THIS FILING SUBMITTED ON RECYCLED PAPER
BEFORE THE ILLINOIS POLLUTION CONTROL BOARD
IN THE MATTER OF: )
)
NOx TRADING PROGRAM: ) R06-22
AMENDMENTS TO 35 ILL. ) (Rulemaking - Air)
ADM. CODE PART 217 )
NOTICE OF FILING
TO: Ms. Dorothy M. Gunn John C. Knittle, Esq.
Clerk of the Board Hearing Officer
Illinois Pollution Control Board
Illinois Pollution Control Board
100 West Randolph Street 2125 South First Street
Suite 11-500 Champaign, Illinois 61820
Chicago, Illinois 60601
(VIA FIRST CLASS MAIL)
(VIA ELECTRONIC MAIL)
(SEE PERSONS ON ATTACHED SERVICE LIST)
PLEASE TAKE NOTICE that I have today filed with the Office of the Clerk of
the Illinois Pollution Control Board a
MOTION FOR EXPEDITED REVIEW and
INITIAL COMMENTS OF THE ILLINOIS ENVIRONMENTAL REGULATORY
GROUP,
copies of which are herewith served upon you.
Respectfully submitted,
ILLINOIS ENVIRONMENTAL
REGULATORY GROUP,
By: /s/ Katherine D. Hodge
One of Its Attorneys
Dated: March 10, 2006
Katherine D. Hodge
N. LaDonna Driver
HODGE DWYER ZEMAN
3150 Roland Avenue
Post Office Box 5776
Springfield, Illinois 62705-5776
(217) 523-4900
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CERTIFICATE OF SERVICE
I, Katherine D. Hodge, the undersigned, hereby certify that I have served the
attached
MOTION FOR EXPEDITED REVIEW and INITIAL COMMENTS OF
THE ILLINOIS ENVIRONMENTAL REGULATORY GROUP
upon:
Ms. Dorothy M. Gunn
Clerk of the Board
Illinois Pollution Control Board
100 West Randolph Street
Suite 11-500
Chicago, Illinois 60601
via electronic mail on March 10, 2006; and upon:
John C. Knittle, Esq.
Hearing Officer
Illinois Pollution Control Board
2125 South First Street
Champaign, Illinois 61820
Rachel L. Doctors, Esq.
Assistant Counsel
Division of Legal Counsel
Illinois Environmental Protection Agency
1021 North Grand Avenue East
Post Office Box 19276
Springfield, Illinois 62794-9276
Kathleen C. Bassi, Esq.
Schiff Hardin, LLP
6600 Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606-6473
William Richardson, Esq.
Chief Legal Counsel
Illinois Department of Natural Resources
One Natural Resources Way
Springfield, Illinois 62702-1271
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by depositing said documents in the United States Mail, postage prepaid, in Springfield,
Illinois, on March 10, 2006.
/s/Katherine D. Hodge
Katherine D. Hodge
IERG:001/R Dockets/Fil/COS – COMMENTS
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BEFORE THE ILLINOIS POLLUTION CONTROL BOARD
IN THE MATTER OF: )
) R06-22
NOX TRADING PROGRAM: ) (Rulemaking – Air)
AMENDMENTS TO )
35 ILL. ADM. CODE PART 217 )
MOTION FOR EXPEDITED REVIEW
NOW COMES the ILLINOIS ENVIRONMENTAL REGULATORY GROUP
(“IERG”), by its attorneys, HODGE DWYER ZEMAN, and hereby requests the Illinois
Pollution Control Board (“Board”) to expedite review of the Illinois Environmental
Protection Agency’s (“Agency”) Proposal of Amendments to 35 Ill. Admin. Code Part
217. In support of this Motion, IERG states as follows:
1. As set forth in the Proposal of Amendments to 35 Ill. Admin. Code Part
217 (“Part 217”), the Agency seeks to amend Part 217.
2. Part 217, Subparts A, T, U and W contain the regulations regarding: (1)
general provisions; (2) cement kilns; (3) NOx control and trading program for specified
NOx generating units; and (4) NOx trading program for electrical generating units,
respectively, with respect to nitrogen oxide (“NOx”) emissions.
3. The proposed amendments are primarily intended to clarify and update
Part 217. As such, expediting the proposed amendments will not cause material
prejudice to the Illinois EPA.
4. The regulations at issue, Part 217, Subparts U and W, are seasonal rules
and the proposed amendments need to be in place during the 2006 ozone season to be
certain the proposed amendments will be applicable for the 2006 ozone season.
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5. Further, the Agency filed the proposed amendments on January 19, 2006.
The proposed amendments were posted on the Board’s website on or soon after that date.
Certain provisions of the proposed amendments provide that the Agency may confiscate
and redistribute certain NOx Allowances from shutdown or transferred units unless such
NOx Allowances are transferred “to another source or budget unit subject to the
requirements of Subpart U.” See Agency’s Proposed Amendments to 35 Ill . Adm. Code
217, Subpart U, Section 217.462(d)(2)(D) and Section 217.462(d)(3). Only Illinois
sources and budget units are subject to Subpart U. Since the Agency’s proposed
amendments have been officially filed with the Board and published on the Board’s site,
prospective out-of-state buyers have access to the Agency’s proposed amendments and
may not be as likely to purchase NOx Allowances from Illinois units for fear that the
Agency’s proposed amendments may become the rule in Illinois and that if an Illinois
unit may someday be shutdown or sold, the Agency would confiscate the NOx
Allowances. Further, out-of-state buyers that may be willing to accept the additional risk
associated with the Agency’s proposed amendments would likely determine that NOx
Allowances from Illinois units would have a lower value than NOx Allowances from
units located in other states. Thus, sources that may wish to sell NOx Allowances during
the period that the Agency’s proposed amendments could possibly become the rule in
Illinois would be materially prejudiced as a result of the denial of this motion.
6. In addition, since the proposed amendments include allocations of NOx
Allowances that are different for some sources than the current rule, it is unclear if the
Agency will, or could properly, issue NOx Allowances for the 2007, 2008 and 2009
seasons before this rulemaking is complete. If the Agency allocates the NOx Allowances
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for 2007, 2008 and 2009 under the current rule, it may have to make an adjustment to the
allocation to redistribute certain NOx Allowances. Such a redistribution would
materially prejudice the owners of the units involved since they would not be certain of
the number of NOx Allowances that they could rely upon until some future date after the
allocation.
7. On the other hand, if this rulemaking is not expedited and the Agency does
not allocate the NOx Allowances for 2007, 2008 and 2009 until after this rulemaking is
complete, Illinois owners of units subject to Part 217 would be at a disadvantage with
regard to sources in other states. NOx Allowances are transferable between entities in
approximately 20 states. Approximately 16 states in the NOx trading program have
already made allocations for year 2007. Some states have made allocations through the
year 2009. Sources in those states currently have the opportunity to sell the future year
NOx Allowances, use them and sell older NOx Allowances or to engage in trades
intended to maximize the value of their NOx Allowances. In Illinois, owners of units
subject to Part 217, would be denied this opportunity until this rule is finalized. Further,
since the value of NOx Allowances tends to decline over time, the value of the 2007,
2008 and 2009 NOx Allowances that Illinois owners of units subject to Part 217 receive
will likely be lower if this rule is not expedited. The lack of flexibility and lower NOx
Allowance value that would be associated with a delay in this rulemaking would put
Illinois owners of units subject to Part 217 at a competitive disadvantage when compared
with other states in the program. Therefore, Illinois owners of units subject to Part 217
would be materially prejudiced as a result of the denial of this motion. Thus, for the
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reasons stated in paragraphs 5, 6 and 7 above, IERG urges the Board to move forward
with this rulemaking as expeditiously as possible.
8. On October 19, 2000, the Board, pursuant to Section 28.5 of the Illinois
Environmental Protection Act (“Act”), accepted In the Matter of: Proposed New 35 Ill.
Adm. Code 217.Subpart U, NOx Control and Trading Program for Specified NOx
Generating Units, Subpart X, Voluntary NOx Emissions Reduction Program, and
Amendments to 35 Ill. Adm. Code 211, R01-17 (Oct. 19, 2000) for fast track rulemaking.
At that time, the Board, without commenting on the merits of the proposal, adopted the
proposed amendments for first notice publication.
9. Since the initial proposal of Part 217 was required to meet the State’s
federal obligations under the Clean Air Act, 42 U.S.C. § 7401,
et seq.
, the Board’s review
of the proposed amendments, which clarify and update Part 217 regulations, should also
be expedited.
10. IERG also requests that the requisite hearing be scheduled as soon as
possible in accordance with Section 28(a) of the Act, 415 ILCS 5/28(a).
11. IERG is filing its Initial Comments on the Agency’s proposed
amendments to Part 217 simultaneously with this motion.
12. IERG believes that the information necessary for the Board to schedule a
public hearing is contained in the Agency’s Statement of Reasons and in IERG’s Initial
Comments. If more information is needed, IERG will cooperate fully to expeditiously
provide the same to the Board and its hearing officer.
13. As required by 35 Ill. Admin. Code § 101.512, this Motion is
accompanied by an affirmation attesting that the facts cited herein are true.
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WHEREFORE, for the above and foregoing reasons, the ILLINOIS
ENVIRONMENTAL REGULATORY GROUP hereby respectfully requests the Illinois
Pollution Control Board to expedite review in this matter.
Respectfully submitted,
ILLINOIS ENVIRONMENTAL
REGULATORY GROUP
By: /s/ Katherine D. Hodge
One of Its Attorneys
Date: March 10, 2006
Katherine D. Hodge
HODGE DWYER ZEMAN
3150 Roland Avenue
Post Office Box 5776
Springfield, Illinois 62705-5776
(217) 523-4900
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AFFIDAVIT
LINOIS
SS
COUNTY OF SANGAMON
)
Deirdre K.
being first duly sworn on oath, affirms that the facts set forth in
the Motion for Expedited Review are true and correct.
Deirdre K. Himer, Executive Director
Illinois Environmental Regulatory Group
3150 Roland Avenue
gfield, Illinois 62703
this
d and sworn to before me
ay of March, 2006.
is
S
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Patti L. I ,ticker
otary Pnbli", ,),n' 'it 116r,' is
Tommi'Si"I1 i.':,
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BEFORE THE ILLINOIS POLLUTION CONTROL BOARD
IN THE MATTER OF: )
)
NOx TRADING PROGRAM: ) R06-22
AMENDMENTS TO 35 ILL. ) (Rulemaking - Air)
ADM. CODE PART 217 )
INITIAL COMMENTS OF THE
ILLINOIS ENVIRONMENTAL REGULATORY GROUP
NOW COMES the ILLINOIS ENVIRONMENTAL REGULATORY GROUP
(“IERG”), by one of its attorneys, Katherine D. Hodge of HODGE DWYER ZEMAN,
and submits its Initial Comments in the above-captioned matter to the Illinois Pollution
Control Board (“Board”), stating as follows.
I.
INTRODUCTION
IERG is an Illinois not-for-profit corporation affiliated with the Illinois State
Chamber of Commerce. IERG is composed of 59 member companies regulated by
governmental agencies that promulgate, administer or enforce environmental laws,
regulations, rules or other policies. A number of IERG’s member companies conduct
activities governed by the regulations set forth in 35 Ill. Admin. Code Part 217.
On January 19, 2006, the Illinois Environmental Protection Agency (the “Illinois
EPA”) submitted a Proposal of Amendment (the “Proposal”) to 35 Ill. Admin. Code Part
217 (“Part 217”). The Board issued an order on February 2, 2006, accepting the Proposal
for hearing, granting the Illinois EPA’s motion for waiver with regard to certain filing
requirements and requesting copies of certain other documents from the Illinois EPA.
IERG submits the following Initial Comments on the Proposal.
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2
II.
DISCUSSION
A.
General Comments
Generally, IERG appreciates and supports the Illinois EPA’s efforts to provide
clarity to Part 217. The Illinois NOx Trading Program (the “Program”) became effective
in 2001. Two IERG member companies own and operate units that were not included in
the Program. Other member companies own boilers that are used as emissions control
devices (referred to herein as “CO Boilers”), which should have been more clearly
exempted from the Program. Further, several of IERG’s member companies are relying
upon newly established federal emissions calculations methodologies for low mass
emissions (“LME”) units in order to demonstrate compliance with the State requirements.
The LME methodologies were revised by the United States Environmental Protection
Agency (the “USEPA”) in June 2002 and again in August 2002, after the promulgation of
Part 217. Further, there were several inconsistencies and other outdated references in
Part 217 that needed to be addressed. IERG contacted the Illinois EPA soon after the rule
became effective to discuss the need for amendments to Part 217.
It is important to IERG and its member companies that any clarifications to the
rule: (1) specifically exclude CO Boilers located at refineries from the requirements of
the rule; (2) include certain units owned by member companies into the rule and provide
for an allocation to such units; (3) clarify the sections of the rule that apply to units for
which low-emitter status may be requested; and, (4) maintain the economic and
constitutional integrity of Part 217.
While IERG agrees that the Proposal accomplishes some of these goals, most
notably the exclusion of CO Boilers, IERG believes that the Proposal does not address
some issues in an appropriate manner. Further, IERG supports the corrections made by
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3
the Illinois EPA to Subparts A, T, W and the sections of Subpart U that are not
specifically addressed herein. In particular, as written, the Confiscation Provisions (as
defined below) of the Proposal would likely have a deleterious effect on the economic
underpinnings of the Program and would violate the commerce clause of the United
States Constitution. IERG proposes to replace the Confiscation Provisions with
constitutional and economically sound provisions that will specify the actions that the
Illinois EPA must take should they be unable to issue certain NOx Allowances. IERG
will discuss the specific issues below.
B.
CO Boilers
The Proposal includes language at amended Section 217.454(e) that will exclude
existing CO Boilers at Illinois refineries. IERG believes that the language in the Proposal
is sufficient to ensure CO Boilers at refineries will be exempt from the Program. IERG
appreciates the Illinois EPA’s efforts to resolve this problem with Part 217.
C.
Inclusion of Units
The Proposal includes Boiler CB-706 located at Flint Hills Resources, LP (“Flint
Hills”) and provisionally includes the CFB Boiler located at Bunge Milling, Inc.
(“Bunge”) in the Program by including the boilers on Appendices D and E of Part 217.
1
IERG agrees that this is an appropriate means by which to include the boilers. However,
the Statement of Reasons submitted by the Illinois EPA contains several errors with
regard to Flint Hills. On page 9, the Statement of Reasons includes two parentheticals
indicating that Flint Hills had formerly been doing business as BP Amoco. These
parentheticals are not correct and should be stricken. Furthermore, in the next to last
1
Flint Hills Boiler CB-706 was covered by the Program but did not receive an allocation of NOx
Allowances. The Bunge CFB Boiler was inadvertently not covered by Part 217 and did not receive an
allocation of NOx Allowances.
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sentence on page 9, the Statement of Reasons incorrectly lists the sources that have units
that will receive a reduction in Allowances in order to provide the NOx Allowances to
the boiler at Flint Hills. The list should read as follows: A. E. Staley Manufacturing
Company, Archer Daniels Midland Company (Decatur Complex), Corn Products
International, Inc. (Argo Manufacturing Facility), Aventine Renewable Energy, Inc.,
Morris Cogeneration, LLC and Trigen-Cinergy Solutions of Tuscola, LLC.
In addition to the problems with the Statement of Reasons addressed above,
Appendices D and E contain several errors as submitted in the Proposal. Appendix D
incorrectly lists the company names of ConocoPhillips Company, Marathon Ashland
Petroleum LLC and Chicago Coke Co., Inc. Appendix E incorrectly lists the company
name of Marathon Ashland Petroleum LLC and Chicago Coke Co., Inc. and misspells the
name of Morris Cogeneration, LLC. Further, the unit designation numbers for the first
two units listed for ConocoPhillips Company are not correct. Finally, Appendix E, as
presented in the Proposal, does not specifically state that the CFB Boiler located at Bunge
will not be subject to Subpart U until the boiler has received an allocation of Allowances.
Attached hereto as Exhibit A are proposed alternative versions of Appendices D and E,
showing changes from the currently enacted Appendices D and E. IERG requests that
Appendices D and E of the Proposal be stricken and replaced in their entirety with
IERG’s proposed Appendices D and E, as presented here in Exhibit A.
D.
Low-emitter Provisions
As written, the Proposal is unclear as to which units may elect low-emitter status.
Section 217.454(c) states that “the owner or operator of a source listed in Appendix E of
the Part may elect low-emitter status for a budget unit subject to subsection (a) of this
section.” Under this language, the owner of a source listed in Appendix E which also
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5
owned other sources not listed on Appendix E with units that may be subject to the
Program, would be able to bring the units at the non-Appendix E source into the Program
as low-emitters. However, Section 217.472(d) states that “[o]nly a unit located at a
source to which the Agency has ever allocated Allowances under Appendix E of this Part
may elect low-emitter status.” Under the language of Section 217.472(d), the owner of
sources listed on Appendix E and other sources not listed on Appendix E (as described
above) would not be able to elect low-emitter status for any unit not listed on Appendix
E. The Statement of Reasons adds to the confusion in its discussion of Section 217.454
by stating that “[t]o be eligible, the source must be listed in Appendix E.” SOR p. 13. As
can be seen, this language in the Statement of Reasons does not conform to the language
in the Proposal. The statement of Reasons further adds to the confusion in its discussion
of Section 217.472. On page 18, the Statement of Reasons states that “only a source
listed in Appendix E may elect low-emitter status,” while the section it is describing
would allow any source to which the Illinois EPA had ever allocated Allowances to elect
low-emitter status regardless of whether the source was currently listed on Appendix E.
Again, this language in the Statement of Reasons does not conform to the language in the
Proposal. Taken together, the conflicting provisions coupled with the conflicting
explanations make the low-emitter provisions vague and overly complicated.
IERG proposes to simplify the low-emitter provisions by extending the
availability of low-emitter status to all units, not merely those owned by sources listed in
Appendix E. IERG believes that flexibility for units that are currently subject to Part
217, and units that could become subject to Part 217, is an important consideration with
regard to the low-emitter status provisions. IERG believes that the low-emitter
provisions in Part 217 serve an important purpose by allowing units that are truly low
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6
emitters to take federally enforceable permit limits, retire a stream of Allowances large
enough to cover their emissions, and thereafter not be subject to the bulk of the
provisions of Part 217.
While it could be argued that extending the low-emitter provisions to sources not
currently listed on Appendix E would require more effort by the Illinois EPA to make
occasional amendments to Appendix E, IERG believes that extending the availability of
low-emitter status to units that are not owned by owners and operators listed on
Appendix E would not be overly complicated. IERG notes that when Subpart U was
initially promulgated, Appendix E included fifteen separate facilities as owners or
operators. The Proposal would add two new facilities as owners or operators, delete one
facility as an owner or operator, correct the names of four of the original facilities and
completely change the names of eight of the original facilities listed on Appendix E to
reflect a change in the ownership of the unit. Only two of the original fifteen facilities
listed as owners or operators on Appendix E will not be changed by the Proposal. Since
the Illinois EPA has been able to make the appropriate changes to Appendix E that were
required by the Proposal, it would seem that a few additional changes to Appendix E, due
to the inclusion of low-emitters during a future amendment to Appendix E, would not add
an onerous additional burden on the Illinois EPA. IERG would recommend that the low-
emitter provisions be extended to all appropriate units, whether or not the owner or
operator is currently listed on Appendix E.
Attached hereto as Exhibit B are proposed alternative versions of Sections
217.454 and 217.472 of Part 217, regarding low-emitter status and low-emitter
requirements, showing changes from the currently enacted Sections 217.454 and 217.472.
IERG requests that Sections 217.454 and 217.472 of the Proposal be stricken and
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7
replaced in their entirety with IERG’s proposed Sections 217.454 and 217.472, as
presented here in Exhibit B.
E.
Economic and Constitutional Integrity of Part 217
IERG recognizes that there may be situations where the Illinois EPA could be
unable to allocate certain NOx Allowances. However, IERG has several concerns with
the confiscation provisions included as Section 217.462(d) and (e) (the “Confiscation
Provisions”) of the Proposal. These problems include: (1) the placement of the
Confiscation Provisions; (2) the potential economic impact of the provisions; (3) the
inclusion of a specific provision regarding bankruptcy; and (4) the constitutionality of the
Confiscation Provisions. IERG will discuss each of its concerns below under separate
headings.
1.
Placement
The Illinois EPA has placed the Confiscation Provisions in Section 217.462,
which is entitled “Methodology for Obtaining NOx Allocations.” As proposed, the
Confiscation Provisions envision a reallocation of certain Allowances and do not discuss
any methodology for any unit to obtain Allowances. Since the Confiscation Provisions
and IERG’s proposed amendments address reallocation of certain Allowances, the
provisions would be better placed in Section 217.466 regarding NOx Allocations
Procedure for Subpart U Budget Units, or in a new odd-numbered section, such as a new
Section 217.467.
2.
Economic Impact
The Confiscation Provisions are intended to address situations where the Illinois
EPA, for one reason or another, is unable to allocate NOx Allowances to the units listed
in Appendix E. The Confiscation Provisions provide that if a unit subject to Subpart U
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8
does not have an account officer or an account within two years after the Illinois EPA is
required to make an allocation to the unit, the Illinois EPA may confiscate the NOx
Allowances and allocate them to new sources. Similarly, if a unit is permanently
shutdown and does not permanently transfer its NOx Allowances to a unit subject to
Subpart U within two years, the Illinois EPA may confiscate the allocation to the unit and
allocate the Allowances to new sources. Further, if a unit is sold and the seller fails to
notify the Illinois EPA that the NOx Allowances have been transferred to the new owner
or to another source or unit subject to Subpart U, the Illinois EPA will allocate the NOx
Allowances to the new owner. It must be noted that only Illinois sources and units may
be subject to Subpart U. Therefore, if a unit is shutdown or sold and its allocation is sold
to any person who is not an Illinois source or unit subject to Subpart U, the Illinois EPA
may confiscate the Allowances.
According to the USEPA, there are five overarching principles that should guide
all environmental cap and trade programs – simplicity, accountability, transparency,
predictability and consistency. See Tools of the Trade: A Guide to Designing and
Operating a Cap and Trade Program for Pollution Control at 3-1, EPA430-B-03-002,
June 2003.
Simplicity is important because “markets perform better when the rules are simple
and easily understood by all participants.” Id. The Confiscation Provisions add
considerable complexity to the Program. For example, as Subpart U currently stands,
there are effectively two classes of Allowances: Allowances allocated to Appendix E
units which may be traded to any party, and Allowances initially allocated to the NSSA,
which will be returned to the Appendix E units if not used in one year. Under the
Confiscation Provisions, the number of effective classes of Allowances is expanded
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considerably. In addition to (1) Allowances allocated to Appendix E units which may be
traded to any party and (2) Allowances initially allocated to the NSSA which will be
returned to the Appendix E units if not used in one year, the new classes of Allowances
would include: (3) Allowances confiscated from shutdown sources that will be issued to
new sources; (4) Allowances transferred from a shutdown source to an out-of-state
source; and (5) Allowances that may be claimed to be part of a bankruptcy estate. Each
of these new classes of Allowances would have a different value. Further, under the
Confiscation Provisions, the very future availability of NOx Allowances could be called
to question.
Currently, a broker or out-of-state party may buy a continuous stream of NOx
Allowances from an Illinois source or unit for a specified period of years. If the Illinois
source shuts down, the party is contractually entitled to retain the NOx Allowances. If
the proposed automatic Confiscation Provisions on shutdown were adopted, purchasers
of NOx Allowances would be required to address the future economic viability of the
seller’s business, which is beyond the purview of what these rules should impose. This
extensive up-front evaluation would add considerable complexity to the Program and
certainly increase transaction costs. The additional complexities and increased
transaction costs added to the Program by the Confiscation Provisions would have a
chilling effect on the Allowance market in general and, in particular, the price and
salability of Illinois Allowances. Finally, the added complexities would not result in any
increased benefit to the environment.
In addition, the Confiscation Provisions undermine the predictability and
consistency of the Program. Under the Program as it stands, once an entity has purchased
Allowances from an Appendix E unit, the purchasing entity can be assured that it will
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10
have the ability to bank or trade the Allowances, just as if it were an entity listed on
Appendix E. If the Confiscation Provisions are added to the Program, the future value of
NOx Allowances is dependent upon the actions of the source that owns the unit listed on
Appendix E, (i.e. whether the unit will be shutdown or sold to another source) even
though the Allowances may have been sold years before. Brokers and out-of-state parties
could not predict the future value of any stream of Allowances they may purchase.
It should be noted that the on-going success of the Program requires that
participants be allowed to continue to trade, regardless of where either party is located.
In fact, as of the date of this writing, Illinois NOx SIP Call units have been involved in
trades involving 72,928 Allowances. Less than half of these traded Allowances, or
31,195 Allowances, were traded from one Illinois unit to another Illinois unit. Since the
majority of trades are not made from one Illinois unit to another, the Confiscation
Provisions would have a profound negative effect on the Program.
3.
Bankruptcy Provision
The Proposal includes, as the second sentence of Section 217.462(d), the
following sentence: “This authority does not apply to Allowances at a source or emission
unit subject to or at issue in a pending bankruptcy action, or where an order for relief has
been entered in an involuntary bankruptcy case, such that the debtor, trustee, or other
parties in interest may assert that the owner or operator’s interest in the Allowances may
be considered property of the estate pursuant to Section 541(a) of the Bankruptcy Code
(11 U.S.C. § 541(a)).” IERG fails to understand inserting this sentence into the Proposal.
With regard to bankruptcy law, the United States Supreme Court has repeatedly
affirmed the position that “[p]roperty interests are created and defined by state law.”
Butner v. United States, 440 U.S. 48, 55 (1979). According to Lexis, Butner has been
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cited for this specific principle over 700 times. These cases make it clear that before an
item can be “property of the estate” for the purposes of bankruptcy, the item must first be
“property” under state law. Section 217.456(d)(6) of Part 217 states that “[a]n allowance
allocated by the Agency or USEPA under the NOx Trading Program or pursuant to this
Subpart does not constitute a property right.” The new bankruptcy related sentence in
Section 217.462(d) is irreconcilable with the statement in Section 217.456(d)(6) that
Allowances are not a property right. An item is either property under state law or it is
not. In fact, “a bankruptcy trustee can acquire no greater rights in property than the
debtor.” In re Thompson, 253 B.R. 823, 825 (Bankr. D. Ohio 2000).
When two enactments of the same body are irreconcilable, under the doctrine of
repeal by implication “the one which was enacted later should prevail . . .” State v.
Mikusch, 138 Ill. 2d 242, 254 (1990). In the present matter, adoption of the new sentence
in Section 217.462(d), could result in NOx Allowances constituting a property right
through the repeal by implication of Section 217.456(d)(6). Thereafter, Allowances
could be considered property for any purpose, including the takings and interference with
contracts provisions of the United States Constitution. If Allowances are property, the
application of the other provisions of Section 217.462(d) and (e) would certainly seem to
be a state action resulting in a taking of property without just compensation and,
therefore, constitute an unconstitutional taking.
The bankruptcy provision introduces added uncertainty into the Program. While
it seems clear that under the bankruptcy provision the Illinois EPA would not be allowed
to confiscate NOx Allowances that may be claimed as property of a bankruptcy estate,
the rule does not provide any guidance regarding the actions the Illinois EPA’s must take
in that circumstance. It cannot be determined whether the Illinois EPA must allocate the
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, MARCH 13, 2006
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12
Allowances to the original unit, allocate the Allowances to some other unit or whether the
Illinois EPA would be allowed to withhold the NOx Allowances indefinitely.
Furthermore, the current Section 217.456(d)(6) provision (Allowances are not
property) could be relied upon by the Illinois EPA, should it determine that it must reduce
allocations to meet future emission reduction requirements. However, if this were to
occur at some future date, it would seem to promote disparate treatment of Allowances
for units at sources that had ever been involved in a bankruptcy as opposed to those that
had not. For example, if a party in a bankruptcy case asserts that the continuous
perpetual stream of Allowances are the property of a bankruptcy estate, it would seem
that the new sentence would indicate that the Illinois EPA would concede that such
Allowances were property of the bankrupt, and untouchable by the Illinois EPA. Should
such a situation occur, the Illinois EPA could require reductions of allocations of
Allowances to non-bankrupt units, but could not interrupt allocations of Allowances to
bankrupt units. Since the bankruptcy provision is not specific to units subject to
Appendix E, it would seem that, should the Illinois EPA determine that future reductions
of Allowances were needed, a broker could purchase continuous streams of Allowances
from several Appendix E units, declare bankruptcy, claim the Allowances were part of
the bankruptcy estate and, therefore, protect those Allowances from reduction.
Finally, no other market-based cap and trade program in Illinois provides for
specialized treatment in the instance of bankruptcy. It should be noted that the Emission
Reduction Market Program (35 Ill. Adm. Code 205 et. seq.) (“ERMS”) is a cap and trade
market-based emissions reduction program with provisions that address the same
emissions market issues that are addressed by the Program. The ERMS program does not
have any bankruptcy provision. Subpart W of Part 217 (25 Ill. Adm. Code Subpart W),
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, MARCH 13, 2006
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13
the federal SO2 trading program (40 CFR 73), the federal NOx SIP Call trading program
(40 CFR 96), the federal NOx budget trading program (40 CFR 97) all comprise market-
based cap and trade emission reduction programs. None of these programs contains a
provision regarding differing property rights in a bankruptcy situation or a concept
limiting interstate trading with regard to Allowances held by shutdown units.
Generally, IERG believes that the bankruptcy provision adds considerable
complexity which would result in a negative effect on the Program. Further, the added
complexity and negative effect would not be balanced by any benefit to the Illinois EPA,
affected sources or the environment. IERG would recommend that the second sentence
of Section 217.462(d) be removed from the Proposal.
4.
Constitutionality of Confiscation Provisions
Sections 217.462(e)(1) and (2), of the Illinois EPA’s Proposal, provide that in
most circumstances where the Illinois EPA confiscates Allowances, the Allowances will
be reallocated to new sources in Illinois. Sections 217.462(d)(2) and (d)(3) provide that
Allowances from a shutdown unit or a unit sold to another entity will be confiscated
unless the shutdown unit transfers its Allowances to another Illinois source. IERG
requests that if there must be Confiscation Provisions, the owners or operators of
shutdown or sold units should be allowed to keep their Allowances and transfer such
Allowances to any party that can legally purchase such Allowances. IERG also requests
that any confiscated Allowances be redistributed to budget units already listed in
Appendix E. While the Illinois EPA does not state its reasons for requiring transfers to
in-state units and making redistributions to new in-state units, the only rational
assumption is that the rule is intended to facilitate business, and particularly new
business, in Illinois. IERG, as an organization representing Illinois businesses, finds this
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, MARCH 13, 2006
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14
rationale to be laudable. However, IERG believes that the provisions discussed above
would constitute an unconstitutional interference with interstate commerce.
There do not appear to be any federal regulations that address the situation as
described in the preceding paragraph. Therefore “[i]n the absence of federal legislation,
these subjects are open to control by the States so long as they act within the restraints
imposed by the Commerce Clause itself.” Philadelphia v. New Jersey, 437 U.S. 617, 623
(1978). Furthermore, “State laws enacted for a legitimate public purpose with only an
incidental effect on interstate commerce are constitutional ‘unless the burden imposed is
clearly excessive in relation to the putative local benefits.’” Clean Air Mkts. Group v.
Pataki, 194 F. Supp. 2d 147, 159 (D.N.Y. 2002). The new source set aside (“NSSA”)
provisions of the current version of Part 217 are an excellent example of a state law with
a legitimate purpose (providing a fund of Allowances for new Illinois sources) and an
incidental and limited effect on interstate commerce (only 3% of the total NOx budget for
non-EGUs is reserved for the NSSA, with the rest of the Illinois Allowances available for
interstate commerce).
The Proposal would provide that all Allowances confiscated from budget units
without accounts or account officers, and all Allowances confiscated from shutdown
units, would be allocated to new Illinois budget units. Furthermore, under Subsections
217.462(d)(2) and (d)(3), sources contemplating a shutdown or sale of a unit would be
forced to sell their Allowances to another Illinois unit or lose them. The Proposal does
not limit the number of Allowances that may be affected by the Confiscation Provisions.
As stated before, although IERG finds the Illinois EPA’s interest in Illinois business
laudable, “regardless of the ultimate legislative purpose, even if laudable, a statute that
discriminates against commerce is protectionist and violates the Constitution. If the
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, MARCH 13, 2006
* * * * * PC #1 * * * * *
15
legislative means result in ‘isolating the State from the national economy,’ then the
statute is unconstitutional despite a legitimate legislative goal. Further, a state cannot
validly legislate to ‘its own inhabitants a preferred right of access over consumers in
other States to its natural resources or to privately owned articles of trade. In other
words, a state cannot block imports from other states, nor exports from within its
boundaries, without offending the Constitution.” Id. at 160.
IERG maintains its position that the confiscation aspects of the Confiscation
Provisions, as written, are unconstitutional. However, if certain Allowances are to be
confiscated, it would seem that there are three possible alternatives. First, the Illinois
EPA could redistribute the confiscated Allowances to new sources, but as described
above, that option would seem to be unconstitutional. Second, they could retire the
confiscated Allowances, which option would be antithetical to the market-based nature of
Part 217 and would also violate section 9.9(d)(4) of the Illinois Environmental Protection
Act (providing “that the Agency allocate to non-EGUs Allowances that are designated in
the rule, unless the Agency has been directed to transfer the allocations to another unit
subject to the requirements of the NOx Trading Program, and that upon shutdown of a
non-EGU, the unit may transfer or sell the Allowances that are allocated to such unit”).
Third, the Illinois EPA could redistribute the confiscated Allowances to the units listed in
Appendix E in order for such Allowances to remain available for interstate commerce.
IERG would recommend the third approach listed above.
5.
Scenarios
The full impact of the Confiscation Provisions may best be understood by the
presentation of actual scenarios that show the effects of the Confiscation Provisions when
applied to potential business situations. Below are four scenarios that discuss the Illinois
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, MARCH 13, 2006
* * * * * PC #1 * * * * *
16
EPA’s actions that would be required based on Section 217.462(d)(1)-(3) of the Proposal
and the disposition of the confiscated Allowances, as would be required by Section
217.462(e)(1)-(3).
Scenario 1
Section 217.462 (d)(1) - Through a contract, company A transfers to company B
100 Allowances per year for 15 years to be delivered once every three years. The first
three-year transfer is carried out without problem. A’s account representative dies within
24 months after the Agency is required to make the next 3-year NOx allocation and A
does not certify a new representative for a considerable time. It is unclear what the
Illinois EPA would be required to do in such a situation. Company A failed to have an
account representative for a period within two years of the time that the Agency was
required to make its next allocation. The rule is silent regarding how long a source can
be without an account representative within the 2-year timeframe before (d)(1) is
triggered. The Agency sends a certified letter to A. A responds in 10 days with evidence
that it has continuously held a NOx Budget Account, but has not yet appointed a new
account representative. The Agency may consider the Allowances “forfeited” under (e)
because the Agency did
not
receive a response from the source indicating that it “has
appointed an account representative.” Since the Agency can consider the Allowances
forfeited, it can redistribute the Allowances to new sources under (e)(1). When the next
installment under the contract is due, B contacts A to receive transfer of the Allowances.
A informs B that it cannot perform. B cannot sue A for specific performance of the
contract because A does not have any Allowances. B probably cannot sue the Agency
because the Agency is not a party to the contract. B will have taken all appropriate steps
to assure its future compliance and may still be left without Allowances.
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, MARCH 13, 2006
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17
Scenario 2
Section 217.462 (d)(2) - Company C had a single NOx budget unit that received
100 NOx Allowances per year. C permanently ceased operation of the unit and withdrew
its permit. The current price for NOx Allowances is $1,500 per allowance. The source
has good reason to believe that in a few years the price for Allowances will be $5,500 or
more per allowance. C makes occasional spot sales but generally holds its Allowances
and does not permanently transfer them to another source within two years of the date
that the Agency is required to make a NOx allocation. The Agency sends C a certified
letter. C responds in 10 days that it intends to keep its Allowances and sell them when
the price increases. C’s Allowances will be considered forfeited by the Agency under
(d)(2) because C did not permanently transfer its Allowances to another source subject to
Subpart U before the Agency sent the certified letter. C’s Allowances will be reallocated
to new sources under (e)(1). The only way C can avoid this result is to permanently
transfer all of its Allowances at a time when the price for Allowances may be
extraordinarily low. The rule drives C’s behavior rather than the market forces that the
rule was originally intended to harness for environmental purposes.
Scenario 3
Section 217.462 (d)(2) – This scenario is the same as scenario 2 above, except
that company C transferred all of its current and future NOx Allowances some time ago
to an out-of-state broker who is not subject to Subpart U. Since C did not permanently
transfer its Allowances to another Illinois source subject to Subpart U before the Illinois
EPA sent the certified letter. C’s Allowances will be reallocated to new sources under
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, MARCH 13, 2006
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18
(e)(1). The broker, through no fault of his own, will not receive the NOx Allowances that
he bargained and paid for.
Scenario 4
Section 217.462 (d)(3) - Company D sells all of its assets (except its Allowances)
to company E before the Agency’s next allocation date. Company E is a large operation
that already has an allocation and, for tax purposes, does not want to acquire company
D’s Allowances. Company D sells all of its NOx Allowances to company F which is an
Ohio company that is not subject to Subpart U. The Agency sends a certified letter to the
former owner. The former owner responds that it sold its NOx Allowances to company
F. The Agency must confiscate the Allowances under (d)(3) because company F is an
Ohio company that is not subject to Subpart U. The Agency would then be required to
redistribute the Allowances to company E under (e)(3). The rule thwarts the intended
outcome of a perfectly legitimate market transaction. D will have no Allowances to
provide to F and will be forced to breach its contract with F. F will not acquire the
Allowances that it bargained for in good faith. E will be stuck with Allowances that it
specifically did not want.
6.
IERG’s Proposed Amendments
Attached hereto as Exhibit C, please find suggested language that would address
the same situations that the Illinois EPA has attempted to address with the Confiscation
Provisions. The language is marked to show changes versus the current section of Part
217. Please note that the suggested language: (1) does not classify certain Allowances as
“property” while claiming that others are not property; (2) provides specific, well defined
steps that the Illinois EPA and the owners/operators of budget units must take in
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, MARCH 13, 2006
* * * * * PC #1 * * * * *
19
situations where some units do not receive an allocation; and (3) avoids the commerce
clause constitutional problems that would be created by the Confiscation Provisions.
IERG’s proposed amendments provide the Illinois EPA and sources with clear,
definite procedures that must be followed in a situation where the allocation of certain
NOx Allowances to a unit listed in Appendix E is in question. In IERG’s proposal, a new
subsection (1) has been added under Subsection 217.466(a) that will require the Illinois
EPA to send a certified letter to the owner or operator or account representative of any
budget unit that has not received a NOx Allocation. A new subsection (2) has been
added to specify the actions that the Illinois EPA must take if the owner, operator or
account representative has performed all of the activities needed for the budget unit to
receive an allocation. A new subsection (3) has been added to specify what action the
Illinois EPA must take when an owner, operator or account representative has not yet
taken the required actions for a budget unit to receive a NOx Allocation, but the owner or
operator nevertheless indicates that it does intend to fulfill such requirements. A new
subsection (4) has been added to specify the actions the Illinois EPA must take if the
owner, operator or account representative indicates that it has transferred some or all of
its NOx Allowances to another budget unit. A new subsection (5) has been inserted to
specify the actions the Illinois EPA must take if it does not receive a response from the
owner, operator or account representative within 45 days or if the owner, operator or
account representative indicates that it does not intend to obtain the necessary
requirements to receive a NOx Allocation.
IERG requests that Confiscation Provisions in the Proposal be stricken in their
entirety. IERG further requests that IERG’s proposed changes to Section 217.466, as
provided in Exhibit C, be included in Part 217.
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, MARCH 13, 2006
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20
III.
CONCLUSION
IERG requests that the rulemaking in this proceeding be amended consistent with
the above comments. IERG appreciates this opportunity to participate in this rulemaking.
Respectfully submitted,
ILLINOIS ENVIRONMENTAL
REGULATORY GROUP,
By:/s/ Katherine D. Hodge
_____________
One of Its Attorneys
Dated: March 10, 2006
Katherine D. Hodge
HODGE DWYER ZEMAN
3150 Roland Avenue
Post Office Box 5776
Springfield, Illinois 62705-5776
(217) 523-4900
GWN/Misc./217 Changes/Comments to Agency Proposal v03
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, MARCH 13, 2006
* * * * * PC #1 * * * * *
Exhibit A
Section 217.Appendix D Non-Electrical Generating Units
COMPANY ID # / NAME UNIT DESIGNATION
UNIT DESCRIPTION
1 2 3
A. E. STALEY MANUFACTURING COMPANY
115015ABX 8507006129996020099
299
COAL-FIRED BOILER 1
115015ABX 8507006129996020099
299
COAL-FIRED BOILER 2
115015ABX 7302008412996020099
129
BOILER #25
ARCHER DANIELS MIDLAND CO EAST PLANTCOMPANY (DECATUR
COMPLEX)
115015AAE 85060030081 COAL-FIRED BOILER 1
115015AAE 85060030081 COAL-FIRED BOILER 2
115015AAE 85060030081 COAL-FIRED BOILER 3
115015AAE 85060030082 COAL-FIRED BOILER 4
115015AAE 85060030082 COAL-FIRED BOILER 5
115015AAE 85060030082 COAL-FIRED BOILER 6
115015AAE 85060030083 GAS-FIRED BOILER 7
115015AAE 85060030083 GAS-FIRED BOILER 8
FLINT HILLS RESOURCES, LP (JOLIET FACILITY)
197800ABZ
960100250119
CB-706
CPC INTERNATIONAL INC.
CORN PRODUCTS INTERNATIONAL, INC. (ARGO MANUFACTURING
FACILITY)
031012ABI 9102006916096010009
160
COALGAS-FIRED BOILER 6
031012ABI
7302014604196010009
041
BOILER SERIAL 15813 # 1
COAL-FIRED
031012ABI
7302014604296010009
042
BOILER SERIAL 15812 # 2
COAL-FIRED
031012ABI
7302014604396010009
043
GAS FIRED BOILER NO 4
WEST STACK BLRS
031012ABI
7302014704596010009
045
BOILER SERIAL 18345 # 3
COAL-FIRED
031012ABI
7302014704696010009
046
GAS FIRED BOILER NO 5
EAST STACK BOILER
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, MARCH 13, 2006
* * * * * PC #1 * * * * *
2
GREAT LAKES NAVAL STATION
NAVAL TRAINING CENTER/GREAT LAKES
097811AAC
7808007101195120330
011
BOILER #5
097811AAC
7808007101195120330
011
BOILER #6
INDIAN REFINING LIMITED PARTNERSHIP
101805AAC 72110297015 BOILER 18601
101805AAC
72110297016
BOILER 18602
101805AAC
72110297017
BOILER 18603
JEFFERSON SMURFIT CORPORATION
119010AAL 72120426001 BLR 7-COAL FIRED
CHICAGO COKE CO., INC.
031600AMC
96030032091
BOILER 4B
MARATHON OIL CO ILLINOIS REFINING DIVISION
MARATHON ASHLAND PETROLEUM LLC
033808AAB
7211129105596010007
055
BOILER #3 OIL,REF GAS
FIRED
033808AAB
7211129105696010007
056
BOILER #4 REF GAS,
OIL FIRED
MOBIL JOLIET REFINING CORP
EXXONMOBIL OIL CORPORATION (JOLIET FACILITY)
197800AAA
7211056700295120304
002
AUX BOILER-REFINERY
GAS FULL FIRE IF COGEN
DOWN
197800AAA
8601000904395120304
043
STATIONARY GAS
TURBINE
PEKIN ENERGY COMPANY
AVENTINE RENEWABLE ENERGY, INC.
179060ACR
7302008701996030001
019
BOILER C – PULVERIZED
WET BOTTON, WALL
FIRED
QUANTUM - USI DIVISION
MORRIS COGENERATION, LLC
063800AAC063800AAJ
7210001601399110011
001
BOILER # 1
063800AAC063800AAJ
7210001601399110011
002
BOILER # 2
063800AAC063800AAJ
7210001601499110011
003
#3 GAS FIRED BOILER
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, MARCH 13, 2006
* * * * * PC #1 * * * * *
3
063800AAC063800AAJ
7210001601699110011
004
#5 GAS FIRED BOILER
063800AAC063800AAJ
7210001601799110011
005
#6 BOILER
QUANTUM - USI DIVISION
TRIGEN-CINERGY SOLUTIONS OF TUSCOLA, LLC
041804AAB041030ABG
7212120710801010038
01
BOILER NO 1
041804AAB041030ABG
7212120710901010038
06
BOILER NO 2
041804AAB041030ABG
7212120711001010038
07
BOILER NO 3
041804AAB041030ABG
7212120711101010038
08
BOILER NO 4
041804AAB 72121207112 BOILER NO 5
SHELL OIL CO WOOD RIVER MFG COMPLEX
CONOCOPHILLIPS COMPANY (WOOD RIVER REFINERY)
119090AAA
7211063308095120306
080
BOILER NO 15
119090AAA
7211063308195120306
081
BOILER NO 16
119090AAA
7211063308295120306
082
BOILER NO 17
U UNITED STATES STEEL - CORPORATION (SOUTH WORKS)
031600ALZ
8201004401396030055
013
NO. 6 BOILER,#5 POWER
STATION (FUEL-NAT.GAS)
031600ALZ
8201004401496030055
014
NO 1 BLR NG
UNIV OF ILL - ABBOTT POWER PLANT
019010ADA
82090027006
BOILER #7 (265 MBTU)
UNO-VEN COMPANY
CITGO PETROLEUM CORPORATION
197090AAI
7211025303796030079
037
BOILER 430-B-1
BUNGE MILLING, INC.
183020ABT
72121262091
CFB BOILER
(Source: AddedAmended at 25 Ill. Reg. 128 , effective December 26, 2000
)
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, MARCH 13, 2006
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4
Section 217.Appendix E Large Non-Electrical Generating Units
COMPANY
ID # /
NAME
UNIT
DESIGNATION
UNIT
DESCRIPTION
BUDGET
ALLOCATION
BUDGET
ALLOCATION
LESS 3% NSSA
1 2 3 4 5
A. E. STALEY MANUFACTURING COMPANY
115015ABX
85070061299960
20099299
COAL-FIRED
BOILER 1
176175
171170
115015ABX
85070061299960
20099299
COAL-FIRED
BOILER 2
175 170
115015ABX
73020084129960
20099129
BOILER #25 125 121
A. E. STALEY MANUFACTURING
COCOMPANY (Total Allocation)
476475
462461
ARCHER DANIELS MIDLAND CO EAST PLANT
COMPANY (DECATUR
COMPLEX)
115015AAE 85060030081 COAL-FIRED
BOILER 1
238237
231230
115015AAE 85060030081 COAL-FIRED
BOILER 2
261 253
115015AAE 85060030081 COAL-FIRED
BOILER 3
267 259
115015AAE 85060030082 COAL-FIRED
BOILER 4
276 268
115015AAE 85060030082 COAL-FIRED
BOILER 5
275 267
115015AAE 85060030082 COAL-FIRED
BOILER 6
311 302
115015AAE 85060030083 GAS-FIRED
BOILER 7
19 18
115015AAE 85060030083 GAS-FIRED
BOILER 8
19 18
ARCHER DANIELS MIDLAND CO EAST
PLANTCOMPANY (DECATUR COMPLEX)
(Total Allocation)
1,6661,665
1,6161,615
FLINT HILLS RESOURCES, LP (JOILIET FACILITY)
197800ABZ
960100250119
CB-706
6
6
FLINT HILLS RESOURCES, LP (JOLIET
FACILITY) (Total Allocation)
6
6
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, MARCH 13, 2006
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5
CORN PRODUCTS INTERNATIONAL, INC. (ARGO MANUFACTURING
FACILITY)
031012ABI 91020069160960
10009160
GAS-FIRED
BOILER 6
55 53
031012ABI
73020146041960
10009041
BOILER # 1
COAL-FIRED
209210
203204
031012ABI
73020146042960
10009042
BOILER # 2
COAL-FIRED
210 203
031012ABI
73020146043960
10009043
GAS FIRED
BOILER NO 4
WEST STACK
BLRS
81
79
031012ABI 73020147045960
10009045
BOILER # 3
COAL-FIRED
211 205
031012ABI 73020147046960
10009046
GAS FIRED
BOILER NO 5
EAST STACK
BOILER
81 79
CORN PRODUCTS INTERNATIONAL, INC.
(ARGO MANUFACTURING FACILITY) (Total
Allocation)
848847 823822
GREAT LAKES NTC
NAVAL TRAINING CENTER/GREAT LAKES
097811AAC 78080071011951
20330011
BOILER # 5 26 25
097811AAC 78080071011951
20330011
BOILER # 6 26 25
GREAT LAKES NTCNAVAL TRAINING
CENTER/GREAT LAKES (Total Allocation)
52 50
JEFFERSON SMURFIT CORPORATION
119010AAL 72120426001 BLR 7-COAL
FIRED
39 38
JEFFERSON SMURFIT CORPORATION
(Total Allocation)
39 38
MARATHON OIL CO ILLINOIS REFINING DIVASHLAND PETROLEUM LLC
033808AAB
72111291055960
10007055
BOILER #3 OIL,
REF GAS FIRED
53 51
033808AAB
72111291056960
10007056
BOILER #4 REF
GAS,OIL FIRED
53 52
MARATHON OIL CO ILLINOIS REFINING
DIVASHLAND PETROLEUM LLC (Total
Allocation)
106 103
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, MARCH 13, 2006
* * * * * PC #1 * * * * *
6
EXXON MOBIL
EXXONMOBIL OIL CORPORATION (JOILET REFINERY)
197800AAA 72110567002951
20304002
AUX BOILER-
REFINERY GAS
101 98
197800AAA 86010009043951
20304043
STATIONARY
GAS TURBINE
85 82
EXXON MOBILEXXONMOBIL OIL
CORPORATION (JOLIET REFINERY) (Total
Allocation)
186 180
WILLIAMS
AVENTINE RENEWABLE ENERGY, INC.
179060ACR 73020087019 BOILER C -
PULVERIZED
DRY BOTTOM
377376
366365
WILLIAMSAVENTINE RENEWABLE ENERY,
INC. (Total Allocation)
377376
366365
EQUISTAR
MORRIS COGENERATION, LLC
063800AAC
063800AAJ
72100016013991
10011001
BOILER # 1
40
39
063800AAC
063800AAJ
72100016013991
10011002
BOILER # 2
40
39
063800AAC
063800AAJ
72100016014991
10011003
#3 GAS FIRED
BOILER
40
39
063800AAC
063800AAJ
72100016016991
10011004
#5 GAS FIRED
BOILER
40
39
063800AAC
063800AAJ
72100016017991
10011005
#6 BOILER
4039
3837
EQUISTARMORRIS COGENERATION, LLC
(Total Allocation)
200199
194193
EQUISTAR
TRIGEN-CINERGY SOLUTIONS OF TUSCOLA, LLC
041804AAB
041030ABG
72121207108960
20121108
BOILER NO 1
121120
118117
041804AAB
041030ABG
72121207109960
20121109
BOILER NO 2
121
118
041804AAB
041030ABG
72121207110960
20121110
BOILER NO 3
121
117
041804AAB
041030ABG
72121207111960
20121111
BOILER NO 4
120
116
041804AAB
72121207112
BOILER NO 5
0
0
EQUISTAR TRIGEN-CINERGY SOLUTIONS OF
TUSCOLA, LLC (Total Allocation)
483482
469468
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, MARCH 13, 2006
* * * * * PC #1 * * * * *
7
TOSCO
CONOCOPHILLIPS COMPANY (WOOD RIVER REFINERY)
119090AAA 72110633080951
20306080
BOILER NO 15 40 38
119090AAA 72110633081951
20306081
BOILER NO 16
40
39
119090AAA 72110633082951
20306082
BOILER NO 17
80
78
TOSCOCONOCOPHILLIPS COMPANY (WOOD
RIVER REFINERY) (Total Allocation)
160 155
U UNITED STATES STEEL - CORPORATION (SOUTH WORKS)
031600ALZ 82010044013 NO. 6 BOILER,
#5 POWER
STATION (FUEL-
NAT.GAS)
90 88
031600ALZ 82010044014 NO 1 BLR NG 90 87
U UNITED STATES STEEL - CORPORATION
(SOUTH WORKS) (Total Allocation)
180 175
UNIV OF ILL - ABBOTT POWER PLANT
019010ADA 82090027006
BOILER #7
86
83
UNIV OF ILL - ABBOTT POWER PLANT (Total
Allocation)
86
83
CITGO PETROLEUM CORPORATION
197090AAI 72110253037 BOILER 430-B-1 23 22
CITGO PETROLEUM CORPORATION (Total
Allocation)
23 22
LTV STEEL COMPANYCHICAGO COKE CO., INC.
301600AMC
031600AMC
[UNIT
DESIGNATION]
96030032091
BOILER NO 4B
*60
*58
LTV STEEL COMPANYCHICAGO COKE CO.,
INC. (Total Allocation)
*60
*58
* Pursuant to Section 217.460(f), Column 2, Column 4 and Column 5 will be adjusted at
such time as USEPA makes an allocation for LTV Steel’s Boiler No. 4B.
BUNGE MILLING, INC.
183020ABT
72121262091
CFB BOILER
*
*
BUNGE MILLING, INC. (Total Allocation)
*
*
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, MARCH 13, 2006
* * * * * PC #1 * * * * *
8
*Columns 4 and 5 will be adjusted when USEPA makes an allocation for Bunge’s CFB
Boiler. Bunge’s CFB Boiler will not be subject to any of the provisions of Subpart U of
this Part until such time as the CFB Boiler receives an allocation of NOx Allowances.
GRAND TOTAL 4,8824,856
4,7364,711
(Source: AddedAmended at 25 Ill. Reg.5914 , effective April 17, 2001
)
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, MARCH 13, 2006
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1
Exhibit B
Section 217.454 Applicability
a)
ThisExcept as provided in subsection (e) of this Section, this Subpart
applies to any fossil fuel-fired stationary boiler, combustion turbine, or
combined cycle system, with a maximum design heat input greater than
250 mmbtu/hr and that is:
1.
A unit listed in Appendix E of this SubpartPart, irrespective of any
subsequent changes in ownership, unit designation, or name of the
unit; or
2.
A unit not listed in Appendix E of this Subpart Part that:
A.
At no time serves a generator producing electricity for sale;
B.
At any time serves a generator producing electricity for
sale, if such generator has a nameplate capacity of 25 MWe
or less and has the potential to use no more than 50% of the
potential electrical output capacity of the unit. Fifty
percent of a unit’s potential electrical output capacity shall
be determined by multiplying the unit’s maximum design
heat input by 0.0488 MWe/mmbtu. If the size of the
generator is smaller than this calculated number, the unit is
subject to the provisions of this Subpart, but if the size of
the generator is greater than this calculated number, the unit
is subject to the provisions of Subpart W of this Part;
C.
Is part of any source, as that term is defined in 35 Ill. Adm.
Code Section 211.6130, listed in Appendix E of this Part;
or
D.
Is a unit subject to Subpart W of this Part (excluding any
unit listed in Appendix F of this Part, regardless of any
change in ownership or any change of operator), and the
owner or operator makes a permanent election, at the time
of applying for a budget permit pursuant to this Part, to
subject the unit to the requirements of this Subpart rather
than Subpart W of this Part. Any unit for which such an
election is made will not receive an allocation from the
Subpart U or Subpart W NOx Trading Budget.
b)
Those units that meet the above criteria and are subject to the NOx Trading
Program emissions limitations contained in this Subpart are budget units.
c)
Low-emitter status: Notwithstanding subsection (a) of this Section, the
owner or operator of a budget unit subject to the requirements of
* * * * * PC #1 * * * * *
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, MARCH 13, 2006
2
subsection (a) of this Section and which such unit is listed in Appendix E
of this Part or which such unit meets the requirements of subsections
(c)(1) and (c)(2) of this Subpart may elect low-emitter status by obtaining
a permit with federally enforceable conditions that meet the requirements
of Section 217.472(a). Starting with the effective date of such permit, the
unit shall be subject only to the requirements of Section 217.472. A unit
not listed in Appendix E is not eligible to elect low-emitter status pursuant
to Section 217.472 unless the owner or operator of such unit meets the
following requirements:
1)
The owner or operator of the unit not listed in Appendix E shall
obtain a permanent transfer of allowances from a unit listed in
Appendix E to the unit not listed in Appendix E. Such permanent
transfer will not be effective until, the owner or operator has
complied with Section 217.462 of this Subpart and the change in
allocation is reflected in the applicable federally enforceable
permits.
2)
The Agency shall initiate a rulemaking to amend Appendices D, E
and G of this Part every three years to reflect any changes to the
listed NOx allocations, if such changes have occurred.
d)
The owner or operator of any budget unit not listed in Appendix E of this
Part but subject to this Subpart shall not receive an allocation of NOx
allowances from the Subpart U or Subpart W NOx Trading Budget, except
for any allowance from the new source set-aside NSSA in accordance with
Section 217.468 of this Subpart. Such unit must acquire NOx allowances
in an amount not less than the NOx emissions from such budget unit
during the control period (rounded to the nearest whole ton) in accordance
with the federal NOx Trading Program, Subpart X of this Part or pursuant
to a permanent transfer of NOx allocations pursuant to Section 217.462(b)
of this Subpart.
e)
Notwithstanding any other provisions of this Subpart, a source and units at the
source subject to the provisions of subsection (a) of this Section will become
subject to this Subpart on
the first day of the control season subsequent to the
calendar year in which all of the other states subject to the provisions of the NO
x
SIP Call
(63 Fed. Reg. 57355 (October 27, 1998))
that are located in USEPA
Region V or are that contiguous to Illinois have adopted regulations to implement
NO
x
trading programs and other required reductions of NO
x
emissions pursuant
to the NO
x
SIP Call, and such regulations have received final approval by USEPA
as part of the respective states’ SIPs for ozone, or a final FIP for ozone
promulgated by USEPA is effective
. [415 ILCS 5/9.9(f)]
e) This Subpart does not apply to the following boilers used to combust and
thereby control CO emissions from a fluidized catalytic cracking unit
(FCCU), specifically the Boiler 112B-2 at the refinery located at Lemont,
Illinois; Boilers 14B-3 and 14B-4 at the refinery located in
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, MARCH 13, 2006
* * * * * PC #1 * * * * *
3
Channahon/Joliet, Illinois; the waste heat boiler 60F-1 at the refinery
located in Robinson, Illinois; and CO Heaters/Boilers CCU No. 1 and
CCU No. 2 at the refinery located in Roxana, Illinois.
(Source: Added at 25 Ill. Reg.5914, effective April 17, 2001)
(Source: Amended at__________Ill. Reg. __________, effective _________________)
*
*
*
Section 217.472 Low-Emitter Requirements
Starting with the effective date of the permit referred to in Section 217.454(c), thea
budget unit electing low-emitter status shall be subject onlypursuant to the requirements
of this Section. 217.454(c) shall be subject only to the following requirements:
a) For each control period the owner or operator elects low-emitter status, the
federally enforceable permit conditions must:
1)
Restrict the unit to burning only natural gas, fuel oil, or natural gas
and fuel oil;
2)
Limit the unit's potential NOx mass emissions for the control
period to the lesser of 25 tons or lessthe number of allowances
allocated to the unit in Appendix E of this Part or, if the unit is not
yet listed in Appendix E, the number of NOx allowances that have
been permanently transferred to that unit from another unit listed in
Appendix E;
3)
Restrict the unit's operating hours to the number calculated by
dividing 25 tons of the allowable potential NOx mass emissions
provided in subsection (a)(2) of this Section by the unit's
maximum potential hourly NOx mass emissions;
4)
Require that the unit's potential NOx mass emissions shall be
calculated by using the monitoring provisions of 40 CFR 75, or if
the unit does not rely on these monitoring provisions, as follows:
A.
Select the applicable default NOx emission rate:
0.7 lbs/mmbtu for combustion turbines burning natural gas
exclusively during the control period; 1.2 lbs/mmbtu for
combustion turbines burning any fuel oil during the control
period; 1.5 lbs/mmbtu for boilers burning natural gas
exclusively during the control period; or 2 lbs/mmbtu for
boilers burning any fuel oil during the control period.
B.
Multiply the default NOx emission rate under subsection
(a)(4)(A) of this Section by the unit's maximum rated
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, MARCH 13, 2006
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4
hourly heat input which is the higher of the manufacturer’s
maximum rated hourly heat input or the highest observed
hourly heat input. The owner or operator of the unit may
request in the permit application required by this subsection
that the Agency use a lower value for the unit's maximum
rated hourly heat input. The Agency may approve such
lower value if the owner or operator demonstrates that the
maximum hourly heat input specified by the manufacturer
or the highest observed hourly heat input, or both, are not
representative. The owner or operator must demonstrate
that such lower value is representative of the unit's current
capabilities because modifications have been made to the
unit that permanently limit the unit’s capacity;
5)
Require that for 5 years at the source that includes the unit, records
demonstrating that the operating hours restriction, the fuel use
restriction and the other requirements of the permit related to these
restrictions were met; and
6)
Require that the owner or operator of the unit report to the Agency
for each control period the unit's hours of operation (treating any
partial hour of operation as a whole hour of operation), heat input
and fuel use by type. This report shall be submitted by November
11
st
of each year the unit elects low-emitter status.
b)
The Agency will notify the USEPA in writing of each unit electing low-
emitter status pursuant to the requirements of subsection (a) of this Section
and when any of the following occurs:
1)
The permit with federally enforceable conditions that includes the
restrictions in subsection (a) of this Section is issued by the
Agency;
2)
Such permit is revised to remove any such restriction;
3)
Such permit includes any such restriction that is no longer
applicable; or
4)
The unit does not comply with any such restriction.
c) The unit shall become subject to the requirements of this Subpart if, for
any control period under this Section, the fuel use restriction or the
operating hours restriction under subsection (a) of this Section is removed
from the unit's permit or otherwise is no longer applicable, or the unit does
not comply with the fuel use restriction or the operating hours restriction
under subsection (a) of this Section. Such unit shall be treated as
commencing operation on September 30 of the control period for which
the fuel use restriction or the operating hours restriction is no longer
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, MARCH 13, 2006
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5
applicable or during which the unit does not comply with the fuel use
restriction or the operating hours restriction.
d) TheAn owner or operator of a unit to which the Agency has ever allocated
allowances under Appendix E of this Part meets the requirements set forth
in Section 217.454(c) may elect low-emitter status. In that case, theThe
Agency will reduce the Subpart U NOx budget by the number of
allowances equal to the amount of NOx emissions the unit is permitted to
emit during the control period, pursuant to a federally enforceable
condition in the unit’s permit. The, but in no case will the Agency deduct
more allowances than the number of allowances that the unit was allocated
in Appendix E of this Part or, if the unit is not yet listed in Appendix E,
the number of NOx allowances that have been permanently transferred to
that unit from another unit listed in Appendix E. If the owner or operator
of has requested a permit emission limit greater than its allocation for the
budget unit as set forth in Appendix E of the Part, the owner or operator of
such a unit electing low-emitter status may demonstrate that it holds
sufficient allowances to cover the unit’s NOx emissions by offsetting the
emissions from such unit, not to exceed its permitted emission limit as
included in its federally enforceable permit, with allowances issued for
voluntary NOx reductions meeting the requirements of Subpart X of this
Part or that there has been a permanent transfer of allowances from
another unit listed in Appendix E. The Agency will not reduce the
Subpart U NOx budget by the allowances issued for NOx reductions
obtained in accordance with Subpart X of this Part.
(Source: AddedAmemded at 25 ______ Ill. Reg. 5914 __________, effective April 17,
2001
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, MARCH 13, 2006
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Exhibit C
Section 217.466 NOx Allocations Procedure for Subpart U Budget Units
For each control period, the Agency will allocate the total number of NOx allowances in
the Subpart U NOx Trading Budget apportioned to budget units under Section 217.460 of
this Subpart, subject to adjustment as provided in this Subpart. These allocations will be
issued as provided in subsections (a) and (b) of this Section, as follows:
a)
The Agency will allocate to each budget unit that is listed in Appendix E
of this Part the number of allowances listed in Column 5 of Appendix E of
this Part for that budget unit for each 3-year period of the program, except
as provided in Section 217.462(b) of this Subpart. The Agency will report
these allocations to USEPA by March 1 of 2004, and on April 1 triennially
thereafter.
1)
After the Agency makes an allocation to budget units listed in
Appendix E of this Part, for any control period including the initial
control period, if any of the NOx allowances listed in Column 5 of
Appendix E of this Part are not allocated by the Agency to the
corresponding budget unit listed in Appendix E of this Part, the
Agency will send a certified letter to the holder of the NOx budget
permit applicable to such unit or the account representative or, if
there is no NOx budget permit issued for such unit, to the last
owner or operator of the budget unit, as listed on the source’s most
recent operating permit. The certified letter will state that the
recipient may be entitled to an allocation of NOx allowances and
include a contact telephone number and a copy of this Section
217.466. The owner or operator or account representative will
have 45 days to respond in writing to the Agency.
2)
If the owner or operator or account representative indicates in its
response that the unit has a NOx budget permit, a NOx budget
account and a NOx account representative and provides the NOx
budget account number and NOx budget permit number in its
response, the Agency will verify that the NOx budget account
number and NOx budget permit number correspond with the
budget unit listed in Appendix E of this Part, for which an
allocation has not yet been made, and issue the NOx allowances for
the budget unit within 10 days of receipt of the response.
3)
If the owner or operator or account representative indicates in its
response that it does not have a NOx budget permit, a NOx budget
account and a NOx account representative, but that it is in the
process of obtaining a NOx budget permit, a NOx budget account
and a NOx account representative, the Agency will hold the NOx
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, MARCH 13, 2006
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2
allowances that are associated with such a budget unit until the
owner or operator or account representative provides the Agency
with a NOx budget account number and NOx budget permit
number. The Agency will verify that the NOx budget account
number and NOx budget permit number correspond with the
budget unit listed in Appendix E of this Part, for which an
allocation has not yet been made, and issue the NOx allowances for
the budget unit within 10 days of receipt of the NOx budget
account number and NOx budget permit number.
4)
If the owner or operator or account representative indicates in its
response that some portion or all of the NOx allowances associated
with the budget unit listed in Appendix E of this Part have been
transferred to another budget unit subject to this Subpart, a budget
unit subject to Subpart W of this Part, or to any person who could
legally purchase the NOx Allowances, and provides the signature
of the account representative and the account numbers for both the
transferring budget unit and the recipient, the Agency will allocate
the NOx allowances in the manner described in the response within
10 days of receipt of the response, or if the signature of the account
representative and the account numbers for both the transferring
budget unit and the recipient are sent by a separate
correspondence, within 10 days of the receipt of the signature of
the account representative and the account numbers for both the
transferring budget unit and the recipient.
5)
If the Agency does not receive a response within 45 days, or if the
owner or operator states in its response that it has permanently shut
down the unit listed in Appendix E of this Part, and does not intend
to obtain a NOx budget permit for the unit listed in Appendix E of
this Part, the Agency will deem the allowances forfeited and
allocate the allowances pro-rata to the owners or operators of the
budget units listed in Appendix E of this Part. If there are
insufficient allowances to allocate whole allowances, such
fractional allowances shall be retained by the Agency and allowed
to accumulate until the accumulated fractional allowances are
equal to a whole allowance. The Agency will then allocate such
accumulated whole allowances. Within two years after making an
allocation under this Subsection, the Agency will propose a
rulemaking to the Board to amend Appendix E of this Part to
reflect these allocations.
b)
The Agency will allocate allowances from the new source set-aside NSSA
to "new" budget units as set forth in Section 217.468 of this Subpart.
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c)
The Agency will report allocations from the new source set-asideNSSA to
USEPA by April 1 of each year for the following year.
d)
To the extent that allowances remain in the new source set-asideNSSA
after any allocation pursuant to subsection (b) of this Section, the Agency
shall allocate any such remaining allowances pro-rata to the owner or
operator of the budget units listed in Appendix E of this Part to the extent
a whole allowance may be allocated to any such owner or operator. The
Agency will make such allocation by April 15 of each year. If there are
insufficient allowances to allocate a whole allowance to any such owner or
operator of a budget unit listed in Appendix E of this Part, such
allowances shall be retained by the Agency in the new source set-
asideNSSA. Any such allowances retained in the new source set
asideNSSA shall be accumulated in the new source set asideNSSA and
may either:
1)
Be available for allocation to new budget units for future control
periods, subject to the provisions of Section 217.468 of this
Subpart; or
2)
If, after any annual allocation to new budget units, there are
sufficient allowances accumulated in the new source set-aside to
allocate one or more whole allowances to the owner or operator of
existing budget units listed in Appendix E of this Part on a pro-rata
basis, such accumulated whole allowances shall be allocated pro-
rata to such owner or operators.
(Source: AddedAmended at 25 Ill. Reg.5914 , effective April 17, 2001
)
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, MARCH 13, 2006
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