Microsoft Word - R06-26 101006 afternoon hearing transcript.txt

BEFORE THE ILLINOIS POLLUTION CONTROL BOARD

IN THE MATTER OF:

)

PROPOSED NEW CAIR SO2 CAIR )

NOx ANNUAL AND CAIR NOx OZONE ) R06-26

SEASON TRADING PROGRAMS, ) (Rulemaking - Air)

35 ILL. ADM. CODE 225,

)

CONTROL OF EMISSIONS

)

FROM LARGE COMBUSTION SOURCES)

SUBPARTS A, C, D AND E

)

HEARING DAY ONE

Proceedings held on October 10th, 2006, at

1:30 p.m., at the Illinois Pollution Control

Board, 1021 North Grand Avenue East, Springfield,

Illinois, before John Knittle, Hearing Officer.

Reported by: Beverly S. Hopkins, CSR, RPR

CSR License No: 084-004316

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11 North 44th Street

Belleville, IL 62226

(618) 277-0190

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APPEARANCES

Board Members present:

Chairman G. Tanner Girard

Board Member Andrea S. Moore

Board Member Thomas Johnson

Anand Rao, Senior Environmental Scientist

ILLINOIS ENVIRONMENTAL PROTECTION AGENCY

BY: Ms. Rachel L. Doctors

Assistant Counsel

Division of Legal Counsel

1021 North Grand Avenue East

Springfield, Illinois 62794-9276

On behalf of the Illinois EPA

ILLINOIS ENVIRONMENTAL PROTECTION AGENCY

BY: Mr. John J. Kim

Assistant Counsel

Air Regulatory Unit

1021 North Grand Avenue East

Springfield, Illinois 62794-9276

On behalf of the Illinois EPA

SCHIFF HARDIN LLP

BY: Mr. Stephen J. Bonebrake

Attorney at Law

6600 Sears Tower

Chicago, Illinois 60606

On behalf of Dynegy and Midwest Generation

SCHIFF HARDIN LLP

BY: Ms. Kathleen C. Bassi

Attorney at Law

6600 Sears Tower

Chicago, Illinois 60606

On behalf of Dynegy and Midwest Generation

MCGUIRE WOODS LLP

BY: Mr. David Rieser

Attorney at Law

77 West Wacker Drive, Suite 4400

Chicago, Illinois 60601-1681

On behalf of Ameren Energy Generating

Company, AmerenEnergy Resources Generating

Company and Electric Energy, Inc.

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ENVIRONMENTAL LAW & POLICY CENTER

BY: Ms. Faith E. Bugel

Staff Attorney

35 East Wacker Drive, Suite 1300

Chicago, Illinois 60601-2110

On behalf of the Environmental Law

& Policy Center

BAKER & MCKENZIE

BY: Mr. Steven J. Murawski

One Prudential Plaza, Suite 3500

130 East Randolph Drive

Chicago, Illinois 60601

Interested Party

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HEARING OFFICER KNITTLE: We're

returning after a lunch break, and as I recall we

were -- Mr. Bonebrake and Ms. Bassi were asking

questions of this particular panel, and I remind

you you're all sworn in. You're aware of that

I'm sure. I guess we can just proceed. We have

a new -- just so you know, we have a new

reporter.

MR. BONEBRAKE: Mr. Ross, before lunch

we were talking a little bit about the ICF

prediction of costs associated with the -- with

the CASA. In assessing potential impacts on

Illinois jobs, did the Agency consider the

impacts of the tens of millions of dollars that

the Illinois Generators were predicting by ICF to

incur as a result of the CASA?

MR. ROSS: No, I don't believe we

assessed a potential loss of jobs at power plants

which would be implied by additional costs at

power plants as projected by IPM.

MR. BONEBRAKE: You mentioned, I

think, Mr. Ross, that ICF was predicting that

emissions in Kentucky would increase as a result

of the CASA, do you recall that, Mr. Ross?

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MR. ROSS: That emissions in Kentucky

would decrease as a result of what was modeled by

ICF. ICF found that the reductions would -- most

of the reductions would occur in Florida and

Kentucky.

MR. BONEBRAKE: Yeah, thank you. I

had -- I stated that incorrectly. And do you

happen to know with respect to Kentucky, and if

you answered -- you probably answered this

morning, do you happen to know what Kentucky is

proposing or has adopted with respect to CAIR

implementation including set asides?

MR. ROSS: No, I don't. I think it's

important to note in regards to loss of potential

jobs at power plants that the modeling did not

project any shutdowns as a result of Illinois

policy, that is, shutdowns of units, EGUs at any

of the power plants.

MR. BONEBRAKE: Can reduced generation

at an electric generated unit lead to a decrease

in the number of jobs even if the unit is not

shut down?

MR. ROSS: Could it potentially lead

to?

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MR. BONEBRAKE: Sure.

MR. ROSS: Oh, potentially I believe

it could be a factor since you would assume that

revenue would be affected by such loss

generation.

MR. BONEBRAKE: Mr. Ross, in your

written testimony I think you were indicating

that one of the things that the CASA does is

provide incentives for zero emission electric

generation, do you recall that?

MR. ROSS: That's correct.

MR. BONEBRAKE: Is nuclear generation

zero emission generation technology?

MR. ROSS: That's not the type of

generation I'm referring to in my testimony. And

we'll get into this, I believe, a little bit more

when we specifically discuss the categories and

there's a presentation on this, but I think we're

specifically referring to solar, wind, and hydro

power.

MR. BONEBRAKE: Does that mean that

the Agency has made a decision to carve nuclear

out of the CASA to zero emission generation for

whatever reason?

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MR. KALEEL: Yes. I don't believe

nuclear generation -- and I'm certain nuclear

generation is not eligible for the CASA.

MR. BONEBRAKE: What was the basis for

the decision for excluding nuclear generation?

MR. ROSS: There are --

MR. DAVIS: With respect to that the

-- the decision was that these allowances

originally were intended for the coal-fired

facilities and that's where we want this -- the

bulk of them to go. If you look at what the

potential projects a nuclear power plant could

undertake, one of them would be supply-side

efficiency projects. We wanted to make sure that

the credit allowances, if you will, for that

category were specifically for the coal-fired

utilities.

MR. BONEBRAKE: I'm not -- Maybe I'm

not tracking the answer. My question was with

respect to the zero emission category.

MR. DAVIS: The zero emission -- and

I'm attempting to look the definition up, but

it's specifically for renewables. While one may

classify a nuclear power plant as a zero emitter,

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that was definitely not our intent. Our intent

was solar, hydro, and wind.

MR. BONEBRAKE: Okay. And I guess --

then I guess to get back to the question of what

was -- what was the reason for that intent for

that decision to carve out the rule?

MR. DAVIS: The reason was to -- the

reason to exclude --

MR. BONEBRAKE: To exclude.

MR. DAVIS: -- nuclear?

MR. BONEBRAKE: Correct.

MR. DAVIS: When -- We're attempting

to ensure that those particular allowances had

the chance to get to the electric generating

units, the coal-fired electric generating units.

We did not want, as you probably know, the

coal-fired -- or the nuclear generators are quite

large and we did not want a change -- supply side

type change at their plant in effect draining the

pool.

MR. ROSS: In addition, I would say

that we were being consistent with the Governor's

energy policy and how they define renewable

energy sources, so I believe our definition

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corresponds with the Governor's.

MR. DAVIS: And the -- it looks like

page 39 of the Illinois Final Rule, it looks like

we go and define what a zero emitter would be,

and that specific definition includes wind,

solar, thermal -- I believe the rule, page 39,

addresses what the definition for a zero-emission

electric generating project is. And it reads

including wind, solar (thermal or photovoltaic)

and hydro power project. It was never our intent

that a coal -- a nuclear generator would be

considered a zero emitter.

HEARING OFFICER KNITTLE: Ms. Bassi,

do you have a question?

MS. BASSI: I believe you said that

the -- a reason why the Agency chose to exclude

nuclear power from this, aside from the

Governor's edict, is that you wanted to be sure

that the zero -- or you wanted to ensure that the

zero emissions category went to the coal-fired

units or had a chance of going to the coal-fired

unit; is that correct?

MR. DAVIS: Within the category of

EE/RE is supply side energy efficiency.

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MS. BASSI: But the question was about

the zero emission.

MR. DAVIS: Which that is -- that is

what the category pulled out of that. A zero

emitter is an EE/RE category.

MS. BASSI: I don't -- Okay. Fine.

But I don't see how solar, wind, and hydropower

are going to the coal-fired units.

MR. DAVIS: His question was -- I'm

attempting to point out that a zero emitter is

not and never was intended to be a nuclear power

plant.

MS. BASSI: But his question was why?

MR. DAVIS: And I believe I gave that

we were attempting to -- a nuclear power plant

would be eligible unless otherwise excluded for

supply-side category. We -- In consistency with

the Governor's plan, we specifically excluded

that category so that they would no longer be

eligible for whatever portion they could take and

now that portion then will potentially be

available for the coal-fired units.

MS. BASSI: Aren't those -- aren't

those -- aren't those allocated on a pro-rata

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basis based on your share of what's available?

MR. DAVIS: Yes. So would the total

pool not then be greater by removing the

contribution that a nuclear generator could take

from it?

MS. BASSI: I know it would. Okay.

MR. ROSS: And we'll be going over --

MS. BASSI: Pardon me?

MR. ROSS: We'll be going over the

category in detail and there will be a

presentation on that and we'll give examples of

categories and how the amount of allocations are

determined. Several examples will be provided on

that and we will be going over it probably in

excruciating detail if need be.

MR. BONEBRAKE: Mr. Ross, I had a

question for you regarding a comment that you

have in your testimony at page 8 of your written

testimony.

MR. ROSS: Okay.

MR. BONEBRAKE: And it's the second

paragraph on the top starting in the last

sentence page 8. Second full paragraph last

sentence starts, Since Mercury emission

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reductions can be obtained as a "cobenefit" and

from the control devices used to reduce SO2 and

NOX, it makes sense to allow companies the option

to synchronize the control of these pollutants

provided that public health and the environment

are likewise positively impacted. Do you see

that, Mr. Ross?

MR. ROSS: I do.

MR. BONEBRAKE: And, in fact, wasn't

that a rationale of USEPA in its proposal of both

CAMR and CAIR?

MR. ROSS: Their rationale -- one of

their rationales was that it is more cost

effective, I believe, to allow companies to

synchronize the control of these pollutants. Did

they also include the second part of this

sentence, that is, provided that public health

and the environment are likewise positively

impacted, I don't recollect them also stating

that.

MR. BONEBRAKE: But it is true, is it

not, that USEPA promulgated the CAIR and the CAMR

federal programs with the notion that the timing

should be synchronized to realize these

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cobenefits?

MR. ROSS: That's true.

MS. BASSI: I'd like to ask a couple

of questions about the compliance supplement

pool.

MR. ROSS: Okay.

MS. BASSI: Earlier we were talking

about $2,500 being a reasonable assumption among

us here as to the cost of NOX allowance.

MR. ROSS: That's correct.

MS. BASSI: Okay. Can you tell us and

tell the Board what the value -- in terms of the

value of those allowances in 2006 dollars would

be of the compliance supplement pool assuming

$2,500 dollars a ton?

MR. ROSS: Assuming $2,500 -- or,

yeah, $2,500 per ton, I can't readily tell you

without a calculator, but we did an assessment

based on $2,000 per ton and given that there are

11,299 allowances in the compliance supplement

pool, that would equate to $22,598,000.

MS. BASSI: How has this amount been

included in the Agency's analysis of the cost of

the annual NOX CAIR program? In other words, when

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ICF did its analysis, did it also assume

retirement of the compliance supplement pool? I

think you said no.

MR. ROSS: Right. We went through

that. But, no, ICF did not. However, ICF did

model 100% of our set asides being retired which

is not the case. And, again, I think a point

that was made during those discussions was that

the preamble to the CAIR states that the marginal

cost as a ton of annual NOX controlled under CAIR

is the same with or without the compliance

supplement pool.

MS. BASSI: I understand that, but

that doesn't get the cost loss -- essentially the

revenue loss to the company for not having this

compliance supplement pool, does it?

MR. ROSS: No, it doesn't. But the

USEPA stated that states have the ability to

utilize compliance supplement pool as they see

fit. And they stated that the purpose of the

compliance supplement pool is for encouraging

early reduction or if there are reliability of

the grid issues. We have a policy which

encourages early reduction and, that is, what we

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categorize our early adopters. So we are

addressing the incentive provided to companies

for early controls in that manner so that tends

to reduce the need for any incentive through the

compliance supplement pool. And also --

MS. BASSI: Are there 11,299

allowances in the early adopter pool?

MR. ROSS: The early adopter pool is

each and every year there's a certain amount of

allowances available, whereas, the compliance

supplement pool was 11,299 allowances and that's

it. So during some future year, the amount of

allowances from the early adopter pool will

certainly exceed 11,299 allowances.

MS. BASSI: Perhaps we can get to that

when Mr. Cooper talks about that as to what those

allowances would be and when they would cease to

be applicable because I would think there would

be an end.

MR. ROSS: Well, I -- I mean --

MS. BASSI: We can wait.

MR. ROSS: Okay. Yeah, we'll wait for

Mr. Cooper.

MS. BASSI: Doesn't the use of low

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sulfur powder river basin coal reduce SO2

emissions and benefit the -- the environment?

MR. ROSS: The use of low sulfur coal

reduces SO2 emissions in comparison to the use of

the same amount of bituminous coal.

MS. BASSI: Does that reduction

benefit the environment?

MR. ROSS: To the extent that it

provides a greater reduction in SO2, it benefits

the environment in regards to SO2. However, there

are other pollutants involved to generate the

same amount of electricity you need to burn more

subbituminous coal than you would bituminous coal

due to the higher heating value of bituminous

coal.

MS. BASSI: Does the use of low sulfur

coal reduce NOX?

MR. ROSS: I don't believe so.

MS. BASSI: I think this is also a

question that is appropriate for you. Could you

explain the status of this proposal with USEPA

given that the submittal deadline for this was

September 11th and that date has passed?

MR. ROSS: Right. Well --

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MS. BASSI: And that you will also not

make the October 31st deadline for initial

allocation?

MR. ROSS: Right. We have been

officially FIPed by USEPA.

MS. BASSI: Has the finding been

published?

MR. ROSS: I'm uncertain as to that.

But we were FIPed and USEPA will be making

allocations sometime in 2007, I believe, and we

would hope that our rule becomes promulgated

shortly thereafter or even before such that our

rule will come into effect before USEPA could

allocate a second time.

HEARING OFFICER KNITTLE: Mr. Ross,

can you explain for the record what FIPed means?

MR. ROSS: It means that the federal

-- or the USEPA has imposed the Federal

Implementation Plan which in essence requires us

to abide by the requirements of the model federal

CAIR so that our CAIR, as proposed in Illinois

allocations, will not be made in accordance with

our proposal or the first allocation period.

Instead, they will be made in accordance with the

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model federal CAIR rule which does not have our

set asides and subject of much discussion. So we

will be submitting State Implementation Plans

that will include CAIR, and that plan we hope

that that would be proved, our rule finalized

before USEPA can make a second allocation. If

that is the case, then the second time

allocations are made, they would be allocated

within accordance with our proposal rather than

the model federal CAIR.

MS. BASSI: Don't USEPA's initial

allocations run through 2014?

MR. ROSS: No. I believe their

initial allocations are only for the first year

for the NOX. So for 2007, I believe, they

allocate for the year 2009 only.

MS. BASSI: And that's in the FIP?

MS. DOCTORS: Yes, yes. The dates and

the years that they allocate for is -- are in the

April 28th, 2006, Federal Register.

MS. BASSI: So basically is it the

case that the federal -- that the FIP is

different from the model rule and that USEPA is

not implementing the model rule in the FIP?

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MR. ROSS: No. USEPA is implementing

their model rule in the FIP.

MS. BASSI: But the model rule

provides for initial allocations to 2014, don't

they?

MR. ROSS: That's not -- My

understanding is that the first allocation are

only made for the year 2009.

MS. DOCTORS: His testimony is

correct. On page 25, 354, it would be 71 Federal

the year in the control period, that they be

allocated for and the date that USEPA would

credit or record the allocations and accounts,

and then in that Table VI-2 and the table next to

it, Table 6-3, is the allocations under the CAIR

model rule and that shows what you were

discussing, so the allocation is different.

HEARING OFFICER KNITTLE: Do you have

a question?

MR. RIESER: Yes. Can IEPA either

produce the documents that contains the official

FIPing as Mr. Ross indicated or a citation to the

Federal Register in which that FIPing was

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published if it was published in the Federal

MS. DOCTORS: Yes, it's been provided.

MR. RIESER: Do you know which of

those it was?

MS. DOCTORS: I just need to check.

Off the top of my head I'm not sure whether we

got a separate letter or it all took place in the

April register.

MR. RIESER: Thank you very much.

MR. RAO: I have a follow-up to the

CAIR FIP. You have a brief discussion in the

Statement of Reasons on page 10 and 11 -- 10 and

11 about the implications of CAIR FIP. Can you

take a look at the dates you have on page 11 and

comment on whether those dates are consistent

with Mr. Ross's testimony?

MS. DOCTORS: Mr. Rao, could you

repeat the question?

MR. RAO: Yeah. I was referring to

your discussion about CAIR FIP on pages 10 and 11

and on page 11 you state that the first action

that USEPA will take under the FIP will be making

NOX allocations on July 30th, 2007, for 2009

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period. When I read that, it seemed like it was

not consistent with what Mr. Ross testified. I

just wanted you to clarify.

MR. ROSS: I believe it is consistent

with what I said, that under the FIP USEPA will

be making allocations in 2007 for 2009, a single

year. So that's consistent with --

MR. RAO: I thought you said that the

allocation will be made -- the first allocation

will be September of 2006.

MR. ROSS: Seven.

MR. RAO: Seven?

MR. ROSS: Right. We were FIPed in

2006.

MR. RAO: Okay.

MR. ROSS: The first allocations to be

made by USEPA be in 2007.

MR. RAO: So what do -- if we have a

rule in place before the date, then the

allocations under your proposal may come into

play?

MR. ROSS: Right.

MR. RAO: Okay.

MS. BASSI: To follow-up on Dr. Rao

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here, wasn't there also something in the

Statement of Reasons to the effect that even if

the rule is not approved into the FIP, USEPA will

accept Illinois' allocation methodology? Is that

-- how does that work, please?

MS. DOCTORS: Okay. Mr. Bloomberg

will address that.

MS. BASSI: Okay.

MR. BLOOMBERG: I don't know the exact

passage that you're talking about but I have

spoken to USEPA CAMD and I do not recall exactly

which person there.

HEARING OFFICER KNITTLE: What is

CAMD?

MR. BLOOMBERG: Clean Air Markets

Division. And what they said is it is their

intent, even though they recognize that some

states including Illinois won't, you know, were

getting FIPed, that if we have a rule in process

and it's progressing along, they will likely hold

off on their allocation and wait for our

methodology to pass.

MS. BASSI: Do they indicate how long

they will hold off?

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MR. BLOOMBERG: They did not specify.

MS. BASSI: Is that specified in that

Federal Register, how long they'll hold off?

MR. BLOOMBERG: I don't know.

MS. BASSI: Ms. Doctors, you were just

pointing to a page and if you could point Mr.

Ross to that if there's a date there, that would

be helpful.

MR. ROSS: Well, I think the dates in

the Federal Register are identical to those in

Statement of Reasons.

MS. BASSI: Does that imply then that

USEPA will wait until July 30th and enter the FIP

allocation methodology?

MR. ROSS: I believe he based that on

a conversation.

MS. BASSI: Yeah.

MR. ROSS: But the -- does it imply it

in the Federal Register, I don't know.

MR. KIM: Before you get off the topic

of this Federal Register, we'll double check it

but I believe that in response to Mr. Rieser's

question, the documentation for the -- that sets

out that Illinois EPA or the state will be

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subject to the federal limitation plan. I think

it's in that same Federal Register passage.

We'll go get that -- if that's not correct, we'll

provide that passage. But I believe it's in --

that's Exhibit D, the Statement of Reasons, so

that's -- that's been provided to the Board, but

I think that is the Federal Register that

contains the language that basically imposes the

FIP on it.

MR. RIESER: And you'll confirm that

one way or the other?

MR. KIM: Yes, yes.

MR. RIESER: Thank you.

HEARING OFFICER KNITTLE: Mr.

Bonebrake?

MR. BONEBRAKE: Mr. Ross, a follow-up.

The initial allocation under the proposed

Illinois rule is for a three-year period: 2009,

10 and 11; is that correct?

MS. DOCTORS: Yes.

MR. ROSS: Yes.

MR. BONEBRAKE: With the -- with the

FIP now in place, what revisions to the Illinois

proposed rule do you envision will be required?

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MR. ROSS: We will be providing a

revision that allows the use of heat input for an

additional year for allocation. This is because

our rule required that output based monitors be

installed at the beginning of 2007, which it is

obvious to us at this time that our rule will not

be final by then, so for the initial allocation

period and the following year, we will allow the

use of heat input for allocations. I believe

that's the major -- only major change that we

will need to make.

MS. BASSI: To follow-up on that then,

so then assuming that FIP remains for a year, for

the very -- for 2009, then will the allocations

that you -- that the Agency would make for its

quote initial period would be 2010 and 11 --

MR. ROSS: I believe that's --

MS. BASSI: -- only for the two-year

period?

MR. ROSS: That's true, yes.

MS. BASSI: In these additional

amendments that you -- that the Agency has

indicated will be available later this week, do

they include changes to all these various dates

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that are passing?

MS. DOCTORS: Let me speak to that

since I'm working on that.

MS. BASSI: Okay.

MR. KIM: Not that this is testimony

by the way.

MS. BASSI: This is what?

MR. KIM: This is not testimony.

MS. DOCTORS: I'm not sworn in.

HEARING OFFICER KNITTLE: You know,

and we want to -- I was about to jump in earlier,

but we do want the witness who is sworn in to be

answering the questions so in a legal matter like

this or a procedural matter, it's fine. But if

you're going to testify to the merits of the

substance of the proposal, we're going to have to

swear you in, Ms. Doctors. Let him -- let him

answer the question.

MR. ROSS: We will be answering those

questions when we submit the revised testimony

which if you could wait a day or so we'll get

into those. But our legal department has been

asked to make all the necessary changes in

regards to this issue you're discussing, and

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they're still looking into -- well, I think they

-- they know what changes need to be made.

They're finalizing the language and putting it in

presentation mode so that we can bring it in

front of the Board.

MR. BONEBRAKE: And I appreciate that

we're not getting testimony from counsels and

I'll ask this question of counsel with that in

mind. I've heard a couple of different things

late this week, a couple of days on these

changes. Do we have a reasonably good sense of

when we'll be getting the proposed revisions to

the rule because I imagine that will or may at

least precipitate some additional questions?

That would be helpful for scheduling.

MR. KIM: I think we're waiting just

on a couple of two or three points just to try

and get final resolution on that. And being

obviously time away from, you know, desks,

phones, and stuff maybe slowed us down a little

bit, but I think once we get that taken care of,

the motion itself is a -- the contents of the

motion are largely done. It's just waiting to

get a couple of little pieces in place. So,

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again, maybe I'm being overly optimistic but I'm

hopeful, you know, in the next day or so.

MR. BONEBRAKE: And that I did have a

follow-up question for you, Mr. Ross. When you

were mentioning the heat input revision that was

going to be required as a result of the FIP, as I

understood your testimony you were indicating

that generators in Illinois during this initial

allocation period may elect to use heat input as

an alternative to gross output; is that correct?

MR. ROSS: That's correct.

MR. BONEBRAKE: And that is a decision

that the generators may make at their discretion?

MR. ROSS: That is correct.

MS. BASSI: Is that straight heat

input, or is it converted to gross output?

MR. ROSS: I believe it's straight

heat input similar to how the USEPA, but we will

have someone testifying on that.

MS. BASSI: Okay. I see someone back

there really deep in --

HEARING OFFICER KNITTLE: Do we have

somebody from the back panel that wants to speak

to that, Ms. Doctors?

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MS. DOCTORS: Jackie Sims is.

MR. ROSS: It appears it may be

converted.

MR. DAVIS: I'll be testifying to the

output versus input and I'll be clarifying that,

but it is converted heat input for the first

round and possibly for the second round.

MR. BONEBRAKE: Just to make sure that

I understand that correctly, although the heat

input information would be converted to gross

output, the generators have the election or the

discretion to submit and rely upon that the

Agency use heat input data as opposed to gross

output data?

MR. DAVIS: Yes.

MR. BONEBRAKE: That is still correct?

MR. DAVIS: Yes.

MS. BASSI: I have a couple questions

about your presentation and you're saying why

didn't I ask those before.

MR. ROSS: Okay. No I just have to

look for my presentation.

MS. BASSI: Okay. Counting the cover

page as page one --

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MR. ROSS: Okay.

MS. BASSI: -- on Slide 17 or page 17

which says CAIR in Illinois in paren continued at

the top and the first dot point is the more NOX

reduced the greater the benefits.

MR. ROSS: Yes.

MS. BASSI: The last dot on that page

says USEPA modeling in support of CAIR shows that

CAIR will not be sufficient for all of Illinois

to obtain the PM2.5 and ozone NAAQS, N-A-A-Q-S.

Does this statement assume that other statutorily

required reductions -- or have been accounted for

in the modeling? And by other statutorily

required reductions, I mean, RACT where it

continues to apply and has not already been

applied, the new CTG, any reductions that are

coming as a result of federal measures and so

forth?

MR. ROSS: I believe USEPA model on

the books controls and on the way controls that

they were made aware of, or aware of, or made

aware of by the state, so they modeled, I guess,

what they considered the likely scenario of rules

coming so --

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MR. KALEEL: USEPA's modeling was done

prior to the CAIR rulemaking so it's somewhat

older than some of the modeling work that

Illinois EPA and LADCO was engaged in right now,

but I think Jim's statement is correct, that at

least at the point that they did the modeling,

they -- USEPA made every effort to include the

emission reductions that are expected from

programs that are already in place like the NOX

SIP Call, like Federal Motor Vehicle Control

Programs, Tier 2, CAIR, low sulfur fuels. A lot

of those things -- the rules are already in place

in emission reductions. Jim's terminology was on

the books.

MS. BASSI: Is this statement

consistent with the most recent of the Illinois

EPA or LADCO modeling?

MR. KALEEL: Yes, it is.

MS. BASSI: And does Illinois USEPA or

LADCO modeling include the new CTG?

MR. KALEEL: The modeling that we used

in the Technical Support Document is a generation

or maybe even two generations old and the -- that

particular modeling did not include the new CTGs.

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We're trying to make an effort, we being Illinois

USEPA and LADCO, and the other LADCO states are

making an effort to include those in a future

round.

MS. BASSI: Okay. And what about

RACT?

MR. KALEEL: RACT to the extent --

RACT, Reasonably Available Control Technology, to

the extent it is required or in place in

non-attainment areas was accounted for.

MS. BASSI: And CTG, by the way, means

Control Technology Guideline?

MR. KALEEL: Yes.

MS. BASSI: My second question is on

Slide 18, the next one.

HEARING OFFICER KNITTLE: Mr. Rieser?

Can we interject?

MS. BASSI: Yes.

HEARING OFFICER KNITTLE: He has a

question on that last slide.

MR. RIESER: There's been some

discussion, and maybe this is best addressed to

Mr. Kaleel, that current result -- or the current

sampling results document that may allow the IEPA

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to document attainment with ozone in the Chicago

area; is that correct?

MR. KALEEL: The preliminary ozone

monitoring that includes this summers ozone data,

as well as the prior two years, indicates that

the monitor that's historically been the

controlling monitor for the Chicago

non-attainment area is one located in Chiwaukee,

Wisconsin, is, in fact, below the level of the

8-hour ozone standards. So that Chiwaukee

monitor, the Chicago non-attainment area is -- is

eligible to request redesignation.

MS. BASSI: And is the Illinois EPA

doing that?

MR. KALEEL: At this time we haven't

decided whether or not to do that. We're working

with our neighboring states to decide whether or

not to pursue that.

MS. BASSI: Why would you not?

MR. KALEEL: Well, there's still other

monitors in Wisconsin and across the lake, Lake

Michigan, in the state of Michigan that we

perceive our contribution to be significant, if

not overwhelming, and because of our contribution

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to those other states we may elect not to do

that.

MS. BASSI: What does contribution to

other states have to do with attainment in the

non-attainment areas that Illinois is responsible

for?

MR. KALEEL: Well, it's historically

been our policy for at least 15 years to try to

resolve the non-attainment problems throughout

the Lake Michigan basin at the same time. So we

-- we're continuing that policy. We're working

with the other states to decide how to approach

the current situation with the monitors near

Chicago.

MS. BASSI: Okay.

HEARING OFFICER KNITTLE: Mr. Rieser?

MR. RIESER: If there is a decision to

apply for a change in the attainment designation

for the Chicago area, does that have any impact

on either the statement that you've got here or

the application of these rules?

MR. ROSS: I don't believe it would

change the statement made here because this is in

terms of USEPA's modeling that has already been

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performed, so it's a past tense statement. Going

forward -- Well, I mean, the statement wouldn't

change unless USEPA performed another round of

modeling.

HEARING OFFICER KNITTLE: Yes, Ms.

Bassi?

MS. BASSI: Is it not the case that if

Illinois pursued redesignation and it was granted

on the basis of clean data; in other words, the

monitors showed attainment that would not apply

in Illinois are the CTGs and not RACT, in

Chicago, at least?

MR. KALEEL: I guess I'm not sure

about the CTGs. The NOX RACT, I think, is a

determination that we have to approach USEPA on.

RACT is a statutory requirement in the Act for

moderate non-attainment areas and --

MS. BASSI: But if the area is no

longer moderate non-attainment because it's in

attainment, then doesn't it follow that those

things no longer apply.

MR. KALEEL: EPA would have to make a

determination, that's true. I think an argument

like that could be made.

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MS. BASSI: Is there not guidance that

already says that?

MR. KALEEL: I'm not sure about

guidance. There is some precedent for that

approach. One other comment is that we still

have PM2.5 non-attainment in Chicago and downwind

areas, and although the guidelines for

implementation of the PM2.5 standards have not

been finalized yet, we expect that RACT will be a

requirement for PM2.5 and including NOX RACT. So

I'm not sure, you know, that it will get us

anywhere if RACT is not required for ozone. It

will be still required for PM2.5.

MS. BASSI: I had a question on Slide

18 but it no longer makes any sense.

HEARING OFFICER KNITTLE: Are we

finished with Mr. Ross?

MS. BASSI: For this time.

HEARING OFFICER KNITTLE: I assume

that Mr. Ross will stay on the panel?

MR. ROSS: Yes.

MS. DOCTORS: Yes.

HEARING OFFICER KNITTLE: We're

keeping -- Let's go off the record for a second.

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(A discussion was held off the

record.)

HEARING OFFICER KNITTLE: We're going

to continue with this panel. Ms. Doctors, do you

have another witness that you want to have come

up and sit with the front panel?

MS. DOCTORS: Yes, I'd like to have

Rory Davis come forward. The questions are going

to be directed at Rob Kaleel for the most part.

HEARING OFFICER KNITTLE: Can you say

his name again for the court reporter?

MS. DOCTORS: Rory Davis, R-O-R-Y,

Davis, D-A-V-I-S.

HEARING OFFICER KNITTLE: Thank you.

Ms. Doctors?

MS. DOCTORS: Yes, I'd like to ask

that the testimony of Rob Kaleel be admitted as

if read. It'd be Agency Exhibit 4.

HEARING OFFICER KNITTLE: Do we have

any objections to the testimony of Robert Kaleel?

MS. BASSI: Is this the same as what

is submitted to the Board?

MS. DOCTORS: Yes.

HEARING OFFICER KNITTLE: Seeing none,

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this will be admitted as exhibit -- Agency

Exhibit No. 4. Mr. Bonebrake, you may proceed.

MR. BONEBRAKE: Mr. Kaleel, first I

have a clarification question for you pertaining

to the first page of your written testimony and

it's the second full paragraph, the last

sentence. And it refers to the fact that your

testimony is based on information provided to the

Board by the Illinois EPA Technical Support

Document, do you see that?

MR. KALEEL: Yes, I do.

MR. BONEBRAKE: Do you, in fact, write

a portion of the Technical Support Document?

MR. KALEEL: Yes.

MR. BONEBRAKE: And what portion did

you write?

MR. KALEEL: I had involvement in

writing several portions but primary

responsibility for writing the -- what's chapter

-- or Section 3.0, The Environmental and Health

Benefits.

MS. BASSI: Mr. Kaleel, in that same

statement that Mr. Bonebrake was quoting, you say

your testimony is based on the TSD, is your

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testimony then just a summary of the TSD?

MR. KALEEL: That was my intention was

to summarize the TSD.

MS. BASSI: Okay. You provide

information regarding economic and health

benefits in national terms apparently taken from

USEPA's Analysis; is that correct?

MR. KALEEL: That's correct.

MS. BASSI: How does this specifically

translate to Illinois?

MR. KALEEL: There isn't in that

Section 3.0 or in my testimony specific

information derived from USEPA. There isn't

specific information for Illinois. The costs are

-- the cost information, health information

generally is applicable to the entire CAIR

region, including Illinois.

HEARING OFFICER KNITTLE: Mr.

Bonebrake?

MR. BONEBRAKE: Does that mean then

that your discussion both in the TSD and in your

testimony of health impacts and costs are all

related to USEPA's analysis of the federal CAIR

and do not take into consideration the impact of

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any deviations from the federal model reflected

in the Illinois proposal?

MR. KALEEL: Yes, that's correct.

MS. BASSI: Is Forest Productivity a

big business in Illinois?

MR. KALEEL: I have no information on

Forest Productivity. Again, we're citing federal

information.

MS. BASSI: Okay. What is the

Agency's basis for stating that Randolph Township

and Randolph County is a non-attainment area for

ozone? This is in the Statement of Reasons, I

believe. It's on -- it's on page 3 and footnote

2 of Statement of Reasons.

MR. KALEEL: If that's in the

Statement of Reasons, that's in error. Randolph

County is considered to be an attainment area for

ozone. The Baldwin Precinct or Baldwin Township

in Randolph County is non-attainment for PM2.5.

MS. BASSI: I believe there's an error

in the Code of Federal Regulation on the

designation of the PM2.5 non-attainment area.

They call it Baldwin Village, has that been

corrected?

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MR. KALEEL: I believe that's been

corrected. The terminology -- the correct

terminology would either be Baldwin Precinct or

Baldwin Township.

MS. BASSI: And I believe you stated

earlier that the -- Well, first of all, would you

explain, please, what a design value is with

respect to a national ambient air quality

standard in a monitoring concept?

MR. KALEEL: Yes. In a monitoring

concept I guess it depends a little bit on the

form of the standard whether you're talking ozone

or PM2.5, but in the case of ozone, the design

value would be for a particular monitor would

represent the fourth highest value in three

years. That's typically been the case. I think

in the case of -- I'm sorry, in the case of

8-hour ozone, it's the average of the fourth

highest over three years, so -- and the idea

being that that value was above a level of the

air quality standard 85 parts per billion then

that monitor would be exceeding the standard,

violating the standard.

MS. BASSI: Does the same concept

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apply to PM2.5 in that the design monitor reflects

whatever -- however the standard is expressed?

MR. KALEEL: Yes. The air quality

standards, the way you would interpret the

monitoring data, is different for each standard.

In the case of PM2.5, what the annual average of

form of the standard, the design value is

computed by just a straight arithmetic average of

three years of data, three annual averages at

each monitoring site.

MS. BASSI: Would you again -- I --

you just mentioned this a minute ago, but would

you state again what is the design monitor for

the Chicago ozone non-attainment area?

MR. KALEEL: Historically the critical

monitor in our attainment demonstration has been

the Chiwaukee monitor. It does -- it does move

around; however, from -- from one period to

another there have been times in the past where

the critical monitor has been north of Milwaukee.

There have been times in the recent past where

concentrations have been observed that are higher

in Indiana so it does move around, but typically

it's been the Chiwaukee monitor for ozone.

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MS. BASSI: In your -- in your

testimony you included a couple of figures and

specifically looking at Figure 2. -- 2-2 on page

10 of your testimony, how much -- this is -- this

is addressing the 8-hour ozone designation and

the red counties are non-attainment counties.

How much -- how many of those are -- can you

somehow delineate for us what comprises the exact

non-attainment area that Illinois -- that is the

Illinois and, I believe, Indiana non-attainment

area?

MR. KALEEL: Yeah, the Chicago --

MS. BASSI: Thank you.

MR. KALEEL: -- metropolitan area --

or the non-attainment area that reflects the

Chicago Metropolitan area includes six counties

in northeastern Illinois, two partial counties.

They're just certain townships in two counties in

northeastern Illinois and also Lake and Porter

Counties in Indiana.

MS. BASSI: And Lake and Porter

Counties are the furthest west counties in

Indiana?

MR. KALEEL: Yes, they are.

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MS. BASSI: Does the Chicago

non-attainment area include any portion of

Wisconsin?

MR. KALEEL: It does not.

MS. BASSI: Is -- Where is the

Chiwaukee monitor located?

MR. KALEEL: It's in Wisconsin,

virtually at the border between Wisconsin and

Illinois at the lake front.

MR. BASSI: How can it be the design

monitor for the Chicago non-attainment area when

it was not in the non-attainment area?

MR. KALEEL: Well, this has been --

the border for the non-attainment area, there's

-- there's -- there's some legal history to it,

and I may or may not get the legal history

totally correct. The Kenosha and Racine Counties

in southeast Wisconsin are -- especially Kenosha

County, is part of the Chicago metropolitan

statistical area that the MSA boundaries would

include those counties as well as the two in

Indiana. Historically, those counties have been

part of the Chicago non-attainment area. The

state of Wisconsin had asked, and USEPA agreed,

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back in the context of the 1-hour ozone that for

administrative purposes that the Kenosha and

Racine Counties be split off and be included as

the Milwaukee non-attainment area. So this goes

back into the -- I believe the designations

pursuant to the 1990 Clean Air Act amendments.

MS. BASSI: Thank you. Is it correct

that both of the Illinois ozone non-attainment

areas are so called Subpart 2 non-attainment

areas?

MR. KALEEL: That's correct.

MS. BASSI: Would you explain what

Subpart 2 non-attainment areas are, please?

MR. KALEEL: There's -- there's -- in,

I believe, it's Section 110 of the Act there's

two parts that -- that -- okay. I'm sorry Part D

of the Clean Air Act, there are two sections that

govern the criteria or the control requirements

for new non-attainment areas for various

pollutants. Subpart 1 is a more general

description of non-attainment area requirements

for any pollutant whether it include particulate

matter, it would include ozone, sulfur dioxide.

Subpart 2 was included for -- specifically for

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ozone. It had a very prescriptive set of control

requirements. It really, back in the days of the

1990 Clean Air Act amendments, had very

prescriptive requirements and categories of the

severity of non-attainment. So it includes a

kind of a ramp-up of requirements depending on

the severity of ozone concentrations at that

time, again, a 1-hour ozone. So Subpart 2 areas

are previously areas that have been

non-attainment for 1-hour ozone.

MS. BASSI: Is it -- is it not the

case that Subpart 2 areas are those who had a

particular design value at the time of

designation for the 8-hour ozone standards?

MR. KALEEL: There was -- there was a

criteria or ranking that EPA did for Subpart 2,

and I think it included areas that were still

non-attainment for 1-hour ozone at the time that

the 8-hour ozone standard was implemented. But

there was even a category of concentrations based

again on 1-hour ozone. It was less than 125

parts per billion for 1-hour ozone but greater

than 120 parts, so these are areas that were

barely meeting the standard, the 1-hour standard

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at that time. Those were considered to be

Subpart 2 areas.

MS. BASSI: What was the Metro East

non-attainment area status at the time of

designation in terms of attainment or

non-attainment?

MR. KALEEL: Metro East area as part

of the St. Louis multi state non-attainment area,

and it was an attainment of the 1-hour ozone

standard. It was a stated petition that USEPA

had approved for redesignation, a petition

previously to redesignation. The St. Louis area

was a moderate non-attainment area.

MS. BASSI: And at the time of

designation for the 8-hour ozone standard, I

believe you just said a bit ago that subpart --

that both of the non-attainment areas in Illinois

are Subpart 2 non-attainment areas?

MR. KALEEL: Yes.

MS. BASSI: So base that on another

statement you just made, does that imply then

that even though the Metro East non-attainment

area have been redesignated to attainment under

the 1-hour standard it was barely an attainment?

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MR. KIM: As engrossing as this is, is

this -- I'm not sure where the relevance of this

line of questioning comes into play with Mr.

Kaleel's testimony.

MS. BASSI: Mr. Kaleel is probably the

best person to answer the questions, number one,

and the relevance of this is that the Agency has

made statements all through this that these are

-- that this rule and some of the deviations from

the federal rule are going to be used towards

attainment of these standards and, therefore,

attainment of the standards is relevant.

MR. KIM: And I think in that context

I would disagree, but I'm not sure most of these

questions seem to be based more on the historical

fact on all of this. I think we're taking more

of a perspective approach on this as opposed to

the --

MS. BASSI: Sorry.

MR. KIM: -- as opposed to the

background that you're it calling here.

MS. BASSI: Well, part of the -- part

of this background goes to what's going to be

required in the non-attainment area in addition

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to this.

HEARING OFFICER KNITTLE: Is that an

objection, Mr. Kim?

MR. KIM: It is an objection.

MS. BASSI: Sorry.

HEARING OFFICER KNITTLE: I think I'll

sustain that as to the background information. I

can't see how it's relevant.

MS. BASSI: All right. I believe in

your -- in the Statement of Reasons that perhaps

in your testimony there is discussion about when

the attainment dates are.

HEARING OFFICER KNITTLE: I'm sorry.

You're speaking -- I thought you were asking

another question.

MS. BASSI: I am. I am. Would you

please explain -- Actually, I was looking at you

because I wanted to be sure this wasn't part of

that same background stuff. It is in the

Statement of Reasons for sure. When is the

attainment date for the -- for the Illinois ozone

non-attainment area?

MR. KALEEL: The attainment date for

ozone is officially June 15th, 2009 -- I'm sorry,

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June 15th, 2010.

MS. BASSI: And I believe it says 2009

in the Statement of Reasons; is that correct?

And I didn't write down a page number, sorry.

MR. KALEEL: I don't recall the

specific date that was in the Statement of

Reasons. The -- Effectively 2009 has to be a

clean year for ozone for the areas to attain it

on time. June 15th is very early in the ozone

season so the June 15th date in 2010 really has

to revert back to the prior year of 2009. You

have to have a complete season to be able to make

a determination of the attainment.

MS. BASSI: But is it true that June

15th, 2009, actually has no relevance? The 2009

clean year would be at the end of the ozone

season?

MR. KALEEL: I believe -- If it says

that in the Statement of Reasons, I believe that

is right.

MS. BASSI: Where -- Do you know the

current ozone -- or do you know the current PM2.5

design value for the non-attainment area?

MR. KALEEL: The current as in the --

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MS. BASSI: Including 2005, 4 and 3 --

or, yeah, 5, 4, and 3?

MR. KALEEL: I don't recall the

specific values. We can -- we can provide that.

I know that we have summaries of that. I don't

have that with me at the moment.

MS. BASSI: Does -- Would USEPA's

proposed revision of the daily standard for PM2.5,

the 35 micrograms per cubic meter, affect at all

this rulemaking?

MR. KALEEL: I think -- Officially, I

don't believe EPA has addressed it yet. I think

EPA is working on a policy for transition from

the current 24-hour PM2.5 standard to the newly

promulgated standard. They haven't done that

yet.

MS. BASSI: You state in -- someone

states in the Statement of Reasons that the

attainment date for most areas, and that was in

quotes, for PM2.5 is April 5th, 2010. Does this

mean that there are areas in Illinois that have

an attainment date other than that?

MR. KALEEL: That would be the

applicable attainment date for PM2.5 for both

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Metro East and Chicago.

MS. BASSI: Okay. Would you explain

then how the CAIR rule which goes into effect for

SO2 and, therefore, PM2.5 in 2010 will -- will

effect attainment of the PM2.5 standard in 2010?

MR. KALEEL: That's a good question.

I wish USEPA would have promulgated CAIR sooner.

There will be some NOX reductions anticipated by

CAIR in 2009 as part of the summer season

program. I think USEPA also anticipates some

early reductions prior to the attainment date for

PM2.5 just due to the economics of trading, so

there may be some early reductions. But as we're

all aware, the program, the CAIR program, doesn't

provide a lot of NOX reductions early in the

program. Most of the NOX reductions will come by

2015, the second phase. And these dates don't

line up well with the attainment dates for either

8-hour ozone or PM2.5 and we -- we have commented

to that effect to USEPA when they first proposed

CAIR.

MS. BASSI: It's effectively then the

time you have to attain or at least have

implemented all your programs for attainment by

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-- is by the end of 2009 or by the beginning of

2009?

MR. KALEEL: For -- for ozone it would

be the beginning of the ozone season 2009. For

PM2.5 it would be the end of 2009 or right at the

beginning of 2010.

MS. BASSI: Do emissions of NOX and SO2

generally have a local impact, meaning, within

the non-attainment area?

MR. KALEEL: Are you speaking about

PM2.5, is that --

MS. BASSI: Yeah.

MR. KALEEL: I guess I get to ask you

a question. But the --

MS. BASSI: That's called clarifying.

MR. KALEEL: For PM2.5, SO2 and NOX

reductions typically have their effect further

downwind. The -- urban -- urban area, PM2.5

levels usually see sulfate and nitrate as a major

constituent of PM2.5 on the filters in the

non-attainment areas, but the science would

suggest that PM -- that that sulfate and nitrate

concentrations on those filters originated

upwind, that they were a result of transport

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rather than locally generated particulate matter.

MS. BASSI: Can you tell us how far NOX

and SO2 emissions are transported from coal-fired

power plants?

MR. KALEEL: Hundreds of miles.

MS. BASSI: Does SO2 transport greater

than NOX?

MR. KALEEL: They're both in a gaseous

form so I think that they could. They could --

could transport a great distance. The form that

the sulfur is in at that time is subject to

atmospheric chemical reactions, so SO2 may not

remain in the form of SO2 for hundreds of miles.

It really depends on what other chemical

constituents are available in the atmosphere as

to what reactions take place or what form the

sulfur is at any given location downwind.

MS. BASSI: Does the -- does the SO2 --

you said it will change chemical form, does it

change back to SO2?

MR. KALEEL: I don't believe it does,

no.

MS. BASSI: What would be the impact

on a NOX or SO2 air quality monitor of

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approximately 1,300 megawatts of coal-fired

generation if it were shut down -- if this were

shut down in the vicinity of that monitor?

MR. KIM: Are you referring to a

specific scenario, or is this just a very

specific hypothetical?

MS. BASSI: This is a very specific

hypothetical that had its generation in something

or other that I didn't write down, but I think

it's related to the CASA.

MR. KALEEL: In general, a power plant

with a very tall stack will not have large

impacts close to the monitor. There are -- there

are short-term exceptions, dramatic exceptions to

that and very unstable atmosphere is the power

plant plume can touch down very close within

hundreds of meters of the stack even with a tall

stack. In general, however, the SO2 and NOX

emissions are going to travel some distance

downwind before causing any kind of ground level

impacts. Similarly, particulate matter, primary

particulate matter, from a tall stack can have a

local impact or can also contribute somewhat

downwind.

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MS. BASSI: Okay. You say that each

user one of the largest sources of NOx, this is in

the first page of your testimony, what are some

other large sources of NOX?

MR. KALEEL: The other main source of

NOX in our state inventory or in our

non-attainment inventories are mobile sources.

There are other point sources of NOX, other

industrial boilers, other industrial processes,

basically any industrial process that causes

emissions at higher than ambient temperatures.

Any fuel combustion type source can be a NOX

source.

MS. BASSI: Do mobile sources have the

same transport characteristics as emissions from

power plants?

MR. KALEEL: Typically not. The NOX

that is emitted from mobile sources is obviously

at the ground level and not from a tall stack.

The chemical transformation of NOX from cars and

NOX from power plants typically would take in the

range of several hours and, again, that depends

on the availability of other constituents, other

-- other chemical compounds in the atmosphere to

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cause those chemical reactions to occur.

MS. BASSI: Looking at Table 3. -- or

3-3 and 3-4 in your testimony. I just need to

understand this a little bit more. You stated

the contribution to the Chicago non-attainment

area from Iowa, for example, is 0.28 micrograms

per cubic meter. Could you translate that into

parts per billion for me, please?

MR. KALEEL: I'm not sure that I can.

This is for both PM2.5 and that is the form of the

standard micrograms per cubic meter.

MS. BASSI: So you can't say anything

else, huh? Okay. In the Statement of Reasons

the Agency says that it will pursue emission

reductions from presumably stationary large and

small -- presumably stationary as opposed to

mobile -- large and small internal combustion

engines, NOX RACTs from unnamed source course

category, more stringent VOC emission reduction

-- or limits, I'm sorry, for existing and new

industrial categories, a tightening of ERMs, an

acronym, and adopting SO2 RACTs quote before it

seeks additional reduction in SO2 or NOX from

electric generating units. This is on page 52 on

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the Statement of Reasons. Does the Agency, I

believe -- I believe that someplace else it says

no but does the Agency adopt USEPA's findings

that CAIR is NOX and SO2 RACT?

MR. KALEEL: USEPA gives the states

the option to make that finding that we can use

to participate in the CAIR trading program, that

that would be equivalent to RACT or that would be

a RACT requirement. Illinois has not made the

determination that meeting CAIR is the same as

meeting RACT for EGUs in the non-attainment area.

That's -- that's -- I guess we're still

considering whether or not that we want to do

that or we will do that.

MS. BASSI: So there's not been a

final decision?

MR. KALEEL: That's right.

MS. BASSI: Okay. From what types of

other sources would Illinois USEPA see SO2 RACT?

MR. KALEEL: We're still waiting for

federal guidance on the PM2.5 implementation

approach. We anticipate that SO2 RACT will need

to be addressed for PM2.5 based on draft guidance

that USEPA released last year, but we don't know

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what the final form of that will take.

MS. BASSI: Okay.

HEARING OFFICER KNITTLE: Mr.

Bonebrake?

MR. BONEBRAKE: Why would IEPA, given

the option not assume that -- why would IEPA when

given the option not assume that EGU subject to

CAIR equals RACT?

MR. KALEEL: One of the things that

we're trying to look at right now is still what

is our overall approach for demonstrating

attainment of the air quality standards and to

the extent that EGUs are contributors to

non-attainment, and that we find that certain

controls may be needed from specific plants in or

near the non-attainment area that could be

addressed through RACT, then we would make that

determination. We've not -- not completed our

modeling yet, and we don't know yet whether that

is the case. But to the extent that local power

plant emissions are contributing locally or

within our Lake Michigan basin and within the St.

Louis non-attainment boundaries, then RACT

controls maybe appropriate.

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MS. BASSI: How is this consistent

with or how will it coordinate with the joint

statement that accompanied the two MPS amendments

to Mercury rulemaking? And my apologies for

mentioning for Mercury. How will this all

coordinate together? And in the joint statement,

what I'm referring to is the statement that those

sources that pursue the MPS will be the last to

have to do initial reduction?

MR. KALEEL: RACT and the MPS are

separate requirements. The MPS is an option for

electric utilities. RACT is not an option for

the Agency. We need to pursue RACT in our

non-attainment areas. So we can --

MR. ROSS: And I would just like to

clarify, the joint statement did not say that

sources opting into the MPS will be the last ones

that we look at. It says that we will look to

other sources first and those --

MS. BASSI: And how is that different?

MR. ROSS: Because other sources that

are less well-controlled. Sources entering into

the MPS will be considered well-controlled in

regards to systemwide from that perspective in

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regards to SO2 and NOX.

MS. BASSI: Okay. But -- Okay.

That's fine. I don't know if it was in the

Statement of Reasons or in your testimony, Mr.

Kaleel, there's mention of a super regional

dialogue that involved LADCO and OTC which is the

Ozone Transport Commission, which is the

northeast portion of the United States. It says

Illinois is participating in this. Are you

familiar with what I'm talking about?

MR. KALEEL: I am familiar.

MS. BASSI: Okay. Is this an open

public process?

MR. KALEEL: My understanding is that

the process up-to-date has largely involved the

directors of the agencies of the OTC states and

some of the Midwest states. I know that our

director has participated in those. I don't

believe it's an open process. I believe it's

just the environmental commission that are

participating in that.

MS. BASSI: So your understanding or

your belief is is that there are not any

stakeholders that are participating; is that

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correct?

MR. KALEEL: I'm not aware that there

are any stakeholders.

MS. BASSI: Did USEPA participate?

MR. KALEEL: I don't believe so.

MS. BASSI: Okay. Looking in your

testimony at Table 3-5, does this -- this -- does

this table refer to -- no, it has -- Never mind.

It says for Chicago at three, either Chicago and

then in the second column there's a parentheses

three and then it says -- and this is all under

ozone; correct?

MR. KALEEL: Yes.

MS. BASSI: Which you just stated we

already attained; correct?

MR. KALEEL: Yes. Potentially we've

not attained as the data that I referred has not

been quality assured, but to the extent that the

Chiwaukee monitoring data holds, and I have no

reason to think it won't, the monitoring data

would show that we're meeting the standard.

MS. BASSI: Okay. Does this mean,

according to this, to attain the ozone standard

in Chicago there would need to be an additional

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35% reduction in VOC or CO, one or the other,

emissions in Chicago area beyond what's currently

there?

MR. KALEEL: Yeah, the CO is -- I

hadn't even noticed that before you said it.

What's really intended there for particulate

matter it organic carbon. It should be OC. That

reflects a typo.

MS. BASSI: Okay.

MR. KALEEL: It's not carbon monoxide.

MS. BASSI: Well, I was all excited.

Okay. And then does this mean that there were

additional VOC reductions of 35% from a baseline

and additional NOX reduction in the region from

the baseline that there would be attainment in

the Chicago area?

MR. KALEEL: Yes, that's what is

intended based on this round of modeling.

MS. BASSI: Okay. And that's how the

entire chart would be read; is that correct?

MR. KALEEL: That's right.

MS. BASSI: Okay. What would be the

effect of local reductions of NOX on ozone?

MR. KALEEL: Depending on the

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non-attainment area, depending on the specific

day that is being modeled, and we talked a little

bit this morning about the effects NOX benefit,

but you may see some -- some increase in ozone

concentration, probably wouldn't see a lot of

ozone decrease within the same urban area from NOX

control.

MS. BASSI: Does that apply to

so-called low level sources as well as to

elevated sources of NOX?

MR. KALEEL: I believe that's true.

MS. BASSI: Okay. And when I say

local, you understand I mean the non-attainment

area?

MR. KALEEL: The way I'm interpreting

is almost within the same -- the same

metropolitan area. The NOX emissions from Chicago

probably are not responsible for a lot of the

ozone concentration in Chicago proper. NOX does

contribute to ozone formation downwind; however,

and in some cases that -- that NOX might be just a

few counties away or it might be all the way up

north of Milwaukee or across in Michigan.

MS. BASSI: Is VOC a precursor to

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PM2.5?

MR. KALEEL: VOC is -- is organic

compounds in general are precursors and they are

also in some cases particulate matter, but

usually when you think of volatile organic

compounds, which is historically the way we

Described hydrocarbons for ozone formation, we're

probably not talking the same species as we would

be for particulate matter. Organic carbon is --

I mean, they are hydrocarbons but they typically

are more complex compounds that become

particulate matter virtually right out of the

stack. Perhaps in the case of condensable

organic compound. They may be in a gaseous form

at elevated temperatures but as soon as they

cool, they're in the form of particulate.

MS. BASSI: In your testimony at page

8 you state in the -- it appears there are two

full paragraphs on page 8 and the last several

sentences in the first paragraph on page 8

beginning with, Since NOX emissions are not

expected to change relative to CAIR, and I think

this is referring to actual NOX emissions in

Illinois. You go on to state, Illinois EPA does

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not expect that the air quality impacts from

existing electric generating units will be

significantly different under this proposal

versus CAIR; is that correct? Did you find that?

MR. KALEEL: Yes, that's what that

says.

MS. BASSI: Okay. And the next

sentence says, Thus the air quality modeling of

the federal CAIR rule performed by USEPA and

LADCO, L-A-D-C-O, and described above are

representative of air quality benefits of this

proposal, which doesn't add anything. Is this --

Do these statements indicate that Illinois does

not really expect any air quality benefits from

the CASA?

MR. KALEEL: Referring not just to

this testimony but some of the earlier testimony

from Mr. Ross, I think we -- we -- we do expect

NOX reductions in the future, but my statements

are really based on ICF's modeling and our

ability to quantify the NOX reductions. The

modeling with the IPM model, as Mr. Ross had

testified earlier, doesn't identify NOX reductions

as a result of the retirement in the case of the

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modeling retirement of the 35% of our allowances.

So with our -- without an ability to quantify

those emissions, we thoroughly can't model those.

I think that's kind of what I was trying to

reflect.

MR. BONEBRAKE: And, Mr. Kaleel, what

do you think will be the ramifications of the

inability to model emission reduction that you

just referred in terms of attainment status and

obtaining SIP credit?

MR. KALEEL: Well, our SIP must be

based on verifiable and enforceable emission

reduction and our attainment demonstration will

be based on specific emission reductions that we

do quantify and include in our SIP.

MR. BONEBRAKE: Does that does that

mean then, Mr. Kaleel, that the Agency cannot

rely upon the CASA to obtain SIP credit?

MR. KALEEL: I think we can quantify

at least -- at least a certain SIP credit, and

we're still working on doing that. I think there

was some reference this morning to the document

for removal energy, for example, that allows us

to quantify certain reductions. But in general,

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it's difficult to do that and we won't be relying

on them to any large degree.

MS. BASSI: In order to rely on those

reductions, don't you have to have identified

some projects, or can you rely just on the

prediction that there may be projects?

MR. KALEEL: I believe you have to

identify specific projects.

MR. BONEBRAKE: And --

MS. BASSI: Go ahead.

MR. BONEBRAKE: A follow-up that I

asked Mr. Ross. There was an indication in the

ICF report that CASA would result in emission

reductions in Florida. And you have some

modeling expertise, Mr. Kaleel, so my question

for you: Is there any modeling data that would

suggest that emission reductions in Florida would

have a positive impact on attainment in the State

of Illinois?

MR. KALEEL: In fact, it has been

looked at in terms of the USEPA's modeling of the

Clean Air Interstate Rule and USEPA does not

identify Florida as a significant contributor to

Illinois' non-attainment problems.

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MR. BONEBRAKE: And then I guess, Mr.

Kaleel, this is kind of the bottom line question:

What do you anticipate -- strike that. I think

you agreed with Ms. Bassi when she -- when she

asked you the question that you don't expect,

based upon the ICF analysis, a meaningful

reduction of NOX emissions in the State of

Illinois; is that correct?

MR. KALEEL: From the CASA, I think

that's right.

MR. BONEBRAKE: And beyond that, IEPA

has not quantified any emission reductions that

it thinks might result from the fact that not all

CASA allowances would necessarily be retired

which was the assumption of ICF, is that also

correct?

MR. KALEEL: That's correct.

MR. KIM: Mr. Davis has something to

add to that.

MR. DAVIS: The ICF modeling only

models a retirement of 30%, not modeling an

incentive for additional reductions from

pollution control upgrade: EE/RE projects, early

adopters and clean coal projects. It doesn't

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model the incentive provided by the CASA. It

just models what kind of reductions we might

expect if there was just a retirement at 30%, not

the -- and we do expect and have quantified to

some degree the results in NOX reductions we

expect from the CASA.

MR. BONEBRAKE: When you say we have

quantified just at some degree, I have to ask a

follow-up question. Who and where is that

located?

MR. DAVIS: In the assessment that Mr.

Ross was discussing earlier.

MR. BONEBRAKE: This is the

preliminary graph assessment that we discussed

this morning that the IEPA is trying to find for

purposes of production to us if I understood

correctly our conversation this morning.

MR. ROSS: We will be providing that.

I believe we found it.

MR. KIM: We can do that now actually.

HEARING OFFICER KNITTLE: Let's -- One

second please. Do we have any further questions

for Mr. Kaleel after this is passed out?

MS. BASSI: So far as we know, no.

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HEARING OFFICER KNITTLE: Of course,

you can come back later.

MR. BONEBRAKE: Actually, I do have

one follow-up.

HEARING OFFICER KNITTLE: Sure. Why

don't we do that before we pass this out and then

take a break.

MR. BONEBRAKE: Mr. Kaleel, your

testimony at page 2 indicates that Randolph

County is included as part of the Metro East St.

Louis PM2.5 non-attainment area?

MR. KALEEL: Yes.

MR. BONEBRAKE: Do you recall that?

MR. KALEEL: A portion of Randolph

County.

MR. BONEBRAKE: Portion of Randolph

County. What was the data basis for including

that portion of Randolph County in that

non-attainment area?

MR. KALEEL: Actually, the

determination to include Randolph County was

really made by USEPA Region 5. Our initial

recommendation for the Metro East area did not

include Randolph County. USEPA subsequently

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provided a draft of their determination which

included all of Randolph County. We indicated to

them that it would be appropriate if they were

going to do Randolph County to just include the

Baldwin township. USEPA's interest was the

Baldwin power plant in terms of defining Randolph

County as part of the non-attainment area. So we

identified to them that they could accomplish

that by just including that precinct or that

township.

(Andrea Moore joins the hearing.)

MR. BONEBRAKE: Is there any ambient

to monitoring data to support that designation?

MR. KALEEL: The inclusion, as I

understand it, again it was USEPA's

determination, was not based on ambient data in

Randolph County. It was based on emissions from

the Baldwin power plant.

HEARING OFFICER KNITTLE: Okay.

MR. BONEBRAKE: Nothing further of Mr.

Kaleel then at this point.

HEARING OFFICER KNITTLE: Mr. Kim, are

you offering that as an exhibit, Agency exhibit,

or are you just passing it out as information?

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MR. KIM: No, I think we said that we

would provide it as an exhibit, so we will.

HEARING OFFICER KNITTLE: Okay.

MS. DOCTORS: It will be Agency

Exhibit 5.

HEARING OFFICER KNITTLE: Agency

Exhibit 5.

MR. KIM: You know, maybe after the

break we will reposition so the court reporter is

closer to the witness. Do you know who it is you

have your next set of questions for?

MS. BASSI: Whoever your next witness

is.

MR. BONEBRAKE: I think in your

initial panel per Rachel's e-mail was Jim Ross,

Robert Kaleel, and Mr. Cooper.

MR. KIM: We'll put Mr. Cooper maybe

down closer to the court reporter.

MR. RIESER: Isn't it Gary Beckstead?

MS. DOCTORS: Yeah, Gary Beckstead

would be the next witness, if you're done with

your questions.

MS. BASSI: Yes, we're done with

questions.

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HEARING OFFICER KNITTLE: Before we go

any further, do you need to take a look at this

before you decide whether you want to object to

the admission of this, Exhibit No. 5?

MR. BONEBRAKE: We should probably

reserve our position until we have a chance to

review it. And I guess the other comment I would

make, if it's possible we could have follow-up

questions for both Mr. Ross and Mr. Kaleel.

HEARING OFFICER KNITTLE: It's

understood. And I think I want to make clear

that just because we're excusing someone, it

doesn't mean that -- if you do have follow-up

questions in the future, you will have that

right.

MR. KIM: We'll have them available.

HEARING OFFICER KNITTLE: So we're

going to hold off and resume ruling on Exhibit 5

for now until we see if we have any objections.

Let's take a 10-minute break.

(A short break was taken.)

HEARING OFFICER KNITTLE: And in

addition Andrea Moore has joined us and so Andrea

Moore is participating as well and thank you for

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coming. And we are resuming with the questioning

of the Agency witnesses, and I think it is Gary

Beckstead's turn. Am I correct, Ms. Doctors?

MS. DOCTORS: Yes.

HEARING OFFICER KNITTLE: You'll be

offering Gary up.

MS. DOCTORS: And I'll be offering his

testimony to be entered as read.

HEARING OFFICER KNITTLE: Agency

Exhibit No. 6 will be the testimony of Gary

Beckstead. Do we have any objection to that

testimony? Seeing none, that will be admitted as

Agency Exhibit No. 6. Thank you. Mr. Beckstead,

you were sworn in earlier with everyone else;

correct?

MR. BECKSTEAD: Yes.

MS. BASSI: Did you accept this

Exhibit 5?

HEARING OFFICER KNITTLE: No, I

reserved ruling on Exhibit 5 until you and Mr.

Bonebrake and anyone else wanted to take a look

at it.

MR. BONEBRAKE: We started reviewing

and didn't have a chance to get all the way

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through it.

HEARING OFFICER KNITTLE: That's fine.

We're going to be here for a few days. I would

like to be able to deal with it before we finish

the Springfield portion of the hearing.

MS. BASSI: How does the allocation

methodology encourage Clean Coal Technology such

as CFB?

MR. BECKSTEAD: I didn't hear the

question.

MS. BASSI: Okay. Sorry. In your

testimony I believe you stated something to the

effect of the allocate -- you're talking about

the allocation methodology which would be the --

all the things that go into the allocation method

in Illinois?

MS. DOCTORS: Can you clarify what

page of his testimony you are speaking of?

MS. BASSI: Actually, no. Okay. It's

at the top of page 2. Yes. And at the top of

page 2 of your testimony the first full sentence

there you say that Illinois has proposed a rule

that through the allocation methodology chosen

encourage impact sources to utilize energy

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efficiency, etc., and clean coal technology.

MR. BECKSTEAD: I'm still not with

you.

MS. DOCTORS: It's right here.

MS. BASSI: First full sentence at the

top of the second page.

MR. BECKSTEAD: Okay. Now I'm with

you.

MS. BASSI: Okay. Thank you. How

does -- would you agree that -- that circulating

fluidized beds or CFBs are a clean coal

technology?

MR. BECKSTEAD: They're in that

category, yes.

MS. BASSI: Okay. How does the

allocation methodology that Illinois EPA has

chosen encourage CFBs?

MR. BECKSTEAD: By giving -- by giving

them an incentive to -- Oh, you're talking about

how does it -- Give me the question again? I'm

sorry.

MS. BASSI: Okay. How does the

allocation methodology that Illinois EPA has

chosen encourage the -- encourage the

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construction of CFB?

MR. BECKSTEAD: Well, it would be --

it would defer some of their costs, they would be

getting allocations they can then use for -- they

can sell them or use them for compliance so it'd

defer some of the expenses.

MS. BASSI: Okay. Let me back up a

little bit.

(Tanner Girard enters the room.)

MS. BASSI: This seems out of order in

terms of all of the -- the whole presentation, I

guess, I would say of Illinois' case. But I

believe that yesterday Mr. Bonebrake made -- had

-- was talking to some witness and they made the

point -- It wasn't yesterday.

MR. BONEBRAKE: It was this morning.

You're already distracted.

MR. RIESER: This is just a timeless

experience, isn't it?

MR. KIM: Unless Mr. Bonebrake is

moonlighting.

MS. BASSI: All right. I believe this

morning Mr. Bonebrake made the point, probably

with Mr. Ross, that circulating fluidized beds

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are less efficient in terms of the heat input it

takes to generate electricity, do you recall

that?

MR. BECKSTEAD: I recall that

testimony, yes.

MS. BASSI: Somebody said that. And

so my question is: The allocation methodology

that Illinois EPA has chosen includes allocations

based on growth electrical output, how does that

encourage CFBs?

MS. DOCTORS: I'd like to have this

question deferred to when Mr. Cooper returns.

MS. BASSI: Thank you. When you refer

to utilities in your testimony, do you mean the

power generators that are subject to the

requirements of this rule?

MR. BECKSTEAD: Yes.

MS. BASSI: Okay. With respect to

Illinois' Sustainable Energy Plan, which is an

attachment to the Statement of Reasons, I

believe, as Exhibit G to the Statement of

Reasons, does at least 2% of the electricity sold

to Illinois customers currently comes from

renewable energy sources?

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MR. BECKSTEAD: Yes.

MR. BASSI: It currently does?

MR. BECKSTEAD: That's -- I don't

really know. I mean, that's what the plan calls

for. Beginning -- that begins 2007, January 1,

2007.

MS. BASSI: Okay. Does any of the

electricity sold to Illinois customers today come

from renewable sources?

MR. BECKSTEAD: Yes, there's a small

percentage.

MS. BASSI: Do you know what that

percentage is?

MR. BECKSTEAD: Not exactly, but I

think it's in the neighborhood of 1% or less.

MS. BASSI: Okay. Who's

responsibility is it to ensure that renewable

energy sources are the generators of the

electricity sold to Illinois customers? Would it

be the power generators or the power

distributors?

MR. BECKSTEAD: Power generators.

MS. BASSI: Why -- why do you think

it's the power generators?

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MR. BECKSTEAD: Well, they would be

the ones that have to -- they would be the ones

that have to reconcile budgets and, therefore,

they would be the ones that would be keeping

track of their output.

MS. BASSI: When you say reconcile

budgets, what kind of budgets?

MR. BECKSTEAD: Well, the allowances

that they have to meet.

MS. BASSI: The allowance --

MR. BECKSTEAD: Number of allowances

that -- under the CAIR rule.

MS. BASSI: Is the Illinois

Sustainable Energy Plan at all related to the

CAIR rule?

MR. BECKSTEAD: No.

MS. BASSI: Okay.

MR. BECKSTEAD: No, I'm sorry.

MS. BASSI: Okay. So just talking

about the Illinois Sustainable Energy Plan, which

I believe your testimony says the CAIR rule

compliments and supports, would you tell me, it

says -- what it says about the amount of

renewable energy -- it says 2% of the electricity

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to be sold to Illinois customers -- I'm doing

this badly. I'm sorry. Can we look at Exhibit G

to the statement, please?

MS. DOCTORS: I have -- Here's Exhibit

MS. BASSI: Okay. On the first page

of the Illinois Sustainable Energy Plan, which is

the first page after the letter, do you guys have

that?

HEARING OFFICER KNITTLE: Exhibit G to

what?

MS. BASSI: To the Statement of

Reasons.

HEARING OFFICER KNITTLE: Yeah, right

here.

MS. BASSI: Okay. Would you read the

first sentence, please, under renewable energy

procurement requirement?

MR. BECKSTEAD: We recommend that by

2006 at least 2% of the electricity to be sold to

Illinois customers by electric utility and

alternative retail electrical suppliers be

generated from renewable energy.

MS. BASSI: Okay. And are the power

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generators in Illinois affected by this

particular statement?

MR. BECKSTEAD: Yes. But I think the

date is not consistent with the renewable -- the

Governor's plan. The date should be January 1 of

2007.

MS. BASSI: This is the Governor's

plan, isn't it?

MR. BECKSTEAD: Yes. But it says here

by 2006, that should be 2007. And it's -- the

Governor's plan is merely a recommendation.

MS. BASSI: This is the Governor's

plan. If it says 2006, doesn't it mean 2006?

MR. BECKSTEAD: Huh. Well, one of the

dates are wrong. I'm sorry. We'll straighten

that out.

MS. BASSI: And that's immaterial

anyway.

MR. BECKSTEAD: All right.

MS. BASSI: What I want to know is who

is the -- who are the entities who are to ensure

that 2% of the electricity sold to customers

comes from renewable energy sources?

MR. BECKSTEAD: I would have to defer

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that question.

MS. DOCTORS: Okay.

MR. BECKSTEAD: I'm not too sure who

would be responsible there.

MS. BASSI: Okay. It refers to --

Let's see. Electric suppliers, can you give me

an example of an electric supplier?

MR. BECKSTEAD: A supplier of

electricity would be the -- Huh, no, I can't.

MS. BASSI: Okay. Do you think

Commonwealth Edison would be an example of an

electric supplier?

MR. BECKSTEAD: Okay. I don't know

really.

MS. BASSI: Okay. Well, that is

pretty much all of my questions. Ms. Doctors, is

there someone who can answer questions about this

plan?

MR. KIM: You're referring to Exhibit

MS. BASSI: G to the Statement of

Reasons.

MS. DOCTORS: Mr. Cooper, thinking he

may be able to answer some of the questions. Why

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don't you come forward so the court reporter can

hear you.

MS. BASSI: On the first page of

Illinois' Sustainable Energy Plan, which is the

first page after the Governor's letter, the first

sentence refers to, it says, At least 2% of the

electricity to be sold to Illinois customers by

electric utility and alternative and retail

electric suppliers be generated from renewable

energy. The question is: Whose responsibility

is it to ensure that renewable energy sources are

the -- are the generators of the electricity that

is sold to Illinois consumers?

MR. COOPER: I don't understand the

question. Please rephrase.

MS. BASSI: Okay. I didn't think it

was that hard of a question. Apparently it is.

MR. ROSS: It sounds like who would be

reliable.

MS. BASSI: The question is I -- the

distinction is between electric -- electrical

power generators --

MR. ROSS: And distributors.

MS. BASSI: -- and distributors.

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MR. ROSS: It sounds like --

MS. BASSI: Which of those has to

ensure that 2% of the energy comes from renewable

sources? The generators or the distributors?

MR. KIM: Before we go on, I'm going

to object to the question and this -- the line of

questions that I think you're -- you've been

banking up here on this document in that I think

you have to take this document for what it is.

It's not something that necessarily has been

flushed out with probably the level of detail

that you're looking for. It's simply a plan

which was referred to as far as guidance. Is

there something beyond the four corners of this

particular document? I don't know that anyone in

this room is going to be able to answer that. I

don't know that there are answers for that.

MS. BASSI: There isn't.

MR. KIM: And I think that's the point

you're trying to make. We can concede whatever

is in that document is what is in that document.

MS. BASSI: All right. And what does

it say: Generators or distributors?

MR. KIM: Again, if you're asking what

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it says, it speaks for itself. You're asking him

to interpret how it's supposed to be implemented.

I think that's a statement from the Governor's

office. I think you're going to have talk to

some different people about that.

MS. BASSI: Is Midwest Generation a

distributor?

MR. ROSS: No, they're a generator.

MS. BASSI: All right. Thank you.

MR. ROSS: Distributors are

Commonwealth Edison and Ameren.

MS. BASSI: All right. Does this plan

apply to distributors or generators?

MR. KIM: I'm going to renew my

objection for the same reasons. I think that --

I'm not sure what the level of detail is we're

going to be able to provide on this particular

plan.

HEARING OFFICER KNITTLE: Ms. Bassi,

do you have a response?

MS. BASSI: Yes, I do. Part of your

support are for set asides for energy efficiency

and renewable energy, and renewable energy, in

particular, is this particular plan. You're

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saying that this is -- that this particular

approach that the Agency is taking supports this

plan and, therefore, you've entered this plan

into the record and, therefore, should be able to

answer questions about this plan. The point is

one of the questions that I will get to is: Does

the Agency even have the scope to regulate

anything that falls under this plan? And I think

-- I won't answer that for you.

HEARING OFFICER KNITTLE: Well, I

think -- Mr. Kim, do you have a response to the

rule?

MR. KIM: I think we've already

characterized how we relied upon this. We're

using it for guidance. And if you have a

question as to what the document says, I think it

speaks for itself. If anything beyond that in

terms of how -- or the guidelines within that

document is supposed to be implemented, I don't

think we're the Agency to ask in terms of what

was the specific plan that was, you know, that

was in mind when those things were worked out.

We stated we just -- we're simply trying to

effectuate what's in there, and we looked at that

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as guidance when we prepared the rule.

HEARING OFFICER KNITTLE: I'm going to

sustain it in part. However, the second part of

your question was whether or not the Agency would

have the ability to enforce the authority. I

think that is a question the Agency ought to be

able to answer whether or not you think you would

have the authority to regulate that plan so I'll

direct you guys to answer it insofar as that, but

in terms of the document itself, it does -- it

does speak for itself and they've already -- the

witness has testified he cannot answer anything

further.

MR. KIM: And since I would rather not

begin testifying and have one of my witnesses

speak as to questions on legal issues, I think we

can address that in written comment. I would

rather not -- I don't think anyone here who has

been sworn in as a witness will necessarily be

comfortable in addressing legal authority in

terms of enforcing that.

HEARING OFFICER KNITTLE: Ms. Bassi,

would that be sufficient if they addressed it in

a written comment after the hearing prior to the

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second hearing?

MS. BASSI: In a written comment

between hearings, is that what you're suggesting?

MR. KIM: We did that in Mercury.

HEARING OFFICER KNITTLE: Right.

MR. KIM: There were certain questions

raised in between hearings that --

HEARING OFFICER KNITTLE: I'd like you

to have the opportunity to address that if need

be so --

MS. BASSI: Okay.

MR. KIM: But you're asking a legal

question. You're asking who would be the legal

authority to enforce that, and I don't think it's

an appropriate question for our witnesses.

MS. BASSI: Okay.

HEARING OFFICER KNITTLE: Mr. Kim, you

will be able to do that before the second hearing

along with the other issues? You're dutifully

nodding.

MR. KIM: Yes.

MS. BASSI: Okay. Can you tell me,

Mr. Beckstead, what is the total number of

megawatts of electricity generated or capable of

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being generated in Illinois?

MR. BECKSTEAD: No.

MS. BASSI: Approximately?

MR. BECKSTEAD: I don't have that

number in my head.

MS. BASSI: Is there anyone else who

can?

MR. ROSS: Total number?

MS. BASSI: Of megawatts capable of

being generated by the coal-fired power plants?

MR. BONEBRAKE: The total of gross

generation capacity of coal-fired powered plants

in Illinois.

MR. ROSS: I believe it's in the

neighborhood probably slightly above 17,000

megawatts. That information was provided in our

statewide coal-fired electric utility documents

as part of the mercury rule record.

MS. BASSI: What I have just handed to

the Board is pages 1 and 3 of Exhibit 44 from the

Mercury proposal. That was an Agency exhibit.

And I refer it to you for reference. If you

would like to enter it as an exhibit, that's

fine, whatever.

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HEARING OFFICER KNITTLE: Are you

offering this as an exhibit?

MS. BASSI: Yeah, sure.

HEARING OFFICER KNITTLE: Let's do

that. Any objection to this being entered into

the record?

MR. KIM: I reserve an objection on

relevance. I'm not sure exactly how this can be

used. So if I could find out what the questions

are, then --

MS. BASSI: Okay.

MR. KIM: -- there might not be an

objection.

HEARING OFFICER KNITTLE: How would

you like to refer to this number for the record?

MS. BASSI: I don't care. What do you

prefer? Would this be Exhibit 7 perhaps?

HEARING OFFICER KNITTLE: No, I would

like to do them separately as an Agency exhibit

and --

MS. BASSI: Can I call it Exhibit A?

HEARING OFFICER KNITTLE: Well, just

start over number one, but we'll --

MR. RIESER: How are you categorizing

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this?

HEARING OFFICER KNITTLE: That's what

I was trying to get to. I'm going to label it

Midwest Gen Exhibit No. 1.

MS. BASSI: All right. That's fine.

MR. BONEBRAKE: Can we just call it

Industry Exhibit?

HEARING OFFICER KNITTLE: Well, I

don't know if everyone will agree to that.

MR. RIESER: Keep it company by

company.

HEARING OFFICER KNITTLE: We'll admit

this. Mr. Kim, if you have objections after

you've heard the questions, you can go on the

record.

MR. KIM: That's fine.

MS. BASSI: You can object to the

questions.

MR. KIM: Pardon me?

MS. BASSI: You can object to the

question.

MR. KIM: Okay. Thank you.

MS. BASSI: Okay. Mr. Ross has said

that there's approximately 17,000 megawatts of

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electricity generated in Illinois. And I believe

if you add up column -- there's a column there

that's headed MWE, that it adds up to about that

amount. So, Mr. Beckstead, the renewable energy

set aside, I believe, is 8%; is that correct?

MR. BECKSTEAD: Renewable set aside is

8%?

MR. BASSI: Is that correct?

MR. ROSS: For renewable energy

efficiency set aside combined together is 12%.

MS. BASSI: Okay. What's the

renewable energy portion of it?

MR. ROSS: There is no specific

renewable energy portion of it.

MS. BASSI: Okay. Mr. Beckstead, in

the last paragraph on page 2 of your testimony

this is where I'm getting the 8%.

MR. BECKSTEAD: Okay.

MS. BASSI: Would you read the next to

the last sentence on that page, please, under the

Governor's plan?

MR. BECKSTEAD: This is the Governor's

plan.

MS. BASSI: That's fine.

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MR. BECKSTEAD: Under the Governor's

plan the renewable energy quota increases 1%

annually to 8% by 2013.

MS. BASSI: Okay. Could you tell me

what 8% of 17,000 is approximately?

MR. KIM: I'm going to object. Mr.

Beckstead doesn't have a calculator handy with

him.

MS. BASSI: Well --

MR. KIM: Is this just a math

question?

MS. BASSI: Well, it is a math

question. Would it be about 1,300 megawatts?

MR. BECKSTEAD: Sounds reasonable.

MR. GUPTA: To be precise it's 1,360.

HEARING OFFICER KNITTLE: Sir, can you

identify yourself for the record?

MR. DAVIS: It's Vir Gupta, V-I-R

G-U-P-T-A.

MS. BASSI: Okay. Mr. Beckstead,

would you read the last sentence on that page

that begins with requirement?

MR. BECKSTEAD: This requirement will

lead to more than 3,000 megawatts of power

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generated from renewable energy sources by 2013.

MS. BASSI: Where did you get the

3,000 megawatts of power; do you know?

MR. BECKSTEAD: In researching the

Governor's plan. It was part of his literature.

MS. BASSI: Okay. Is the electricity

that is generated in Illinois consumed in

Illinois?

MR. BECKSTEAD: I think in early

testimony it was said that we are a net exporter

of energy in Illinois.

MR. BASSI: Okay. Is it true that

Illinois will -- is required to continue to

comply with the NOX SIP Call?

MR. BECKSTEAD: The NOX SIP Call will

be modified by the CAIR rule.

MS. BASSI: In what way?

MR. BECKSTEAD: The NOX budget states

the same as it carries on 2015 the CAIR rule will

then be the -- will take place.

MR. KALEEL: The -- As I understand

it, the CAIR summer season trading program

replaces the NOX SIP Call trading program but

there -- so it goes away basically, but the caps

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that were contained in the NOX SIP Call continue

to exist under the CAIR trading program. There's

also caps on emissions for non-EGUs, other

sources that were subject to the NOX SIP Call that

aren't -- that may have the ability to be opted

in under the federal trading program so --

MS. BASSI: Go ahead.

MR. BONEBRAKE: Just a follow-up. The

non-EGUs that were regulated under the NOX SIP

Call and that are not regulated under CAIR, what

-- how -- how are those facilities to be

regulated then, if at all, respectively, Mr.

Kaleel?

MR. KALEEL: In the CAIR rule, the

federal model rule, there's an ability for -- or

an option that's available for non-EGUs to opt in

the trading program, but that opt-in provision

is, you know, kind of up to each state to decide

whether or not to allow that. We have chosen to

not allow opt ins for non-EGUs. We do still need

to regulate non-EGUs and we're doing that through

a separate rulemaking.

MR. BONEBRAKE: And what is the status

of that separate rulemaking?

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MR. KALEEL: We're still directing

regulatory language. We haven't had any of our

outreach meetings with the public or stakeholders

that, and we typically would precede any proposal

to the Board with an outreach or discussion with

affected entities and interested parties as to

the reasonableness of the Agency's

recommendation.

MR. BONEBRAKE: And then what were the

industries that were covered under the NOX SIP

Call that will not have the ability to opt in to

the CAIR rule and, therefore, be subject to this

prospective rulemaking that you're referring to?

MR. KALEEL: There are other subparts

of our NOX SIP Call rule that are included in the

so called non-EGUs. They're large industrial

boilers, cement kilns.

HEARING OFFICER KNITTLE: Yes, Mr.

Rieser?

MR. RIESER: I'm sorry. These

non-EGUs were regulated under subpart -- one of

the rules that was developed as part of the --

MS. BASSI: U.

MR. RIESER: U. Thank you very much.

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Does that -- What happens to that regulation?

MR. KALEEL: We haven't decided

exactly how we're going to deal with Subpart U

and whether or not we remove it from or recommend

that it be revoked and replaced with a new

regulation or whether it would compliment the

existing regulation. But there would be an

ability for and opt in -- would be the

availability of the option to opt in for non-EGUs

under CAIR.

MR. RIESER: In the meantime do the

requirements of Subpart U still apply?

MR. KALEEL: In the meantime they

still apply. They're still Board regulations,

yes.

MR. RIESER: So whatever is required

under Subpart U will be continued to be required

until it's modified or replaced by another

regulation such as the one that we're talking

about?

MR. KALEEL: My understanding is

through the CAIR rule that portion applies

through 2008 with the idea that the states must

substitute a CAIR program or an alternate set of

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requirements by that time.

MS. BASSI: I believe that you said

that the seasonal CAIR cap and the NOX SIP Call

cap are initially the same; is that correct?

MR. KALEEL: Yes.

MS. BASSI: And then is the NOX -- no,

is the seasonal CAIR cap less -- become less than

the NOX SIP cap with the increased set aside?

MR. KALEEL: I mean, the state budget

is the same. It's the way the state chooses to

allocate those allowances.

MS. BASSI: Mr. Beckstead, you state

in your testimony that because of regional haze

monitoring Illinois has decided not to consider

CAIR to be the same as BART -- B-A-R-T, and

stands for Best Available Retrofit Technology --

is that correct?

MR. BECKSTEAD: That's correct.

MS. BASSI: The Statement of Reasons

says on page 7 for this source category,

referring to EGUs, states may choose to require

these electric generating units to install BART

or to adopt and require units located in their

states to participate in the CAIR. And that was

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-- it used the word or. And then it goes on and

it says, Illinois EPA has been in the process of

identifying BART eligible sources and so forth.

Is the decision in your testimony, reflected in

your testimony, consistent with the statement in

the Statement of Reasons?

MS. DOCTORS: What page again?

MS. BASSI: Page 7.

MR. ROSS: I think the documents were

prepared obviously at different points in time.

At this current point in time we are evaluating

whether CAIR will be considered to satisfying to

the BART requirements, and we have not made a

final decision on that.

MS. BASSI: Is that what Mr.

Beckstead's testimony says? And I don't want to

discourage continued consideration. On the last

page of Mr. Beckstead's testimony, last sentence

in the next to the last paragraph.

MR. ROSS: No, that is different than

what Mr. Beckstead's testimony says.

MS. BASSI: So what is the current

status?

MR. ROSS: As I've stated.

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MS. BASSI: That's all I have.

MR. BONEBRAKE: Just so it's clear,

the Agency's position is that it is considering

whether CAIR will be BART or EGUs and that is

still an open question?

MR. ROSS: That's correct.

MR. BONEBRAKE: And do you have a time

frame in mind, Mr. Ross, as to when that decision

would be made?

MR. ROSS: Soon.

MR. BONEBRAKE: Can you give us a

sense of what soon means?

MR. ROSS: I believe we're under some

time restrictions.

MR. KALEEL: The State of Illinois is

under the obligation to submit a SIP revision to

USEPA to implement the BART requirements by

December of 2007. We have had discussions with

industry groups, at least one -- one meeting here

in this room, on our status of our development of

our BART requirements and our BART modeling --

quality modeling. We have not made, as Mr. Ross

said, we have not made a final determination on

what the BART controls will be or what the

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effected sources would be especially in regards

to EGUs.

MS. BASSI: I do have a couple more

questions relative to the sustainable energy plan

but they are not about the content of the plan.

HEARING OFFICER KNITTLE: That's fine.

Are these directed to Mr. Beckstead?

MS. BASSI: I don't know. They're

addressed -- they're directed to the panel over

there. Is the Agency -- in the -- in this

sustainable energy plan it refers to an -- the

Commerce Commission, Illinois Sustainable Energy

Advisory Counsel, do you know if the Agency is a

member of this counsel? I'm sorry. I didn't put

a page number down for that.

MR. KIM: I think you can interpret

our silence that we don't know.

MS. BASSI: Okay. Perhaps you do know

though --

MR. KIM: But we can look into that if

you like.

MS. BASSI: Did the Agency contact

this counsel to determine whether or not the CASA

was supported of -- did the Agency have any

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contact with this counsel in the development of

the CASA?

HEARING OFFICER KNITTLE: By counsel?

MS. BASSI: This Illinois Sustainable

Energy Advisory Counsel.

HEARING OFFICER KNITTLE: Thank you.

MR. ROSS: We have had contacts with

the Department of Commerce and Economic

Opportunity who, I believe, is a member of this.

They are certainly the ones who have answered

questions regarding the Governor's energy policy

so we have had more than one meeting in person

and telephone conversations that -- more than one

face-to-face meeting and telephone conversation

with DCEO personnel.

MS. BASSI: That's it. Thank you.

MR. BONEBRAKE: One other question I

had for you, Mr. Beckstead, and if we turn your

attention back to the page 2 of your testimony at

the top. It's the same phrase actually that Ms.

Bassi had asked you about. And it's the first

full sentence on that page and there's a

reference there to, Through the allocation

methodology chosen encourage impact sources to

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utilized an energy efficiency, renewable energy,

and clean coal technology and so on. Do you see

that, Mr. Beckstead?

MR. BECKSTEAD: Yes, I'm with you.

MR. BONEBRAKE: And I had some

discussions this morning with some of your

colleagues at the Agency regarding the analyses

or assessments that the Agency may have done this

report -- its conclusions concerning whether or

not those goals would be achieved and we were

provided a copy of Exhibit 5 which is a draft

policy. So my question for you is: Other than

Exhibit 5, are you aware of any evidence or

assessment by the Agency that would suggest that,

in fact, impact sources, would as a result of

CASA, perform energy efficiency, renewable energy

or clean coal technology projects?

MR. BECKSTEAD: I have no knowledge of

it.

MR. BONEBRAKE: Thank you?

HEARING OFFICER KNITTLE: Any other

questions for Mr. Beckstead from any other people

in the audience? I see none. Ms. Doctors, you

can go to your next witness.

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MS. DOCTORS: Can we have three

minutes?

HEARING OFFICER KNITTLE: Sure.

(A short break was taken.)

HEARING OFFICER KNITTLE: Let's go

back on the record. We're back on the record

after a short recess. Ms. Doctors, do you have a

witness to present?

MS. DOCTORS: Yoginder Mahajan will be

the Agency's next witness. I would like to enter

his testimony as read. I believe we're at Agency

Exhibit 8.

HEARING OFFICER KNITTLE: I have

Agency Exhibit 7 as next. Am I missing

something?

MS. DOCTORS: All right. Let's go

with Agency 7.

HEARING OFFICER KNITTLE: Unless

there's -- unless I slept through two of them.

Is there any objection to the testimony of this

witness being entered as of read?

MR. BONEBRAKE: No.

HEARING OFFICER KNITTLE: Seeing none,

this will be admitted. This is Agency 7. Ms.

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Doctors, anything before we get started with

questions?

MS. DOCTORS: No, I have nothing.

MR. BONEBRAKE: Hello, Mr. Mahajan, is

that how you pronounce that correctly?

MR. MAHAJAN: Yeah.

MR. BONEBRAKE: I had a some questions

before you and would like to start with page 3 of

your testimony, your written testimony. Again,

specifically the -- the last sentence in the

paragraph that carries over from page 2. And it

starts, In Illinois in 2004 coal-fired electric

generating units account for approximately 99% of

NOX and SO2 emissions from Illinois electric

generating units. Do you see that?

MR. MAHAJAN: Yes.

MR. BONEBRAKE: What percent of

Illinois SO2 and NOX emissions do coal-fired EGUs

represent out of all sources in the state?

MR. MAHAJAN: I did not look at all

states emission. But this is 99% of the total

EGU emission which is affected by this

rulemaking. 90% affected from the coal-fired

unit from all the EGUs.

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MR. BONEBRAKE: So then the 99% then

relates solely to electric generating units and

does not consider any other industries?

MR. MAHAJAN: Yes.

MR. BONEBRAKE: In the bottom

paragraph on that same page --

MR. MAHAJAN: Uh-huh.

MR. BONEBRAKE: -- your first sentence

refers to two primary options for reducing SO2

emissions, do you see that?

MR. MAHAJAN: Yes.

MR. BONEBRAKE: And it's using low

sulfur coal or FGDs; is that correct?

MR. MAHAJAN: Yes.

MR. BONEBRAKE: Are they both equally

effective in reducing emissions of SO2?

MR. MAHAJAN: Depends how much of

sulfur content is in the coal. But the

scrubbers, they're more effective and they can

reduce up to 90-95% of sulfur dioxide but depends

-- in the low sulfur coal, it depends how low the

sulfur content is in the coal.

MR. BONEBRAKE: From an environmental

perspective, does it matter how SO2 emissions are

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reduced, that is, whether they are reduced by use

of an FGD or low sulfur coal?

MR. MAHAJAN: No, I don't think.

MR. BONEBRAKE: Your testimony

provides information about the cost per ton --

ton of emissions reduced for various pollution

controls?

MR. MAHAJAN: Uh-huh.

MR. BONEBRAKE: I think it would be

helpful if you could provide some information to

the Board concerning the actual cost of some of

the controls that likely would be installed as a

result of CAIR, and here I'm talking generically

across the CAIR region, not just in Illinois.

And would you agree that four of the likely --

three of the likely controls would be an FGD wet

or dry, an SCR, and a selective non-catalytic

reduction?

MR. MAHAJAN: Yes.

MR. BONEBRAKE: And could you provide

us with the general understanding of the capital

costs associated with each of those pieces of

pollution -- pollution control?

MR. MAHAJAN: In the federal CAIR

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rulemaking the USEPA provided the cost of

controls as a cost effective as of the control in

dollars per ton, but those other background

document like -- they provide that cost for

emission and that's in the STD. If you want, I

can read from it.

MR. BONEBRAKE: Perhaps you could just

refer me to a page so I know what you're

referring to. And you're referring to the

Technical Support Document by the Agency of this

rulemaking?

MR. MAHAJAN: Yes. This economic

reasonableness of control, that Section 6.0.

MS. BASSI: What page, please?

MR. MAHAJAN: 55, 56, 57, 58, 59, 60

-- Not 60. 59.

MR. BONEBRAKE: Starting with page 55,

are you referring to the Table 6.1?

MR. MAHAJAN: Yes.

MR. BONEBRAKE: And are those

operational costs for FGD systems?

MR. MAHAJAN: Yes.

MR. BONEBRAKE: And can you explain

for us what the term mill/kWh means?

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MR. MAHAJAN: This is one tenth of a

cent.

MR. BONEBRAKE: And so these would be

listed in Table 6.1 - Annualized Operational

Costs for FGD systems; is that correct?

MR. MAHAJAN: Yes.

MR. BONEBRAKE: And do these numbers

that are reflected in Table 6.1 reflect the

capital cost of acquisition for an FGD?

MR. MAHAJAN: No. These are the --

the capital cost, the annualized and then they

add operational costs to come up with an annual

number per year and that's based on the reduction

to come up with -- based on the total hours they

produce to come up with this number.

MR. BONEBRAKE: And can you give us a

rough idea just what the actual capital cost of

an FGD is?

MR. MAHAJAN: It depends on the size

of the unit and the type of the, you know,

equipment you put it on. Like Table 6.2 provides

that information roughly but it's in dollars per

ton. So you can see that -- it depends from 100

megawatt unit to 600 megawatt unit the, you know,

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cost per ton is almost double from 100 ton --

from 100 megawatt unit to 600 megawatt unit.

MR. BONEBRAKE: But, again, that table

talks in terms of cost effectiveness numbers.

And what I was interested in, and if you don't

know you can tell me, what the actual capital

costs roughly speaking of an FGD would be, and I

recognize it may vary depending upon the size of

the unit?

MR. MAHAJAN: Yes. I don't have, you

know, off my head this number.

MR. BONEBRAKE: And similarly for an

SCR, do you know what --

MR. MAHAJAN: Same thing. Yes, I

don't know the capital cost how much but --

MR. BONEBRAKE: And same question for

selective catalytic non-production, would that be

also you don't know what the actual capital cost

would be?

HEARING OFFICER KNITTLE: Ms. Doctors,

were you wanting to say something?

MS. DOCTORS: Yeah, I was. You asked

another question. I think he was still answering

your previous one.

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MR. MAHAJAN: Yeah, the cost that I

provided in the TSD is in the form of dollar per

ton reduced but there is costs that -- which is

not provided over here, but I can find out if you

want.

MR. BONEBRAKE: I think it would be of

interest to know roughly speaking what the actual

capital cost of the likely equipment to CAIR

would be?

MR. MAHAJAN: Whatever is in the

document is -- whatever the document issued by

the USEPA, I can find out that for you.

MR. BONEBRAKE: Is it your thinking

that those capital cost numbers are in the

federal CAIR rule or preamble to the federal care

rule?

MR. MAHAJAN: Not in the preamble, but

like ACT document, they have the costs of the

unit, yes, but not in the CAIR, no.

HEARING OFFICER KNITTLE: Excuse me.

ECD, is that what you said?

MR. MAHAJAN: That ACT, Alternative

Control Techniques Guidelines.

HEARING OFFICER KNITTLE: Thank you.

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MR. BONEBRAKE: And do you know if the

IEPA has filed with the Board any document or

documents which actually provides capital costs

information for NOX and SO2 equipment that could

be installed to comply with CAIR, and, again, the

capital cost information?

MR. MAHAJAN: No, except safe trading

program so we don't say that, you know, that

decision have to install control this type or

that type. They have the option to, you know,

based on the economics, whatever they install the

control or they buy the allowances. We don't

mandate specifically that is to be controlled,

no.

MR. BONEBRAKE: Would you say based on

your experience that an FGD for a 500 megawatt

unit will cost at least 100 million dollars?

MR. MAHAJAN: Probably.

MR. BONEBRAKE: And would you also say

based upon your experience that an SCR for a 500

megawatt unit could cost at least 60 or 70

million dollars?

MR. MAHAJAN: 50 or 60 million, yes.

MR. BONEBRAKE: The -- If I could turn

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your attention to page 4 of your testimony. And

I'm interested in the paragraph that starts at

the bottom of that page and it goes on to the top

of page 5. And you have provided there some cost

numbers and I just wanted to make sure that I

understood the source of these numbers. Is it

true that all of the numbers that are in that

paragraph are based upon the USEPA analysis and

the costs, therefore, are related to the federal

CAIR program?

MR. MAHAJAN: Yes.

MR. BONEBRAKE: And would it be true

that if the CASA that the Agency has proposed

results in greater costs to electric generating

units, then the rule would be relatively less

cost effective than USEPA predicted for the

federal CAIR?

MR. MAHAJAN: I don't know. This

already been addressed by Mr. Jim Ross, all these

ICF modeling they did, so I think most of the

question you have on that have been already

answered.

MR. BONEBRAKE: I don't know that I

asked that question of Mr. Ross so I would I

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would put it to you, sir. If you can give me an

answer.

MR. MAHAJAN: The question that you're

asking that if the CASA would burden the power

plant and I don't know.

MR. BONEBRAKE: I'm sorry?

MR. MAHAJAN: I don't know.

MR. BONEBRAKE: The answer was no?

MR. MAHAJAN: I don't know.

HEARING OFFICER KNITTLE: I think the

answer was I don't know.

MR. BONEBRAKE: I don't know. I'm

sorry.

HEARING OFFICER KNITTLE: Is that

sufficient, Mr. Bonebrake?

MR. BONEBRAKE: Well, let me -- I

think that was maybe a partial answer. Let me

just try it just a little bit different.

MR. KIM: Well, actually I think he

was answering he doesn't know to the premise of

your question. Your question was assuming that

the CASA does result in higher costs. I think

his answer was he doesn't know that that's going

to be the case so maybe --

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MR. BONEBRAKE: Let's assume that it

does, and we'll take for purposes of my question

that you don't necessarily agree with me, you

don't know. But assuming that the CASA does

result in greater cost to electric generating

units, would you agree then that the Illinois

proposal would be relatively less cost effective

as compared to federal CAMR --

MS. BASSI: CAIR.

MR. BONEBRAKE: -- federal CAIR.

Thank you. I have CAMR on the mind.

MR. MAHAJAN: Again, I don't know.

Maybe the presumption is wrong also because when

you reduce -- when you allow emissions to the,

you know, when -- you know, the CASA allowances

because we are not reducing the total budget. We

are just what they call shifting the burden from

one place to other. So if the CASA get some

allowances, likewise that utility has to reduce

their generation also the same, you know, amount.

So I don't know if the CASA will be, you know,

more burdensome on the power plants or not. I

suggest speculative.

MS. BASSI: Mr. Mahajan, if a power --

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if a company reduces its generation because the

burden has been shifted to something else in the

CASA, would that not result in a loss of revenue?

MR. MAHAJAN: It will reduce the cost.

Also, they don't have to pay the unit, you know,

to that level.

MS. BASSI: How is it reducing the

cost?

MR. MAHAJAN: The cost --

MS. BASSI: Because they're not

burning coal that day?

MR. MAHAJAN: Whatever they do have in

the unit.

MS. BASSI: Interesting concept.

MR. BONEBRAKE: Would you turn with me

to page 5 of your written testimony. The second

to last sentence in the carryover paragraph

reads, However, since Illinois has already

controlling electric generating units in the

ozone season, to comply with the NOX SIP Call

Illinois electric generating units are not

expected to incur any additional costs in 2009

ozone season. Do you see that statement, sir?

MR. MAHAJAN: Yes, sir.

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MR. BONEBRAKE: Does the NOX SIP Call

contain set asides for existing units?

MR. MAHAJAN: Yes.

MR. BONEBRAKE: Does --

MS. BASSI: What are they? What is

that set aside for existing units?

MR. MAHAJAN: It's 95% of the 30,701.

MS. BASSI: So the current set aside

is 5%, is that what you said?

MR. MAHAJAN: In the NOX SIP Call?

MS. BASSI: Yes.

MR. MAHAJAN: I think it was 5% and

then it reduces.

MS. BASSI: To 2%?

MR. MAHAJAN: Yes.

MR. BONEBRAKE: Was that set aside for

new sources though?

MR. MAHAJAN: Yes, new sources.

MR. BONEBRAKE: So the NOX SIP Call

does not have a set aside for existing sources;

correct?

MR. MAHAJAN: No. 95% is set aside

for the existing sources.

MR. BONEBRAKE: I see what you're

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saying. There's a 5% set aside for the

allocation?

MR. MAHAJAN: Up to 95 percent for the

existing, yes.

MR. BONEBRAKE: Will there be

relatively fewer allowances available to EGUs

under the seasonal CAIR program as proposed by

Illinois as compared to NOX SIP Call because the

CAIR seasonal program as proposed by Illinois

includes a 25% CASA for existing EGUs?

MR. MAHAJAN: Can you repeat the

question?

MR. BONEBRAKE: Sure. As compared to

the NOX SIP Call --

MR. MAHAJAN: Uh-huh.

MR. BONEBRAKE: -- will the Illinois

CAIR proposal for seasonal allowance for existing

units, will that include fewer allowances for

EGUs because of the existence of the 25% CASA?

MR. KIM: You mean existing EGUs?

MR. BONEBRAKE: Yes.

MR. MAHAJAN: I don't know. But the

sentence you are reading over here that implies

that total budget is 30,701 for the NOX SIP Call

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and for the CAIR for those two. So based on that

because the sources are already meeting those,

you know, budgets so it's -- it's evident that

they will continue that operation and won't incur

any cost. That's the statement that's here.

MS. BASSI: Mr. Mahajan, is it not the

case that the CASA reduces that amount that's

available by 25%?

MR. MAHAJAN: Okay. But that

allowance will come back to the, you know, the

pool. It's not going to go away. So the total

number will remain the same, 30,701.

MS. BASSI: Will those allowances --

will all of those allowances come back to the

same EGUs who now receive allowances under the

NOX SIP Call?

MR. MAHAJAN: Somebody will buy them,

yeah, they will.

MS. BASSI: They will what?

MR. MAHAJAN: Somebody will buy them.

MS. BASSI: Buy them?

MR. MAHAJAN: Yes. Also they will

sell it.

MS. BASSI: Are they not currently

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just allocated to them under the NOX SIP Call?

MR. MAHAJAN: Yeah, they are

allocated.

MS. BASSI: Do they have to buy them

under the NOX SIP Call?

MR. MAHAJAN: No.

MS. BASSI: Okay. Thank you.

MR. BONEBRAKE: The next sentence in

that same paragraph --

MR. KIM: Before you go on, there's a

clarification.

HEARING OFFICER KNITTLE: Do you have

a question, Ms. Doctors?

MS. DOCTORS: I just wanted to clarify

the Agency is not selling the allowances from the

CASA; is that correct?

MR. MAHAJAN: Yes, we are not selling.

MS. DOCTORS: So they wouldn't --

MR. MAHAJAN: They will buy from the

market.

MS. DOCTORS: I don't think the

connection is clear, I guess, between how they're

getting to the market.

MR. BONEBRAKE: Well, regardless of

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where existing EGUs would require allowances that

had been -- were subject to the CASA, the fact is

that when an EGU has to buy a NOX allowance, it

has to spend money; right?

MR. MAHAJAN: Yes.

MR. BONEBRAKE: So that is a cost

associated with the CAIR set aside that's not

present in the NOX SIP Call; correct?

MR. MAHAJAN: Yes.

MR. BONEBRAKE: The next sentence in

that same paragraph reads, However, in the

non-ozone season months it will cost $500 per ton

to run these controls to comply with the CAIR NOX

trading program. And I was going to ask you to

explain how you came up with the $500 per ton

figure?

MR. MAHAJAN: That's what the USEPA

analysis reported in the CAIR rulemaking.

MR. BONEBRAKE: So is that simply the

cost of operating --

MR. MAHAJAN: Cost of operating what

USEPA did. What they are saying is suppose

somebody had installed SCR, Selective Catalytic

Reduction, suppose -- and what happen is the cost

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is already incurred, so additional costs will be

just to upgrade during the non-ozone season.

That will be $500 per ton.

MR. BONEBRAKE: And what type of

additional operational costs would an EGU incur

to further --

MR. MAHAJAN: Use Ammonia, the cost of

ammonia to put it in that -- to use at that SCR

and other maintenance and other labor costs.

MR. BONEBRAKE: And do you have an

understanding of what an EGU, let's say again

around 500 megawatts, would typically spend --

MR. MAHAJAN: No, I don't.

MR. BONEBRAKE: -- for those materials

in an SCR on an annual basis?

MR. MAHAJAN: No, I don't know.

BR. BONEBRAKE: The last paragraph of

your testimony on page 5 --

MR. MAHAJAN: Uh-huh.

MR. BONEBRAKE: -- you described some

emission reductions, do you see that?

MR. MAHAJAN: Yes.

MR. BONEBRAKE: Those emission

reductions, are those a result of the federal

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CAIR based upon USEPA's analysis?

MR. MAHAJAN: Yes.

MS. BASSI: Just to follow-up on that

for a minute, you say that the proposed

reductions -- regulations will provide NOx

emission reduction of 70,018 tons in 2009?

MR. MAHAJAN: Yes.

MS. BASSI: Is that in Illinois?

MR. MAHAJAN: Yes.

MS. BASSI: Does that mean then that

the baseline annual NOX emissions are a little

over 146,000 tons?

MR. MAHAJAN: No. This 146,000 ton is

the IPM projections for 2009 year. That's what

IPM projected these emissions.

MS. BASSI: And that's -- Go ahead.

MR. MAHAJAN: And 76,000 is the

budget.

MS. BASSI: And so subtracting the

budget from the projection is how you came up

with the 70?

MR. MAHAJAN: Yes.

MS. BASSI: Okay. Mr. Mahajan,

listening to your testimony is it correct to --

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to interpret your testimony to say that you are

the one who reviewed USEPA's cost analysis for

the CAIR?

MR. MAHAJAN: Yes, I was one of them

probably, yes.

MS. BASSI: Okay. And did you

determine whether the CAIR -- did you or and the

people you were working with determine whether

the CAIR would be cost effective in Illinois?

Would that --

MR. MAHAJAN: USEPA say CAIR is highly

cost effective and Illinois EPA is -- not

Illinois E -- Illinois is part of the region,

CAIR region, so I will assume that it will be

cost effective for Illinois also.

MS. BASSI: Did you consider -- Your

cost analysis does not appear to reflect the

impact of the 90 percent Mercury removal rule and

what that will entail for Illinois EGU; is that

correct?

MR. MAHAJAN: I don't know.

MS. BASSI: Pardon?

MR. MAHAJAN: I don't know about the

90% mercury rule. They didn't talk about Mercury

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in the CAIR talks.

MS. BASSI: Did you consider the

effects of the MPS, the multi pollutant strategy?

MR. MAHAJAN: No, I didn't.

HEARING OFFICER KNITTLE: Anything

further. Oh, I'm sorry.

MR. RIESER: Mr. Mahajan, just a

couple of questions about one of your methods of

reducing NOX emissions. If you turn to your page

3 of your testimony, do you have -- on the first

pull paragraph there in the middle of the page

you have a discussion of rediscussing NOX

emissions through the use of combustion controls,

do you see that, sir?

MR. MAHAJAN: Yes.

MR. RIESER: Okay. And one of those

combustion controls is over fire air?

MR. MAHAJAN: Yes.

MR. RIESER: Do you know what types of

reductions are expected by using over fire air?

MR. MAHAJAN: Yes. In the TSD I have

to look back.

MR. RIESER: On Table 5-2?

MR. MAHAJAN: Whatever it is.

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MR. RIESER: Page 54.

MR. MAHAJAN: Yes, it says over fire

air 10 to 25 first for the wall fired units.

MR. RIESER: And what is the source of

these values you got in Table 5-2?

MR. MAHAJAN: This is the ACT,

Alternative Control Technique document issued by

USEPA.

MR. RIESER: So there's been no -- the

Agency hasn't done any independent study --

MR. MAHAJAN: No.

MR. RIESER: -- of individual over

fire air units; is that correct?

MR. MAHAJAN: No.

MR. RIESER: I'm sorry. Did you say

no?

MR. MAHAJAN: I said no.

MR. RIESER: Are you aware of the cost

of installing over fire air systems?

MR. MAHAJAN: Again, it's in the TSD.

I don't remember on my -- but I can --

MR. RIESER: Would it be fair to say

in line with Mr. Bonebrake's question that the

cost is per ton basis and not on a --

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MR. MAHAJAN: Yes.

MR. RIESER: -- capital ton basis?

Thank you. Thank you. That's all I have. Thank

you.

HEARING OFFICER KNITTLE: Yes, ma'am.

MS. BUGEL: I have some questions that

might be more appropriately directed to the whole

panel. I'm not sure who should answer them.

There was just discussion of the facts that the

NOX -- the allocation in the NOX SIP Call was

different from the CAIR, is that correct, or the

Illinois proposed CAIR?

MR. MAHAJAN: Yes.

MS. BUGEL: And is it fair to say that

the purpose of the CAIR is different from the NOX

SIP Call?

MR. KALEEL: I think the general

purpose, as EPA stated it in their preamble for

CAIR, is similar in that EPA is taking the action

with the intent of reducing the transport of

precursor emissions. CAIR has or is trying to

address not just ozone, which was the purpose of

the NOX SIP Call, but is also trying to address

transported precursors for PM2.5. CAIR is also

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trying to address 8-hour ozone where the NOX SIP

Call was originally designed to states in

obtaining the 1-hour ozone, so there are some

differences in the purpose.

MS. BUGEL: So then is it fair to say

that the purpose of the CAIR is to achieve

reductions that were not or could not necessarily

be achieved through the NOX SIP Call?

MR. KALEEL: I think -- I think the

idea was to go beyond the NOX SIP Call.

MS. BUGEL: So does it make sense that

the allocation method through the CAIR would then

be different from the NOX SIP Call?

MR. KALEEL: Yeah, I guess I'm not

quite sure how to answer that.

MS. BUGEL: And then I'd like to talk

a little bit about the credits -- distribution of

credits through the CASA as opposed to the

baseline sort of allocation. In Mr. Mahajan's

testimony is it correct that it would be -- that

making reductions would cost less than purchasing

credits, was that -- is that a correct

characterization of part of your testimony on

pages 4 to 5? Cost of control would cost less

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than credits on a per ton basis?

MR. MAHAJAN: Not necessarily.

Depends on the sources.

MS. BUGEL: Okay.

MR. MAHAJAN: They have to -- they

have the option -- they have to consider that

knowledge that how much the control cost on the

unit. And if it is not cost effective, they will

buy allowances from Illinois.

MS. BUGEL: And then is the converse

also true --

MR. MAHAJAN: Sure.

MS. BUGEL: -- for some units it will

be cost effective to make reductions instead of

buying credits; is that correct?

MR. MAHAJAN: Sure.

MS. BUGEL: And these credits it is --

it's expected that the credits through the clean

air set aside, some of those will be sold on the

market; is that correct?

MR. MAHAJAN: Correct.

MS. BUGEL: And certain units will be

choosing to make reductions instead of buying

those credits if it's cost effective for them; is

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that correct?

MR. MAHAJAN: Correct.

MS. BUGEL: So then is it -- is it

logical to then to assume that because certain

units will be making reductions instead of buying

clean air set aside credits that the -- one of

the purposes of the clean air set aside to

achieve reduction is then being met?

MR. MAHAJAN: That is what the consent

is to promote cleaner, you know, sources energy.

MS. BUGEL: Thank you. I have nothing

further.

MS. BASSI: I have a couple follow-up

on that, please.

HEARING OFFICER KNITTLE: Yes, Ms.

Bassi?

MS. BASSI: Could you give us an

example, please, of a type of NOX removal

technology that is more cost effective to install

the technology than to purchase credit?

MR. MAHAJAN: SCR. They can reduce

emissions and they are most -- very cost

effective.

MS. BASSI: So the removal of

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emissions by SCR -- where is that in the -- that

is less -- that is more cost effective than

purchasing allowances, is that what you're

saying?

MR. MAHAJAN: I don't know what is the

cost of the allowances. It depends how much, you

know, cost of the allowance is. That to gain

sources have to make decision whether to buy it

based on the availability of the allowances in

the market and how much they will cost. It

depends on availability.

MS. BASSI: Okay. Mr. Kaleel, you

said that -- Ms. Bugel was asking you some

questions regarding the differences between the

NOX SIP Call and the CAIR and you said that a

purpose of the CAIR was to go beyond the SIP

Call, I believe; is that correct?

MR. KALEEL: That's right.

MS. BASSI: And in what way does the

CAIR go beyond the SIP Call?

MR. KALEEL: Well, when I made that

comment, I was thinking both in terms of the SO2

reductions that are required by CAIR that were

not required by the NOX SIP Call, the annual

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reductions of CAIR which were not required by the

NOX SIP Call and the fact that the number of

allowances decrease in the year 2015 for both

pollutants, so the number of allowances and

presumably the control levels get -- they get

tighter in 2015 which is tighter than what CAIR

would have required.

MS. BASSI: Thank you.

MR. KALEEL: I'm sorry, than the NOX

SIP Call would have required.

HEARING OFFICER KNITTLE: Yes, sir.

MR. BONEBRAKE: Just a follow-up.

Again, I'm not sure who this goes to but it flows

from some things we talked about this morning.

There was some discussion about the emissions

that might be reduced as a result of the CASA and

I think there was some discussion of a wind farm

scenario. And if we have a situation where a

wind farm, let's say, is allocated allowances

from the -- from the CASA and the wind farm then

turns around and sells those allowances to EGUs

in Illinois, is it -- is it true from the

Illinois EGU's perspective, emissions haven't

gone down but the only thing that's happened is

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that the cost of operation for the EGU has gone

up because it has to buy allowances.

MR. ROSS: In that scenario that is

true, yes.

MR. KALEEL: If I could add that isn't

the only additional effect of allocating the CASA

allowance in that way because there's more

electricity being generated per allowance under

that scenario than if the allocation went

directly to the coal-fired unit.

MR. BONEBRAKE: And you would get then

a reduction in Illinois only if you were to make

the assumption that that additional generation

would displace some generation that otherwise

would have been provided by the EGU?

MR. KALEEL: That's true.

MR. BONEBRAKE: And, again, if it

displaces generation from existing EGU, that has

an economic consequence on that EGU, is that

correct as well?

MR. KALEEL: I think that's true, yes.

HEARING OFFICER KNITTLE: Yes, ma'am.

MS. BUGEL: I just have one follow-up

question. Following on Mr. Bonebrake's scenario,

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one hypothetical is that all CAIR allowances

could be distributed to EGUs for free, is that

correct, if there were no set asides?

MR. KALEEL: Yes.

MS. BUGEL: With the set aside 30% of

the allowances may cost EGUs -- there may be --

when they end up on the market, there will be a

cost of getting those allowances; is that

correct?

MR. KALEEL: Yeah, that's true. It's

really a 25% set aside -- 25% set aside under the

CASA and 5% for new sources.

MS. BUGEL: Thank you for correcting

me. And if all the allowances were free, it

would be pretty hard to reduce pollution at less

of a cost than free; is that correct?

MR. KALEEL: It would be pretty hard

to reduce pollution, yes.

MS. BUGEL: So by having to purchase

the credits on the market, there is an incentive

to reduce pollution because it is possible to

make reductions instead of buying credits at less

cost; isn't that correct?

MR. KALEEL: I think that's true. I

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think the idea of the allowance is to -- if the

market is working properly, the cost of the

allowance should generally reflect the marginal

cost of utilities to control NOX if the system is

working right.

MS. BUGEL: So if the system is

working right, it would be incorrect to state

that there would be a cost imposed on industry

without any corresponding pollution reduction,

that would be just counterintuitive; is that

correct?

MR. KALEEL: Well, I mean, the purpose

of the program is to reduce pollution.

MS. BUGEL: Thank you.

HEARING OFFICER KNITTLE: Anything --

Well, let's go off the record for just a second.

(A discussion was held off the

record.)

HEARING OFFICER KNITTLE: We're going

to start up tomorrow with Jacquelyn Sims. We

will be here at 9 a.m. tomorrow. Thank you all.

(Hearing recessed at 4:45 p.m.)

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STATE OF ILLINOIS

COUNTY OF FAYETTE

C E R T I F I C A T E

I, BEVERLY S. HOPKINS, a Notary Public

in and for the County of Fayette, State of

Illinois, DO HEREBY CERTIFY that the foregoing

137 pages comprise a true, complete and correct

transcript of the proceedings held on October

10th, 2006, at the Illinois Pollution Control

Board, 1021 North Grand Avenue East, Springfield,

Illinois, in proceedings held before Hearing

Officer John Knittle, and recorded in machine

shorthand by me.

IN WITNESS WHEREOF I have hereunto set

my hand and affixed by Notarial Seal this 12th

day of October, 2006.

_____________________________

Beverly S. Hopkins, CSR, RPR

Notary Public, Fayette County

CSR License No. 084-004316

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