extended due to global warming
    21 issues.
    22 MR. TREPANIER: Was there an inquiry on
    23 that issue? I'm hearing your answer saying you
    24 don't have any information, but was an inquiry
    L.A. REPORTING - (312) 419-9292
    60

    1 made?
    2 MR. FORBES: Not that I'm aware of.
    3 MR. TREPANIER: I have no additional
    4 questions for the agency.
    5 HEARING OFFICER FEINEN: Mr.
    Forcade,
    6 did you have any?
    7 MR. FORCADE: Yes. Bill
    Forcade from
    8 Jenner & Block representing Tenneco. I have
    9 questions for Mr. Romaine relative to his
    10 testimony -- prepared testimony on page 12 in his
    11 summary this morning concerning best available
    12 technology.
    13 Mr. Romaine, you made a statement in
    14 your summary that a given capture and control
    15 efficiency would be inappropriate as a definition
    16 for BAT because there are existing facilities out
    17 there that meet that standard or more stringent.
    18 Is it your testimony that BAT would be
    19 a standard more stringent than any existing
    20 control technology in the State of Illinois?
    21 MR. ROMAINE: No, it is not.
    22 MR. FORCADE: Is it your testimony that
    23 BAT would be a standard more stringent than 99
    24 percent of the existing control technology in the
    L.A. REPORTING - (312) 419-9292
    61

    1 State of Illinois?
    2 MR. ROMAINE: No, it is not.
    3 MR. FORCADE: Is it your testimony that
    4 BAT would be a standard more stringent than 98
    5 percent?
    6 MR. ROMAINE: No, it is not.
    7 MR. FORCADE: Can you give me a number
    8 less than 98 percent that it would be equal to
    9 BAT?
    10 MR. ROMAINE: No. BAT is a case-by-case
    11 determination.
    12 HEARING OFFICER FEINEN: Mr.
    Forcade,
    13 any more questions?
    14 MR. TREPANIER: I have a question
    15 regarding the agency's
    prefiled testimony there on
    16 page 13.
    17 When the agency suggests that the
    18 overcompliance date could be moved from December
    19 31st -- excuse me, December 31st to September
    20 30th, have they considered -- has the agency made
    21 analysis of moving that date, how that's going to
    22 affect the reductions that the program will
    23 accomplish?
    24 MR. FORBES: We don't believe that that
    L.A. REPORTING - (312) 419-9292
    62

    1 would significantly affect the reductions that
    2 we've estimated previously.
    3 MR. TREPANIER: If you expect that
    4 that's not going to cause a reduction -- that
    5 that's not going to affect the reduction in VOM
    6 emissions, what do you understand to be the
    7 purpose of the industry group -- industries or
    8 industry groups that sought that change?
    9 MR. FORBES: I'm sorry, maybe I
    10 misunderstood. I think we had suggested in our --
    11 you're talking about our comments, the agency's
    12 filed comments?
    13 MR. TREPANIER: Yeah, page 13.
    14 MR. FORBES: We had suggested the ozone
    15 season period, which is April through October, and
    16 I think the suggested change was allowing any
    17 changes or modifications after September 30th.
    18 You're asking about why the
    commenter requested
    19 September 30th?
    20 MR. TREPANIER: Yeah, I'm inquiring into
    21 what you understand is being sought by that
    22 change, by that change in the regulation.
    23 MR. FORBES: Well, I think the
    24 board -- that was the board's recommendation.
    L.A. REPORTING - (312) 419-9292
    63

    1 Some
    commenters had suggested that. The board
    2 considered that and believed that that was the
    3 period that the ERMS program was -- the control
    4 period that the ERMS program was designed for, and
    5 they felt that was appropriate. I believe that
    6 was the reasoning for that proposed change, at
    7 least that's what I know about that.
    8 MR. TREPANIER: So the agency doesn't
    9 expect that there's going to be greater -- more
    10 overcompliance credits given out under that date
    11 change?
    12 MR. FORBES: I think our position was
    13 that -- or our recommendation was that it would be
    14 October 30th, which is in line with the existing
    15 officially designated ozone season because that is
    16 more in mind with the way the inventory was
    17 developed, and reductions and modifications that
    18 occurred during that period would have been
    19 reflected in the base year 1990 inventory.
    20 So going to a shorter period, it is
    21 possible that some of those changes that were
    22 already reflected in the 1990 base year may be
    23 allowed to receive credit. That's what our
    24 concern was. That's why we suggested that it be
    L.A. REPORTING - (312) 419-9292
    64

    1 the officially designated ozone season, that that
    2 be the end point, that is which is October 31st.
    3 MR. TREPANIER: Now, if this change is
    4 adopted, the agency doesn't see that there's going
    5 to be any loss in the reductions that this program
    6 generates given that there will be more credits?
    7 MR. FORBES: The October 31st change, we
    8 do not see that it would affect a significant
    9 amount of reductions that we've been estimating.
    10 The proposed change to September 30th is
    11 uncertain. We believe it could affect some of the
    12 -- as I just mentioned, some of the reductions
    13 that were relied on.
    14 We haven't specifically gone back to
    15 identify those. That's a rather tedious effort to
    16 do that at this point in time, trying to unravel
    17 and find out exactly which changes occurred in
    18 that time frame, but certainly we did rely on the
    19 officially designated ozone season in developing
    20 the 1990 inventory.
    21 MR. MATHUR: May I comment?
    22 MR. TREPANIER: Is it fair to say that
    23 it's fairly certain that there would be some, even
    24 if you deem insignificant, reduction in benefit
    L.A. REPORTING - (312) 419-9292
    65

    1 from the program and certainly no increase in the
    2 benefits of the program by moving that date from
    3 December to October?
    4 MR. FORBES: I think that's correct.
    5 MR. TREPANIER: I mean December.
    6 MR. MATHUR: Mr.
    Trepanier, let me just
    7 add one thing. It is our preference that the date
    8 be October 31st.
    9 MR. TREPANIER: Was the initial proposal
    10 for December 31st?
    11 MR. MATHUR: It was for the end of
    12 December, but having thought through the impact,
    13 the potential impacts, it's our preference that if
    14 it is to be moved up, it be moved up to October
    15 31st.
    16 MR. TREPANIER: Do you know of any
    17 certain industrial facility that will be affected
    18 by that rule change?
    19 MR. MATHUR: I don't know of any
    20 specific industry, but I think what Mr.
    Forbes is
    21 saying is that the manner in which he has computed
    22 the ozone season inventory, he used October 31st,
    23 and we would be much more comfortable with October
    24 31st than September 30th.
    L.A. REPORTING - (312) 419-9292
    66

    1 MR. TREPANIER: And you were using dates
    2 in September and October. Did you mean December
    3 31st, he is more comfortable with September 30th
    4 versus December 31st?
    5 MR. MATHUR: No. I'm saying upon
    6 reconsideration, we feel October 31st would be
    7 appropriate as compared to the board-suggested
    8 September 30th.
    9 MR. TREPANIER: Thank you. Mr.
    Mathur,
    10 I have a question regarding the -- your report on
    11 the ozone transport assessment group. As I see
    12 from the testimony, OTAG is calling for reductions
    13 only in
    NOx, and my recalling from your earlier
    14 testimony is -- I'm recalling -- please correct if
    15 it's not so -- you had stated that if
    NOx was
    16 reduced coming into the Chicago area, that our
    17 ozone levels would rise, that we would need
    18 greater VOM reductions. Is that still your
    19 position?
    20 MR. MATHUR: What I had testified
    21 earlier was that we have to reduce the incoming
    22 ozone and precursors. What OTAG has shown is that
    23 reducing
    VOCs outside the non-attainment area did
    24 not have much impact upon reduction of ozone in
    L.A. REPORTING - (312) 419-9292
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    1 the non-attainment area, but that reductions of
    2 NOx had significant impact on the reduction of
    3 ozone.
    4 Therefore, OTAG is recommending
    5 significant regional reductions of
    NOx, which will
    6 then require that we in Chicago focus on VOC
    7 reductions within the non-attainment area which is
    8 what we are trying to do here.
    9 MR. TREPANIER: Thank you. My question
    10 on Mr.
    Forbes' testimony on page 5, the top of
    11 page 5, the numbers of -- these numbers apparently
    12 are -- are these numbers showing how closely you
    13 expect this program to meet the targets? And I'm
    14 looking at the 727.57 and the sentence continues,
    15 which is less than the target of 735.23.
    16 MR. FORBES: It's simply intended to
    17 reflect the programs that we're relying on for the
    18 9 percent plan as to what the effect of those
    19 programs will be in terms of projected emissions
    20 as compared to what the required target level is
    21 under the Clean Air Act and the USEPA
    22 requirements.
    23 MR. TREPANIER: So does the -- is the
    24 number 727.57, including all ROP control measures,
    L.A. REPORTING - (312) 419-9292
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    1 does that -- this 1999 view on emission level
    2 projection of 727.57 tons per day, does that
    3 include the results of the ERMS reductions?
    4 MR. FORBES: Yes. That includes the
    5 ERMS reductions as proposed in the program that's
    6 in this rulemaking, yes.
    7 MR. TREPANIER: And then is it your
    8 testimony that from your analysis that there is
    9 approximately 8 tons per day of slippage or
    10 cushion?
    11 MR. FORBES: Yes, it is approximately 8
    12 tons. The difference between what we project the
    13 emission level to be and the target level is
    14 approximately 8 tons per day.
    15 MR. TREPANIER: Is it correct is that
    16 approximately 1 percent of the daily emissions?
    17 MR. FORBES: Approximately that.
    18 MR. TREPANIER: Does the ERMS program as
    19 proposed -- do you still believe that the ERMS
    20 program itself has a 3 percent cushion in it?
    21 MR. FORBES: A 3 percent cushion? I'm
    22 not sure what you're referring to.
    23 MR. TREPANIER: Referring to earlier
    24 testimony when we were making a determination on
    L.A. REPORTING - (312) 419-9292
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    1 how close does the -- this proposal, the ERMS
    2 proposal, how close does it come to meeting the
    3 requirements of the Clean Air Act? And I'm
    4 recalling the agency's testimony was either 2 or 3
    5 percent greater reductions are being requested
    6 than are actually required, and is that still the
    7 case?
    8 MR. FORBES: Well, I think the -- I'm
    9 not sure what the percentage is, but there are two
    10 things that have to be considered. One is the
    11 estimated 8 tons a day below target level, which
    12 this program, along with the other measures that
    13 we're using, relied on, achieves the target level.
    14 In addition my testimony identified
    15 that the Clean Air Act requires that we also
    16 provide for contingency. That is an additional
    17 Clean Air Act requirement, and as I pointed out,
    18 that when that's considered along with one of the
    19 measures that will be implemented in 2000, that
    20 that along with the additional 8 tons will be
    21 sufficient to provide us the reductions to meet
    22 both the contingency requirement as well as meet
    23 the rate of progress requirement.
    24 Now, that difference is less than 8
    L.A. REPORTING - (312) 419-9292
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    1 tons. What that turns out to be percentage-wise,
    2 I'm not sure, but the point is that with these
    3 programs that we propose, we will be able to
    4 demonstrate that we complied with the Clean Air
    5 Act requirements and provide sufficient enough for
    6 contingency, but it's not a large extra amount
    7 that we'll end up with.
    8 MR. TREPANIER: Are you saying that the
    9 agency's planning further measures that would
    10 increase the 1 percent for that 8 tons per day
    11 reduction over the target? That is the number,
    12 correct?
    13 MR. FORBES: I'm not sure what you're
    14 referring to.
    15 MR. TREPANIER: I'm asking are you
    16 saying that there's more measures that are going
    17 to come -- if the agency's bringing more measures
    18 forward that would give further -- give more
    19 assurance that Illinois is going to meet the Clean
    20 Air Act requirements in 1999, or is it all here on
    21 the table now?
    22 MR. FORBES: It is all on the table.
    23 What I was discussing a few minutes ago was the
    24 need for contingency. Contingency requirements do
    L.A. REPORTING - (312) 419-9292
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    1 not have to be implemented, but they have to be
    2 available in the event that the state is not able
    3 to meet its rate of progress milestone, and those
    4 have to be available within one year after the
    5 milestone date.
    6 So those can occur after 1999, but the
    7 obligation to meet the rate of progress milestone
    8 level is based on the plan and emission reductions
    9 that have been outlined in my testimony earlier.
    10 So there's no additional measures beyond what
    11 we've been discussing.
    12 MR. TREPANIER: If the -- I understand
    13 then is it true then if the board adopts this
    14 proposal, that you're assured to need further
    15 reductions in the year 2000 because the
    16 contingency isn't concluded here? This ERMS
    17 program is not providing the contingency, is that
    18 true?
    19 MR. FORBES: If the question is does
    20 what we have planned in 1999 provide sufficient
    21 reductions to take care of the rate of progress 9
    22 percent and contingency, the answer is no. But we
    23 do have ongoing federal measures which will be
    24 available and implemented without further need for
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    1 adoption. That will occur in 2000, and that is
    2 sufficient to satisfy the contingency need under
    3 the Clean Air Act.
    4 So we have sufficient reductions. We
    5 have sufficient measures to meet the 9 percent ROP
    6 requirements, and we have, along with the federal
    7 measure in 2000 that I identified and the
    8 additional 8 tons or approximately 8 tons of being
    9 under the target level, those two things together
    10 allow us to meet the contingency requirement as
    11 well.
    12 MR. TREPANIER: I have a question on the
    13 attachment to your testimony on table 3, the area
    14 source measures that were taken. I see there that
    15 one item that's not listed -- and I question why
    16 it's not listed -- is the vapor 2 recovery that's
    17 mentioned in the attachment 1 to your testimony,
    18 the state ROP submittal to the federal EPA.
    19 MR. FORBES: I'm not sure what you're
    20 referring to on table 1.
    21 MR. TREPANIER: I'm looking there on the
    22 federal register attached to your testimony,
    23 federal register page 37504 is the bottom of the
    24 third column, No. 3, area sources, A, stage 2
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    1 vapor recovery.
    2 MR. FORBES: This is a 1996 rate of
    3 progress measure, the stage 2 vapor recovery
    4 requirement. The federal register refers to the
    5 state's 15 percent rate of progress plan which was
    6 effective and required to show compliance in '96.
    7 So that measure has already been relied upon in
    8 the 15 percent plan. That's why it does not show
    9 in the 9 percent plan.
    10 HEARING OFFICER FEINEN: Any more
    11 questions, Mr.
    Trepanier? How many more questions
    12 do you have, Mr.
    Trepanier?
    13 MR. TREPANIER: I have just a handful of
    14 questions.
    15 HEARING OFFICER FEINEN: Finish those
    16 up, and we'll take a break.
    17 MR. TREPANIER: This question is for
    18 Mr. Romaine. In your testimony on pages 15 and
    19 16, the last sentence of your testimony refers to
    20 a fatal flaw in the proposed ERMS.
    21 What would be a fatal flaw in the ERMS
    22 program? What would be the defining hallmarks of
    23 the fatal flaw?
    24 MR. ROMAINE: I think my definition of
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    1 fatal flaw would be something that would prevent
    2 it from being approved by USEPA as achieving the
    3 1990 rate of progress plan requirement, something
    4 that would reduce the level of uncertainty of the
    5 program that the USEPA would not be prepared to
    6 sign off on it to see how it did.
    7 The particular fatal flaw that I was
    8 referring to was if we simply allowed best
    9 available technology to be set no higher than any
    10 particular BACT determination when there's
    11 hundreds of BACT determinations out there that
    12 have been made over the last two decades. So that
    13 would be very unclear exactly what would be
    14 excluded from further reductions with the best
    15 available technology provision. I think that's
    16 something USEPA would find unacceptable.
    17 Another provision that we flagged as
    18 potentially being a fatal flaw is permanent
    ATUs.
    19 Again that raised a concern in terms of the
    20 ability to reliably assure rate of progress.
    21 Perhaps Mr.
    Mathur or Mr. Forbes have other things
    22 that they believe could be fatal flaws in the
    23 program.
    24 MR. TREPANIER: Thank you. A question
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    1 for the agency regarding the testimony of Roger
    2 Kanerva, and it's on pages 3 to 4 of your
    3 testimony.
    4 MS. SAWYER: Mr.
    Kanerva stepped out for
    5 a moment.
    6 HEARING OFFICER FEINEN: Do you want to
    7 reserve that question and see if he comes back
    8 before break? There he is.
    9 MR. KANERVA: I must have left at the
    10 wrong time.
    11 MR. TREPANIER: I have a question
    12 regarding Mr.
    Kanerva's testimony. On pages 3 to
    13 4 of your testimony, I see in your testimony it
    14 seems to express some concern that the ERMS
    15 program may not meet the ROP targets.
    16 My question is are the reductions from
    17 the ERMS program assured or not?
    18 MR. KANERVA: Well, if the program stays
    19 intact the way we designed it and it maintains a
    20 two-year lifetime from the work we did, we're
    21 comfortable we'll meet the targets. The concern
    22 being expressed here is if one were to modify the
    23 design of the program to have an unlimited
    24 lifetime on the trading units, which was the
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    1 representation made by Tenneco which in essence in
    2 this testimony we disagree with and support the
    3 board saying, leave it at two-year lifetime. So
    4 that's the context we were concerned about not
    5 meeting the ROP mandate.
    6 MR. TREPANIER: I want to direct your
    7 attention, though, to that particular statement in
    8 your testimony that refers to trading rather than
    9 hoarding the
    ATUs.
    10 Now, would it be true that if the
    ATUs
    11 were hoarded that there would be less emissions
    12 and the program would more certainly meet the ROP
    13 targets?
    14 MR. KANERVA: Well, in a particular year
    15 if they're building up the banks, yeah, you have
    16 less emissions, but our concern is there will be a
    17 year in which they're used excessively. We're
    18 talking about ROP requirements in general here.
    19 We've got multiple targets to hit down
    20 the road. Yes, we're looking at just the first
    21 three-year period, but we got three of them to
    22 meet so at some point, banked emissions could be
    23 used.
    24 MR. TREPANIER: At that point under the
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    1 current proposal, hypothetically, with the
    2 two-year lifetime, under your reading of -- those
    3 banks could be emitted in one season, and then
    4 would the ROP targets not be met?
    5 MR. KANERVA: First of all, you're not
    6 going to build up as large a bank. Second, it's
    7 highly unlikely the source is going to exhaust
    8 every bit of all banked emissions at one time so
    9 this is a relative thing.
    10 If you're a source and you're trying to
    11 manage your compliance, one of the big advantages
    12 of a modest bank is having a little hedge. You
    13 may or may not need to know exactly what will
    14 happen with your emissions. That's been the
    15 experience in a couple of the programs that have
    16 been operating, for instance, the heavy duty
    17 engine program that allows banking for a company.
    18 They've used it to give themselves a
    19 little cushion on compliance, but if you have a
    20 bank that's four times bigger than what we would
    21 have preferred, then you're much more likely to
    22 use a lot of those emissions, and that's -- so
    23 it's a relative thing here. As the banking gets
    24 larger, the potential for emissions peaking in one
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    1 season gets dramatically larger. So we've
    2 narrowed it down really to a very conservative
    3 level.
    4 MR. TREPANIER: Does the agency's
    5 concern for the peaking of emissions stem from the
    6 agency's understanding of the cyclic nature of VOM
    7 emissions?
    8 MR. KANERVA: It doesn't have anything
    9 to do -- the point we're making here about peaking
    10 has nothing to do with cyclic emissions as you
    11 refer to them. It's a whole different point.
    12 MR. TREPANIER: Wouldn't a peak, as
    13 you're referring to that, wouldn't that reference
    14 to the top level of emissions? I mean, when the
    15 cycle is high, couldn't that be referred to as the
    16 peak?
    17 MR. KANERVA: It has nothing to do with
    18 the cycling. The peaking is a point in time where
    19 a majority of sources might decide to use their
    20 banked emissions for whatever reason. It's
    21 neutral as to whatever is driving that one way or
    22 another. It might be a real hot ozone season of
    23 some kind. I mean, there are variables other than
    24 production level that could drive the equation
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    1 here.
    2 HEARING OFFICER FEINEN: I think we need
    3 to take a break for 10 minutes and then come back,
    4 finish up questions with the agency, take a lunch
    5 and then start with Mr.
    Marder's testimony. Let's
    6 take 10 minutes. I have 10 to 12:00. Be back
    7 here at 12:00. Thank you.
    8 (Recess taken.)
    9 HEARING OFFICER FEINEN: I believe where
    10 we left off at the break, we were in the middle of
    11 asking questions of the agency. Mr.
    Trepanier,
    12 please.
    13 MR. TREPANIER: Thank you. Mr.
    Kanerva,
    14 the concern that you expressed in your testimony
    15 when you just discussed pages 3 to 4 that the
    16 potential that the ERMS program wouldn't meet an
    17 ROP target because of a peak in emissions, is that
    18 based just on hypothetical potential, or is there
    19 something that the -- or was there some
    20 information that the agency has that there could
    21 be a peak of emissions that you're speaking of,
    22 that you're concerned of?
    23 MR. KANERVA: I think it's based on sort
    24 of a qualitative analysis of the potential for
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    1 that, correct. I mean, it's pretty obvious when
    2 you look at how the banking process might work if
    3 you had longer lifetime trading units and we took
    4 a look at that during the design process and what
    5 had happened in a couple of other programs where
    6 they had different lifetime periods. But we don't
    7 have a specific analysis with quantitative results
    8 that shows an exact, say, peaking occurrence or
    9 something, no.
    10 MR. TREPANIER: There's a question I'd
    11 like to ask the -- if I'm allowed. I'm referring
    12 to the comments of the agency that they had filed
    13 previously in this rulemaking dated May 16th, '97,
    14 and it's just for reference. I'm just going to --
    15 the question's kind of coming from what was talked
    16 in those comments, specifically pages 20 to 34.
    17 There on page 28, the agency cites the
    18 ability of an emitter to select emissions data
    19 from a range of eight years to get the higher
    20 emitting years and that that would provide
    21 insurance for unusual, abnormal patterns would be
    22 considered.
    23 My question is does the agency believe
    24 that that would allow emitters to pick peak years,
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    1 peak emission years?
    2 MR. KANERVA: Is this a baseline
    3 determination? It's not relevant to this
    4 testimony at all, I don't think.
    5 MS. SAWYER: This is in reference to the
    6 May 16th comments of the agency, is that what
    7 you're questioning?
    8 MR. TREPANIER: Yes, comments of the
    9 Illinois Environmental Protection Agency made May
    10 16th.
    11 MR. KANERVA: Well, the concept of
    12 peaking and the process of baseline determination
    13 are two different situations entirely. When we
    14 use the term peaking, we're bringing it in
    in the
    15 context of the amount of banked emissions that
    16 exist at any particular point in the program.
    17 That's what we mean by peaking. You
    18 can't take the two and line them up and connect
    19 them one-on-one. So that's the only way I know
    20 how to respond to your question.
    21 MR. TREPANIER: Given the agency's
    22 understanding that the emitters will have the
    23 ability to select from their highest emitting
    24 years within the last eight, does this give the
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    1 agency some concern regarding their concern on
    2 peaking that the difficulty with peaking is
    3 exasperated (sic) when they allow emitter -- every
    4 emitter to choose their worst polluting year as
    5 baseline?
    6 MR. KANERVA: Well, first of all, that's
    7 your characterization, not ours. They're supposed
    8 to pick representative years out of a three-year
    9 time range, and if that isn't suitable, then they
    10 have to justify that something is represented
    11 outside of that range. They don't just
    12 automatically get to pick the highest emissions in
    13 an eight-year period. So no, we don't agree with
    14 what you're characterizing is the process.
    15 MR. TREPANIER: You do agree, don't you,
    16 with the agency's comment that emitters have the
    17 ability to select operating emissions data from
    18 this range of eight years and the opportunity to
    19 use data from higher emitting years?
    20 HEARING OFFICER FEINEN: I'm going to
    21 ask Mr.
    Trepanier to point that out again, and
    22 secondly, it's not testimony today, and you're
    23 asking the agency a question about a public
    24 comment or public comments filed on May 16th, and
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    1 I think it's awful hard for the agency to respond
    2 to that. Can you cite what filing it is?
    3 MR. TREPANIER: I'm looking at the
    4 filing which is the comments of the Illinois
    5 Environmental Protection Agency dated May 16th,
    6 1997.
    7 HEARING OFFICER FEINEN: Page 28?
    8 MR. TREPANIER: Page 28.
    9 MS. MC FAWN: Mr.
    Trepanier, you
    10 understand that those comments -- not having them
    11 in front of me -- those have to do with
    12 establishing the baseline which is different than
    13 the last series of questions you were giving
    14 Mr.
    Kanerva.
    15 MR. TREPANIER: What I'm referring to
    16 and how I would link that to the previous question
    17 is exploring the particular link between this
    18 ability to select the highest polluting years and
    19 the agency's concern for peaking.
    20 MS. MC FAWN: Well, maybe when you
    21 testify, you could explain that because I think
    22 you put the question to Mr.
    Kanerva, and I think
    23 he said he doesn't see the connection between the
    24 two, between the baseline and the agency's concern
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    1 that banked emissions might be used in a situation
    2 where if there's a lot of banked emissions, they
    3 might all be simultaneously used causing an ozone
    4 problem.
    5 So I think he's answered your question,
    6 if you want to see the link between that statement
    7 and their concern of a glut of banked emissions
    8 being used at any one period of time. Maybe you
    9 can explain to us your concern about the link
    10 between baseline and banked emissions.
    11 MR. TREPANIER: If I might close on this
    12 with another question. In that same public
    13 comments on the very next page, there's reference
    14 to avoiding beginning ERMS with inflated
    15 baselines.
    16 If that were to happen and this ERMS
    17 program began with inflated baselines, would that
    18 be a fatal flaw?
    19 MR. KANERVA: What do you mean by fatal
    20 flaw? Explain the context of fatal flaw. Fatal
    21 flaw relative to what?
    22 MR. TREPANIER: Well, today's testimony
    23 did refer to a fatal flaw, and we did have a
    24 definition.
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    1 MR. KANERVA: Excuse me, what are you
    2 saying?
    3 MR. TREPANIER: The agency did offer an
    4 explanation of fatal flaw earlier today.
    5 MR. ROMAINE: I offered a personal
    6 definition of a fatal flaw which would be
    7 something that would prevent this program from
    8 being approved by USEPA as meeting our 1999 rate
    9 of progress plan requirements. I don't believe
    10 baselines would necessarily factor into that
    11 determination. Baselines would determine whether
    12 corrective action would be needed, but they
    13 wouldn't necessarily represent a fundamental flaw
    14 in the program as such.
    15 MR. TREPANIER: Could this program
    16 accomplish a goal of reduction in VOC emissions if
    17 the baselines are inflated beyond 12 percent?
    18 MR. KANERVA: Yes. You could still
    19 achieve reductions. The question is the reduction
    20 might be somewhat less than what you would like if
    21 for some reason they came out that way. This is
    22 all conjecturing here, but it's just relative. If
    23 you're one percent too high, you have one percent
    24 less total reduction you achieve perhaps, because
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    1 there's many, many factors that's going to affect
    2 that one way or the other.
    3 MR. TREPANIER: And this ERMS program is
    4 part of a submittal to the USEPA that's within one
    5 percent of its target? The problem with an
    6 inflated baseline, is the agency anticipating that
    7 that would be less than 1 percent, less than 8
    8 tons per day lost of reductions from this program?
    9 MS. SAWYER: Well, I think you're kind
    10 of taking our comments out of context.
    11 MR. TREPANIER: So the testimony today
    12 that was entered today by Mr.
    Forbes on page 5 of
    13 his testimony that the projected 1999 emissions
    14 was 727.57 and that the target level is 735.23
    15 which would be 8 tons per day difference.
    16 Now, regarding the potential of an
    17 inflated baseline, is it the agency's assumption
    18 that any difficulty or reduction in benefits from
    19 this program resulting from inflated baselines --
    20 MS. SAWYER: I still think you're taking
    21 our comments out of context. We were not
    22 suggesting that the program will have inflated
    23 baselines. We were saying if certain changes are
    24 made to the rule, there was a potential for
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    1 inflated baselines. So we have never acknowledged
    2 that the baselines would be inflated in this
    3 testimony at this point or in the comments at this
    4 point.
    5 MR. TREPANIER: Well, I would point you
    6 then to page 34 of your comments on May 16.
    7 HEARING OFFICER FEINEN: I'm going to
    8 stop right here and say that unless some of the
    9 questions to the testimony presented today -- if
    10 you have concerns about inflated baselines and
    11 their effect towards overall achievement, you can
    12 testify to that fact today or tomorrow.
    13 I think today's purpose of answering
    14 questions was for the testimony the agency's
    15 presented today. I've given you a wide range for
    16 asking questions, but this question seems to be
    17 the same question in the last five minutes but
    18 just presented in a different manner. I think the
    19 agency's attempted to answer it, has answered to
    20 the best of their capabilities at this point, and
    21 let's move on to a different question.
    22 MR. TREPANIER: If I could just engage
    23 you for one moment on this is that I wanted to
    24 bring to the agency's attention was that they have
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    1 been answering the question. On that page 34,
    2 they in fact have acknowledged that there will be
    3 inflated baselines, and they use the Ray-O-
    Vac as
    4 an example where they say Ray-O-
    Vac would have a
    5 baseline well in excess of its emissions in the
    6 majority of years in the past seven years.
    7 HEARING OFFICER FEINEN: And I don't
    8 want to testify so let's go off the record.
    9 (Discussion off the record.)
    10 MR. TREPANIER: I have a question for
    11 the agency. In your earlier comments on May 16th,
    12 you noted USEPA addressed concerns. I haven't
    13 received any concerns from the USEPA. How did the
    14 agency receive those, when and in what form?
    15 MR. ROMAINE: I believe these were
    16 telephone conversations with USEPA. We work with
    17 USEPA, and we have periodic telephone calls with
    18 them on a range of matters.
    19 MR. TREPANIER: Thank you.
    20 HEARING OFFICER FEINEN: Are there any
    21 other questions for the agency? Mr. Burke, would
    22 you please state your name.
    23 MR. BURKE: Ron Burke with the American
    24 Lung Association metropolitan Chicago. I just
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    1 have a handful of questions.
    2 My first is what is your justification
    3 for -- on what basis do you believe that the
    4 switch to a seasonal new source review program
    5 versus an annual new source review program is
    6 consistent with the Clean Air Act?
    7 MR. ROMAINE: The key principle is that
    8 the Clean Air Act requires emission reductions to
    9 make continuity and reasonable further progress.
    10 In fact, for ozone, reasonable further progress is
    11 measured on a seasonal basis. We don't address
    12 reasonable further progress in terms of winter
    13 emissions.
    14 It's recognized that ozone is a
    15 seasonal problem. The extent of the season varies
    16 from location to location, but by addressing
    17 offsets on a seasonal basis, we will make sure
    18 that major new projects do not interfere with
    19 reasonable progress which is what the Clean Air
    20 Act requires.
    21 MR. BURKE: In your testimony, you
    22 touched on the ozone season for the purposes of
    23 the ERMS program.
    24 Do you believe that the May through
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    1 September time frame would also be appropriate for
    2 the new ozone standard recently adopted by USEPA?
    3 MS. SAWYER: I'm not sure we can answer
    4 that question at this time, Mr. Burke.
    5 MR. BURKE: Well, follow-up, if there
    6 was a need to change the ozone season for the ERMS
    7 program, how would that be accomplished?
    8 MR. MATHUR: We'd revise the rules or
    9 propose that they be revised.
    10 MR. BURKE: I'm not sure how this
    11 directly relates to the testimony, but you can
    12 reel me in if you think it's out of line.
    13 How will transient and the spatial
    14 distribution of hazardous air pollutant emissions
    15 be evaluated?
    16 MR. KANERVA: For the annual report on
    17 how the market system is operating?
    18 MR. BURKE: For example, yes.
    19 MR. KANERVA: Just a second, let me pull
    20 that language out exactly. You're referring to
    21 item 9 under the list of what would be dealt with
    22 with the annual report, is that right, trends and
    23 spatial distributions of hazardous air pollutants?
    24 MR. BURKE: Right.
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    1 MR. KANERVA: Well, obviously we still
    2 have to go through the process of sorting all of
    3 this out, but we are going to have data on
    4 hazardous air pollutants, and we're working on
    5 getting the rule there to be consistent with the
    6 approach on how we want to analyze this.
    7 So we'll know where transactions have
    8 taken place and trades from one location to
    9 another, and then to the extent we see any pattern
    10 on whether or not those trades happen to involve
    11 things that are hazardous air pollutants, we would
    12 be able to show whether or not they're going up or
    13 down relative to where trades are occurring.
    14 I think the context of that was some
    15 concern that the trading process might result in
    16 hot spots or trends and affect locations or trends
    17 in how hazardous pollutants will be emitted. So
    18 we've essentially committed to provide the
    19 information to help people understand whether
    20 that's happening or not.
    21 MR. BURKE: How would that information
    22 be reported to the public?
    23 MR. KANERVA: The annual report will be
    24 a public document so it will be available to
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    1 whoever wants to have it.
    2 MR. BURKE: Similarly, will information
    3 be provided as part of the annual report or
    4 otherwise on the effects of directionality or
    5 trading on the effectiveness of the ERMS program
    6 and reducing those levels?
    7 MR. KANERVA: Well, we did have in item
    8 No. 6 in that list, distribution of transactions
    9 by geographic area or character. So I think the
    10 point was exactly that, that if there seems to be
    11 a one-way directional flow of trades one way or
    12 another and that seems to be significant, a
    13 significant pattern, then we may want to do some
    14 additional modeling of effects or whatever.
    15 MR. BURKE: And last question, does the
    16 proposed rules specify any penalty for inaccurate
    17 filing as opposed to, for example, an emissions
    18 excursion? In other words, even if an emissions
    19 excursion did not occur and there were inaccurate
    20 filing, is there any penalty?
    21 MR. KANERVA: That's just a regular
    22 enforcement case. It would be a traditional civil
    23 penalty case that we would file against somebody
    24 for inaccurate data.
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    1 MR. BURKE: Okay, thank you.
    2 HEARING OFFICER FEINEN: I believe the
    3 board has a question for the agency.
    4 MR. RAO: I have a question for
    5 Mr. Romaine concerning the landfill. When you
    6 established baselines for landfills, will any
    7 consideration be given to the unique emission
    8 pattern of landfills where the peak rate of
    9 emissions occur sometime, you know, in the future
    10 for some of these landfills? So how will that be
    11 accounted for?
    12 MR. ROMAINE: As we've set up the rule,
    13 landfills would be treated like other sources.
    14 They would have to evaluate their emissions based
    15 on the period of time '94, '95, '96, and that is
    16 the baseline time period unless they can
    17 demonstrate that other time periods, '91 through
    18 '97, are more representative.
    19 The other issue, though, is that
    20 landfills do have the opportunity for voluntary
    21 compliance to the extent that they have upgraded
    22 their control systems in the last year since 1990.
    23 MR. RAO: They cannot use any peak rate
    24 to establish that baseline?
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    1 MR. ROMAINE: We have not proposed any
    2 provisions to that effect.
    3 HEARING OFFICER FEINEN: Are there any
    4 other questions for the agency?
    5 MS. HENNESSEY: There was one question I
    6 had on you mentioned in your public comments that
    7 you were working with Sun Chemical to come up with
    8 a proposal on how to handle consolidation of
    9 participating and non-participating sources. Do
    10 you have anything yet?
    11 MR. ROMAINE: No, we don't.
    12 MS. HENNESSEY: Okay, thank you.
    13 HEARING OFFICER FEINEN: Any other
    14 questions? Let's take lunch and then come back
    15 for Mr.
    Marder's testimony and questions of
    16 Mr.
    Marder. Let's take an hour lunch. Let's try
    17 to be back here about 1:30. Thank you.
    18 (Lunch recess taken.)
    19 HEARING OFFICER FEINEN: Let's proceed
    20 to the testimony of Mr.
    Marder, if we could have
    21 the witness sworn in, please.
    22 (Witness sworn.)
    23 MS. HODGE: Good afternoon. My name is
    24 Katherine
    Hodge, and I'm with the law firm of
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    1 Hodge & Dwyer from Springfield, Illinois. I'm
    2 here representing the Illinois Environmental
    3 Regulatory Group.
    4 We have just one witness today,
    5 Mr. Sidney
    Marder. He did prefile testimony, and
    6 he will today just offer a brief summary of his
    7 prefiled testimony. Mr.
    Marder.
    8 MR. MARDER: Thank you. Good afternoon.
    9 I have previously testified in this proceeding
    10 before the board. I appreciate the opportunity to
    11 add these comments. I'll very briefly summarize
    12 the points that I made in my testimony. The first
    13 issue I addressed was our recollection of the
    14 intended proportionality in Section 9.8(c)(3) of
    15 the Act, and the two main points I would emphasize
    16 is it was our belief and remains our belief that
    17 proportionality has to be demonstrated over a
    18 continuum and not project by project and not
    19 regulation by regulation, and because of that, we
    20 argued strenuously, negotiated strenuously with
    21 the agency to ensure that any future reductions
    22 through the ERMS program would be resultant from a
    23 full board regulation process, and we believe that
    24 that is what is in the regulation as proposed now.
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    1 The second issue deals with new source
    2 review and inconsistencies between Illinois' new
    3 source review and the Clean Air Act. We are aware
    4 that the agency's about to propose regulations to
    5 reconcile any instances, and we certainly support
    6 that, and I would like to again emphasize that the
    7 proposed Section 205.320(g) was not intended nor
    8 does it address those inconsistencies, but rather
    9 was intended to provide a transition mechanism for
    10 sources that had rather unique circumstances.
    11 Item 3 is the need to provide ERMS
    12 sources with additional relief from the 1999
    13 deadline for compliance with reduction
    14 requirements. We continue to feel very strongly
    15 about this issue, and we reemphasize our point
    16 that we believe at a minimum if the board cannot
    17 go along with the year 2000 extension, then there
    18 should be no penalty for the first year.
    19 Now, the longer it takes to adopt the
    20 rules, the more important this becomes. The
    21 agency in its comments raised the issue of
    22 enforceability. I would like to emphasize that
    23 the only enforceable mechanism we have in the ERMS
    24 program is the CAAPP permit. There is no
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    1 enforceability until such time as a baseline is
    2 included as a condition in the CAAPP permit. The
    3 board suggested an alternative that if we have a
    4 permit by January 1st, 1999, then you would not
    5 get a waiver of the excursion non-compliance
    6 provisions.
    7 We would respectfully note that that
    8 gives us a maximum of four months from the time we
    9 receive that permit or when the enforceability
    10 starts until such time as the start of the first
    11 ozone season, and that, from a business point of
    12 view, is an unreasonably short period of time.
    13 The agency in their comments recommended the
    14 issuance of a draft permit by 4-30-99.
    15 That by definition would mean that
    16 there's no enforcement for that facility -- first
    17 of all, it's one day between the issuance of the
    18 draft permit and the trigger for the program, and
    19 second of all, until the permit is issued, the
    20 program is not enforceable on that source because
    21 there's no condition, there's no baseline, there's
    22 no permit, there's no program for that source. So
    23 we would urge the board to review the testimony
    24 and reconsider on this position -- on this point.
    L.A. REPORTING - (312) 419-9292
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    1 The next subject I addressed was the
    2 status of
    ATUs which are the subject of an appeal,
    3 and we had some discussion on that earlier this
    4 morning. I would say up front that ERG
    5 respectfully disagrees with the board's
    6 description on the current status of a permit
    7 during the
    pendency on appeal, and we respectfully
    8 disagree with the agency's statement this morning
    9 as to what the status of the permit is. Having
    10 said that, I think that it is totally unnecessary
    11 for the purposes of this proceeding to get into
    12 that issue. If we want to, we can.
    13 I think this would be a more
    14 appropriate discussion for another proceeding or
    15 for briefs on the subject if the board wanted it.
    16 Whatever that outcome is, I think it's somewhat
    17 irrelevant to this particular proceeding. The
    18 important thing, though, is what's going to happen
    19 to the
    ATUs during the pendency of the appeal, and
    20 rather than waiting for the similar question from
    21 Board Member
    Hennessey, I'll respond to it, if I
    22 may. It's a little off my testimony.
    23 MS. HENNESSEY: It's coming.
    24 MR. MARDER: A couple of points. First
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    1 of all, no manager, environmental manager or plant
    2 manager, is going to allow their facility to file
    3 a frivolous appeal. There's too much at stake.
    4 Appeals are thought about, and there has to be
    5 some merit to them.
    6 So I agree with
    Roger's analysis on
    7 this. These things can happen, but the odds of
    8 them happening are very, very low. If it is a
    9 frivolous appeal, the board has the right to
    10 reject it, dismiss it. Most of these appeals,
    11 they're going to move pretty quickly.
    12 If the agency feels that the permit
    13 appeal is without merit, they're going to refuse
    14 to grant waivers, and this thing should go through
    15 in the statutory 120 days. More importantly, the
    16 second point is the establishment of the baseline
    17 is going to be in almost all cases a one-time
    18 event. It's going to happen before the program
    19 starts, we hope, apropos my comments a moment ago.
    20 The agency has a statutory deadline to
    21 grant all CAAPP permits 24 months after the first
    22 application. Now, that's March of '98. That's
    23 not going to happen, but let's say we get pretty
    24 close to that. From the day I get my CAAPP
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    1 permit, that's the day I get my baseline, and
    2 that's when I have to file the appeal. Now, if
    3 the agency is timely or even a little late, we
    4 have enough time between the grant of that permit
    5 and the 120 days or 150 days for appeal to decide
    6 this issue before the first ozone season.
    7 There's going to be some cases that it
    8 still won't be decided, and it may go to the
    9 appellate court, but those are going to be few and
    10 far between. When we negotiated this with the
    11 agency, we talked about some of these issues, and
    12 we felt that the balance between you get some and
    13 you give some was fair. We recognize that if we
    14 lose the appeal, we won't have to go back and
    15 credit that for the first season in the event we
    16 do go through the first season, which again is
    17 going to be fairly rare.
    18 But if the agency is going to look at
    19 what mechanisms can be done to, if you will,
    20 correct that situation, then we would ask that the
    21 converse be looked at. If we win the appeal, we
    22 have lost the right to sell those
    ATUs which was
    23 legitimately ours. Should there also be a
    24 mechanism to make sure that we are credited with
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    1 additional
    ATUs? All of these issues made us
    2 believe let's leave it the way it is.
    3 It's going to be a rare occurrence, and
    4 in our -- I think I can say, in our joint
    5 estimate, this is the best public policy decision.
    6 The next point that I'll mention is the treatment
    7 of emission units under an industrial category
    8 where MACT has been demonstrated. Just briefly,
    9 the points are that there seem to be some
    10 confusion, at least in my mind, from reading the
    11 board's opinion as to the applicability of MACT to
    12 a unit, an emission unit, versus a category or
    13 entire facility.
    14 We believe it is the unit, and we
    15 concur with the agency on that, but also lost in
    16 the language, we think, was a concept that MACT is
    17 MACT, and if a unit is excluded because it has
    18 complied with a MACT standard, it doesn't matter
    19 what form that MACT standard took, and in my
    20 testimony, I delineate four possibilities of how
    21 you meet the standard. In any case, if the
    22 emission unit has met MACT, I think it's the
    23 intent of the rule -- and I believe the agency
    24 would concur -- that that unit be exempt from
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    1 reductions. It's included in the baseline but
    2 exempt from emission reductions.
    3 That's a brief summary of my testimony.
    4 I'd be glad to answer any questions.
    5 MS. HODGE: At this time I'd like to
    6 move for the admission of Mr.
    Marder's prefiled
    7 testimony.
    8 HEARING OFFICER FEINEN: It's been
    9 handed to me to be moved into the record as
    10 Exhibit No. 76 is the
    prefiled testimony of
    11 Mr.
    Marder dated August 7th, 1997.
    12 If there's no objections to moving that
    13 into the record as Exhibit No. 76, I'll do so.
    14 Seeing none, Exhibit No. 76 will be Mr.
    Marder's
    15 testimony dated August 7, 1997. Thank you.
    16 (Document received
    17 in evidence.)
    18 HEARING OFFICER FEINEN: Are there any
    19 questions? I don't believe there's any
    prefiled
    20 questions. Any other questions? Mr.
    Trepanier.
    21 MR. TREPANIER: Hello. Regarding the
    22 treatment of MACT units, is it your understanding
    23 that all units that have a MACT standard have been
    24 limited in their emissions of VOM?
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    1 MR. MARDER: There has been a limitation
    2 put on those units, yes, whether it be through
    3 control or operating practices or a determination
    4 that this is the most that that unit should be
    5 expected to do.
    6 MR. TREPANIER: So the limitation -- do
    7 you understand then that these units that have the
    8 limitation placed on them, that that MACT, maximum
    9 achievable control technology, is specifically
    10 addressing
    VOMs?
    11 MR. MARDER: Yeah. Well, if the MACT
    12 standard is for
    VOMs, yes. If it's for
    HAPs, it
    13 can be for a HAP that's not VOM. There are
    HAPs
    14 that are not
    VOMs which are subject to MACT
    15 standards.
    16 MR. TREPANIER: Is it your
    17 organization's position then that those sources
    18 that should be exempted from the reduction with
    19 those units would be units that have a MACT
    20 standard for VOM emissions?
    21 MR. MARDER: That's the only thing
    22 that's relevant is VOM. The only thing that this
    23 regulation applies to is VOM.
    24 MR. TREPANIER: When you say this
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    1 regulation --
    2 MR. MARDER: Those are the only ones
    3 that would be exempt.
    4 MR. TREPANIER: When you say this
    5 regulation, you're referring to the rulemaking?
    6 MR. MARDER: Yes.
    7 MR. TREPANIER: I'm referring to the
    8 MACT standards themselves. Is it your
    9 organization's position that a unit that has a
    10 MACT standard limiting VOM emissions, that those
    11 specifically and exclusively are the units with
    12 MACT standards that should be exempted?
    13 MR. MARDER: Under this proposed rule?
    14 MR. TREPANIER: From the 12 percent
    15 reduction required by this rule.
    16 MR. MARDER: This rule only applies to
    17 VOMs. So if you're asking me whether a MACT
    18 standard that controls a particulate HAP should be
    19 excluded from this rule, I think the answer is
    20 that's not relevant. They're not covered one way
    21 or another.
    22 MR. TREPANIER: Thank you.
    23 HEARING OFFICER FEINEN: Are there any
    24 other questions?
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    1 MS. HENNESSEY: Just a question on the
    2 status of
    ATUs on appeal. I just want to clarify
    3 my earlier question when I was discussing how
    4 there might be a competitive advantage for one
    5 source if it had higher -- if it just chose a
    6 method, whether intentionally or not, but chose a
    7 method that gave it a higher baseline as compared
    8 to another source similarly situated that happened
    9 to choose a different method, there would be some
    10 competitive advantage if they're allowed to use
    11 those
    ATUs while they're disputed.
    12 MR. MARDER: Sure.
    13 MS. HENNESSEY: Whether there's any
    14 intent -- I'm not suggesting that there's going to
    15 be a lot of frivolous appeals filed, but
    16 reasonable people can certainly disagree about the
    17 way this baseline is going to be calculated.
    18 MR. MARDER: I think you are correct.
    19 If during the
    pendency of an appeal someone gets
    20 an advantage because of the appeal, that could
    21 happen. The converse, though, is also true. They
    22 are being deprived of the right to sell that
    23 during the
    pendency of the appeal, and I guess our
    24 opinion is it's much ado about nothing. This will
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    1 hardly ever happen.
    2 MS. HENNESSEY: So whatever competitive
    3 advantage someone might get, you think it is
    4 fairly
    unsubstantial compared to the complexities
    5 in developing a system for crediting or repaying
    6 someone
    ATUs that might have been disputed ?
    7 MR. MARDER: I think that's correct. I
    8 think one of the things we tried not to get into
    9 is that whole issue which I said is not relevant
    10 because once you get into that can of worms,
    11 there's a whole bunch of issues as to do you split
    12 a condition of an appeal. Is a baseline a
    13 condition, or is each ATU a condition? And it
    14 just, I think, is not worth the effort at that
    15 point.
    16 MS. HENNESSEY: Okay, thank you.
    17 HEARING OFFICER FEINEN: Are there any
    18 other questions? Seeing none, let's move on to
    19 the presentation from Tenneco.
    20 MS. HODGE: Thank you.
    21 MR. FORCADE: Mr. Hearing Officer, could
    22 we have two minutes, please.
    23 HEARING OFFICER FEINEN: Sure. Let's go
    24 off the record.
    L.A. REPORTING - (312) 419-9292
    107

    1 (Discussion off the record.)
    2 HEARING OFFICER FEINEN: Proceed with
    3 the testimony of Mr.
    Wakeman from Tenneco. Swear
    4 in the witness.
    5 (Witness sworn.)
    6 MR. FORCADE: Mr. Hearing Officer,
    7 members of the board, my name is Bill
    Forcade from
    8 Jenner & Block in Chicago representing Tenneco.
    9 We have one witness today, Mr. Jim
    Wakeman. We
    10 have
    prefiled testimony, and Mr.
    Wakeman intends
    11 to give a very brief summary of that testimony.
    12 MR. WAKEMAN: Good afternoon. My name
    13 is Jim
    Wakeman, regional environmental manager for
    14 Tenneco. In a nutshell, our testimony concerns
    15 two areas. One is the application or the
    16 applicability of MACT or maximum achievable
    17 control technology or the
    NESHAPs to a facility.
    18 We would like to suggest in the
    19 rulemaking that if a MACT in fact implies or is
    20 recorded as being no controls, that that be
    21 acceptable and that that facility or that
    22 emissions unit does in fact meet the MACT standard
    23 and have that emission unit excluded from the ERMS
    24 program. The other issue had to do with the
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    1 definition of BAT or B-A-T and the exclusion of
    2 units meeting that standard.
    3 What we were suggesting is that the
    4 definition be a little more clear in its
    5 definition of the upper and the lower limits, and
    6 one of our suggestions was the numeric number for
    7 an upper limit. The other one, of course, would
    8 be something in the nature of BACT. In a
    9 nutshell, that was my testimony.
    10 MR. FORCADE: At this time, I would move
    11 the introduction of Mr.
    Wakeman's prepared
    12 testimony.
    13 HEARING OFFICER FEINEN: I'm looking at
    14 the testimony of Mr.
    Wakeman dated August 8, 1997.
    15 I believe this is the same as the
    prefiled
    16 testimony.
    17 If there's no objections to entering
    18 that into the record as read, I'll do so. Seeing
    19 none, I'm marking as Exhibit No. 77 Mr.
    Wakeman's
    20 testimony dated August 8th, and I believe the
    21 agency had some
    prefiled questions for
    22 Mr.
    Wakeman. Let's proceed with those first.
    23 MS. SAWYER: Good afternoon,
    24 Mr.
    Wakeman. Our first question, is it your
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    1 understanding that maximum achievable control
    2 technology or MACT and national emissions
    3 standards for hazardous air pollutants,
    NESHAPs,
    4 are federal emission standards?
    5 MR. WAKEMAN: Yes, it is.
    6 MS. SAWYER: Is it your position that
    7 the board's determination as to the exclusion from
    8 reductions for MACT or NESHAP units under the ERMS
    9 will alleviate a source's obligations to comply
    10 with federal MACT for that unit?
    11 MR. WAKEMAN: No. No, it is not.
    12 MS. SAWYER: Then would you please
    13 explain your position on page 7 of your testimony
    14 that the board's application of the MACT-based
    15 exclusion from reductions under the ERMS may
    16 undermine national standards.
    17 MR. WAKEMAN: In a nutshell, the
    18 examples that we gave in our testimony was both
    19 for -- the situations concerned a facility that
    20 had both HAP and VOM as the emitting constituent,
    21 and our concern was that the board can adopt
    22 regulations that are technically and economically
    23 reasonable.
    24 And if the board adopts standards that
    L.A. REPORTING - (312) 419-9292
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    1 are more stringent than MACT or
    NESHAPs, that in
    2 effect the board is saying that the federal
    3 standards were not adequate and that the
    4 reasonability and the technical feasibility of
    5 what the federal government analysis showed was
    6 incorrect.
    7 MS. SAWYER: Go on to question No. 4.
    8 Are you aware that CAAPP or Clean Air Act Permit
    9 Program sources are required to identify in their
    10 CAAPP applications federal emission standards
    11 applicable to their emission units including
    MACTs
    12 and
    NESHAPs ?
    13 MR. WAKEMAN: Yes, I am.
    14 MS. SAWYER: I would just like to ask
    15 one quick follow-up to that.
    16 Could you please explain your position
    17 that the board would have a great deal of
    18 difficulty evaluating compliance for an emission
    19 unit with a MACT and NESHAP if these units are
    20 addressed in that source's CAAPP application and
    21 permit.
    22 MR. FORCADE: Would you please repeat
    23 that to make sure I understood the question.
    24 MS. SAWYER: Sure. Could you explain
    L.A. REPORTING - (312) 419-9292
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    1 your position that the board would have a great
    2 deal of difficulty determining an emission unit's
    3 compliance with a MACT standard if these units, in
    4 their compliance with those standards, have to be
    5 addressed in the CAAPP applications for those
    6 sources?
    7 MR. FORCADE: Can we take a second to
    8 look at our prepared testimony and try and figure
    9 out where that was said? Do you have a page
    10 number?
    11 MS. SAWYER: You could look on page 9,
    12 the paragraph before E, section E or that whole
    13 actual section D which is on page 8, 9.
    14 MR. FORCADE: Take a second, please.
    15 MR. WAKEMAN: I think what our testimony
    16 means is I don't think it has to do with the Clean
    17 Air Act permit as such. It has to do with the
    18 determination of sorting through a facility that
    19 may have several
    MACTs applied to it and
    20 determining which MACT applies to which unit.
    21 If the statement is that if a facility
    22 complies with MACT for a particular emission unit,
    23 then it should be excluded from ERMS. I think
    24 that's our bottom line as to what we mean by that.
    L.A. REPORTING - (312) 419-9292
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    1 MS. SAWYER: Question No. 5, when USEPA
    2 evaluates controls for MACT, is it your
    3 understanding that it is evaluating appropriate
    4 practices for control of hazardous air pollutants?
    5 MR. WAKEMAN: Yes.
    6 MS. SAWYER: Isn't it correct that USEPA
    7 is not evaluating control measures for total VOM
    8 emissions in establishing
    MACTs.
    9 MR. WAKEMAN: Yes.
    10 MS. SAWYER: That concludes -- do you
    11 have any more questions? That concludes our
    12 questions.
    13 HEARING OFFICER FEINEN: Are there any
    14 other questions for Mr.
    Wakeman at this time?
    15 Seeing none, we'd like to just call back
    16 Mr.
    Marder for a couple of questions.
    17 MS. HENNESSEY: Just one question. Off
    18 the record.
    19 (Discussion off the record.)
    20 MS. HENNESSEY: I had one question I
    21 forgot to ask you earlier -- yes, he's still under
    22 oath for the rest of his life.
    23 (Laughter.)
    24 MS. HENNESSEY: We received public
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    1 comment from USEPA. Have you had a chance to see
    2 that?
    3 MR. MARDER: No.
    4 MS. HENNESSEY: Well, they raise a point
    5 similar to the one that IEPA raised, which is with
    6 respect to
    ERG's request that the board make 2000
    7 the year that the program begins instead of 1999,
    8 they state that in order for Illinois to meet the
    9 9 percent ROP requirement, the program must take
    10 effect in 1999. Could you comment on that?
    11 MR. MARDER: Yeah. I think the
    12 alternate that we suggested was aimed at just such
    13 an eventuality, that we assumed the
    Feds were
    14 going to say that, and that's why we tried to come
    15 up with an alternate. That's one answer.
    16 The other answer is oftentimes in my
    17 experience, the USEPA says and makes certain
    18 statements that this or that may or may not be
    19 enforceable or may or may not be acceptable, and
    20 then after a series of negotiations and
    21 discussions, they change their mind. That's not
    22 true in air, but true in water, and we have found
    23 that sometimes it's necessary to continue
    24 discussions with USEPA rather than accept on the
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    1 face their first comment.
    2 Deadlines are missed routinely. I
    3 reemphasize the point I made before that this
    4 program is not enforceable at all until I get my
    5 permit. If I don't get my permit by the time the
    6 first ozone season comes about, we don't have a
    7 program. It's totally non-enforceable. I don't
    8 have a baseline, I don't have a permit, I can't do
    9 anything.
    10 The agency has probably for good reason
    11 but has missed their deadline in granting the
    12 permits. As we get closer and closer, it becomes
    13 more important. I think our members would be
    14 willing to accept the 1999 deadline. We would be
    15 willing to make a good faith effort to comply with
    16 this, and I would think the vast majority would be
    17 able to, but we don't feel that we should be put
    18 at risk and suffer noncompliance penalties for
    19 reasons that are basically beyond our control. So
    20 if we can find the finesse, which is often the way
    21 to solve the
    USEPA's problem, we're willing to
    22 work with the agency and the board on that.
    23 MS. HENNESSEY: Thank you. That was all
    24 I had.
    L.A. REPORTING - (312) 419-9292
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    1 HEARING OFFICER FEINEN: At this point,
    2 we will proceed to Mr.
    Trepanier's testimony. I'm
    3 assuming you're going to read it in.
    4 MR. TREPANIER: Yeah, I'll read it in.
    5 HEARING OFFICER FEINEN: Can you swear
    6 the witness, please.
    7 (Witness sworn.)
    8 MR. TREPANIER: Good afternoon. I thank
    9 the board for this opportunity to address them and
    10 all those persons present and the hearing officer
    11 for your patience as I've participated in this
    12 process.
    13 I did
    prefile some testimony which
    14 really was a great burden, and that stemmed from
    15 the cost, which for me was about $25, and I just
    16 wanted to mention that to the board so that I
    17 could make that record because I'm just concerned
    18 that the -- as much as the board, you know, has
    19 extended themselves, and I appreciate that, to
    20 allow my participation, it is a very difficult
    21 process, and there may be something that you
    22 notice down the road that will be a little simpler
    23 to be able to bring the public in, and I would
    24 appreciate your hearing from me on that.
    L.A. REPORTING - (312) 419-9292
    116

    1 Regarding the Emissions Reduction
    2 Market System, I am opposed to this program being
    3 adopted in Illinois, and that's an opposition
    4 that's also -- that I would express on behalf of
    5 an environmental and community justice
    6 organization I belong to, the Blue Island Greens,
    7 and for information, it's also the position of the
    8 National Green Party to oppose establishment of
    9 pollution rights or allotments or tradable
    10 permits.
    11 I believe that this opposition to
    12 pollution trading is for a good cause. I don't
    13 believe that this, the program that has been
    14 proposed, will obtain the Clean Air Act or rate of
    15 progress reduction that Section 9.8 has authorized
    16 this program for the purpose of, and I also
    17 believe that the program as proposed goes beyond
    18 what Section 9.8 would allow.
    19 Specifically, I believe that this
    20 proposed rule represents a
    commodification (sic)
    21 of the air, and that's something that's foreign to
    22 Illinois, and it fundamentally alters every
    23 person's place in Illinois. I believe that the
    24 proposal goes beyond the statutory language of the
    L.A. REPORTING - (312) 419-9292
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    1 Act, and for that, I would point the board even
    2 initially to the title of Section 9.8, Emissions
    3 Reduction Market System, and I would -- and I say
    4 that the word "reductions" right after the word
    5 "emissions" and immediately before the "market"
    6 indicates that it was the intention of the
    7 legislature to allow a market in emissions
    8 reductions exclusively and that the legislature
    9 never did and never did intend to allow a
    10 permanent market to be developed in pollution
    11 rights.
    12 I believe that the proposal
    13 unnecessarily creates a property right out of the
    14 air, and this, like I say, without a direction or
    15 intent expressed by the legislature. And I
    16 believe that it's doing so unnecessarily because
    17 the purposes of the Act could be obtained without
    18 causing a permanent market in pollution rights to
    19 be established, and it's possible that we can use
    20 the Emissions Reduction Market System to obtain
    21 the reductions that we're seeking and do so as I
    22 believe the legislature wanted us to do, wanted it
    23 to happen is that those reductions would occur
    24 where they're most economically feasible so for
    L.A. REPORTING - (312) 419-9292
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    1 the least amount of cost.
    2 And that could occur without
    3 necessitating a permanent market, and that is my
    4 understanding, and I believe the testimony that
    5 was given to the board showed that when this
    6 program is implemented through the Clean Air Act
    7 and Title V permits, that those Title V permits
    8 can contain a permanent and enforceable limit on
    9 the emissions from any source.
    10 So if a source is needing or has the
    11 ability to reduce their pollution and sell those
    12 emission reductions on the market, then another
    13 polluter who may need some more emissions
    14 allotment could purchase those, and that would be
    15 the end of the transaction as I believe would
    16 happen if this program were designed -- were
    17 limited to an emissions reduction market, and it
    18 is my position that what's been proposed here is
    19 beyond a market in emissions reduction. In fact,
    20 it is a market in pollution rights.
    21 I believe that the rule would result
    22 unfairly -- the rule would unfairly result in a
    23 foreign corporation owning the air rights in a
    24 community they've long abused, and I'm
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    1 specifically talking about my own community in
    2 Blue Island and an oil company there, Clark Oil,
    3 which I understand is foreign-owned, and I really
    4 think that it's very unfair to give to that
    5 corporation a carte blanche in pollution sales,
    6 selling something they did not pay for, something
    7 our children may be unable to stop paying for.
    8 I feel that this program wasn't
    9 developed in the full light of day, nor do I
    10 believe it could have been. I believe that right
    11 from the start with the title of the statute being
    12 Emission Reductions Market System that reading the
    13 title leads someone to believe that what is to be
    14 bought and sold are actual reductions in
    15 pollution, and I don't think that that came --
    16 that that's what in fact the proposal is.
    17 I think that what reductions in
    18 pollution, if they occur, are
    miniscule relative
    19 to the amount of pollution rights that would be
    20 granted under this proposal, and I decry that the
    21 agency didn't hold a general public meeting,
    22 although they were asked several times during a
    23 multi-year rulemaking.
    24 Although the agency held several or
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    1 many meetings, as they testified, and that these
    2 meetings were often arranged by those who would
    3 most benefit from the proposal, and this came
    4 forward both in Sarah
    Dunham and Roger
    Kanerva's
    5 testimony. In fact, I had contacted the agency
    6 when I saw this Section 9.8 being adopted by the
    7 legislature and before that, and I contacted the
    8 agency with questions, comments and expressing my
    9 desire to be involved in this, and the agency told
    10 me they were sending me on to a mail list for
    11 this, and this was a year before the proposal was
    12 brought to the board but never did the agency use
    13 that mailing list to give me any notice of what it
    14 was that they were proposing, and in fact many,
    15 many months -- it was several months after the
    16 proposal was given to the board that I learned how
    17 far it's come along and that there was a final
    18 proposal from the agency to critique, and that's
    19 because the agency didn't notify me that the
    20 proposal was finalized, although they did choose
    21 to notify some individuals.
    22 The agency's supporting documentation
    23 had claimed that environmental groups were
    24 substantially in agreement with this proposal, and
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    1 I don't believe that that was true. In fact, the
    2 document seemed to state specifically that the
    3 organization Citizens for a Better Environment was
    4 substantially in agreement with this proposal, and
    5 having spoken with representatives of that
    6 organization, they claimed that they had said
    7 nothing about this proposal to the agency, that
    8 they were at a meeting, and they were silent the
    9 entire time, and this, the agency didn't dispute
    10 during their own testimony on cross-examination.
    11 And I would just on that point -- not
    12 to belabor, but the documentation also cited the
    13 Environmental Defense Fund as being in agreement
    14 with this proposal, but that's practically
    15 meaningless to me because the Environmental
    16 Defense Fund was the major proponent of the
    17 proposal, and even from their own witnesses, they
    18 claim to have actually brought the idea of
    19 pollution trading to the US Congress for adoption
    20 in 1990. So it's no surprise Environmental
    21 Defense Fund would have been supportive of this
    22 proposal.
    23 I believe that the proposed market
    24 system would create a market force with a tendency
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    1 to drive low profit VOM emitters out of business,
    2 and this to serve the pollution emission
    3 requirements of wealthy or high profit VOM
    4 emitters. The proposed market system would create
    5 a market force with a tendency to drive labor
    6 intensive VOM emitters out of business to serve
    7 the pollution emission requirements of low labor
    8 VOM emitters, and the proposed rule would cause a
    9 transfer of wealth from consumers to producers.
    10 This transfer of wealth from consumers
    11 to producers is caused by an effect that's been
    12 referred to as an opportunity cost, which in
    13 simple terms businesses would be charging rent for
    14 their pollution rights because these pollution
    15 rights for a business becomes an asset, and now in
    16 order to hold on to their asset, they've
    17 apparently -- my understanding in order for the
    18 corporation to hold the asset, they've got to be
    19 making money on that asset.
    20 So this is going to raise the prices to
    21 consumers and cause their money to go to the
    22 polluters. The granting of pollution allotments
    23 would increase the cost of doing business for all
    24 firms. The granting of pollution allotments would
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    1 increase income to regional firms because of their
    2 ability to raise product prices and increase
    3 income to national industries because of their
    4 incentive to sell allotments because a national
    5 industry would have a tendency to -- there would
    6 be a market force for that national industry to
    7 move their production out of the Chicago
    8 non-attainment zone because that frees up their
    9 asset which is their pollution rights.
    10 In this way the proposal gives area
    11 emitters an incentive to partially or fully shut
    12 down operations. I'm very concerned that when
    13 this shift occurs, which I believe is inevitable
    14 if this permanent market in pollution rights is
    15 established, that the VOM emissions are going to
    16 be looked at, and there's going to be an updating
    17 of the facilities, and for those who are
    18 consumers, consumptive consumers, this may be a
    19 positive development because the force will be to
    20 drive greater levels of production from the same
    21 amount of
    VOCs.
    22 So that force which is just created by
    23 trading the pollution allotments without any
    24 reductions required -- this trading of pollution
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    1 allotments would cause facilities, I believe, to
    2 -- facilities that are most efficient in emitting
    3 the
    VOMs to purchase the pollution rights from
    4 those that are least efficient in emitting
    VOMs,
    5 and I feel mixed about this, but the problem that
    6 I want to bring to the board's attention is that
    7 when this occurs and the move to a higher
    8 efficiency and higher production level occurs, the
    9 work force will be reduced.
    10 Older businesses using more workers
    11 would be replaced by newer businesses more
    12 efficient that can produce more widgets with the
    13 same amount of
    VOMs, and there's going to be a
    14 reduction in jobs available without a reduction in
    15 pollution.
    16 I believe that the agency hasn't
    17 accurately reflected the emission history of the
    18 likely effect of VOM emitters. A scientific study
    19 of receptor modeling approach to VOC emission
    20 inventory validation in Chicago reported in the
    21 July '95 Journal of Environmental
    22 Engineering -- reported that inventory emissions
    23 of refineries in the Chicago non-attainment area
    24 are low by a factor of about 10. Further, major
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    1 Chicago non-attainment area emitters doubling or
    2 quadrupling their reported emissions since 1990
    3 has not been reported by the agency, and another
    4 major -- and other major point source VOM emitters
    5 have not been counted at all, although they have
    6 appeared in the USEPA airs facility database of
    7 large VOM emitters continuously since 1990 till
    8 the most recent report in 1995.
    9 These omissions of readily available
    10 and relevant data from this rulemaking causes the
    11 point source category of emitters as a group to
    12 not contribute a proportionate share of reductions
    13 under the proposed rule and I believe also is
    14 going to cause that the actual reductions that the
    15 program can effect are going to be less than
    16 reported. I believe that the proportionate share
    17 -- I guess I would tell the board that I would
    18 like to see that this statute required a
    19 proportionate share of reductions from these point
    20 sources proportionate to the other sources, but
    21 having read the board's order, I see that the
    22 board doesn't see that that's what the rule
    23 requires, that that's not what the law requires.
    24 But on that point, I think that this
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    1 program doesn't fairly exact reductions from the
    2 point sources relative to the reductions that the
    3 other sources are doing. I believe that the
    4 proposed rule would create excess emission
    5 allowances. This will cause the rule's effect to
    6 be diminished when the necessary reductions to
    7 obtain the 1990 Clean Air Act ROP will not occur.
    8 The agency did not consider the
    9 allotment magnification factor caused by cyclic
    10 emitter patterns. The prevalence of VOC emitters
    11 with cyclic patterns is well known and widely
    12 reported in literature and regional newspapers.
    13 The Chicago Sun Times reported on March 4th, 1997,
    14 page 40, a report on the cyclical nature of the
    15 chemical sector including quoting Amoco executive
    16 vice president of chemicals upon the quote, the
    17 well-known
    cyclity (phonetic) of the business, I'm
    18 quoting.
    19 Also Can
    Corder (phonetic) another
    20 major VOM emission sector was reported in the same
    21 paper on March 27, '97, page 54, to operate in a
    22 cyclical business. The Daily
    Southtown also
    23 reported on the cycle peaks and turns in the
    24 chemical industry on April 5th, 1997. The
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    1 proposed rule would operate to cause all cyclic
    2 emitters to gain allotments at a much higher level
    3 than their average emission levels.
    4 In aggregate this will allow and even
    5 encourage a flood of allotments on to the market
    6 as these cyclic emitters move through a down
    7 market and have a full bank of emission reduction
    8 credits. These would be false emission reductions
    9 reflecting only that the cyclical emitters are
    10 given allotments enough to emit at their highest
    11 levels of the '90s minus any other required
    12 reductions.
    13 And I believe that the method that
    14 these excess emissions or these false emission
    15 reductions will move on to the market is through
    16 the existence of the LAER units that currently
    17 operate below their permitted level and/or other
    18 production increases that will provide a market
    19 for the excess emission credits created by the
    20 program.
    21 This will net in effect an actual
    22 increase in pollution levels as the affected firms
    23 find the fluidity allowed by trading the false
    24 excess emission credits. We would be unable to
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    1 reach the Clean Air Act ROP for 1999 with this
    2 proposal. The same 2 percent of excess emission
    3 reductions that the agency reports that this
    4 program would produce, that's the 12 percent minus
    5 1 percent for the ACMA minus the 9 percent for the
    6 ROP, the contingency the agency claimed it was
    7 making with this proposal has also been said by
    8 agency witnesses to be covering so many different
    9 contingencies that no real excess and in fact a
    10 deficit of reductions can be expected.
    11 Because the agency has not estimated
    12 nor even included the percentage of the point
    13 source emissions subject to this rule expected to
    14 be exempted from the 12 percent reductions with
    15 the BAT exemption, the reductions this proposal
    16 can generate have been overestimated, possibly
    17 grossly so.
    18 The potential loss of reductions and
    19 the real likelihood of an increase of emissions
    20 for facilities under the 15 ton per season
    21 exemption on reductions will further prevent
    22 attainment of the ROP. I would point out to the
    23 board that this rule would place its greatest
    24 burden on small emitters and those who have done
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    1 the right thing and already reduced their
    2 pollution levels. Given the unreliability of the
    3 data that this program is based upon and the
    4 likelihood that better information will become
    5 available, it is premature and besides unpalatable
    6 to grant permanent pollution rights.
    7 The proposal would allow the point
    8 source sector as a whole to increase their
    9 proportionate share of emissions by individually
    10 discovering more emissions with a, quote, a more
    11 accurate determination method, unquote. Under
    12 this proposal, there's not a commensurate a way to
    13 increase the sector's proportional share of
    14 reductions.
    15 The agency's failure to forecast or
    16 otherwise analyze the potential under this
    17 proposal for allotments to all point sources to
    18 exceed the 1996 level of emissions renders the
    19 agency's projections of reduction levels
    20 unreliable. In fact, it was shown in the agency's
    21 testimony that at least they have some
    22 understanding of this dynamic and the impact that
    23 it might have on the reductions that could be
    24 obtained, but their reliance on the 2 percent
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    1 cushion to cover this slippage is unjustifiable.
    2 Mr. Romaine, I remind you, testified at
    3 page 1117, quote, "I would expect all emitters
    4 will seek seasons with the higher emissions." So
    5 when all of the emitters are getting their
    6 allotments at their highest season's level, then
    7 the total allowable amount of pollution is greater
    8 than any single year we've ever seen.
    9 And then with the fluidity that's
    10 sought with this market, the agency's actually
    11 making -- attempting to get these -- this market
    12 moving so that other people will buy these excess
    13 allotments, and I say that that can result in more
    14 pollution than we've ever seen.
    15 The agency's reliance upon donations to
    16 the ACMA appears to be based upon a belief that
    17 polluters will receive a tax break for their
    18 donations. Since this would result in a loss of
    19 revenue to the state or federal government without
    20 a related reduction in actual emissions -- and I
    21 might also say related health costs, health care
    22 costs -- this seems implausible and is not
    23 reflected in either federal or state law.
    24 Further, the agency appears to rely
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    1 upon polluters not being concerned with the value
    2 of allotments that would go to the ACMA when their
    3 facility had a shutdown if that facility did not
    4 pre-sell their allotments. So I say I believe
    5 that the testimony that we've come through in the
    6 rule itself that polluters, large polluters have
    7 been encouraged to sell all of their pollution
    8 allotments prior to closing their facility and
    9 thus preventing the 20 percent from going into the
    10 ACMA.
    11 I would suggest that the value of this
    12 program, if any, occurs only when the agency is
    13 reducing the level of allowable pollution, and
    14 this is what the General Assembly desired when
    15 approving Section 9.8 of the Environmental
    16 Protection Act. I would ask the board in
    17 conclusion to consider the testimony that I've
    18 given today and that of all of the other good
    19 people who the board have seen during this
    20 rulemaking and consider that testimony as cause
    21 and reason to limit this pollution reduction
    22 program to only that time period of the pollution
    23 reductions and to not create a new and heretofore
    24 repugnant and unrecognized pollution property
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    1 right in Illinois without a legislative mandate.
    2 Then I do have one visual aid that a
    3 friend of mine had created, and I'll read it for
    4 the benefit of the court reporter, and it says,
    5 pollution allotments make the whole earth pay, and
    6 in the Greens, we're likening these pollution
    7 allotments to dirty dollars. I thank you very
    8 much for your patience, and if there's any
    9 questions, I can answer those now.
    10 HEARING OFFICER FEINEN: Are there any
    11 questions of Mr.
    Trepanier at this time?
    12 MS. SAWYER: I have a quick question.
    13 Mr.
    Trepanier, you noted that you attached a USEPA
    14 AIRS facilities subsystem quick look report to
    15 your testimony?
    16 MR. TREPANIER: Yes.
    17 MS. SAWYER: We at the agency didn't
    18 receive a copy of that.
    19 MR. TREPANIER: That's correct. That
    20 was similar to what I believe was the agency's
    21 practice, that attachments weren't mailed to
    22 everyone on the service list. There is just no
    23 way that I could have done that.
    24 HEARING OFFICER FEINEN: Before we go
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    1 down this path, let me just note that I believe
    2 it's the same attachment that was attached to the
    3 April 18th, 1997, file that he made which has been
    4 marked as public comment No. 3.
    5 MS. SAWYER: Okay. We didn't receive
    6 that filing. We were trying to assemble something
    7 similar, and we may have some comments on it
    8 because we're not sure if we're going to be
    9 commenting on the same document since we didn't
    10 get a copy of it.
    11 MR. TREPANIER: In response, you know,
    12 in saying, you know, I wish that I could have, you
    13 know, sent that to you, and I hope that you are
    14 able to have a copy of that.
    15 When I did receive the agency's filing
    16 of August 8th, it reported an attached
    17 recommendation, recommendation trading program
    18 framework, and that also appears not to be with
    19 the document.
    20 MS. SAWYER: Okay. Did you want to see
    21 a copy of that?
    22 MR. TREPANIER: Yeah, I'm interested in
    23 what OTAG came up with.
    24 MS. SAWYER: Why don't you show me what
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    1 we're looking for, and we can get a copy of that
    2 to you. Perhaps we can look at a copy of what the
    3 board has as their attachment for your document.
    4 That's all I have. I just wanted to check on that
    5 document.
    6 HEARING OFFICER FEINEN: Are there any
    7 other questions for Mr.
    Trepanier? Seeing none,
    8 let's go off the record for a second.
    9 (Discussion off the record.)
    10 HEARING OFFICER FEINEN: You're going to
    11 just summarize. Let's proceed with the testimony
    12 of Mr. Burke who has indicated he would like to
    13 testify today. We have handled all the
    prefiled
    14 questions and testimony at this point, and if we
    15 could have the witness sworn in, we will proceed
    16 with his testimony.
    17 (Witness sworn.)
    18 MR. BURKE: My name is Ron Burke. I'm
    19 director of environmental health for the American
    20 Lung Association of metropolitan Chicago. I
    21 appreciate the board taking the time to hear my
    22 testimony today, and I appreciate the audience
    23 sticking around as well. I'm going to summarize
    24 comments that we'll submit today to the board.
    L.A. REPORTING - (312) 419-9292
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    1 In some cases you'll note that I've
    2 again raised issues presented previously to the
    3 board, specifically during testimony in April, I
    4 believe it was. So I won't try to -- I'll try not
    5 to spend too much time on those topics. So I'll
    6 start with the concerns we've raised previously
    7 about potential for toxic hot spots and localized
    8 increases in air toxins.
    9 As mentioned before, because the ERMS
    10 proposal does not distinguish between toxic and
    11 non-toxic VOM emissions, it's possible that a
    12 source could purchase
    ATUs generated from
    13 non-toxic VOM emissions to either avoid decreasing
    14 or to actually increase toxic VOM emissions.
    15 We've noted before that there's clearly a limit on
    16 the potential for this given the declining cap on
    17 total VOM emissions, but nonetheless there is a
    18 concern.
    19 Similarly, there's the possibility for
    20 pushing emissions off to the off season. I should
    21 say the off-ozone season as has been mentioned by
    22 a couple of folks here today previously, and
    23 specifically the concern is the potential for
    24 off-season increases in toxic VOM emissions. In
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    1 either case, the risk of localized toxic hot spots
    2 is real, and I point out to the board that
    3 recently organizations in California have filed a
    4 civil rights lawsuit against the state and five
    5 companies alleging that the state's air pollution
    6 trading program contributes to toxic hot spots in
    7 predominantly minority communities. I've attached
    8 a copy of a Los Angeles Times article. This is
    9 all I have on the suit thus far, but it gives you
    10 a review of the issue.
    11 So with this in mind, we recommended in
    12 April and we will recommend once again that the
    13 rule minimally establish an annual emissions cap
    14 for participating sources based on actual historic
    15 emissions of
    HAPs and the stated toxic air
    16 contaminants as well until such time as MACT or
    17 NESHAPs are met. Again this is designed to offset
    18 or counter the possibility of localized increases
    19 in toxic emissions.
    20 Frankly, I'm not sure if it even goes
    21 far enough within the context of this proposal.
    22 However, it would probably be sufficient. The
    23 board might need to look at other measures outside
    24 the context of this proposal to offset this
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    1 potential problem, but it does need to be
    2 addressed. We will also recommend once again that
    3 the agency look at not only HAP emissions but also
    4 the state toxic air contaminants when looking at
    5 the distribution of toxic contaminants in relation
    6 to this program. And similarly, we ask that when
    7 reporting -- when sources report information to
    8 the agency, they include emissions for both
    HAPs
    9 and the state toxic air contaminants.
    10 Our comments address the new source
    11 review issue that's come up in testimony today.
    12 Let me start by saying I believe Mr. Romaine from
    13 the agency has addressed the concern that we
    14 raised here when he said offset credits that have
    15 been applied to a SIP essentially for which we've
    16 already taken credit could not essentially be
    17 assigned
    ATUs for the purposes of the ERMS
    18 program.
    19 Our concern again is that we would be
    20 essentially double counting credits or essentially
    21 giving folks -- giving sources
    ATUs for credits
    22 that were supposed to have been eliminated from
    23 the air shed already by inclusion in the SIP. So
    24 again I would ask the board to take a hard look at
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    1 that to make sure indeed that is the case, but
    2 again I think Mr. Romaine said that indeed it is
    3 so I will move on.
    4 To our comments on baseline emissions
    5 which are in some ways related to our comments on
    6 exclusions from the program. Previously we've
    7 expressed some concerns about the potential for
    8 the generation of false credits either from --
    9 because of inflated baselines or because of
    10 improper exclusions.
    11 I suppose the baseline emissions is
    12 more likely to create the false credits that we've
    13 raised concerns about in the past. As I recall,
    14 the agency has said that the potential excess
    15 associated with inflated baselines, while it is
    16 real, a real possibility, I should say, is likely
    17 to be very small in comparison to the total ATU
    18 pool, but again, I would ask that the board take a
    19 hard look at this because indeed there is the
    20 potential for false credits and that would
    21 undermine the program and undermine the state's
    22 ability to make reasonable further progress
    23 towards attainment.
    24 Along these lines, we've suggested
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    1 before and we'll suggest once again that the rule
    2 define non-representative emissions to avoid
    3 disagreements that could delay implementation and
    4 that could limit the extent to which baselines
    5 exceed actual emissions. We're concerned that
    6 this will become a potential barrier to
    7 implementing the program as these
    8 non-representative emissions are disputed,
    9 potentially appealed to the board. So a more clear
    10 definition of what actually is meant by
    11 non-representative, you can help clear this up.
    12 Again moving on to exclusions, from the
    13 program, we've previously suggested a more
    14 detailed definition of best available technology,
    15 one that would define maximum degree of VOM
    16 reduction as being at least as pronounced the
    17 greatest level of reductions for comparable units.
    18 This is essentially how Mr. Romaine and the others
    19 from the agency have defined this, but my
    20 understanding that nonetheless that definition
    21 hasn't been incorporated into the rule itself.
    22 There's clearly a lot of concern about
    23 how this is going to be done on a case-by-case --
    24 how best available technology is going to be
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    1 categorized on a case-by-case basis. This is one
    2 way to provide a little more direction that I
    3 think is appropriate and consistent with what the
    4 agency has already stated they're going to do.
    5 We have previously expressed concerns
    6 about the LAER exclusion and have recommended a
    7 seasonal emissions limit up front for excluded
    8 units that do meet LAER. The concern again is
    9 that while the rate may be set, production could
    10 increase, and therefore, total emissions could
    11 increase thereby defeating the overall purpose of
    12 this plan or I should say this proposal.
    13 A seasonal emissions limit up front for
    14 these units that have been excluded because they
    15 meet LAER could at least minimize or I should say
    16 prevent increases in emissions from these excluded
    17 units. Moving on to the MACT exclusion issue, we
    18 strongly object to the board's proposal to exempt
    19 sources that achieve MACT or
    NESHAPs after 1999.
    20 As the agency points out in
    prefiled
    21 testimony and today, this provision seriously
    22 jeopardizes the state's ability to achieve its
    23 rate of progress requirements and comply with the
    24 Clean Air Act. I note that the agency pointed out
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    1 in its
    prefiled testimony that MACT in many cases
    2 won't result in significant VOM reductions beyond
    3 where the sources already are, and this in our
    4 opinion calls into question the sensibility of
    5 exempting any source based on the implementation
    6 of MACT or
    NESHAPs regardless of whether MACT
    7 implementation occurs before or after 1999.
    8 Indeed Section 9.8 (c)(4) of the state
    9 Environmental Protection Act says the ERMS program
    10 should assure that credit or exclusion is granted
    11 for emissions units that meet MACT or
    NESHAPs, and
    12 we recommend that we go with the former providing
    13 credit but not providing exclusions. We recommend
    14 that adjusting the baseline for sources that have
    15 achieved MACT prior to '99 but not exempting them.
    16 On the other hand, for sources that are
    17 meeting MACT post 1999, frankly we're not crazy
    18 about the policy of counting these as voluntary
    19 VOM reductions, but the Act does seem to require
    20 it. Again, we encourage the board to go with
    21 granting credit but not excluding them altogether,
    22 not just for the post '99 MACT implementation
    23 sources but also those that do so before 1999.
    24 I'd like to address the issue of
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    1 exemption from the emissions excursion
    2 compensation for 1999 that's been talked about
    3 today. Essentially we concur with the agency's
    4 prefiled testimony on this matter. It could be
    5 significantly detrimental to the state's overall
    6 efforts to achieve ozone attainment if this is
    7 pushed back to 2000 or I should say if
    8 compensation excursions are exempted in 1999 and
    9 pushed back to 2000, we are concerned again we are
    10 going to miss our rate of progress deadlines. So
    11 we concur with the agency there.
    12 The subject of whether or not emission
    13 reduction generators at participating sources
    14 should be allowed to be located potentially
    15 outside the non-attainment areas has come up. We
    16 concur with the board's position on this. It's
    17 probably premature to do so at this time, although
    18 it certainly needs to be looked at in the future.
    19 The issue of shutdowns and what to do
    20 with the
    ATUs associated with those facilities has
    21 received much attention, and we think it is one of
    22 the more -- probably one of the most critical
    23 issues that still remains unresolved in addition
    24 to the potential for air toxic hot spots. We note
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    1 that both the board and the agency characterized
    2 the proposed 80/20 split where 80 percent of the
    3 ATUs stayed with the facility, essentially stay
    4 with their ownership and 20 percent might go to
    5 the ACMA. That was characterized as a compromise,
    6 and we certainly don't see that as a compromise.
    7 We had suggested 100 percent retirement
    8 of these credits, and in fact, I think it comes
    9 back -- this issue really drives home the points
    10 that were made earlier about whether or not this
    11 system is going to be creating ownership of
    12 credits, whether we are
    commodifying (sic), I
    13 think is the word I heard, air pollution in
    14 northeastern Illinois.
    15 If sources are allowed to sell -- let
    16 me back up. If
    ATUs stay in circulation, if the
    17 air pollution associated with these facilities
    18 lives on into perpetuity even after they've shut
    19 down or left the region or whatever, I think
    20 you're essentially saying that indeed these
    21 facilities have ownership over these air pollution
    22 rights, and I strongly disagree with that concept
    23 in part because it raises some real legal issues,
    24 but secondly, we feel that until the region has
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    1 reached attainment, 100 percent of these credits
    2 should be retired, no less.
    3 There's no good reason to keep these
    4 credits in circulation when we still haven't
    5 reached attainment, and furthermore, maintaining
    6 ATUs associated with plants that have shut down
    7 suggest that the
    ATUs are property when in reality
    8 they are part of an alternative regulatory system
    9 owned by the public, not individual companies.
    10 I have some comments on
    11 compliance -- compliance assurance as well. We
    12 suggest that noncompliance fees or some other
    13 compensation should be specified in the rule for
    14 an accurate filing and late filing. I asked this
    15 question earlier, and the agency suggested that
    16 this can be handled by standard procedures, and
    17 I'll take their word for it on that one.
    18 The rule should specify the minimum
    19 frequency with which the agency will conduct
    20 audits. We suggest at least once every two years.
    21 Again the future of this program is not -- none at
    22 this time, but assuming that it does extend well
    23 beyond into the next millennium, we should look at
    24 having a minimum audit requirement.
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    145

    1 I think the rule needs a section that
    2 explains how the agency will determine whether an
    3 excursion has occurred, and therefore, excursion
    4 compensation is required. The rule states that
    5 this will happen, that this procedure will be
    6 employed but does not spell out how the emission
    7 excursion will be determined, and we think that
    8 should be included in the proposal.
    9 We've also suggested a source-by-source
    10 compliance summary available to the public in our
    11 past testimony. I won't go over all the
    12 components because it's quite long, but again I
    13 re-submit that to the board and to your attention
    14 and ask you to give it serious consideration.
    15 Earlier I asked the agency about how
    16 they're going to communicate to the public their
    17 analysis of the effects of directionality and
    18 reactivity of VOM and VOM trades to the public,
    19 and I'm satisfied with the response that we
    20 received earlier. And finally, on the subject of
    21 overcompliance and the date at which that
    22 overcompliance decision will be made, we concur
    23 with the agency's suggestion that it be October
    24 31st instead of December 31st.
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    1 That is all I have. I just want to
    2 close by once again pointing out that on a whole
    3 this is a really good program, but it has at least
    4 two major flaws remaining in our opinion; one, the
    5 potential for toxic hot spots; two, the indefinite
    6 life of
    ATUs regardless of whether a plant has
    7 shut down, left the region, so on.
    8 I think those are especially two very
    9 problematic components to this proposal. We ask
    10 you to give those a hard look. That's all I have.
    11 HEARING OFFICER FEINEN: Do you want to
    12 move what you passed out as an exhibit or do you
    13 just want to give us your testimony? You can
    14 always file this in the public comment later on.
    15 MR. BURKE: I'd like to file this as a
    16 public comment.
    17 HEARING OFFICER FEINEN: That's fine.
    18 Let's go off the record for a second.
    19 (Discussion off the record.)
    20 HEARING OFFICER FEINEN: Are there any
    21 questions for Mr. Burke? Seeing none, let's go
    22 take a 15-minute break.
    23 MS. HENNESSEY: We're going to have an
    24 opportunity to ask questions after the break? I
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    1 do have some. I thought the agency was going to
    2 be preparing some questions for Mr. Burke.
    3 HEARING OFFICER FEINEN: Why don't we
    4 take a 15-minute break and come back with
    5 questions for Mr. Burke. Sorry.
    6 (Recess taken.)
    7 HEARING OFFICER FEINEN: I think we'll
    8 start out with the agency's questions.
    9 MR. KANERVA: Roger
    Kanerva, Illinois
    10 EPA. We had just one question, Mr. Burke, and
    11 actually we need to lead into this with a little
    12 bit of a recap of your oral testimony here today.
    13 I believe you testified that our responses today
    14 regarding the annual performance report and how we
    15 would handle the patterns of emissions and any
    16 potential geographic focus to those was
    17 satisfactory to you I believe is what you said
    18 earlier?
    19 MR. BURKE: How that information would
    20 be reported to the public as described by you
    21 seemed acceptable to me, yes.
    22 MR. KANERVA: Well, then with regard to
    23 your very first point here about possible global
    24 hot spots, toxic hot spots, since we're talking
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    1 about just an initial phase for this program and
    2 we are going to be reporting on the situation of
    3 hazardous air pollutants in our annual performance
    4 report, what would your view be of utilizing the
    5 information from the first year or two of a report
    6 to start to give us a real empirical basis to
    7 judge whether or not unusual patterns would
    8 develop with HAP emissions and then work out some
    9 sort of possible regulatory action to address that
    10 HAP? If you could respond to that concept, if you
    11 would.
    12 MR. BURKE: Well, I think that approach
    13 makes sense, but in addition to tracking the
    14 distribution of these emissions and looking for
    15 toxic hot spots essentially -- that's what you're
    16 describing -- we think it's appropriate to take
    17 steps to actually prevent the problem from
    18 happening in the first place. Again we've
    19 suggested an approach which is one way we think to
    20 accomplish this preventive strategy.
    21 MR. KANERVA: Okay, thank you.
    22 HEARING OFFICER FEINEN: Are there any
    23 other questions from the agency? Any other
    24 questions? Mr.
    Trepanier.
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    1 MR. TREPANIER: Thank you. Being from
    2 Blue Island, I am concerned when I heard your
    3 testimony about toxic hot spots. In Blue Island
    4 there's already a chemical company and an oil
    5 refinery and several other users of toxic
    6 materials.
    7 Now, is this the type of a locale in
    8 your estimation that could be troubled by
    9 increases in hazardous air pollutants? And if so,
    10 how would that be occurring? How would I notice
    11 it? Is there some way that I could --
    12 MR. BURKE: I think that's a good
    13 question. While there's no way to predict with
    14 any certainty whether toxic hot spots will occur
    15 or where they'll occur, the potential seems to be
    16 there, and Blue Island is a good example of where
    17 indeed this might happen.
    18 For example, the Clark Oil refinery is,
    19 as I understand it, relatively inefficient at
    20 least for a refinery, and let's say, for example,
    21 that instead of reducing emissions consistent with
    22 the 12 percent reduction requirement, the facility
    23 instead purchases credits or even worse, purchases
    24 credits and allow it to even increase emissions at
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    1 least over the short term. Again, yes -- and in
    2 worst case scenario some of the other sources
    3 around there do the same. Over time we
    4 potentially see a toxic hot spot of sorts, and
    5 it's a real concern.
    6 Again it's been raised in California
    7 and other places. Granted, given the way the
    8 program is set up now, it doesn't seem likely, but
    9 given the potential repercussions of such an
    10 instance, we think it's sensible to adopt a
    11 preventive strategy.
    12 MR. NEWCOMB: This is Chris
    Newcomb from
    13 Dart Container. I guess I'm unclear over the
    14 concern of toxic hot spots given the fact, as I
    15 understand it, that the ERMS program as well as
    16 the statute in question here can't change any of
    17 the requirements of the Clean Air Act itself and
    18 how these requirements are imposed upon stationary
    19 sources here in Illinois.
    20 Wouldn't the type of scenario that
    21 you're talking about only occur if a facility were
    22 to significantly increase its emissions, and
    23 therefore, they would still have the requirements
    24 of getting permit application, getting the permit
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    1 and possibly going through significant
    2 modification? Your toxic hot spot, I guess,
    3 scenario, I'm not sure how that could take place
    4 without some major Clean Air Act violation. Can
    5 you maybe give me a scenario by which this could
    6 actually happen ?
    7 MR. BURKE: A scenario. Well, it's my
    8 understanding that especially prior to MACT or
    9 MACT being implemented, sources are allowed to
    10 increase emissions within certain parameters, and
    11 it would seem possible -- and again while it's
    12 more unlikely given the declining cap that this
    13 program is going to apply to all
    VOMs, it does
    14 seem possible that a source could, A, not reduce
    15 VOMs but specifically nontoxic
    VOMs through the
    16 purchase of
    ATUs from other sources, or B,
    17 potentially increase toxic
    VOMs through those
    18 purchases as well.
    19 I think in most cases -- and maybe I'm
    20 wrong frankly -- especially prior to MACT being
    21 implemented -- there isn't necessarily a limit on
    22 total emissions but instead a limit on emissions
    23 rates. And if you increase production and the
    24 possibility of the purchase of
    ATUs indeed toxic
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    1 VOM emissions could increase.
    2 HEARING OFFICER FEINEN: Any other
    3 questions? Seeing no other questions, let's go
    4 off the record -- I'm sorry, let's go back on the
    5 record and excuse Mr. Burke from answering any
    6 other questions. Thank you very much. Now, let's
    7 go off the record.
    8 (Discussion off the record.)
    9 HEARING OFFICER FEINEN: Public comment
    10 period's going to end on September 8. The public
    11 comments need to be with the board's office by
    12 4:30 on September 8 either by hand delivery or fax
    13 will be acceptable or other means, but the board
    14 has to have a copy by 4:30.
    15 Service on the rest of the participants
    16 on the service list will be by normal process.
    17 Then we will allow a second comment to be filed on
    18 September 18th. Once again, it has to be with the
    19 board by 4:30 either by fax, hand delivery or by
    20 mail, and then you can serve the rest of the
    21 parties by normal service. If there's no other
    22 outstanding matters at this point, I will end this
    23 proceeding today. Seeing none, let's close it.
    24 Thank you.
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    1 (Which were all the proceedings
    2 had in the above-entitled hearing
    3 on this date.)
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    1 BEFORE THE ILLINOIS POLLUTION CONTROL BOARD
    2
    3 LISA H. BREITER, CSR, RPR, CRR, being
    4 first duly sworn, on oath says that she is a court
    5 reporter doing business in the City of Chicago;
    6 that she reported in shorthand the proceedings at
    7 the taking of said hearing and that the foregoing
    8 is a true and correct transcript of her shorthand
    9 notes so taken as aforesaid, and contains all of
    10 the proceedings had at said hearing.
    11
    12
    13
    14
    LISA H. BREITER, CSR, RPR, CRR
    15
    L.A. REPORTING
    79 West Monroe Street
    16 Suite 1219
    Chicago, Illinois 60603
    17 (312) 419-9292
    (312) 419-9294 Fax
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    L.A. REPORTING - (312) 419-9292
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