Microsoft Word - R06-26 101106 afternoon hearing transcript.txt

BEFORE THE ILLINOIS POLLUTION CONTROL BOARD

October 11th, 2006

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

)

Proceedings held on October 11th, 2006, at

1:00 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

KEEFE REPORTING COMPANY

11 North 44th Street

Belleville, IL 62226

(618) 277-0190

KEEFE REPORTING COMPANY

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.

KEEFE REPORTING COMPANY

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

SIERRA CLUB

BY: Mr. Bruce Nilles

122 W. Washington Avenue, Suite 830

Madison, Wisconsin 53703

EXHIBITS

Agency Exhibit No. 10 -- 4

Agency Exhibit No. 11 -- 72

Agency Exhibit No. 12 -- 84

Agency Exhibit No. 13 -- 85

Agency Exhibit No. 14 -- 85

Agency Exhibit No. 15 -- 89

Agency Exhibit No. 16 -- 92

Agency Exhibit No. 17 -- 93

Agency Exhibit No. 18 -- 153

Agency Exhibit No. 19 -- 153

KEEFE REPORTING COMPANY

HEARING OFFICER KNITTLE: We're back

on the record after a lunch recess. My

understanding, Ms. Doctors, that we are going to

be presenting the testimony of Mr. Bloomberg?

MS. DOCTORS: Yes. And I'd like to

request that his testimony be admitted as read

and marked as Agency Exhibit 10.

HEARING OFFICER KNITTLE: Any

objection to his testimony being admitted? I see

none. That will be admitted as Agency Exhibit

10. Ms. Doctors, do you have any preliminary

testimony you wish to elicit?

MS. DOCTORS: No, I do not.

HEARING OFFICER KNITTLE: Mr.

Bonebrake? Ms. Bassi?

MS. BASSI: I have an initial, thank

you, background type question. You say in your

testimony that your academic credentials include

a Bachelor of Science in Ceramic Engineering?

MR. BLOOMBERG: Yes.

MS. BASSI: Do you have more?

MR. BLOOMBERG: I took all of the

necessary classes for a master's degree but was

unable to complete the research.

KEEFE REPORTING COMPANY

MS. BASSI: I know the feeling. Okay.

That was just my little background. Okay. I

would like for you to reconcile a couple of

things for me that are included in the federal

proposal that -- if you could. At Section

51.1230, do you have it in terms of the Code of

Federal Regulations when I refer to a federal

section?

MR. BLOOMBERG: I have some parts. I

don't know that I will have exactly what you're

MS. BASSI: All right. Then a little

background. Are you familiar with the purpose or

with the direction of Section 51 or Part 51 of

the federal code?

MR. BLOOMBERG: Part 51 off the top of

my head, no, I do not have that.

MS. BASSI: Would it -- does it make

sense to you that Part 51 would be directed to --

would be directed to states and what states are

required to do?

MR. BLOOMBERG: Off the top of my head

I can't answer that.

MS. BASSI: Well, may I show him Part

KEEFE REPORTING COMPANY

51?

HEARING OFFICER KNITTLE: Yes, you

may.

MS. BASSI: This is the Code of

Federal Regulations, Edition 2005, and I believe

Part 51 may or may not have been incorporated by

reference or at least referred to in the Agency's

submittal. And if you would turn to Section

51.123(o), Subsection O.

MS. DOCTORS: Are you referring to

Illinois state plans?

MS. BASSI: No. This is about -- this

is the CAIR.

MS. DOCTORS: Okay.

MS. BASSI: This is the general CAIR

requirements of states. I know it takes a while

to --

MS. DOCTORS: Can we have a page

number?

MS. BASSI: No, I didn't. Okay.

Subsection O2 and then little ii and a large B.

MR. BLOOMBERG: Okay.

MS. BASSI: Okay. How far in advance

of a vintage year, meaning, the date that's put

KEEFE REPORTING COMPANY

on a NOX allowance, does USEPA require a state to

submit allowance allocation?

MR. BLOOMBERG: Well, for what it says

here, we have to have issued allocation by

October 31st, 2006, for 2009, 10, and 11. And by

October 31, 2008, and October 31 of each year

thereafter for the year after the year of the

notification deadline. Without reading through

the rest of this off the top of my head, I'm not

entirely sure what that means.

MS. BASSI: Well, is the first portion

of that consistent with the Agency's proposal,

that you had initially at least planned to make

your initial allocation for 2009, 10, and 11 in

2006?

MR. BLOOMBERG: Yes.

MS. BASSI: Okay. And in the Agency's

submittal some place, I believe it says that

allocations are due three years in advance of the

year in which they'll be used? Maybe --

MR. BLOOMBERG: Allocations are due?

MS. BASSI: Maybe Ms. Sims back

there --

MS. SIMS: Repeat the question.

KEEFE REPORTING COMPANY

MS. BASSI: How far in advance does

the Agency have to make its allocations to USEPA?

MS. SIMS: According to our proposed

Illinois rule, three years in advance.

MS. BASSI: Three years in advance.

Okay. Is this a requirement of USEPA?

MS. SIMS: I'm not sure.

MS. BASSI: Okay. Do you have Federal

someplace?

MR. BLOOMBERG: No, I don't.

MS. BASSI: This is, I think, included

in the Agency's submittal.

MS. DOCTORS: Are you -- are you

asking the witness to interpret --

MS. BASSI: I want some reconciliation

of two passages that are in the federal

requirement.

MS. DOCTORS: I'm not sure that this

witness is familiar with -- with these particular

passages.

MS. BASSI: That's why I'm asking him

to read them. Do you have that? Would you get

that?

KEEFE REPORTING COMPANY

MS. DOCTORS: Repeat that.

MS. BASSI: 70 Federal Register at

page 25349.

HEARING OFFICER KNITTLE: You know

what part of the Agency's proposal it is at?

MS. BASSI: Well, this is Part 96 and

this is -- this is the model rule that we've been

talking about all along.

MS. DOCTORS: Okay. 25 --

MS. BASSI: 25349.

HEARING OFFICER KNITTLE: It'd helpful

for the record to identify it. You said it was

part of the Agency's proposal. The exhibit --

MS. BASSI: The Agency, I believe,

submitted -- I'm sorry.

HEARING OFFICER KNITTLE: Is it an

exhibit or a document by reference or part of the

TSD?

MS. BASSI: I don't know at -- I can't

tell you off the top of my head.

MR. BONEBRAKE: Is this the July 6,

2005?

MS. DOCTORS: Or the May 12, 2005?

MS. BASSI: This is the May 12, 2005.

KEEFE REPORTING COMPANY

MS. DOCTORS: I think we have the

document and the page number that she's referring

to. I think it was --

HEARING OFFICER KNITTLE: And I'm not

saying you're not going to be able to find it.

What I wanted is so when people are reading the

transcript, they know what they're looking for.

Can you read that?

MS. DOCTORS: Yes, I could. It's

Illinois EPA Exhibit No. A from the table of

contents.

HEARING OFFICER KNITTLE: Thanks.

MS. BASSI: Thank you. Okay. On page

25349 at Section 96.141, so it's on that page --

MR. BLOOMBERG: Yes.

MS. BASSI: -- Subsection B1, okay,

this is -- is this part of the model rule?

MR. BLOOMBERG: Having just been given

this, honestly, I don't know the answer.

MS. BASSI: Can you tell me how many

years in advance that section says allowances are

to be made?

MR. BLOOMBERG: This says the sixth

year after the year of the applicable deadline.

KEEFE REPORTING COMPANY

However, it's my understanding this is a

recommendation and states have flexibility,

especially if it is, as you indicated, the model

rule.

MS. BASSI: Right. And that's what I

wanted you to explain, if you could, as to why

Illinois was doing it three years in advance for

the first initial -- for the initial allocation

as opposed to what the model rule is providing?

MR. BLOOMBERG: I believe that Jackie

Sims already answered a very similar question --

MS. BASSI: Possibly.

MR. BLOOMBERG: -- discussing the

faster roll in and the -- bringing new units in

more quickly, getting shutdowns out more quickly.

MS. BASSI: With -- And, again, I

apologize if you're not the right person for

this. With the FIP, could you explain again

then, please, why if the FIP goes into a place

and the FIP includes the model rule, that the

allocation, the initial allocations, are not as

set forth in that provision?

MR. BLOOMBERG: Well, I --

MS. DOCTORS: Objection. Why -- I

KEEFE REPORTING COMPANY

don't understand why she's asking the witness to

explain a Federal Register concerning the FIP.

That Federal Register needs to speak for itself.

HEARING OFFICER KNITTLE: Ms. Bassi?

MS. BASSI: That's fine. I'll

withdraw the question. Going back to some

questions that we were asking you before lunch

regarding -- regarding timely allocation --

MR. BLOOMBERG: Yes.

MS. BASSI: -- at pages 47 to 48 of

the Statement of Reasons.

MR. BLOOMBERG: Yes.

MS. BASSI: Okay. This is where the

Statement of Reasons is explaining the shorter

look-back period that the Agency proposes. All

right. And does it say in here that the source

should have excess bank allowances from the year

prior to an outage that will cover an outage

year?

MR. BLOOMBERG: Can you give me a page

number, please?

MS. BASSI: 48, the top of the page.

MR. BLOOMBERG: Yes, it does.

MS. BASSI: Okay. And, again, what

KEEFE REPORTING COMPANY

happens if the Agency does not make its

allocations timely to -- to make up for the loss

of allowances during the outage year?

MR. BLOOMBERG: I am unsure of what

USEPA will do. However, one point remains that,

as you noted, we are giving allowances, I

believe, three years in advance --

MS. BASSI: Uh-huh.

MR. BLOOMBERG: -- so that's quite a

long -- a long time before the transfer deadline.

And as noted, we have already committed to doing

it timely.

MS. BASSI: Does the Agency bear any

liability for failure to submit allocations

timely?

MR. BLOOMBERG: That's a legal

question. I have no idea.

MS. BASSI: If the Agency, assuming

you have no liability or that that would be the

Agency's position, what recourse do power

companies have to -- to have allocations made

timely?

MR. BLOOMBERG: That's probably

another legal question, and I can't answer that.

KEEFE REPORTING COMPANY

MS. BASSI: Is this covered in the

rule?

MR. BLOOMBERG: Not to my knowledge.

MR. BONEBRAKE: Mr. Bloomberg, I have

a question for you and it pertains to page 2 of

your testimony. It's the third complete

paragraph.

MR. BLOOMBERG: Yes.

MR. BONEBRAKE: And the second

sentence in that paragraph starts with the word,

Among these requirements, and at the end there

there's a reference to rounded to the nearest

whole ton?

MR. BLOOMBERG: Yes.

MR. BONEBRAKE: Can you explain to us

what that means?

MR. BLOOMBERG: It means that if they

-- Let me just double check what I said here.

If, for example, a source emitted 10.3 tons of

NOX, they would only have to give 10 allowances.

However, if they held 10.7, they would need to

hold 11 allowances.

MR. BONEBRAKE: And what -- what if

10.5?

KEEFE REPORTING COMPANY

MR. BLOOMBERG: 10.5 USEPA rounds up.

MR. BONEBRAKE: On page 3 of your

written testimony, the full -- first full

paragraph, the last sentence reads, As noted in

the TSD, electric generating units are currently

required to report gross electrical output data

to USEPA. I know you were with us this morning

when we were talking about this issue.

MR. BLOOMBERG: Yes.

MR. BONEBRAKE: Do you have any

further information for us about what gross

electrical output data is submitted to USEPA?

MR. BLOOMBERG: I do not. I was

relying upon the TSD.

MR. BONEBRAKE: I think that's all

this table has for Mr. Bloomberg.

HEARING OFFICER KNITTLE: Mr. Rieser?

MR. RIESER: Yes. Following straight

under the language that Mr. Bonebrake pointed to

you on page 3 of the second and bottom paragraph

of page 3 you talk about, There may be additional

monitoring, recordkeeping or reporting required

for any project sponsor of a Clean Air Set-Aside

request, and you say its requirements will be

KEEFE REPORTING COMPANY

specific to the project in question and are not

described in detail within the proposed

regulations. When and how are these additional

requirements to be identified for sponsors?

MR. BLOOMBERG: They would be

involved, and let me -- let me find -- try and

find the specific portion of the rule. Excuse me

one moment while I just check.

MR. RIESER: No problem.

MR. BLOOMBERG: Yeah, an example would

be 225.470, CASA Applications. In the discussion

of what would be sent to us, what would be

involved in the application, that is when such

additional requirements might be discussed.

MR. RIESER: Well, as a specific

matter of process, would the Agency respond to an

application saying you need the following things

and your application is incomplete, or how

exactly is that intended to work?

MR. BLOOMBERG: If you look at

225.470(c), it looks like (c)(6), it talks about

additional information requested by the Agency to

determine the correctness of the requested number

of allowances, etc., so based on that, whoever is

KEEFE REPORTING COMPANY

requesting the allowances, would apply to us, and

us being the Agency, and the Agency would respond

with either an approval or a letter saying we

need additional information.

MR. RIESER: And there are also

monitoring, recordkeeping and requirement --

requirements -- excuse me, monitoring,

recordkeeping and reporting requirements that may

also be added to the Agency that are different or

beyond what are specified in the regulations?

MR. BLOOMBERG: We wanted to provide

flexibility and, therefore, it would be

impossible to include in the CASA section all of

the possible permeations of monitoring and

recordkeeping and reporting. You know,

obviously, a windmill is going to have different

requirements than a pollution control upgrade.

MR. RISER: Is there a section in the

regulation that describes the type of monitoring,

recordkeeping or reporting that may be required?

MR. BLOOMBERG: I do not believe so.

Although, there is -- are sections about

information that may be requested or required, so

you can --

KEEFE REPORTING COMPANY

MR. RIESER: I'm sorry. Finish your

answer.

MR. BLOOMBERG: You can kind of figure

out from the information required how you would

need to keep an eye on that information.

MS. DOCTORS: I think Mr. Ross can

further answer -- I'm sorry. Mr. Cooper.

MR. COOPER: Mr. Davis is who -- I

just ask him to restate the question so I have a

good idea of what he's asking.

HEARING OFFICER KNITTLE: Can you find

Mr. Rieser's question, please?

(The Reporter read from the record as

follows: And there are also

monitoring, recordkeeping and

requirement -- requirements -- excuse

me, monitoring, recordkeeping and

reporting requirements that may also

be added to the Agency that are

different or beyond what are

specified in the regulations?)

MR. COOPER: Yes, they're put in the

CASA Section 225.140, I believe, and those refer

to the DOE documents, has also been referenced in

KEEFE REPORTING COMPANY

TSD, the measurement and verification guidelines

for energy projects.

MR. RIESER: So you're referring to

the incorporations by reference, 225.140?

MS. DOCTORS: May I direct the witness

to look at section -- I'm showing him Section

225.470(c)(4)(A). Is this -- I'm going to ask is

this where we find the requirements for the

recordkeeping, reporting and monitoring?

MR. COOPER: Yes, that is.

MS. BASSI: Would you repeat that

section again, please?

MR. COOPER: 225.470.

MR. BLOOMBERG: C4A.

MR. RIESER: And is it accurate that

the Agency is reserving to itself the authority

to expand on what's required under

225.470(c)(4)(A)?

MR. COOPER: In what manner?

MR. RIESER: Well, the sentence that

we started this all with was, in Mr. Bloomberg's

testimony was there may be additional monitoring,

recordkeeping or reporting required. Now all I'm

trying to do is get a sense of what the bounds of

KEEFE REPORTING COMPANY

that -- those -- those types of requirements are

and where those bounds are discussed in the

regulation.

MR. COOPER: I have -- No, I don't

believe.

MS. DOCTORS: Rory Davis is going to

take that, explain what he means by his own

statement.

MR. DAVIS: Yeah. The information is

-- that we need is all listed here. However, the

methods by which this information -- well,

actually these are only examples. I should note

this does say examples.

MR. RIESER: Okay. When you say here,

you're referring to?

MR. DAVIS: 225.470(c)(4)(A).

MR. RIESER: Thank you. Go ahead.

MR. DAVIS: And this lists examples,

again, of some of the information that would be

provided for in order to obtain allowances from

the CASA, but it does not go into how this

information would be determined, again, because

this way it allows flexibility based on the type

of project.

KEEFE REPORTING COMPANY

MR. RIESER: And by referencing the

guidelines in 225.470(c)(4)(A), that's where you

-- the procedures and methods in those

guidelines, that's where you would expect to

derive the monitoring, recordkeeping and

reporting requirements for an individual project;

is that correct?

MR. DAVIS: I would not limit to only

that particular document as -- I cannot say that

that document covers all possibilities. However,

we have -- we would use that and other -- other

available information.

MR. RIESER: Thank you.

HEARING OFFICER KNITTLE: Anything

further, Mr. Rieser?

MR. RIESER: No, that's it. Thank you

very much.

MS. BUGEL: Nothing for me. Thank

you.

MR. BONEBRAKE: I do have a follow-up.

HEARING OFFICER KNITTLE: Yes, sir,

Mr. Bonebrake.

MR. BONEBRAKE: I was going to direct

that question to Mr. Cooper, but since this

KEEFE REPORTING COMPANY

section has been implemented by Mr. Bloomberg,

I'll at least start with you. 225.470(b)

requires submissions of applications for CASA

allowances by May 1, is that correct, in a given

year?

MR. BLOOMBERG: Yes.

MR. BONEBRAKE: And the application to

be submitted -- contents of application to be

submitted are set forth in 225.470 Subpart C; is

that correct?

MR. BLOOMBERG: I believe that's

correct.

MR. BONEBRAKE: And then Subpart C6,

as you were discussing with Mr. Rieser, contains

a reference to any additional information

requested by the Agency, do you see that, Mr.

Bloomberg?

MR. BLOOMBERG: Yes.

MR. BONEBRAKE: And one inference that

can be drawn from that is any additional

information requested by the Agency also needs to

be submitted by May 1st in order for the

application to be timely submitted, is that the

intention of the Agency?

KEEFE REPORTING COMPANY

MR. BLOOMBERG: The way it is written,

that is correct. That is the way I would

interpret it.

MR. BONEBRAKE: So we're in a

situation then where an initial application needs

to be submitted by May 1st -- initial application

has to be submitted by May 1st, the Agency

requests additional information and that

additional information also has to be submitted

by May 1st; is that correct, Mr. Bloomberg?

MR. BLOOMBERG: I believe what this is

referring to is additional information that has

been discussed with the Agency. Obviously, we

would not expect people to go back in time to

after they've submitted by May 1st if we request

additional information.

MR. BONEBRAKE: Let me make sure I

understand that answer. If a party timely

submits an application and the Agency asks for

additional information, that additional

information can be submitted after May 1st and

the application made would still be considered

timely; is that correct, Mr. Bloomberg?

MS. SIMS: We have 90 days to review

KEEFE REPORTING COMPANY

the CASA application and it's in the regulations,

to tell them if it's complete or not.

MR. BONEBRAKE: That 90 period -- What

section are you referring to, Ms. Sims?

MS. SIMS: I have to find it. It's

Section 225.475(a)(1).

MR. BONEBRAKE: So that is

conceivable, is it not Mr. Bloomberg, that the

Agency might not even request additional

information on -- for an application submitted

before May 1, make -- the Agency may not even

request additional information until after May

1st?

MR. BLOOMBERG: That's correct.

MR. BONEBRAKE: So in that scenario,

would the application be considered to be timely

submitted even though additional information

would be provided in response to request by the

Agency after May 1st?

MR. BLOOMBERG: Could you repeat?

Sorry.

MR. BONEBRAKE: Let's assume a

scenario where an application is submitted before

May 1st, okay?

KEEFE REPORTING COMPANY

MR. BLOOMBERG: Yes.

MR. BONEBRAKE: After May 1st the

Agency requests additional information, okay?

MR. BLOOMBERG: Yes.

MR. BONEBRAKE: That additional

information is then submitted by the parties to

the Agency. Will the application be considered

complete and timely submitted notwithstanding the

fact that additional information is submitted

after May 1st?

MR. BLOOMBERG: Presuming that the

additional information is provided, you know,

timely and -- and that additional information

answers all of the questions asked by the Agency,

yes.

MR. BONEBRAKE: Same question but the

scenario is the Agency requests additional

information before May 1st but the additional

information is provided after May 1st, is the

application still considered timely?

MR. BLOOMBERG: I think it would

depend on how the additional information is

requested. If the application, for example, is

submitted in -- on April 1st and we -- the Agency

KEEFE REPORTING COMPANY

undertakes its review under 225.475 and at that

point determines the additional information is --

is required, it would be the same answer that I

just gave you before. However, if, for example,

there is an ongoing situation where it's the same

company applying year after year and they have

previously been told this is the additional

information required -- requested by the Agency

which, I believe, is what is covered in six here,

and they did not provide it at that point, then

the application would not be considered complete.

HEARING OFFICER KNITTLE: Mr.

Bloomberg, may I interject a question?

MR. BLOOMBERG: (Nods head.)

HEARING OFFICER KNITTLE: Going back

to the first scenario --

MR. BLOOMBERG: Yes.

HEARING OFFICER KNITTLE: -- where

there's a timely submitted application before May

1st and then afterwards the Agency asks for

additional information --

MR. BLOOMBERG: Yes.

HEARING OFFICER KNITTLE: -- is there

any time limit for the Agency to submit that

KEEFE REPORTING COMPANY

additional information? Is that set forth

anywhere?

MR. BLOOMBERG: No, there is nothing

in the rule at this time.

HEARING OFFICER KNITTLE: So the

Agency would just decide what would be a timely

submission thereafter?

MR. BLOOMBERG: That's something that

I think we'll have to discuss and look into

putting in a date certain.

HEARING OFFICER KNITTLE: Thanks.

MR. BONEBRAKE: And in a scenario

where the Agency requests information before May

1st, I'm not sure I fully understood your last

answer.

MR. BLOOMBERG: Uh-huh.

MR. BONEBRAKE: Were you suggesting

that if the project sponsor submitted the

application somehow should have anticipated what

the request would be, that if it was not

submitted by May 1st it's not timely?

MR. BLOOMBERG: Well, it's not trying

to anticipate. This is -- this section, I

believe, is intended to incorporate the fact

KEEFE REPORTING COMPANY

that, as I said before, there is some flexibility

here. It's difficult to write a rule that takes

into account all possibilities. And so if a

company comes to us and says we want to apply for

this and we say, okay, this is what you're going

to need to give us, even if it doesn't happen to

be included in this rule, this would be the

additional information requested. So it's

something -- it's not asking the company to try

and guess what the Agency is going to want, but

rather that the company has already been

previously told this is what you have to include.

MR. BONEBRAKE: So are you saying that

if there is specific information set forth in the

rule from which a party should determine this is

something I need to put in my application, then

if the Agency has to come back and ask for it, in

that scenario it was submitted after May 1st it's

not timely, but if there's some information that

is not identified as required in the rule for the

application, the Agency has to support that and

if not submitted until after May 1st that would

be nonetheless a timely application, is that the

distinction you're drawing?

KEEFE REPORTING COMPANY

MR. BLOOMBERG: I have to tell you I

think I got lost somewhere along the way in those

examples. I think it's safe to say that, you

know, there has to be a certain amount of common

sense approach to this. If -- if, you know, one

small piece of information is left out and

everything is submitted well in advance, the odds

of us deeming the entire application untimely is,

I would say, fairly small. Now obviously we want

all the information and the rule will dictate

that we get the information, but it's, I think, a

common sense approach has to be dealt with as

well.

MR. BONEBRAKE: I'm all for common

sense. I'm just concerned that my view of common

sense and yours or others in the Agency might

differ.

HEARING OFFICER KNITTLE: Mr. Rieser?

MR. RIESER: This is more of a process

question. Is this the appropriate place and the

appropriate witness with whom to ask -- from whom

to ask questions regarding the CASA process

itself because I had a whole series of questions

along those lines that -- but just looking at the

KEEFE REPORTING COMPANY

witness list, it's my understanding there's going

to be a presentation and then we'll sort of get

into it. So I got questions now or I can wait.

MR. BLOOMBERG: It is anticipated, or

I believe it is anticipated, that the compliance

unit will be the ones reviewing this at the time

that it is anticipated, so I guess I'm as good as

anybody.

MR. RIESER: All right.

HEARING OFFICER KNITTLE: Ms. Doctors,

would you like to wait until after the

presentation or would you like to have --

MS. DOCTORS: I think it's up to Mr.

Bloomberg because he has a time constraint either

way.

HEARING OFFICER KNITTLE: Mr. Rieser,

do you have a preference?

MR. RIESER: Whatever works -- I

assume Mr. Bloomberg will be available tomorrow

and I don't know what his time constraint is.

MR. BLOOMBERG: I think it would be

best to do it now unless some of the questions

that come up relate specifically to what Mr.

Cooper will be discussing, but we can tell you

KEEFE REPORTING COMPANY

that as it happens.

MS. BASSI: Is this like the

application, you have to anticipate it?

MR. BLOOMBERG: That's right.

MR. BONEBRAKE: I guess depending how

we interpret description of the CASA process, I

know we have a lot of questions too, so I don't

know whether it's best to go onto Mr. Bloomberg

or Mr. Cooper but just to give you a heads up, we

have quite a few questions regarding the CASA.

Some of them I would call them administration

type questions and I'm not sure who's going to be

best to do those.

MR. BLOOMBERG: Mr. Cooper is sitting

up here too so he can certainly help me out.

MR. RIESER: Well, let me just dive in

then. One of the -- along with Mr. Bonebrake,

and I think everybody here, we understand there

are differences in how the company and how the

Agency or citizens for that matter interpret

common sense. And the bottom line on this is

that in reviewing the rules, I didn't see that

there was an opportunity for reviewing any review

of the Agency's determinations with respect to

KEEFE REPORTING COMPANY

CASA allowances. I'm wondering if that's correct

and whether there's a reason for handling it that

way?

MR. BLOOMBERG: I do not believe there

is a such an opportunity.

MR. RIESER: Okay. Was that a

conscious decision by the Agency, as opposed to

an unconscious. Is that a policy determination

that the Agency made?

MR. ROSS: I believe we discussed this

in internal meetings and -- to some degree, yes.

That was a -- we discussed that in internal

meetings, and we did decide to write the rule as

it is that there is no external review of our

decision.

MS. BASSI: I'd like to follow-up on

that, if I may.

MR. RIESER: Go ahead.

MS. BASSI: Is this a final Agency

determination?

MS. DOCTORS: Objection. This is

calling for the witness to make a legal

statement.

HEARING OFFICER KNITTLE: Ms. Bassi?

KEEFE REPORTING COMPANY

MS. BASSI: You know, I'm afraid I

have a problem with all of these objections to

the legal -- to questions about the legality of

the Agency's actions. An Agency's proposal has

to be within the scope of its authority. It has

to be based upon what's in the Act, and somebody

has to be able to answer those questions about

those as to whether or not something is within

the bounds of the Act.

MR. KIM: But the flip side of that is

Mr. Ross, or any of the witnesses on this panel,

are not qualified and I don't think it's going to

be helpful or relevant to the Board for them to

give you their legal analysis of your question.

What Mr. Ross stated was there was a decision

made not to write in appeal rights into the rule

and that is why the rule looks as it is. Your

question as to whether or not the -- this is a

final administrative decision or presumably your

next step would be whether the Administrative

Procedure Act applies I think is a very legal

question. It is nothing more, nothing less. If

it's something we need to raise in written

comments, we can certainly do it that way and so

KEEFE REPORTING COMPANY

direct it and we would be happy to do so, but I

don't think it's going to be appropriate or

helpful for any of the witnesses here to begin to

go through case law on what is and what is not a

final administrative decision, what the criteria

for such decisions, what the appeal process for

those decisions because frankly I don't think

anybody here has any idea what the answers to

that are.

HEARING OFFICER KNITTLE: Anything

further, Ms. Bassi?

MS. BASSI: Well, just ask for appeal

is all so --

MR. KIM: And I believe the answer was

we made a decision not to write into the rule

specific language setting out appeal rights.

HEARING OFFICER KNITTLE: You know,

I'm going to allow Mr. Ross to attempt to answer

that question, but I'm generally going to sustain

that objection. There's only limited amount of

benefit that will come to the Board for us to

hear what Mr. Bloomberg or Mr. Cooper intended

the legal ramifications of the rule and I think

Mr. Ross is in a position where he is probably

KEEFE REPORTING COMPANY

considered this issue. Yes, Mr. Rieser?

MR. RIESER: I was just going to ask a

different question not -- a different question

than Ms. Bassi had but I didn't know --

HEARING OFFICER KNITTLE: I'd like to

hear the answer -- Mr. Ross to answer Ms. Bassi's

question, then you can ask whatever question

you'd like along as Mr. Kim or Ms. Doctors don't

object to it. The question again was?

MS. BASSI: Is this a final Agency

decision?

MS. DOCTORS: I repeat my --

HEARING OFFICER KNITTLE: Your --

MS. DOCTORS: It's a term of art

whether something is a final Agency determination

that there is case law on it.

MS. BASSI: Did I use the word final

Agency action?

MS. DOCTORS: Okay.

HEARING OFFICER KNITTLE: Well, hold

on Ms. Bassi. Let her finish her clarification

so we can get on the record.

MS. DOCTORS: I think I was finished.

HEARING OFFICER KNITTLE: Oh, well,

KEEFE REPORTING COMPANY

then, Ms. Bassi?

MR. ROSS: It was our decision to go

forward with the rule as it is currently written

which does not contain any appeal process.

MS. BASSI: Okay. And when I say is

this a final Agency decision, I don't mean that

decision. I mean the decision as to what -- what

-- what the dispensation is or the final decision

about a CASA application?

MR. KIM: Same objection.

HEARING OFFICER KNITTLE: The Agency

objections are noted for the record. Mr. Ross?

MR. ROSS: I would believe it would be

final to the point that we don't receive

additional information somewhere along the CASA

that would cause us to change our decision.

MS. BASSI: Thank you.

HEARING OFFICER KNITTLE: Mr. Rieser?

MR. RIESER: And what was the basis

for the -- for the decision you made with respect

to the appeal in this case?

MR. ROSS: Well, it was discussed

internally that we are -- it was discussed

internally, as I stated, and we are the

KEEFE REPORTING COMPANY

implementing Agency of the rule, we could get

administratively bogged down, tied down in

appeals, disagreements with our semi or final

decision on the amount of CASA to allocate, so

based on our belief, the best way the CASA was

not to go forward with any appeal rights.

MR. RIESER: Okay. Turning to

225.440(h).

MR. BONEBRAKE: I'm sorry. What was

that reference?

MR. RIESER: 225.440(h).

MR. BLOOMBERG: 440(h)?

MR. RIESER: 440 -- no, excuse me.

I'm sorry. Where am I? 440(8).

MR. BLOOMBERG: Okay.

MR. RIESER: The last sentence of that

section talks about, The Agency may from time to

time elect to retire CAIR NOX allowance in the

NUSA that are in excess of a certain amount, do

you see that?

MR. BLOOMBERG: Yes.

MR. RIESER: What would be the basis

for deciding to retire or not retire and at what

point in time would that decision be made?

KEEFE REPORTING COMPANY

MS. DOCTORS: Mr. Ross.

MR. ROSS: Well, we talked about this

a little bit the other day that one of the

reasons we would retire allowances would be for

benefit of air quality and public health.

Therefore, those would be primary factors in

obtaining decision to retire that allowance.

MR. RIESER: Is this a decision -- the

language says that the Agency may from time to

time elect to retire NOX allowances that are in

excess of a certain amount. When are those --

when are those times and how will the Agency make

a decision at those specific times?

MR. ROSS: First, there has to be

excess allowances available to retire and that

means that a CASA categories are not being

utilized wholly.

MR. RIESER: These are the --

MR. ROSS: These are NUSA.

MS. DOCTORS: I was just referring the

witness to the subsection that we're discussing.

MR. ROSS: So there would not have

been sufficient or enough new sources being

constructed so that the NUSA category is not

KEEFE REPORTING COMPANY

being utilized and, I believe, it would have to

have been doubled.

MS. DOCTORS: Okay. Ms. Sims, do you

know how many years --

MS. SIMS: That 15,000 number is five

times the 5% of the face to NUSA.

MR. ROSS: So you would have to first

have an amount of allowances in the NUSA pool

greater than 15,881 and then we would at that

time discuss potential retirement of those

allowances. So from time to time that will occur

and there would be excess allowances in the NUSA,

and at that those times we will make a

determination on what to do with those

allowances.

MR. RIESER: And you say that one of

the criteria will be the public health protection

that you discussed, but there -- if there is

situations where you may elect not to retire,

what would that be based on?

MS. DOCTORS: Mr. Bloomberg.

MR. BLOOMBERG: Potentially if we know

there's an upcoming need for those NUSA

allowances, new large plants coming in, perhaps

KEEFE REPORTING COMPANY

there was a delay in building one that was

expected and that's why it builds up to that

level. We would evaluate the -- whether or not

to retire versus holding them to help that new

unit.

MR. ROSS: If there was a forecast in

need for some of those allowances, we would

perhaps elect not to retire.

MR. RIESER: Thank you.

HEARING OFFICER KNITTLE: Mr. Rieser

-- I'm sorry.

MR. JOHNSON: Before we go on for

anticipating the hearing officer's question, for

purposes of clarification of the record there are

two Section Hs in 225.445 according to my copy of

the notice of proposed rule. You were referring

to the second H; is that correct?

MR. RIESER: That's correct.

MR. JOHNSON: Thank you.

HEARING OFFICER KNITTLE: Ms. Bassi?

MS. BASSI: On the same section that

Mr. Rieser was asking questions about, when does

the Agency -- what is the earliest that the

Agency could expect the NUSA to accumulate to

KEEFE REPORTING COMPANY

five times the amount so that the Agency could

begin to retire allowances?

MR. ROSS: I mean, we just have to

speculate to answer that question.

MS. BASSI: Could it be 2013?

MR. ROSS: It could be.

MS. BASSI: And that would be five

years assuming no allowances were allocated.

MR. BLOOMBERG: Hypothetically.

MS. BASSI: Hypothetically. Thank

you. Is this after the attainment date for ozone

and for PM2.5?

MR. ROSS: Yes, but there's a new PM

standard promulgated recently.

MS. BASSI: So then any retirement of

the NUSA could not be used as SIP credit toward

an attainment demonstration; is that correct?

MR. ROSS: For a current or planned

attainment demonstration we can't forecast what

type of reductions we will need in the future.

MS. BASSI: Stipulated. But all we

have to work with right now is the current

standards; is that correct? Those are the only

ones that are applicable right now; is that

KEEFE REPORTING COMPANY

correct?

MR. ROSS: That's correct. But we

have maintenance standards also.

HEARING OFFICER KNITTLE: Mr.

Bonebrake?

MR. BONEBRAKE: And, Mr. Ross, is

there any provision in the proposed rules that

would permit appeal or review of the Agency's

election to retire NUSA allowance?

MR. ROSS: No, there's not.

MR. RIESER: My next question involves

Section 225.455. In C the Agency talks about

acting as a mediator where more than one project

sponsor request CAIR NOX allowances for the same

project. Could you give an example --

MS. DOCTORS: Objection. I think he's

misstating the rule. What did --

MR. RIESER: Will not. Excuse me.

Thank you. Thank you very much. Even with that

correction, could you give an example of what

circumstances where you expect more than one

project sponsor?

MS. SIMS: I can give an example. Say

the City of Chicago wants to get CASA credit for

KEEFE REPORTING COMPANY

like their rooftops, solar energy panels that

they've been doing there, and say the City is

applying for a CASA allowances at the same time

maybe that apartment building itself those people

are wanting to get cast CASA allowances for their

roof tops, solar panel projects. So we can't

say, well, you can't have them because the City's

getting them. They will to -- we would reject

the application and they would have to decide who

is going to get what.

MR. RIESER: Can somebody other than

the owner or operator of the facility that's

doing whatever the thing is that generates the

potential for CASA allowances apply for CASA

allowances?

MS. DOCTORS: Okay. My -- This

question needs to be addressed to Mr. Roston.

Here he is -- Mr. Copper. I'm sorry. This is

going to be forever a problem for me sitting next

to Jim Ross and Mr. Cooper on the other side.

Can you restate the question for Mr. Cooper?

HEARING OFFICER KNITTLE: Could you

read that back, please, Mr. Rieser's question?

(The Reporter read from the record as

KEEFE REPORTING COMPANY

follows: Can somebody other than the

owner or operator of the facility

that's doing whatever the thing is

that generates the potential for CASA

allowances apply for CASA

allowances?)

MR. RIESER: Mr. Cooper, we're looking

at 225.455 which deals with the issue of more

than one program sponsor. And the question being

can somebody other than the owner or operator of

a facility or source that does the activity that

generates the basis for asking for allowances

apply for those allowance?

MR. COOPER: I would answer -- One

more time, please.

MR. RIESER: I'm going to break it

down and make it much simpler. Who can apply for

CASA allowances?

MR. COOPER: I believe the ultimate

answer would be anyone, and that's the whole

point of the review process where we determine

what is eligible and what is not. I believe the

intent behind this was if two people apply for

the same -- the same project, an example comes to

KEEFE REPORTING COMPANY

mind is, I believe, an ESCO, Energy Saving

Corporation, or something to that effect. That

may not be the right term. They come in and do a

building audit and they determine that these

lights are old and inefficient so they recommend

an upgrade. We, the diligent EPA, do that. The

EPA may claim that credit is now ours or the

ESCO, if that's the right term, may believe those

are theirs. That is one potential example of

CASA.

MS. DOCTORS: We have a clarification.

MR. BLOOMBERG: There is a definition

of project sponsor within the rule. It talks

about who can be a project sponsor.

MS. DOCTORS: Let the record note

that's Section 225.130.

MR. RIESER: Now does the potential

for a conflict list primarily with respect to

these energy efficiency issues or does it also

reflect to things that a utility -- excuse me,

electrical generator might do at this facility.

MR. COOPER: I don't believe we had

any specific group in mind. I believe this was

in effect covering our basis in the event that

KEEFE REPORTING COMPANY

this event did arise in the future. I don't

believe there was any specific people we were

attempting to prevent this from taking place. We

simply wanted it put forward that we will not, in

the event of two people fighting over the same

chunk of allowances, we wanted nothing to do with

REA beings over Part B?

MR. RIESER: Looking at the definition

it says, Project sponsor be the person -- project

sponsor means a person including the owner or

operator of electric generating units that

implements or helps implement an energy

efficiency and conservation for renewable energy

or clean technology project as listed in certain

sections of the rule. So it's a person that

implements or helps to implement which is a

pretty broad -- broad universe. What were you

trying to capture with that universe?

MR. COOPER: I believe we were trying

to capture the specific people undertaking the

activity. I guess it is conceivable that

through, again, in my lighting change example, as

a form of payment to the contractual negotiation

it could be worked out that in addition to

KEEFE REPORTING COMPANY

whatever sum of money providing a service, we

will get your allowance. So I think we -- our

aim was for the ones undertaking the project.

MR. RIESER: Okay. Is it your

intention, again turning to the example of an

EGU, that if a -- for example, the State of

Illinois brings an action against an EGU owner

under the state rule that requires certain

activities that be done that falls within the

CASA definitions, that the State of Illinois

would be eligible of a project sponsor because it

helped to implement those projects?

MR. COOPER: No, I do not believe that

is our intent.

MR. RIESER: Okay. So when you say

helps to implement, what did you have in mind?

MR. COOPER: My thinking is that in

this ESCO scenario where we, the Agency, are not

experts on lighting, HVAC, things like that,

third party firms that specialize in that, I

believe, they would be who I would classify as

the helper.

MR. RIESER: Okay. And so what you're

describing, correct me if I'm wrong, is a

KEEFE REPORTING COMPANY

situation where a company that, I guess I would

characterize as a consultant, goes it a building

owner and says, look, you can redo your building

for achieving a lot of energy efficiency, that

consultant could then independent of the building

owner apply for CASA allowances?

MR. COOPER: Conceivably. And therein

lies the -- not act as the mediator. I believe

we were attempting to allow the flexibility that

if you as -- Let's take a school. Maybe a school

wants nothing to do with allowances because they

don't watch the allowance market. They don't

want any of that, but the energy efficiency firm

does. And in that case if they arrange

contractually, I believe certainly by the

language, that we would allow them. Now if the

school change their mind later, says, you know

what, the contract aside, we want it, that's

where the no mediator portion is.

MS. BASSI: Mr. Rieser, can I ask a

question?

MR. RIESER: Yes.

MS. BASSI: Using your example of the

school doing something like this, if I were a

KEEFE REPORTING COMPANY

member of the school board and, therefore,

affiliated with the school or if I were the

principal at the school and, therefore,

affiliated with the school, could I as an

individual affiliated with the school but not on

behalf of the school apply for those credits?

MR. COOPER: If you fell within the

definition of project sponsor.

MR. RIESER: What about the truck

driver that drives the material to the school?

MR. COOPER: I think a dose of reality

is needed. We could continue this all the way to

the people that manufacture the light bulbs. We

assume everyone helps. The intent was for the

person or persons or organization that undertakes

the project. If that language is not clear, I

think we can work on that.

MR. BONEBRAKE: I think we're all

wrestling with the language helps to implement

and what that means.

MR. RIESER: Well, and especially in

the situation, for example, again turning to an

EGU, an EGU retaining a consultant to do an

energy efficiency project and obviously contract

KEEFE REPORTING COMPANY

with that energy efficiency, would that

consultant to say you're not entitled to these

allowances, it may or may not occur to the EGU

not present in this room and not represented by

the people in this room to review those contracts

and make that decision and so you would have a

situation where consultant -- what seems to be

allowable is the consultant who helps -- who is

retained to help an EGU perform an energy

efficiency project would be entitled to claim the

allowances, and I'm not sure if that's where the

Agency really wants to go with that or --

MR. COOPER: I do not believe that is

the intent as written. It appears that is

allowable. I would say it is anyone's due

diligence undertaking those kind of projects that

it's your job to know the rules. If someone in

the EGU realm is undertaking this kind of

project, I would hope that they read the rules

and would predict the kind of problems and

contractually enter into their business

arrangement that these are ours or these are

yours, we will take a lower payment or --

MR. RIESER: Yeah, I guess the

KEEFE REPORTING COMPANY

suggestion is probably going to be in response

that the Agency might want to review the policy

behind the helps to implement language.

MR. COOPER: I believe that is a very

good comment.

MR. BONEBRAKE: Just a couple of

follow-up questions. The term clean coal

technology project as used in the definition on

the project sponsor, is that intended to include

pollution control upgrade projects, that that

latter term is otherwise used in these

regulations?

MR. COOPER: I don't believe so. Can

you repeat the question?

MR. BONEBRAKE: Well, there's a term

used in project sponsor clean -- clean technology

projects or clean technology project, do you see

that?

MR. COOPER: Yes, I do.

MR. BONEBRAKE: Does that include

pollution control projects and existing EGUs?

MR. COOPER: I believe it does, yes.

MR. BONEBRAKE: And also as the Agency

considers provisions, I think this situation

KEEFE REPORTING COMPANY

should also be considered. Is it not true that

there are some projects that could have been

performed even before today that would be

eligible for CASA allowance?

MR. COOPER: Yes, I believe that when

I present -- I will discuss, I believe, with that

briefly the look back for eligibility period

where we establish certain lines in the sand

where you are in or you are out.

MR. BONEBRAKE: And you mentioned that

a party should pay attention to what the

regulations are, but parties that were involved

with projects that could have generated CASA

allowances where the projects occur before this

rule was even proposed could not have -- could

not have had notice of this proposal; right?

MR. COOPER: Not at the time

potentially.

MR. BONEBRAKE: So there would have

been no way for them to provide any contract

unless they were clairvoyant to provide them such

a contract for the allocations of CASA

allowances, is that not also correct?

MR. COOPER: That is correct. It is a

KEEFE REPORTING COMPANY

very good comment.

MR. BONEBRAKE: So there are some

parties here who will undertaken activities which

the Agency has determined worthy of CASA

allowances would not have been -- not have been

in a position to protect themselves with respect

to the project sponsor definition, is that also

correct?

MR. COOPER: I believe that is

accurate.

MR. RIESER: I am ready to move on to

225.460(c)(1).

CHAIRMAN GIRARD: Before you do that,

Mr. Rieser, I'm trying to get a handle on this

project sponsor idea so I would just ask a

general question. Is it the Agency's position

then that if Clean Air Set-Asides are only

available to owners or operators, it's less

flexible than if we interject this new concept of

a project sponsor?

MR. COOPER: Repeat, please.

HEARING OFFICER KNITTLE: Pardon?

MR. COOPER: Repeat the question,

please.

KEEFE REPORTING COMPANY

HEARING OFFICER KNITTLE: You're

asking who to repeat the question? You want Dr.

Girard to repeat the question or the court

reporter?

MR. COOPER: Either or.

HEARING OFFICER KNITTLE: Ask me if

you want the court reporter to read it back and

I'll decide if we should do that, okay. You can

repeat that.

(The Reporter read from the record as

follows: Before you do that, Mr.

Rieser, I'm trying to get a handle on

this project sponsor idea so I would

just ask a general question. Is it

the Agency's position then that if

Clean Air Set-Asides are only

available to owners or operators,

it's less flexible than if we

interject this new concept of a

project sponsor?)

MR. COOPER: I -- I don't believe the

project sponsor is a new concept. I believe our

intent was to try to make it as broad and

encompassing as possible to open the universe of

KEEFE REPORTING COMPANY

sources of people that could apply. Conceivably

a neighborhood association that installs solar

cells on each and every one of the houses in the

block, is that block aggravated enough to be

eligible, we wanted them to fall under the scope.

CHAIRMAN GIRARD: And will that still

work if the owners or operators, in that case

owners of the buildings, could apply for the

CASA? Why do we have to interject this new

outfit project sponsor?

MR. JOHNSON: He said homeowners

association.

CHAIRMAN GIRARD: Well, homeowners

association.

MR. COOPER: Individually they would

not reach the magnitude, I believe, of the point

five or greater to roll over but as a collective

they would.

HEARING OFFICER KNITTLE: Mr. Davis?

MR. DAVIS: Also, we're thinking

about, for instance, EGU could sponsor an

efficiency project with another entity and be

able to apply -- to apply for the CASA credits

for that efficiency measure. So they wouldn't

KEEFE REPORTING COMPANY

necessarily be the owner/operator of the business

that's making the upgrades or efficiency

measures, taking the efficiency measures.

However, they can still sponsor that project

through perhaps discounted electric rates on a

commercial level or -- it doesn't necessarily

have to be -- the project sponsor doesn't

necessarily have to be the owner/operator of the

facility undertaking the measures.

MR. ROSS: I believe owner/operator is

a legal term that is confined by a definition.

It's used in regard to stationary sources. So

when we say project sponsor, we bring in others

from example he's given so I don't think -- I

think owner/operator was limiting and, therefore,

we added a definition of project sponsor to

broaden those eligible for the set aside.

CHAIRMAN GIRARD: Thank you. That's

-- I was trying to get more examples into the

record.

MR. COOPER: Would you like more?

CHAIRMAN GIRARD: Do you have more?

Go ahead.

MR. COOPER: Wind farms, a local

KEEFE REPORTING COMPANY

farmer you can go on the internet and you

yourself can purchase your own multi kilowatt

wind turbine. In that example farmers could put

in a group of them and in that case maybe one

guy, one farmer does have multiple people's

properties. In that case he would be the

owner/operator or project sponsor of those even

though they would be on other properties. Is

that the example you were looking for?

CHAIRMAN GIRARD: So sort of like a

farmers wind farm association?

MR. COOPER: Which they have. The --

I believe I talked about that in the TSD in

Chicago. The Chicago Solar Partnership, if

memory serves, it's -- the last time I looked it

was a collection of some 28 odd independent

sites. Those sites aggregate to something on the

order of two megawatts worth of solar capacity.

That would be another example where perhaps the

Solar Partnership is the project sponsor rather

than all the independent 28 independents. For

the moment I'm out.

MR. JOHNSON: Essentially you want to

encourage these types of environmentally friendly

KEEFE REPORTING COMPANY

projects as well as encourage corporate

landowners?

MR. COOPER: The attempt was to make

-- to open a program's doors as wide as possible

to allow as many as possible that are eligible to

take advantage of the program. We attempted not

to say you the homeowner, we don't want to mess

with you. You the farmers cooperative, we don't

want to mess with you. You 28 solar, no. We

tried within the confines of the rule to open the

doors wide enough so that virtually anyone

qualified can come in.

HEARING OFFICER KNITTLE: Yes? Sir,

can you identify yourself?

MR. NILLES: Bruce Nilles with the

Sierra Club. If the City of Springfield decides

to retrofit a certain number of low income

housing -- low income homes and generates a

certain amount of energy daily with the NOX

reduction, is that the kind of project you think

would be eligible?

MR. COOPER: I believe that would be

on the -- yes, I believe that would be. That is

a form of demand side management.

KEEFE REPORTING COMPANY

MR. NILLES: And the idea is to reward

the city to do a good project for the city in

order to save energy as well as generating energy

savings for low income residents?

MR. COOPER: Absolutely.

MS. BASSI: In your example -- in that

example, if the allowance were sold, who would

get the income?

MR. COOPER: If the allowance was sole

by whom?

MS. BASSI: So the city of -- In this

example, does the City of Springfield get the

allowance?

MR. HILLES: Yes, the City of the

Springfield would be the recipient of the NOX

credit and would be putting up the resources to

be able to allow the low income housing to be

retrofitted.

MR. RIESER: Was your question

answered?

MS. BASSI: Yes. Thank you.

HEARING OFFICER KNITTLE: Mr. Rieser,

are you ready to continue?

MR. RIESER: I am. We were -- I was

KEEFE REPORTING COMPANY

pointing you to 225.460(c)(1) which describes

both eligible and ineligible air pollution

control upgrade projects. Among the ineligible

projects are over fire air techniques and I want

to ask the basis for excluding over fire air

techniques as opposed to including selective

non-catalytic reduction technologies?

MR. ROSS: We wanted to provide cost

recovery ability to those controls that cost the

greatest amount. As we discussed earlier, and

that gets the greatest benefit that add-on

controls or coal-fired EGUs such as FGDs, FDRs,

FMCRs and baghouses can cost tens of millions to

hundreds of millions of dollars. And they also

potentially provide the greatest benefit in

regards to reductions of emissions, and so that's

where we focus our attention, on those types of

controls.

MR. RIESER: If it could be

demonstrated that a technology such as over fire

air provided equal or greater benefits to SMCR at

less cost, isn't that an activity that ought to

be eligible for CASA allowance?

MR. ROSS: I mean, we are willing to

KEEFE REPORTING COMPANY

look at that, but, again, cost is a factor.

There are -- A trading program in general

benefits a -- the addition of a control device in

that by reducing your emissions you are, in

essence, bringing up allowances to be sold,

traded, used as the company sees fit. And if

that control option, in this case an over fire

air combustion modification, I believe, if it's

inexpensive, there may be little need for

additional cost recovery such as that provided by

the CASA. So we're certainly willing to look at

something like that but cost is a factor.

MR. RIESER: When -- Well, for one,

would it be useful to impedovise (phonetic) the

installation of lower cost but equally effective

control strategies to preserve the pool but also

-- to preserve the allowance pool but also to

provide for equal -- equal control measures?

MR. ROSS: Perhaps. I mean, I can see

where you -- one could argue that, yes. But,

again, the cap and trade program in itself

provides an incentive. What we're looking for

with CASA is to provide additional incentive to

add-on controls which are more expensive and,

KEEFE REPORTING COMPANY

therefore, less likely to be undertaken or as

readily undertaken as something that's multiple

times lower in cost. I believe when over fire

air is a NOX control option, SCR is a NOX

controlled option, SCR is an add-on control

device which can cost in the neighborhood, you

know, anywhere, I believe, from 20 million

upwards to 60 million. A lot of it intended on

the size of the generating unit. Over fire air

on the other hand, as my understanding and I

believe we expressed this in our Technical

Support Document, where we have tables addressing

the cost of different control options, it's

multiple times lower in cost than SCR. So,

therefore, any additional cost recovery provided

to installing an SCR makes that type of control

more likely to be installed.

MR. RIESER: When you say that you're

willing to take a look at this, is that in the

context of this regulatory process, or would you

consider language that allowed for those types of

individual technology demonstrations to allow for

eligibility within the rule itself?

MR. ROSS: Say that again, I'm sorry.

KEEFE REPORTING COMPANY

MR. RIESER: As soon as I got two

thirds of the way through that I knew it was

going to make no sense at all so I'm going to

break it down. You said you would take a look at

this issue --

MR. ROSS: Right.

MR. RIESER: -- and is it your

intention to take a look at it in the context of

this -- the regulatory language that we've got

before the Board?

MR. ROSS: Well, I would say that we

looked at it already and decided against over

fire air. I believe it was primarily based on

cost is what I previously discussed. Given to

the extent that we are provided additional

information, we are willing to look further into

that and other issues that are being raised at

the hearing. And if an amendment to the rule is

determined appropriate, then we are willing to do

that.

MR. RIESER: Would that consideration

include adding language to this eligibility

discussion that you got in C1 that would provide

for an unnamed -- either technologies that are

KEEFE REPORTING COMPANY

currently named or for future developed unnamed

technology to be presented to the Agency for

eligibility and have the Agency make a

determination regarding its eligibility at the

time it's presented to them?

MR. ROSS: I believe the answer to

your question is yes. We could potentially amend

the rule to include something like that. And

what I am currently looking at is something

similar to that already exists in the rule.

Because I know we had discussed and contemplated

that in our internal meeting. Again, that there

may be some new technology that comes on to the

scene that can provide substantial reductions in

NOX or SO2 that we would like to provide an

incentive for. And given that, we would be open

to amending the rule or giving CASA such a

project and I think we incorporated that in to

some degree into the rule.

MR. RIESER: 460(e).

MS. DOCTORS: Section 225.460(e)?

MR. RIESER: But this does not allow

for the inclusion of anything that is

specifically excluded under 460(c)?

KEEFE REPORTING COMPANY

MR. ROSS: It does not allow for the

inclusion of over fire air which is what you have

specifically raised, that's correct.

MR. RIESER: And would there be any

consideration to softening that not specifically

excluded language?

MR. ROSS: Yes, we could give

consideration based on information provided in a

review -- internal review that would indicate

that it's appropriate to even include something

such as over fire air.

MR. BONEBRAKE: Okay. I have a

follow-up just on that section if you don't mind.

Section C, Subsection C that we were just talking

about, the delete in language is clean technology

project and then below that we have two subparts,

Subpart 1 refers to air pollution and control

equipment and Subpart 2 clean coal technologies.

And when I first read C, I had been under the

impression that both -- both C1 and C2 were both

categories of clean coal technology. And if you

go to, however, 225.465, which is the next

Section A, Subpart 2 refers to air pollution

control equipment and Subpart 3 separately refers

KEEFE REPORTING COMPANY

to clean coal technology which created an

ambiguity in my mind at least. So my question

was: Subpart C of 225.460, which Mr. Rieser was

just asking you about which refers to clean coal

technologies, are clean coal technologies, as

that term is used in this rule, intended to

capture all of the projects that are identified

both in C1 and C2?

MS. DOCTORS: Mr. Cooper needs to

answer that question.

MR. COOPER: I apologize.

MR. KIM: I apologize.

MR. BONEBRAKE: You need all that

again?

MR. COOPER: I believe so.

MR. BONEBRAKE: I have practice so

I'll try to make this quick. 225.465(a)(2)

refers to air pollution control equipment and A3

clean coal technologies, do you see that, Mr.

Cooper?

MR. COOPER: A2 and A3?

MR. BONEBRAKE: Right.

MR. COOPER: 465.

MR. BONEBRAKE: That's where my

KEEFE REPORTING COMPANY

question starts and I'll go back to 460.

MR. COOPER: A2 and A3, yes.

MR. BONEBRAKE: And that suggested to

me that air pollution control equipment of the

category was separate and apart from clean coal

technology?

MR. COOPER: It is, yes, I believe.

MR. BONEBRAKE: Now if we go back to

460(c).

MR. COOPER: It says clean technology

projects, not clean coal technology.

MR. BONEBRAKE: So clean technology

projects include both air pollution control

equipment upgrades and clean coal technology?

MR. COOPER: I believe, yes.

MR. BONEBRAKE: Okay. So whenever we

see the term clean technology projects in the

proposed rule, we are attending to capture both

of those categories?

MR. COOPER: I believe so, yes.

HEARING OFFICER KNITTLE: Ms. Bassi?

MS. BASSI: I'd like to go back to

460(d) and (e), please.

MR. COOPER: 460 what?

KEEFE REPORTING COMPANY

MS. BASSI: Subsection D and E. Okay.

In Subsection E it appears to me that this is the

other category where something is not

specifically listed, someone could apply to the

Agency for a CASA allowance for those things

unless they are not specifically excluded by

Subsection D. Subsection D appears to exclude

only nuclear power projects, projects required to

meet emission standards required by other state

or federal laws except for baghouses or projects

required to meet the -- to comply with the

consent decree or SEP; is that correct? Whoever

is answering.

MR. COOPER: I missed your question.

You read it but I missed your question.

MS. BASSI: Well, did I read it

correctly?

MR. COOPER: I believe you read the

words.

MS. BASSI: That's all I asked so far.

Okay. If that is the case, would not an over

fire air project be eligible for consideration

under E because it's not excluded under D?

MR. COOPER: I believe it's excluded

KEEFE REPORTING COMPANY

under the definition of the clean -- I believe

it's excluded under the definition of clean

technology project.

MS. BASSI: But E does not say what is

excluded under A and C. This is for projects

other than those that are listed under A and C?

MS. DOCTORS: E1 through C23.

MS. BASSI: What?

MR. BLOOMBERG: It is listed in C. It

is a project specifically listed and excluded in

MS. BASSI: But E doesn't say the ones

that are excluded in C.

MR. BLOOMBERG: No, but it is

specifically listed. It says for projects that

are not specifically listed in Subsections A

through C. Over fired air is listed in C. It

also happens to be excluded in C.

MS. BASSI: But it's listed -- it is

not listed in C as one of the types of projects

that would be in other, in quotes, under E?

MR. BLOOMBERG: That's not what E

says. It says not specifically listed. And over

fired air is specifically listed in C. It is

KEEFE REPORTING COMPANY

also specifically excluded in C, but the more

importantly in this case it is specifically

listed in C.

MS. BASSI: With all do respect, I

don't think that's very clear and something you

might consider.

MR. BLOOMBERG: Okay.

MS. BASSI: Because it appears -- it

appears from the reading of this, the only

exclusion are the ones that are listed in D.

MR. BLOOMBERG: I'm sure we can work

on some clarifying language.

MS. BASSI: But Mr. Rieser wants it

included on the other.

MR. BLOOMBERG: We know.

MR. RIESER: And I think we'll be

happy to submit our comment on what we prefer.

MS. BASSI: Just trying to help.

HEARING OFFICER KNITTLE: Mr. Rieser,

I think we're back to you.

MR. RIESER: The next series of

questions I have have to do with the -- what I

call the pour over among the different

categories, so I don't know if that's suited for

KEEFE REPORTING COMPANY

Mr. Bloomberg or is a Mr. Cooper question.

MR. BLOOMBERG: Do you mean the

overflow?

MR. RIESER: Yeah.

MR. BLOOMBERG: Mr. Cooper will be

specifically addressing that in his presentation.

MR. RIESER: Then I'll hold those

until he does that.

HEARING OFFICER KNITTLE: Are you

finished with your remaining questions, Mr.

Reiser?

MR. REISER: Yes.

HEARING OFFICER KNITTLE: Ms. Bugel?

MS. BUGEL: I have nothing. Thank

you.

HEARING OFFICER KNITTLE: Let's go off

the record a second.

(A discussion was held off the

record.)

HEARING OFFICER KNITTLE: Let's meet

back at three o'clock.

(A short break was taken.)

HEARING OFFICER KNITTLE: Let's go

back on the record. We're going to have a brief

KEEFE REPORTING COMPANY

presentation from Mr. Cooper and then -- so we're

going to vacate the front table and then come

back up before we start the questioning.

MS. DOCTORS: This would be Agency

Exhibit 11.

HEARING OFFICER KNITTLE: Is there

going to be any objection to the Exhibit 9,

Agency Exhibit 9? Seeing none, this will be

admitted into the record as Exhibit 9. No, no.

I'm way off. It's Agency Exhibit No. 11.

MR. RIESER: Which one is this?

HEARING OFFICER KNITTLE: What you

have in front of you is Agency Exhibit No. 9, the

presentation.

MR. REISER: Thank you.

MR. COOPER: Good afternoon.

Everybody situated? Yeah. This is a

presentation that briefly summarizes the CASA

which is unique to Illinois. I don't believe

we've tried something like this before. This

presentation is very similar to a presentation

that was performed during the outreach, so for

some of you it will be old hat and for the Board

hopefully it clarifies and summarizes some of

KEEFE REPORTING COMPANY

what we're trying to get across.

As you can see by this slide, these

are the topics we'll be covering. As we've

discussed at great length there are four

categories of which Illinois' CASA attempts to

incentivise. Energy efficiency/renewable

projects, pollution control upgrades, clean coal

technology and early adopters which is somewhat

of a confusing term. I'm liking it to a timing

bonus. Some acceptable projects are those before

you. We've mentioned a couple of them yet today.

I believe actually the demand side management

came up as an example from Mr. Nilles. We've

also anticipated that there may be energy

efficient new construction would be green

buildings and the like, supply side energy

efficiency which would specifically supply to a

generating unit; high efficient power; wind,

solar and the rest. Next please.

Specifically under pollution control

upgrades, as the rule is currently proposed,

there are only four types that would be

allowable: The FGD, baghouse, SCR/SNCR. And as

was discussed earlier, there are a host of

KEEFE REPORTING COMPANY

projects which are specifically excluded at least

in the current draft. As far as clean coal

technology, not to specifically be confused with

clean technology, there are IGCC, integrated

gasification combined cycle plants, as well as

fluidized bed coal combustion. The timing bonus

quite simply are projects that come in prior to

those within that window of time, effectively,

the early adopter category is an attempt to gain

emissions sooner through this -- or gain emission

reductions, pardon my misstatement, emission

reduction sooner than someone otherwise perhaps

would have done. It provides basically an

additional kick of allowances as we'll talk about

a little bit later. Next, please.

We won't go through all these

calculations. They were provided for

completeness. We will touch on just a few, but

they all generally work the same way. As you can

see for the energy efficiency and conservation

projects, it's a rather simple formula where a

number of allowances is directly related to the

megawatt hours that a project offsets. The 1.5

is a constant, the 2000 is a conversion to tons.

KEEFE REPORTING COMPANY

Next, please.

A short example, a very real example,

a facility like this or any other across the

entire state undergoes a lighting and motor

upgrade project. And in this particular

hypothetical example they offset 10,000 megawatts

hours. You plug it in and it equates out very

simply that. And, again, we won't go through all

of these. The exact same procedure, the only

difference being in this case is the amount

generated rather than conserved and there's a

different multiplier. There's a short example.

Again, same basic form at a different multiplier.

Example for your own.

Now we'll pause for a moment on this

one. Air pollution control upgrades as we

previously stated: FGD, SCR/SNCR and then there

is baghouse, that comes later. There's a

separate equation. Essentially what that

equation says is that during -- or we create a

baseline emission, so two years prior to the

installation of the control device, we are going

to create a baseline. That's the ERB factor.

ERA then is every years annual average. Allowing

KEEFE REPORTING COMPANY

for this difference actually provides incentive

to the utility to operate their equipment as low

as possible as to them as economically viable.

The K factor is a de-rating factor to keep the --

because the megawatts generate for a plant are so

large so the K factor brings it down in scope.

And as you can see there is a difference for the

K, for NOX and SO2 and the difference being the

drastic reductions in NOX -- or in SO2, excuse me,

that could be had from an FGD.

A small example here, again a very

real example. There's -- This is not a

particular plant. This is totally made up data.

This is no one in specific. But a plant chooses

to undergo a project. Their prior two year

baseline was 1.8 pound per megawatt hour, not

million BTU, and after the upgrade they were able

to achieve a 50% reduction apparently. And in a

given year they generated 2.8 million megawatts.

As you can see, all of factors plug into the

equation and we arrive at 126 allowances.

So the baghouse, not quite as

complicated of an equation, same as before except

a different factor. Similar example. Again, a

KEEFE REPORTING COMPANY

utility installs the baghouse, 2.8 million. We

plug them in and we arrived with 280 allowances.

Very similar except we've defined in this case

with the 1.0 as to what we are considering a

baseline of clean is. An example.

So here's the early adopter, and

people that qualify by the way of the structure

of the formula is they should qualify for at

least one. That's the leading factor. But

centrally it's 10% of the sum of everything else

that they otherwise qualified for. So if they

installed within a period of time a controlled

device as well as a wind farm, we're going to

recognize that. In this case in one of the

previous examples, the wind farm was installed

prior to the -- or within the window of time and

the equation runs as such. Had there been more

than one project, there would be more than one in

the summation.

Allowance distribution period. The

slide pretty well speaks for itself, I believe.

I don't know what more I can say on that at this

point. Look back for eligibility. This is, I

believe, verbatim from the proposed rule. There

KEEFE REPORTING COMPANY

are windows of time which we have allowed a

project in the not too distance past to qualify

for.

Here we get to the topic of under and

over subscription which has been the topic of

some of the debate I'm to understand. The first

goal of this -- and there will be a slide that

follows. I don't know if it helps to look at

that now before we go on. But the first aim is

that a category doubles, so it's business as

usual until a category doubles. Once the

category doubles, that excess then is eligible to

spill to its neighboring categories. Our aim is

to first apply that spillover to those other

categories that are over subscribed. Once the

over subscribed categories are filled to the zero

line where all requests have been met, then those

allocations begin to fill the neighboring

categories that have not yet doubled.

And as has been brought up earlier, if

under some scenario all categories were to

eventually become full by double their amount,

there is flexibility for the Agency to retire

those excess allowances. What I was reminded of

KEEFE REPORTING COMPANY

is that this slide is not indicative of the rule

as it is currently written per se. The coming

amendment which is close --

MS. DOCTORS: Close.

MR. COOPER: Close. This is the aim

of the current amendment. I believe that it's a

-- for the most part a clarification of what our

intent was, what the new language is saying. But

any rate, here's a purely hypothetical scenario.

Again, this is not -- it is sort of based on

reality but at the same time perhaps not. We can

see that four categories. These categories are

roughly to scale. In this case the first, and

we're looking at the before side, the first set

of columns have the EE/RE category has filled

beyond its first full point. It is working on

becoming doubly full. In this scenario the

pollution control upgrade category is completely

over subscribed. There are the red boxes

indicating that there are more requests than

allowances available.

In the next category, the clean coal

technology category, apparently in this example

there wasn't much interest and it has much more

KEEFE REPORTING COMPANY

than doubled in its size. And the last category,

zero the adopters is also over subscribed. How

this, with the amendment, would be run now, we're

on the right-hand side, the after filling

portion. The box over clean coal technology,

that represents that amount of allocations has

spilled to those that are over subscribed first.

As you can see in the picture by the now white

boxes with the dotted lines, their needs have

been fully met.

MS. DOCTORS: Is this slide number 25?

MR. COOPER: It's what it says. This

is slide number 25. Is that what I was supposed

to say?

MS. DOCTORS: Yes.

MR. COOPER: Fair enough. Pause on

that note. I was saying something about filling.

Okay. So we've -- our first priority has been to

meet the needs of their requests that have been

over subscribed, and in this particular example

we were able to achieve that. So both the

pollution control upgrade category as well as the

early adopter categories were able to have every

request met. And as this example would have it,

KEEFE REPORTING COMPANY

there turned out to be a little extra. That

little extra then gets divvied amongst the other

remaining categories in an attempt now to fill

them to their doubling point. I think we're

holding. So I hope that gives a visual

representation of what the amended language is

trying to achieve. I'm not sure that it does. I

hope it does. I hope it brings it more into

focus what our goals are.

First and foremost we don't waste a

drop. Once something is doubled, every effort is

made to fill the need. Not one -- one allowance

will be retired until every need is met. I think

that's important to stress.

Preempting a potential question for

later, I decided to throw this in and this

essentially gives a justification for the waiting

choices in the various equations. Briefly the

point five as noted, I believe, in the TSD as

well is less than the other amounts. The reason

being, those particular units will generate NOX.

An example of this would be a landfill gas

methane to energy project. While we do want to

encourage that, at the same time we do recognize

KEEFE REPORTING COMPANY

that there is a NOX consequence and, therefore,

the lower rate. The 1.0 is what we're deeming as

a clean unit and, as stated, necessary for

attainment. The 1.5 is fairly standard. I

believe the standard allocation methodology uses

that. And the final point, the 2.0, the reason

this is more is because these units generate

electricity with no associated emissions. So

that's something we first want to very heavily

promote as well as its definitely in step with

the Governor's goals.

A combination of set asides, as can be

read, we fully encourage entities to undertake as

many projects that would fall within these

categories. And we definitely will allow you to

reap each category that you can get.

As was stated earlier, I believe,

there are almost innumerable projects, so that's

what the first bullet point is referring to. The

pollution control upgrade category I felt was

important to note that it is specifically denoted

for the EGUs and then, as taken from the rule,

commercially generating for eight years is what

we're going to call an existing unit.

KEEFE REPORTING COMPANY

Building off the first bullet point

from the last slide, the pollution control

upgrade category represents 20% of our CASA.

Again, the sole beneficiaries of that category

are the EGUs. Additionally, in the EE/RE

category, there would be supply side energy

projects. Again, the only people that would be

eligible for that would be the EGUs. So those

are two earmark sections designed for those

sources.

HEARING OFFICER KNITTLE: Thank you,

Mr. Cooper. It's my understanding that Ms.

Doctors has some preliminary questions she wants

to ask of Mr. Cooper before you start asking

questions of him; is that correct?

MS. DOCTORS: Yes. I'd start by

getting his testimony admitted as if read. I

believe this is Agency Exhibit 12. Yesterday

there was a question --

HEARING OFFICER KNITTLE: Can you just

hold on a second, please. We need to get a copy

of the testimony and get it in the record. Any

objection to the admission of the testimony as if

read into the record? That will be admitted as

KEEFE REPORTING COMPANY

Agency Exhibit No. 12. All right, Ms. Doctors,

you may proceed.

MS. DOCTORS: Okay. Yesterday Ms.

Bassi asked for information on the current

construction projects. We have an exhibit off of

our Website, I believe.

MR. COOPER: Yes.

MS. DOCTORS: This would be marked as

Agency Exhibit 13. I'd like to have this

admitted.

HEARING OFFICER KNITTLE: Is this --

MR. COOPER: Ms. Bassi had asked a

question earlier about the number of projects,

utility projects. And during the break I was

able to run and produce a document that lists

them all. I thought it would be useful.

HEARING OFFICER KNITTLE: Very

efficient.

MR. COOPER: Thank you.

HEARING OFFICER KNITTLE: Ms. Bassi,

is there going to be any objection to this?

MS. BASSI: I'd like to see it first.

HEARING OFFICER KNITTLE: Mr. Rieser,

any objection to this?

KEEFE REPORTING COMPANY

MR. REISER: No.

HEARING OFFICER KNITTLE: This will be

admitted as well as Exhibit 13. I'm sorry. Ms.

Doctors, you may proceed.

MS. DOCTORS: Okay. Ms. Bassi had

also and Mr. Reiser had asked which states had

output -- output based allocation schemes or

methodology. This is from UCPA's Website, I

believe. I'd like to mark it as Agency Exhibit

14. Mr. Cooper, could you tell us a little bit

about this document.

MR. COOPER: This document is titled

as the -- or done by EPA and the CHP Partnership.

There is a table on the first page that answers

-- partially answers the question from Mr.

Davis's testimony as to what are the benefits of

efficiency on page 3, I believe. There is also a

table of current state output based regulations.

HEARING OFFICER KNITTLE: Any

objection to the admission of this document?

MR. BONEBRAKE: No objection.

HEARING OFFICER KNITTLE: Seeing none,

this be admitted as Agency Exhibit No. 14.

MS. BASSI: Can I ask a question about

KEEFE REPORTING COMPANY

this?

MR. COOPER: Sure.

MS. BASSI: Am I reading this

correctly, these are the states that currently

have state output based regulations as opposed to

those that are proposing them under the CAIR; is

that correct?

MR. COOPER: I'm reading it the same

way you are. Table 1 states output based

regulations. I made an effort to go and pull

this data also at the break. And I believe it

addresses at least in part some of your previous

questions.

MS. BASSI: Thank you.

MR. BONEBRAKE: And in that same Table

1 there's a reference to DG rule, do you know

what that means?

MR. DAVIS: I do. Distributed

generations.

MR. COOPER: Yes. I believe it states

the abbreviation for that at the top of page 2,

third -- second bullet point emission limits for

small distributed generations (DG). Second page,

top right column, second bullet point.

KEEFE REPORTING COMPANY

MR. BONEBRAKE: And to your knowledge,

Mr. Cooper, is Table 1 an exhaustive list of

state regulations that have output based

regulations?

MR. COOPER: I am not aware of that.

HEARING OFFICER KNITTLE: I'm sorry.

Ms. Doctors?

MS. DOCTORS: We have three more

documents.

HEARING OFFICER KNITTLE: Okay. Were

all these copied by Mr. Cooper on a break?

MS. DOCTORS: No. We'd like to have

-- we've -- there was a question raised by Mr.

Rieser and Ms. Bassi concerning the 15% set aside

and the guidance that we dated from the NOX SIP

Call.

MR. REISER: I'm not sure I asked that

question.

MS. DOCTORS: No, I'm sorry. Wrong

person. Mr. Bonebrake asked it and Kathleen

Bassi.

MR. BONEBRAKE: It all looks the same

on the transcript.

MS. DOCTORS: I'm sorry. I misspoke.

KEEFE REPORTING COMPANY

This is -- we had asked about what states had

done in terms of set asides and this document

dated from September 16th, 2005, draft is a draft

report prepared by the Climate Protection

Partnership Division, that's a division of USEPA,

and that would be marked Agency Exhibit 14.

HEARING OFFICER KNITTLE: 15.

MS. DOCTORS: 15.

MR. COOPER: Specific interest with

reference to that document, I believe, is page 3.

Page 3 provides a Table 1 size of set aside

account by state.

HEARING OFFICER KNITTLE: Before we

get into this, let's see if we're going to admit

it. Do you have any objections? Do you need a

minute to take a look at this?

MR. BONEBRAKE: Give us just a minute.

MS. BASSI: Is this a year-old draft;

is that correct?

MR. COOPER: That is the date on the

document.

HEARING OFFICER KNITTLE: Yes, Mr.

Rieser?

MR. REISER: Yeah. Do you know

KEEFE REPORTING COMPANY

whether this is -- whether there is a final

version of this?

MR. COOPER: No, I do not. The last

time I looked at this was during the drafting --

during our initial round table period.

MR. REISER: So you haven't looked

back to where this was to verify whether this has

been finalized or not?

MR. COOPER: I have not.

MR. REISER: Maybe if we could suggest

that that be done just to verify whether there is

a more recent and final document.

HEARING OFFICER KNITTLE: Yeah, I

think that would be a good idea for the Agency to

do that.

MR. REISER: Subject to that I don't

have any objection.

MR. BONEBRAKE: That will be my only

concern as well.

HEARING OFFICER KNITTLE: We'll admit

this as Agency Exhibit No. 15, but we direct the

Agency to attempt to discover whether there is a

more recent version of this draft.

MS. DOCTORS: We will. This next one

KEEFE REPORTING COMPANY

discusses the 15% -- I mean, guidance on set

asides and it's alternative NOX allowance

allocation language for the Clean Air Interstate

Act and that would be Agency -- would be Agency

Exhibit 16.

MR. REISER: I think we have to start

taking shorter breaks.

HEARING OFFICER KNITTLE: Yeah, I

think you're probably right.

MS. BASSI: Could I make a

clarification about Exhibit 15 again also,

please?

HEARING OFFICER KNITTLE: Ms. Bassi?

MS. BASSI: The title of Exhibit 15,

this draft report, it refers to the NOX budget

trading program, would you stipulate that that is

NOX SIP Call?

MR. COOPER: I believe so.

MS. BASSI: Okay. Thank you.

MS. DOCTORS: Okay. We have one more

document.

HEARING OFFICER KNITTLE: One second,

Ms. Doctors. You move this for admission;

correct?

KEEFE REPORTING COMPANY

MS. DOCTORS: Yes, I do.

HEARING OFFICER KNITTLE: Any

objection to the admission of this document?

MR. BONEBRAKE: Can we hear a little

bit about the source from somebody from the IEPA

side of the table describe what this document is

first?

MS. DOCTORS: You talking about which

one, the alternative?

MR. BONEBRAKE: The one that says

about STAPPA and ALAPCO on the front.

HEARING OFFICER KNITTLE: That's

right. Agency No. 16.

MS. BASSI: You should issue

magnifying glasses.

MR. COOPER: Your question was what?

MR. BONEBRAKE: What is the source of

this document and if you could just briefly

describe what it is?

MR. COOPER: I believe it's STAPPA and

ALAPCO, the State and Territorial Air Pollution

Program Administrators; ALAPCO, Association of

Air Pollution Control Officials.

MR. BONEBRAKE: Is this a publicly

KEEFE REPORTING COMPANY

available document?

MR. COOPER: I believe so, yes.

MR. BONEBRAKE: I have no objection to

it as an exhibit.

HEARING OFFICER KNITTLE: Mr. Rieser?

MR. REISER: No objection.

HEARING OFFICER KNITTLE: Ms. Bugel?

MS. BUGEL: No objection.

HEARING OFFICER KNITTLE: This will be

admitted as Agency Exhibit No. 16. And, Ms.

Doctors, you may now proceed.

MS. DOCTORS: Agency Exhibit 17. This

is another document that was prepared for the

Energy Services Coalition. Also discusses state

emissions allocation -- allowance set aside

programs. That has been a question has other

states done emission allowance set asides.

HEARING OFFICER KNITTLE: Ms. Bugel,

any objection to the introduction of this as an

exhibit?

MS. BUGEL: No objection.

HEARING OFFICER KNITTLE: Mr. Rieser?

MR. REISER: I guess can you tell us

the source and what the Energy Emission Coalition

KEEFE REPORTING COMPANY

and what is this about?

MR. COOPER: In all honesty, I don't

recall what specific sources it was pulled from.

It was a web resource pulled off as a PDF.

MR. RIESER: Okay. And was this a

part of the Agency's thinking or analysis as it

was putting this program together?

MR. COOPER: I wouldn't necessarily

classify it as that. This was ground level

research into what other states had done. Toward

the tail end of the document is a summary of what

other states had done. I don't know that it

wasn't relied upon.

MR. REISER: Thank you. No objection.

MR. BONEBRAKE: No objection.

HEARING OFFICER KNITTLE: This will be

admit as Agency Exhibit No. 17.

MR. BONEBRAKE: I do have a question

pertaining to this document. Though given the

date, September 2001, would the Agency agree that

Exhibit 17 relates to the NOX SIP Call?

MR. COOPER: I would agree with that.

MS. DOCTORS: For the OTC trading

program.

KEEFE REPORTING COMPANY

MR. COOPER: As a follow-up to that, I

believe it was stated earlier that at the time we

undertook this, and I believe still is the case,

there aren't many other states, it was somewhat

new territory so we had to use data that we --

that was available.

MR. BONEBRAKE: Which at that time

would have related to the NOX SIP Call?

MR. COOPER: In this case, yes.

MR. BONEBRAKE: And was that -- was

this it for the additional documents?

MS. DOCTORS: Yeah, I think there

were -- That was it.

MR. BONEBRAKE: I did have a follow-up

question. My impression had been from the

dialogue we had yesterday there was some IEPA

authored document that might be a summary of

what's -- what states were doing with respect to

the CAIR rules. And maybe I misunderstood that

but my impression there was such a document.

MR. COOPER: With respect to CAIR?

MR. BONEBRAKE: Yes.

MR. COOPER: I don't --

MR. DAVIS: I believe I testified I

KEEFE REPORTING COMPANY

can try to track that information down. I don't

know if there is a composite in the document.

MR. BONEBRAKE: If there is such a

document, we would like to see that.

MS. DOCTORS: Let me just clarify,

what you're looking for is to see if the Agency

has compiled a list of other states proposed CAIR

rule and whether they have set asides?

MR. BONEBRAKE: Or adopted. I imagine

there was may be some adopted CAIR rules but CAIR

implementation rules at this point in time.

MS. DOCTORS: That I'm not sure.

There may be.

MR. BONEBRAKE: And first glance it

looks to the extent that these documents are

memorializing what states have done in connection

with the NOX SIP Call as opposed to CAIR NOX rule?

MS. DOCTORS: I have a couple

clarifying questions.

HEARING OFFICER KNITTLE: Yes, you may

proceed.

MS. DOCTORS: There was a question

that came up about exhibit -- it refers to the

15% NOX. We had introduced some guidance dated

KEEFE REPORTING COMPANY

from 1999 that concerned the NOX SIP Call and

whether -- the question was raised as to whether

it was relevant in the CAIR -- the -- this CAIR

rulemaking proceeding. Do you have any other

information about types of guidance that -- that

-- that USEPA recommended for developing the CAIR

rule in set asides?

MR. COOPER: I believe the Federal

was dated somewhere. I don't have the date

handy, but it was 8D1B. It spoke briefly on the

topic.

MS. DOCTORS: We're looking at the

final CAIR rule dated May 12, 2005, on page

25279.

MR. COOPER: There's a paragraph on

that page that includes, The EPA maintains that

offering such flexibility -- this is in reference

to set asides, The EPA maintains that offering

such flexibility as it did in the NOX SIP Call

does not compromise the effectiveness of the

trading program.

MS. DOCTORS: Is there any other

document?

KEEFE REPORTING COMPANY

MR. COOPER: The STAPPA and ALAPCO

document which was just recently handed out dated

August 2005.

MS. DOCTORS: This is Agency Exhibit

16.

MR. COOPER: Page 10 of that document

and, again, this -- this document developed by

STAPPA and ALAPCO specifically for the Clean Air

Interstate Rule, page 10 they state, EPA has

developed certain guidance documents on the

allocation of EE/RE set aside. And I believe the

documents they are referring to are the -- the

one document was the -- I don't know the

referenced number but Ms. Bassi had called

concern to it.

MS. BASSI: I believe the one was

Exhibit E to the Statement of Reasons or the TSD.

Is that the March 1999 document is what you were

referring to?

MR. COOPER: Yeah, EE/RC set aside, I

believe.

MS. BASSI: Yeah.

MS. DOCTORS: I think that's all.

MR. COOPER: Yeah, that was my only

KEEFE REPORTING COMPANY

comment on that.

MS. DOCTORS: And in some statements

made about what the purpose -- primary purpose of

the CASA was.

MR. COOPER: Yes, I wanted to

emphasize the point, I believe, there were

questions earlier from Mr. Bonebrake to Jim Ross

on what the purpose of the CASA is -- was. And I

wanted to drive home the point that since

outreach -- all of the outreach documents as well

as in the TSD, page 12, the primary purpose of

the CASA has been as an incentive, not

specifically directly to lower emissions. I

wanted to make that point as a point of

clarification.

MR. BONEBRAKE: A follow-up question

to you is incentive to do what?

MR. COOPER: To install wind farm, to

undertake a pollution control upgrade project, to

partake in those particular categories.

MR. BONEBRAKE: And what does the

Agency expect will come from such projects.

MR. COOPER: A benefit to the

environment.

KEEFE REPORTING COMPANY

MR. BONEBRAKE: In the form of reduced

emissions?

MR. COOPER: That would be one.

MS. DOCTORS: What other benefits are

you thinking?

MR. COOPER: There potentially could

be economic benefits if someone installs a wind

farm in Illinois, a construction firm would be

required, materials would be needed. So there

are other benefits other than emission reduction

associated with undertaking CASA.

MS. DOCTORS: Okay. We're -- that was

HEARING OFFICER KNITTLE: Nothing

further, Ms. Doctors?

MS. DOCTORS: Nothing further.

HEARING OFFICER KNITTLE: Were you

willing to present Mr. Cooper for questions then

I take it?

MS. DOCTORS: I think it's open.

HEARING OFFICER KNITTLE: Let's

proceed to questions.

MR. BONEBRAKE: A follow-up question.

I first had a question as to what has been marked

KEEFE REPORTING COMPANY

as Exhibit No. 13 and I think you indicated, Mr.

Cooper, this is a document that was generated

from IEPA's Website?

MR. COOPER: Excuse me?

MR. BONEBRAKE: It's entitled Electric

Power Plant Generating Unit Construction

Projects.

MR. COOPER: Yes.

MR. BONEBRAKE: And you said you

printed this off IEPA Website; is that correct?

MR. COOPER: Yes, the Website is at

the bottom.

MR. BONEBRAKE: Can you identify for

us what types of projects are listed on page 1

and running over to page 2 of this document?

MR. COOPER: As the headings read,

page 1 listing of new coal and solid fuel fired

units; page 2 listing of simple cycle turbine

projects; page 3 listing of active combined cycle

turbine projects.

MR. BONEBRAKE: With respect to the

first heading listing of new coal and solid fuel

fired unites, are these units that's have been

built or permitted, or what is the status of

KEEFE REPORTING COMPANY

100

these units and how is it that they arrive on

this list?

MR. COOPER: I believe the status is

the right most column. It denotes whether a

permit was issued. For example, of the CWLP or

Christian County Generation, application under

review.

MR. BONEBRAKE: So have any of these

projects then listed in the listing of new coal

and solid fuel fire -- have any of the units in

this category been listed as constructed -- have

they have been constructed at this point in time?

MR. COOPER: I missed your question.

MR. BONEBRAKE: With respect --

MR. COOPER: Has anything been built?

MR. BONEBRAKE: Yes.

MR. COOPER: On this particular

listing?

MR. BONEBRAKE: Correct.

MR. COOPER: The first page of the

entire document?

MR. BONEBRAKE: Well, what I

specifically was asking about was the listing of

new coal and solid fuel fired units.

KEEFE REPORTING COMPANY

101

MR. COOPER: To my knowledge on this

particular listing it looks like the Southern

Illinois Power Cooperative unit is the only one

to my knowledge, second page.

MR. BONEBRAKE: And that dates back to

yet an application date of July 12, 2000?

MR. COOPER: That is what the date

application received appears to be.

MR. BONEBRAKE: So any new coal and

solid fuel fired unit for which there was an

application submitted in 2000 or thereafter is

reflected in this first listing of units; is that

correct?

MR. COOPER: To my knowledge. I don't

generate this list. I have nothing to do with

maintaining this. I merely printed it as is. So

I'm taking this at face value.

MR. ROSS: And just to provide an

update, I believe Taylorville Energy Center

project, that permit has gone to public notice.

I believe a hearing is scheduled in November in

Taylorville.

CHAIRMAN GIRARD: I have a question,

Mr. Cooper. On page 2 at the bottom there's some

KEEFE REPORTING COMPANY

102

notes that refer to some of the abbreviations of

the table. What -- what would be the difference

between an I or E date permit issued or date

permit effective?

MR. COOPER: I believe I would state

that --

MS. BASSI: If I could jump in. An

example of that is in the Prairie State

Generating Project. It has --

MR. ROSS: Right.

MS. BASSI: -- an R, an I and an E.

MR. ROSS: After -- I don't want to

make assumptions here, but after a permit is

issued, it can be appealed in which case it is

not effective. They cannot construct under that

permit until the appeal is resolved.

MS. BUGEL: If you look underneath the

graph it says R, the date of the application is

received, I is the date the permit issued, and E

is the state the permit is effective. Was that

the question?

CHAIRMAN GIRARD: Well, what I was

trying to understand was why the Southern

Illinois Power Coop is operating when it has a

KEEFE REPORTING COMPANY

103

date permit issued and the Prairie State, for

example, has a permit issued on April 28th, '05,

and it has an effective permit on August 24th,

'06. So if it relates to appeals, that might

help explain it.

MR. ROSS: Absent an appeal, a permit

would be effective the date it's issued. Those

two dates would be identical.

MR. BONEBRAKE: Although, wouldn't

that May 16, '01, permit reference for SIPC have

been a construction permit for that particular

unit? Would you know, Mr. Ross, if that permit

was appealed?

MR. ROSS: I do not believe the SIP

Call permit was appealed.

MS. BASSI: And these permits and

dates and so forth, these are all construction

permits, correct, of various types as opposed to,

for example, Title 5 permits.

MR. ROSS: I believe so, yes. They're

certainly not Title 5 permits, I can tell you

that.

CHAIRMAN GIRARD: Well, I'm curious

about Enviropower down there, the last item on

KEEFE REPORTING COMPANY

104

the table, where the permit was issued in '01 and

the project status is now under investigation.

What does that mean?

MR. ROSS: Well, for a construction

permit there must be a continual process of

construction. If there's a certain lapse time

frame in which no construction occurs, the permit

is no longer considered effective, so I believe

Enviropower had a period where no construction

was taken place. And, I believe, I would have to

discuss this with our legal department, but I

believe it's our position that their permit may

no longer be valid due to this last period of no

construction period.

CHAIRMAN GIRARD: Probably enough said

since we may see an appeal at some point. Okay.

I won't ask any more questions. Thank you.

MS. BASSI: May I start?

HEARING OFFICER KNITTLE: Oh, yes,

please do.

MS. BASSI: Thank you. Mr. Cooper, I

had a couple of questions about your slide.

MR. COOPER: Sure.

MS. BASSI: You told me I had to wait.

KEEFE REPORTING COMPANY

105

On 519, 519 provides an example of the

installation of a fluidized bed combustion boiler

and then there's a formula down below on the

second dot. And I was looking at that compared

with the Agency's Exhibit No. 1, number 11 on

number 1, this is the errata sheet and it appears

that the formula in number 11 B1 in Exhibit 1 is

different from the formula on Slide 19. And I

just want to be sure that Exhibit 1 is the -- is

the formula that applies?

MS. DOCTORS: Your number -- which

number on your --

MS. BASSI: It was number 11.

MR. BONEBRAKE: It's on page 2.

MS. BASSI: Yeah.

MS. DOCTORS: We're cross referencing

it with Section 225.465.

MS. BASSI: And I did not do that

cross reference. I apologize.

MS. DOCTORS: Okay. Do you want to

ask your question?

MS. BASSI: Well, my question is: Is

number 11 on Exhibit 1 talking about the same

thing as Slide 19?

KEEFE REPORTING COMPANY

106

MR. COOPER: I -- I believe the errata

sheet does not translate well to which -- I

believe the first sentence does not -- if you

look at 225.465(b)(1), that is the equation.

This is not saying fluidized coal combustion is

this equation. That equation is as remains on

225.465(b)(5).

MS. BASSI: Okay. Which is the same

as what you have in Slide 1?

MR. COOPER: It should, yes.

MS. BASSI: Okay. Thank you.

MR. COOPER: You're welcome.

MR. BONEBRAKE: And I'm sorry, Mr.

Cooper, the item 11 on page 2 of Exhibit 1 has a

1.5 pound per megawatt hour entry whereas item 5

in the portion of the rule that you just

mentioned has a 1.0 megawatt hour corresponding

reference, so which of those numbers is what the

Agency intends?

MS. DOCTORS: It -- We did not change

-- there was no intent with the errata sheet to

change that equation.

MR. COOPER: If you look at

225.465(b)(1), the equation is missing a left

KEEFE REPORTING COMPANY

107

paren.

MR. BONEBRAKE: Well, okay, and item

11 reads Section 225.465(a) -- I see. So the

only thing you're intending for subdivision five

of that part of the rule was the additional

reference to clean coal technology --

MS. DOCTORS: Correct.

MR. BONEBRAKE: -- in lieu of IGCC.

Thank you for that clarification.

MS. BASSI: I have a question also

about Slide 25 which is the spillover. Should I

go over that? Anybody have questions about this?

MR. BONEBRAKE: We can get into that

now.

MS. BASSI: On Slide 27. 27, please.

MR. COOPER: 27?

MS. BASSI: 27.

MR. COOPER: Yes.

MS. BASSI: Do I understand this slide

correctly and your presentation of this correctly

to mean that a single project could apply for

allowances under the CASA in multiple categories

as they may apply. So, for example, if I were

going to add to my pulverized coal boiler in my

KEEFE REPORTING COMPANY

108

back yard, a solar panel and I'm going to put on

a baghouse and I'm going to do all of this early

before the rule is applicable, can I get a

pollution control upgrade, because theoretically

it has something already, and a zero emission

safe for the solar panel which is connected to

the boiler and an early adopter?

MR. COOPER: I believe that is the

point, yes.

MS. BASSI: Okay. Thank you.

MR. BONEBRAKE: Mr. Cooper, I had some

questions related to your testimony and also the

regulation and exhibit that was presented

yesterday. First, with respect to your written

testimony on page 1, you refer to the fact that

you have assisted in developing a number of

regulatory programs, stationary sources. Other

than the Illinois CAIR rule, can you identify

what regulatory programs you would have assisted?

MR. COOPER: I have participated to

some extent with the IC Engine Rule, coming IC

Engine Rule, as well as upcoming NOX RACT rule.

MR. BONEBRAKE: And what has been your

involvement with respect --

KEEFE REPORTING COMPANY

109

MS. BASSI: Wait. He might not be

done.

MR. BONEBRAKE: I'm sorry. Were you

finished?

MR. COOPER: Quite.

MR. BONEBRAKE: What was your

involvement with respect to those two

rulemakings?

MR. COOPER: They are upcoming so the

involvement is continuing, but in a similar

manner is this rule a representative from the

permit section providing insight and the tax

assigned.

MR. BONEBRAKE: Do either of those two

rulemakings involve emission trade, allowance

trade?

MR. COOPER: No.

MR. BONEBRAKE: On page 2 of your

written testimony, the first full paragraph in

the Clean Air Set-Aside overview section, the

last sentence reads, The set aside of CAIR, NOX

allowances is not a reduction of the overall NOX

budget as it is not a retirement of allowances.

Do you see that, Mr. Cooper?

KEEFE REPORTING COMPANY

110

MR. COOPER: I do.

MR. BONEBRAKE: There was a slide that

you presented regarding what happens to

allowances in categories that are under

subscribed. After completion of the refilling of

other -- other categories, is it true that the

Agency has discretion to retire allowances at

that juncture?

MR. COOPER: As the rule is written,

yes.

MR. BONEBRAKE: And what are the

factors that the Agency will consider in whether

to retire allowances?

MR. COOPER: That won't be a decision

that I will make. I'm not --

MR. ROSS: Those factors are similar

to as we discussed for the new source set aside.

At that time we will make a decision. The

retirement of those allowances is appropriate

based upon a need to benefit air quality and

public health.

MR. BONEBRAKE: And when is it that

the Agency will make that -- make those kind of

decisions?

KEEFE REPORTING COMPANY

111

MR. ROSS: When there are excess

allowances such that all the over subscribed

categories are filled -- well, I think each

category has to be double, that's correct, right,

and there have to be a total of excess allowances

that the category would essentially not be deemed

used to any great level so that there was a

spillover -- all the more at least double and

there was spillover.

MR. BONEBRAKE: And can you envision a

circumstance, Mr. Ross, where -- when that

scenario presents itself that the Agency would

not retire NOX allowances?

MR. ROSS: Potentially.

MR. BONEBRAKE: Can you describe for

us what you have in mind when you say

potentially?

MR. ROSS: Well, we could make a

decision to leave those set asides there. If, as

for the new sources, it would envision that there

could be an increasing need or they would serve a

greater purpose to the public health and

environment if we left them there for future use.

MR. BONEBRAKE: Is there any provision

KEEFE REPORTING COMPANY

112

set forth in the proposal for view of the

Agency's decision concerning retirement of

allowances in the circumstances we've been

talking about?

MR. ROSS: No, there is not.

MR. BONEBRAKE: And what would the

reason for the Agency's decision not to include

such a provision?

MR. ROSS: We believe that was our

decision to make.

MS. BASSI: Will that decision be

published somehow?

MR. ROSS: I would -- I believe it

would be made known. We would probably seek

input from stakeholders, I believe, and we

certainly wouldn't do it in a vacuum.

MS. BASSI: Are there provisions for

that in the rule?

MR. ROSS: No.

MR. BONEBRAKE: The next sentence in

that same paragraph, Mr. Cooper, starting with

the word instead, Instead the CASA are intended o

be allocated to eligible applicants who in turn

are expected to trade those allowances to the

KEEFE REPORTING COMPANY

113

utilities for their compliance needs. Do you see

that?

MR. COOPER: I sure do.

MR. BONEBRAKE: And by the use of the

term utilities in that sentence, do you mean

electric generators?

MR. COOPER: That is the intended

meaning, yes.

MR. BONEBRAKE: And is it true that if

allowances are traded through such generators, in

fact, the generators are buying those allowances?

MR. COOPER: Possibly.

MR. BONEBRAKE: Wouldn't you expect,

Mr. Cooper, that generators in order to acquire

allowances from another party would have to buy

them?

MR. COOPER: I would expect that is

not the only way.

MR. BONEBRAKE: So would you also

expect that if CASA allowances are, in fact,

allocated to a third party, that the allocation

of the third party has an -- increases the cost

of compliance for generators because generators

must purchase allowances from such third parties?

KEEFE REPORTING COMPANY

114

MR. COOPER: I'm unsure.

MR. BONEBRAKE: I want to work a

little bit through your discussion of the -- I'll

call it the stop over into other categories for

lack of a better word. I'm going to work a

little bit with the regulations in terms of both

application and then what happens to the Agency's

processes. And 225.470 addresses CASA

applications; is that correct?

MR. COOPER: That appears to be, yes.

MR. BONEBRAKE: And then 225.475 is a

separate section that addresses Agency action on

applications for CASA allowances; is that right?

MR. COOPER: Yes.

MR. BONEBRAKE: Now under 225.470, as

we were talking about a little bit earlier,

applications for CASA allowances need to be

submitted by May 1st; is that correct? I'm

looking --

MR. COOPER: I believe in 225.470(b).

MR. BONEBRAKE: That's what I'm

looking at, that's correct.

MR. COOPER: Yes.

MR. BONEBRAKE: And is says, By May 1

KEEFE REPORTING COMPANY

115

of the control period for which the allowances

are being requested.

MS. DOCTORS: I think -- I think Mr.

Bloomberg may have to answer some of these

application questions rather than the more

technical. Why don't you go ahead with your

question.

MR. BONEBRAKE: What I was trying to

understand then is when the -- the timing

deadline there is suggesting that the application

needs to be submitted before May 1 in the year

for which you are actually seeking the CASA

allowances; is that correct?

MR. BLOOMBERG: That is my

understanding.

MR. COOPER: And in a scenario where

multiple applications would be -- are submitted

for CASA allowances from the same category and

the total amount of allowances is greater than

the allowances in that category, will you walk me

through the process on how the Agency will

determine who gets how many allowances?

MR. BLOOMBERG: If there's more than

we have available, and part of this is not going

KEEFE REPORTING COMPANY

116

to track exactly with the rule because we do have

this commitment coming, but I apologize for

knowing something that you guys haven't seen yet.

But when it comes in, we will -- the Agency will

approve the project, approve the amount that is

to be allocated. If there is more than in the

category and there is no overflow, then it will

be allocated pro rata according to the approved

amount. So in other words, if -- if there are

100 allowances available and two companies or two

project sponsors ask for 500 allowances each,

they would each get 50. However, if one was

approved for 600 and one was approved for 400,

the one would get 60 and the other would get 40.

Now, again, that is presuming that there is not

any overflow. If there is overflow, as Mr.

Cooper showed in the slide, then an attempt would

be made to fulfill the entire approved amount

with that overflow.

MR. BONEBRAKE: And a couple of

related questions for you. You just described a

pro rata distribution. In that circumstance as

contemplated by the proposed rule, is the

sequence of the applications of any consequence

KEEFE REPORTING COMPANY

117

so long as all the applications are submitted by

May 1st?

MR. BLOOMBERG: No.

MR. BONEBRAKE: And are you familiar

with the concept of FIFO, first in first out with

respect --

MR. BLOOMBERG: Familiar with it.

MR. BONEBRAKE: I take it from the way

you described the NOX CASA process, that the

Agency is not using a FIFO process; is that

correct?

MR. BLOOMBERG: Correct. It's not

erased.

MS. BASSI: Excuse me. What does

their being erased have to do with FIFO?

MR. BLOOMBERG: Well, it's not erased.

If everything is due by May 1st and someone

submits April 28th, they're not going to get a

benefit over someone who submits April 29th.

MS. BASSI: In the concept of first in

first out, looking at this at slightly a

different way, the first allowances -- the older

allowances are the first ones into a category and

those under a FIFO concept those would be the

KEEFE REPORTING COMPANY

118

first ones that are allocated when you have

accumulated several years worth of allowances in

a category, is that your understanding of FIFO?

MR. BLOOMBERG: My understanding from

Mr. Bonebrake was saying first in first out is

the first people to get in here with an

application would get the allowances. If

misunderstood, I apologize.

MR. BONEBRAKE: No, my question was

just limited to just the first in first out in

terms of the application process for that

particular time period. That's all I was asking

about.

MS. BASSI: Okay. Then I -- then this

needs to be clarified -- in terms -- and because

this needs to be clarified because the vintage

year of an allowance will have some meaning under

the MPS; is that correct?

MR. ROSS: It does.

MS. BASSI: And so considering that

the vintage year of allowances have meaning under

the MPS, does the Agency intend to -- if a source

came in that is -- that has opted into the MPS

and is qualifying for some allowances for

KEEFE REPORTING COMPANY

119

whatever reason related to the MPS and those --

and it's qualifying for these allowances in 2013,

will he be issued 2010 allowances because they're

in the category?

MR. BLOOMBERG: I don't believe it's

something we specifically addressed, but under

normal circumstances for other trading programs,

first in first out does generally apply. So if

there were still 2010 allowances sitting in the

pool and as well as 11, 12, and 13, then the 10

would likely be the ones to go first.

MS. BASSI: I would like to suggest

that might be something that you consider as a

clarification in your rule someplace.

MR. BLOOMBERG: I think we'll consider

it.

MS. BASSI: Thank you.

MR. BONEBRAKE: And similar just to

follow-up to a question that Ms. Bassi had, in

the scenario where there's a pro rata

distribution then the vintage of allowance

question, I guess, also arises how the Agency

would handle that -- the vintage question in the

context of a pro rata distribution.

KEEFE REPORTING COMPANY

120

MR. BLOOMBERG: We could evenly divide

the vintages up as well. Although, it -- I mean,

in all likelihood if we're down to the point

where we have depleted an entire category, then

probably they will all be the vintage. If there

are varying vintages, it would make sense to --

if it is an issue, it would make sense to divide

up the vintages pro rata as well.

MR. BONEBRAKE: And is there anything

in the proposed rule currently that describes or

identifies what -- what vintage allowances would

be allocated when out of CASA?

MR. BLOOMBERG: No.

MR. BONEBRAKE: You also mentioned in

your prior answer the concept of overflow when

you were talking about the pro rata distribution

and I wasn't sure of the timing that you had in

mind that we were discussing overflow. Can you

tell us when the overflow allowance is -- would

the allocated to those who only had received a

partial distribution and when?

MR. BLOOMBERG: Under the amendment

the -- It is all done at once. And that's a

clarification of the process describing the

KEEFE REPORTING COMPANY

121

initial proposed rule because the initial

proposed rule is kind of an iterative process.

It smooths it out it, it takes place all at once.

So if there is an over subscription, the overflow

will take place immediately to fill that same

season or year, the same control period, I guess.

MR. KIM: If you're at a stopping

point, I can wait, but I have the Motion to Amend

the Rulemaking that we've been promising for so

long. I can hand it out now or I can wait until

you're done with this line of questioning. We

just found it on the Board's COOL page, so these

are just courtesy copies of the motion itself.

HEARING OFFICER KNITTLE: Any

preference from anybody?

MR. BONEBRAKE: I guess my thought

would be let's finish up this line of questioning

and --

HEARING OFFICER KNITTLE: Yes, Mr.

Rieser?

MR. REISER: And, again, this may be

answered when we see the new rule, but is there a

time frame -- is there a time frame set out in

the rule for when the pour overs occur? What the

KEEFE REPORTING COMPANY

122

rule sets out is basically two days -- three

days, actually, for this particular process. Is

it the May 1st date by which applications have to

be submitted, the Agency has 90 days to make a

determination as to whether the allocation should

be recorded given those applications and then

there's another date for which, I think, is about

30 days after that 90 day date by which the

Agency submits its allocations -- submits it's

allocation to USEPA, correct?

MS. DOCTORS: Not more.

MR. REISER: More or less?

MS. DOCTORS: The CASA allowances go

to USEPA December 1st.

MR. REISER: December 1st. So a

longer time period?

MS. DOCTORS: I'd like to --

MS. SIMS: Look at 430(b).

MS. DOCTORS: He's asked a different

question. And I believe I'm going to show Mr.

Bloomberg Section 225.475(a). Is there another

date?

MR. BLOOMBERG: By October 1st is when

the Agency shall determine the total number of

KEEFE REPORTING COMPANY

123

allowances that are approvable for allocation

project sponsors based on the application.

MR. REISER: And that's -- this is --

unfortunately, this is a side issue, but that's a

different date than the notification that is

indicated in 225.475(a)(1) that goes out 90 days

after an application is submitted, that's a

different notice than what's described in A,

475(a).

MR. BLOOMBERG: Right. Because A1

talks about the Agency notifying the project

sponsor if it is approvable, non-approvable or

additional information is needed. And so if

they're due May 1st, 90 days, July, August, it

gives the project sponsors a certain amount of

time to come back and -- and as discussed before,

there's no specific deadline that says they have

to come back, but obviously the drop dead date

will be sometime before October 1st because

that's when they made the final determination.

MR. RIESER: And then after you make

the final determination on October 1st, there's

another 60 days before that determination is

reported to USEPA; correct?

KEEFE REPORTING COMPANY

124

MR. BLOOMBERG: That's my

understanding based on what it says.

MR. REISER: Okay. Where in that time

frame do you make the decisions about these pour

overs from one category to another?

MR. BLOOMBERG: According to the new

language that was just filed, what it states is

that if any allowances remain more than double

and it does -- it does not specify a date, okay.

It just talks about that the remaining allowances

will accrue. If there are excess overflow, then

these shall be allocated for any over subscribed

category or distributed and allocated.

MR. RIESER: Is that decision -- is

that decision made only once per control period,

I should say this context, once per year or is --

is it possible there could be two or more of

those types of decisions during the year

depending on sort of the flow of the projects and

what's approved and what's not approved?

MR. BLOOMBERG: In this case it's

better to use control period because there is a

seasonal and an annual so it should only occur

once per control period because the Agency will

KEEFE REPORTING COMPANY

125

determine what's been approved and what, if

anything, is over subscribed, is there any

overflow, this will all be done at once.

MR. REISER: And the functional

manner, whether it's in the regulation or not,

does the Agency have either an idea or intention

or a plan as to when in the process this will

occur before October 1st, after October 1st?

MR. BLOOMBERG: It should occur after

October 1st because -- well, the rule -- what the

rule says is by October 1st. So it is possible

we could do it -- the Agency could do it sooner.

MR. RIESER: Well, by October 1st is

when the Agency --

MR. BLOOMBERG: Determines the total

number of allowances that are approvable for

allocation. So once that number has been

determined, that is what will then tell the

Agency do we any over subscribed categories, do

we have any categories that are more than

doubled, so first a determination has to be made

as to the number of approvable allowances.

MR. RIESER: And isn't it possible

that once you make that first decision and then

KEEFE REPORTING COMPANY

126

there is reorganization of categories, then you

have other decisions to make because now there

are allowances that are available that weren't

previously available?

MR. BLOOMBERG: No, they're separate

-- and, again, part of this is because I got this

year. Like I said, it was previously an

iterative process in the version that I know you

guys have. But it's really two separate things.

First, the Agency approves the project, okay, and

that takes place outside of any determination of

what's available. It's simply this much is

approved.

MR. RIESER: And hence the language in

A that are approvable --

MR. BLOOMBERG: Correct.

MR. RIESER: -- for allocation?

MR. BLOOMBERG: Correct.

MR. RISER: And so the actual

allocation doesn't happen until the report is

made to USEPA on December 1st; is that correct?

MR. BLOOMBERG: Right.

MR. BONEBRAKE: David, a suggestion at

this point in time since the witness is starting

KEEFE REPORTING COMPANY

127

to talk about specifics of the amendment which

isn't before the rest of us, I think it would

probably make some sense to distribute that

document now so we can all be on the same page

literally and figuratively.

HEARING OFFICER KNITTLE: Mr. Rieser,

do you have any problem with that?

MR. REISER: Not at all.

HEARING OFFICER KNITTLE: Let's go off

the record a second.

(A short break was taken.)

HEARING OFFICER KNITTLE: I was going

to ask your -- Mr. Kim or Ms. Doctors, are you

intending to introduce this as an exhibit?

MR. KIM: I think we were just

offering it demonstratively.

HEARING OFFICER KNITTLE: Everybody's

information?

MR. KIM: Yes.

HEARING OFFICER KNITTLE: And you

represent that this was filed today before the

Board on COOL?

MR. KIM: Yes.

HEARING OFFICER KNITTLE: Which is

KEEFE REPORTING COMPANY

128

Clerks Office on Line. So this is a public

record for anyone to see and it has the same --

is a Motion to Amend the Rulemaking Proposal.

There's, of course, a 14-day response period

which I'm sure you guys can take advantage of if

you like. Off the record we discussed whether or

not to proceed today or whether or not to take

some time to digest this, but I think we have

some questions that don't really touch on the

Motion to Amend that we want to proceed with.

Ms. Bassi?

MS. BASSI: I have a quick question on

Section 470(b) and (c) where we were before.

This is a just a clarification to be sure I

understand what the rule says, make sure I

understand it correctly. In Subsection B it says

that a person can apply by May 1st for CASA

allowances, and then Subsection C it says the

allocation will be based on electricity conserved

or generated in the control period preceding the

calendar year in which the application is

submitted. So just by way of example, if someone

applied for a CASA allowance by May 1st, 2009,

would the project for which the allowance was

KEEFE REPORTING COMPANY

129

applied for have to have occurred in 2008?

MR. BLOOMBERG: I'm told that may be a

typo. Excuse one moment. I'm sorry. Okay. No

typo. Sorry. Of course, I've forgotten the

question by this point but I believe that --

well, you just better restate it, Ms. Bassi.

MS. BASSI: All right. If I applied

for a CASA allowance by May 1st of 2009, did the

project have to have done its emissions or done

its electricity savings in 2008?

MR. BLOOMBERG: Yes.

MS. BASSI: So then the allowances

that one is applying for are after the fact,

they're after the fact of activity for which

you're applying for the allowances?

MR. BLOOMBERG: Yes. And that ensures

that we know exactly what was done.

MS. BASSI: Is that the same for the

NUSA, new unit set aside? Does somebody --

MS. SIMS: I don't -- I don't

understand your question.

MS. BASSI: When you're applying for

allowances under the new unit set aside, is it

the same concept where you apply after you've

KEEFE REPORTING COMPANY

130

done the emitting, so I would apply in 2010 for

emissions that occurred in 2009?

MS. SIMS: Yes. But you would get

allocations for that previous -- for that

previous year you were operating.

MS. BASSI: I would get allowances for

operation in 2009 allocated to me in 2010; is

that correct?

MS. DOCTORS: Can I ask a clarifying

question? Isn't it true that source -- I'm

looking at Section 225.445 of the proposal.

Isn't it true that sources -- new units report

their data after the close of the control period?

MS. SIMS: Which section are you

looking at again?

MS. DOCTORS: Subsection B. They

report them January 15th.

MS. SIMS: B. I thought you said D.

B as in boy?

MS. DOCTORS: Yes, B as in boy.

MS. SIMS: That is correct.

MS. DOCTORS: And isn't it true that

in Subsection G it states the Agency shall

allocate the CAIR NOX allowances to new units no

KEEFE REPORTING COMPANY

131

later than February 15 after the applicable

control period?

MS. SIMS: That's true.

MS. DOCTORS: And is this before, you

know, the allowance transfer deadline for the --

in your example, the 2009 control period?

MS. SIMS: I don't understand what you

mean by transfer deadline.

MS. DOCTORS: The deadline that

sources need to have allowances in their account,

isn't that prior to?

MS. SIMS: Yes.

MS. BASSI: It's still after the fact

but prior to the time you have to surrender them?

MS. DOCTORS: Correct.

MS. BASSI: Thank you.

MR. BONEBRAKE: Just a related

question for Mr. Bloomberg in the scenario that

Ms. Bassi described where the party has the

activity generating whatever it is that its

seeking the CASA allowances for in 2008 and make

a submission of an application in 2009 for CASA

allowances. What would be the vintage on the

allocation that would be provided in response to

KEEFE REPORTING COMPANY

132

that application?

MR. BLOOMBERG: In that particular

example, 2009. And then, I guess, what I would

suggest at this point, I think, Mr. Nilles, you

were indicating you had some questions that were

not implicating the amendment set forth in the

motion so I guess maybe what we could do is

proceed with that.

CHAIRMAN GIRARD: Before we go to

that, let me ask a question to Mr. Cooper that

goes to dates. Mr. Cooper, on page 4 of your

testimony -- if you look at that page 4, it's the

second full paragraph there, in this paragraph I

think it relates to the draft proposal. It's

Section 225.470 but it's in this paragraph you

talk about the time frames in which project

construction must begin in order for a project to

be eligible for the NOX allowances from the Clean

Air Set-Asides.

MR. COOPER: Which paragraph are you

referring to?

CHAIRMAN GIRARD: It's the second full

paragraph on page 4.

MR. COOPER: Yes.

KEEFE REPORTING COMPANY

133

CHAIRMAN GIRARD: And you got -- we've

got three different dates there depending on what

type of project it is. Either commence either by

January 1st, 2003, or January 1st, 2001, or after

July 1st, 2006, to be eligible for the

allowances. Why were three different dates

picked, and why do some of these dates go five

years in the past before the rule's even in

place?

MR. COOPER: Before I answer that, Jim

would you like to answer that?

CHAIRMAN GIRARD: Well, I can -- I

mean, the question is you're looking at the

second full paragraph there on page 4 also

relates the dates of Section 225.470 and that

detailed the time frames in which construction

must begin to be eligible for these, you know, NOX

allowances from the CASA. But you got three

different dates there depending on what type of

project it is: January 1st, 2003; January 1st,

2001; July 1st, 2006. First of all, why do you

have three different dates and, second, you know,

why are we going back to January 1st, 2001, for

the commence of some of these projects?

KEEFE REPORTING COMPANY

134

MR. ROSS: Well, we contemplated two

different approaches: One, just looking forward

and starting from the date the rule is -- is

promulgated on; two, looking back some amount of

time in giving some credit to sources that have

undertaken projects that are environmentally

beneficial in order to further incur or further

promote and provide some level of cost recovery

to those projects. We went with the second

approach. That is, in particular, for the

fluidized bed boilers we decided for a look back

until 2001 to give some level of credit to

companies that undertook what we would consider a

clean technology, clean coal project.

MR. JOHNSON: So are there specific

sources that you know of that have done that?

MR. ROSS: Yes, there is. Southern

Illinois Power Company is eligible for that set

aside.

MS. BASSI: Is this the only source

eligible for that set aside as of today that

you're aware of?

MR. COOPER: You asking are there

others that we're aware of?

KEEFE REPORTING COMPANY

135

MS. BASSI: Uh-huh.

MR. COOPER: I'm not directly certain.

Although, that category the language in the rule

reads, I believe, fluidized bed coal combustion

is highly efficient power generation and there

are -- is -- there is definition for highly

efficient projects, so that may encompass other

projects. I'm not certain.

HEARING OFFICER KNITTLE: Excuse me.

Ms. Bugel?

MS. BUGEL: Mr. Ross, why is there an

incentive needed for projects that are already

constructed and not operating?

MR. ROSS: I wouldn't say it was an

incentive. It was perhaps more of an

acknowledgement that they constructed a boiler

that is generally less polluting than pulverized

coal-fired boilers which by far is the typical

type of boiler in Illinois.

HEARING OFFICER KNITTLE: Yes, sir?

MR. NILLES: On the point of the TSD

boiler you're stating it is generally cleaner,

where in the RACT is there any information the

TSD boilers are, in fact, cleaner than pulverized

KEEFE REPORTING COMPANY

136

coal?

MR. ROSS: Where specifically? I

believe it's addressed in our Technical Support

Document that would certainly -- there are

emission factors readily available, AP-42 in

particular, in which we can provide which shows

that the factors for the emissions of NOX from

fluidized bed boilers is a lower emission factor

than for any type of pulverized coal boiler. By

any type, whether it's tangentially fired

boilers, cyclone fired boilers, so in general

fluidized bed boilers are lower emitting for the

pollutants of concern than the pollutant

addressed in CAIR.

MR. NILLES: But isn't the Southern

Illinois facility that you have carved out the

exception for, does that have any post combustion

control?

MR. ROSS: Yes, I believe the

fluidized bed boiler, SIPCO has a baghouse and an

SNCR, selective non-catalytic reduction.

MR. NILLES: And it's your

understanding it has lower emission than the

pulverized coal plants with post combustion

KEEFE REPORTING COMPANY

137

control?

MR. ROSS: It has lower emissions than

many pulverized coal-fired boilers, but in

general what I'm speaking to is the emissions

prior to add-on control devices, that's where we

make our comparison, so it's a cleaner starting

point for a boiler, then the next step of

controlling the emissions from a boiler would be

add-on control device much like there are many

uncontrolled pulverized coal-fired boilers in

Illinois and they can reduce their emissions

through add-on control devices. So you would

have a fluidized bed boiler prior to any add-on

control devices when compared to a pulverized

coal-fired boiler prior to any add-on control

device. The fluidized bed boiler would be the

many less NOX and SO2.

MR. NILLES: I guess I'm trying to

understand the rationale. There are pulverized

coal boilers in Illinois, Havana Unit 9 is a

great example -- Havana Unit 9 has pulverized

coal boiler with a post combustion control of an

SCR, has a much lower NOX rate than an Illinois

project that we're singling out as a cleaner coal

KEEFE REPORTING COMPANY

138

project. And I guess I'm trying to understand

why we're rewarding Southern Illinois when there

are other pulverized coal plants that are doing

better? What's the rationale? What we care

about is air pollution, we don't care about what

their inherent -- I mean, if what we care about

is what's coming out of smokestacks rather than

making smart investments?

MR. ROSS: I have to examine the

emissions from Havana Unit 9 to verify what you

are saying, but in general a fluidized bed boiler

is cleaner prior to add-on control. What you're

saying is Havana Unit 9 has an SCR. I stated

that the SIPCO unit has an SNCR so perhaps we

have to examine these in a little bit more detail

or knowledge that I have readily available but

perhaps the Havana unit has spent more money to

reduce emissions, perhaps the SCR costs more and

is not as cost effective, but I would say in

general the emissions of particulate matter from

the SIPCO unit are in all likelihood much less

than from Havana Unit 9 and that is because

the --

MR. NILLES: We're talking about NOX.

KEEFE REPORTING COMPANY

139

I'm sorry.

MR. ROSS: Well, we're talking about

NOX but in greater picture of what CAIR is

intended to do, we're talking about PM2.5 and

ozone.

HEARING OFFICER KNITTLE: Ms. Bugel?

Oh, I'm sorry.

MR. NILLES: The question about

singling out circulating fluidized beds for

preferential treatment, this one unit, isn't it

true that circulating fluidized bed boilers often

put out a large amount of nitrous oxide,

otherwise known as N2O, at a pulverized coal

plant and coal classification projects don't?

MR. ROSS: Yeah, I believe due to the

lower temperature that fluidized bed boilers

operate at, they do emit more N2O, nitrous oxide,

laughing gas than --

MR. NILLES: Laughing gas, isn't it

very potent to global warming.

MR. ROSS: Yes, I believe it's greater

than 250 times or at least one document site,

that it is 250 times worse for greenhouse -- the

greenhouse effect than PO2 which that was

KEEFE REPORTING COMPANY

140

recently brought to our attention by you, I might

add, and we appreciate that and we are examining

that document. In fact, we have assigned some

staff to review this issue of fluidized bed

boilers emitting N2O and we will take it from

there. We'll see what our research finds. We

also believe that there is the possibility that

fluidized bed boilers may emit some amount less

of CO2. We're uncertain there. We're examining

that also. CO2 is also a greenhouse gas that

we're looking at, that relationship, so based

upon new information that recently has been or

made -- we've been made aware of, we'll reexamine

our treatment of fluidized bed boilers.

MR. NILLES: One quick question back

to the presentation, on page 29, Mr. Cooper, I

believe, you mentioned coal-fired utilities are

also eligible for supply side energy efficiency

projects. Can you elaborate what you mean by

supply side?

MS. DOCTORS: Before we go into supply

side, we have a couple of documents that may help

with the Agency's position on the fluidized

boiler issue, the AP-42 factors, and we have a

KEEFE REPORTING COMPANY

141

fact sheet briefed by the Department of Energy

that talks about the relative emissions.

CHAIRMAN GIRARD: Let me ask one final

question of Mr. Ross before we get too far away

from these dates here. So getting back to that

Section 225.470 which has these different

eligibility dates for these projects, I mean,

would there be a problem if we had one date, say,

you know, projects that have commenced

construction on or after July 1st, 2006?

MR. ROSS: Well, that certainly is a

-- is a possibility that would eliminate the

availably of the CASA for SIPCO. It is one thing

that we could do. It would --

CHAIRMAN GIRARD: But there aren't any

legal regulatory problems?

MR. ROSS: The dates are somewhat

arbitrary in that we arrived at them through

discussion, debate and selected certain dates.

So, no, I don't think they're set in stone in any

way, shape or form by any legal obligation

somewhere. They can be altered as appropriate.

CHAIRMAN GIRARD: And the primary

purpose of the CASA program is to provide

KEEFE REPORTING COMPANY

142

incentives?

MR. ROSS: That's correct.

CHAIRMAN GIRARD: For energy

efficiency?

MR. ROSS: And the other categories.

CHAIRMAN GIRARD: And the other

categories?

MR. ROSS: That's correct.

CHAIRMAN GIRARD: Thank you.

MS. MOORE: And could I just follow-up

to help me understand. There's a finite number

of set asides?

MR. ROSS: Correct.

MS. MOORE: So if we go back to 2001

and those allocations are made, that's reduced

from our finite number of set asides that would

be available to incentivise others putting in new

equipment; is that correct?

MR. ROSS: Well, there's a -- there's

a finite number each year, so going back and

giving credit to SIPCO does reduce the available

set aside for others in the event that there

would only be so many set asides to give out.

That is, if that particular category came over

KEEFE REPORTING COMPANY

143

subscribed somehow, other units would apply for

that and, yes, SIPCO -- the amount of credit

given to SIPCO would be unavailable to others.

MR. JOHNSON: For that year?

MR. ROSS: For that year and following

years since the credit --

MS. MOORE: That is in the control

period?

MR. ROSS: For clean coal technology

is ongoing for that absent the (inaudible).

COURT REPORTER: I'm sorry. I didn't

hear you.

HEARING OFFICER KNITTLE: First, Mr.

Bonebrake?

MR. BONEBRAKE: Mr. Ross, do you

recall when the SIPCO Unit 1, 2, 3 the fluidized

bed boiler was constructed?

MR. ROSS: Recently. I believe 2003,

2004.

MR. BONEBRAKE: And did it replace

older units?

MR. ROSS: Yes, it did. And it

replaced an older, dirtier unit.

MR. BONEBRAKE: So there was an

KEEFE REPORTING COMPANY

144

environmental benefit associated with

construction of Unit 1, 2, 3?

MR. ROSS: Yes.

MR. BONEBRAKE: And SIPCO operated

more than one unit at Marion?

MR. ROSS: Yes, they do.

MR. BONEBRAKE: And do companies make

dispatch decisions, that is, which unit they will

run based upon economic drivers?

MR. ROSS: I believe so.

MR. BONEBRAKE: And would the

variability of additional allowances for a unit

potentially increase the situations in which a

boiler would be operated or potentially operated

at higher level of capacity because of the

economics associated with the additional

allowance?

MR. ROSS: Perhaps.

MR. BONEBRAKE: So, in fact, the

variability of allowances for a fluidized bed

boiler could provide continuing incentives into

the future to operate a low emitting unit; is

that correct?

MR. ROSS: That's true.

KEEFE REPORTING COMPANY

145

HEARING OFFICER KNITTLE: Ms. Bugle

was next and then Ms. Bassi.

MS. BUGEL: Mr. Ross, with the debate

that we've had about what's cleaner PC with

control, PC without control, fluidized beds with

control or without control. Would an easier way

to achieve the same goal to be simply set an

emission level that projections would have to

meet to be eligible for credit in the Clean Air

Set-Aside?

MR. ROSS: That would be one way to

approach it.

MR. DAVIS: Not the way we selected.

We actually do that with an emission level than a

clean coal technology has. We have an emission

level that a clean coal technology has to be

below and they get the difference between that

and it's one mega -- it's one pound per megawatt

hour, so anything below you will receive that

much credit, as Mr. Cooper's example showed, if a

plant was operating at .07 pounds per megawatt

hour, they would get .3 pounds per megawatt hour

credit. So there is that level they have to

operate below in order to earn any CASA credit.

KEEFE REPORTING COMPANY

146

MS. BUGEL: Is it possible to

translate that to pounds per million BTU?

MR. DAVIS: .7, or its factor.

MR. COOPER: .07.

MS. BUGEL: And generally in new units

that are being permitted, new facilities that are

being permitted in Illinois, do you know what

they're being permitted at?

MR. ROSS: I think .07 pounds per

million BTU as a NOX emission rate is generally

recognized as low, clean -- a clean rate.

MS. BUGEL: To back up a little bit,

you said that -- did the Agency consider not

specifying technology and just including an

emission rate?

MR. COOPER: Say it again, please.

MR. BUGEL: Did the Agency consider

not specifying technology such as CFBs and just

including an emission rate perhaps something

lower than?

MR. COOPER: In terms of a CASA?

MS. BUGEL: Yes.

MR. COOPER: Not to my recollection.

MR. DAVIS: I should point out the

KEEFE REPORTING COMPANY

147

CASA gives credit to SCR and clean coal

technology.

MS. BUGEL: One more question, page 18

of the slide, what does highly efficient power

generation mean, is that --

MR. COOPER: It's defined.

MS. BUGEL: Okay.

MR. COOPER: By the rule. It

establishes criteria for what it needs be, highly

efficient.

MS. BUGEL: So on this page that is

not a substitute for CFB, is it?

MR. COOPER: I don't believe that is

the intent, no. The CFB is included in the

definition of clean coal technology.

MS. BUGEL: Okay. Thank you. That

was --

MR. COOPER: We --

HEARING OFFICER KNITTLE: Before we

pass out the documents, Ms. Bassi had a question.

MS. BASSI: Just to provide another

level of perspective, Mr. Cooper, how many

allowances are in the CASA category from which

SIPC [sic] would -- would apply for allowances

KEEFE REPORTING COMPANY

148

for its CFB?

MR. COOPER: The clean coal technology

category as a whole is 6% of the CASA, 4,573

annual allowances, 1,842 seasonal allowances.

MS. BASSI: And does the Agency have

an estimate of how many allowances SIPC would be

eligible for from that annual category?

MS. DOCTORS: I'd like to note that

the witness is looking at Exhibit 5 that -- so

that you still have questions on, Mr. Bonebrake.

HEARING OFFICER KNITTLE: Agency

Exhibit 5?

MS. DOCTORS: Yes. Okay.

MR. COOPER: Table 1 of that.

HEARING OFFICER KNITTLE: Looking at

that, what is your answer, sir?

MR. COOPER: My answer is I don't have

that particular calculation in front of me.

MS. BASSI: Do you have it somewhere?

MR. COOPER: Perhaps long ago. It

could be regenerated, but I don't --

MS. BASSI: Is it less than a

thousand?

MR. COOPER: Honestly, I don't recall.

KEEFE REPORTING COMPANY

149

I would have to run the math.

MS. BASSI: Can we have that tomorrow

maybe?

MR. COOPER: Excuse me?

MS. BASSI: Can we have that tomorrow

maybe?

MR. COOPER: I can make an attempt,

yes.

MS. BASSI: Thank you.

MR. COOPER: I have to call the

relevant data, and I don't want to make a

guarantee if the Website is down.

MS. BASSI: Right.

MR. NILLES: Just a quick

clarification. So the data we're asking for is

what was the NOX emission for the 2005 for the

SIPCO unit we're working out of how much of the

Clean Coal Set-Aside would consume, is that what

we're trying to do?

MS. BASSI: Yes, approximately -- an

estimate how much of the Clean Coal Set-Aside

SIPC would consume from the 4,000 allowances on

an annual basis.

MR. COOPER: This is 2005?

KEEFE REPORTING COMPANY

150

MS. BASSI: Oh, I don't care what

year. 2005 is fine.

HEARING OFFICER KNITTLE: Do you have

any other questions not related to the new motion

to amend? One more. Yes, you.

MR. HILLES: Page 29 of the slide

talks about the supply side energy efficiency

project of EGUs.

MR. COOPER: Yes.

MS. DOCTORS: I was trying to get the

2010.

HEARING OFFICER KNITTLE: Oh, I'm

sorry, sir. You'll have a shot in just a second.

Ms. Doctors, you have documents you want to

submit?

MS. DOCTORS: Yes, I thought I was

done, but I have two more.

HEARING OFFICER KNITTLE: Let's submit

those and we'll finish up with the questions and

then we'll go home.

MS. DOCTORS: Agency Exhibit 19 and

it's just the relevant emission factors from

1842.

MS. BASSI: What's Exhibit 18?

KEEFE REPORTING COMPANY

151

MS. DOCTORS: Is it 18 or -- Okay, 18.

HEARING OFFICER KNITTLE: We're on

Agency Exhibit 18.

MR. COOPER: This document represents

the compilation of air pollution -- air pollutant

emission factor. The document encompasses many

types of combustion technology among which it

provides emission factors for both pulverized

coal boilers of many different types as well as

two different types of fluidized boilers.

MS. DOCTORS: And the second document

it's called -- it's from the -- this would be

Agency Exhibit 19. He's going to --

MR. COOPER: The second document is

just a simple two-page cut sheet developed

apparently by the US Department of Energy's NETL,

the National Energy Technology Laboratory, and in

this particular document they make several

references to both the efficiencies as well as

the pollutant emission rates for this type of

boiler. The second page has a table that details

both apparently typical SO2 and NOX rates and on

the left-hand side there's couple of relevant

facts.

KEEFE REPORTING COMPANY

152

HEARING OFFICER KNITTLE: Do you have

-- we have any objections to Agency Exhibit No.

18, the Compilation of Air Pollutant Emission

Factors? Seeing none, that will be admitted as

Agency Exhibit 18. How about Agency Exhibit 19,

the Program facts on Fluidized Bed Combustion

Program?

MS. BASSI: No objection.

MR. NILLES: I would just note it's

outdated regarding to old performance standards

-- it's outdated. The fact sheet talks about new

performance standards and it's dated 2000 -- it's

dated 2000 and it's comparing circulating

fluidized bed technology to the new source

performance standards that were in effect in

2000. Since 2000 this NSPS has been updated. So

the comparison of CFBs and NSPS are all outdated.

So in terms of showing benefits, I just point out

these numbers are outdated.

HEARING OFFICER KNITTLE: We're going

to admit that with your clarification duly noted.

And, Ms. Doctors, do you have any other documents

you would like to submit?

MS. DOCTORS: Not at this time?

KEEFE REPORTING COMPANY

153

HEARING OFFICER KNITTLE: And it was

Mr. Nilles?

MR. NILLES: Nilles.

HEARING OFFICER KNITTLE: You had some

additional questions you wanted to ask?

MR. NILLES: I just want to go back to

the CFB versus pulverized coal. The City of

Springfield just received a permit for pulverized

coal boiler, it's the cleanest coal boiler permit

in the state, pulverized coal.

HEARING OFFICER KNITTLE: Question?

MR. NILLES: It's in the process of

agreeing to a limit that it's significantly lower

than SIPCO units to CFBs. My question is: Why

would the Agency be rewarding CILCO which has a

much dirtier unit as NOX and excluding the City of

Springfield with a pulverized boiler when it's

going further achieving our overall goal of

NOx --

MR. RIESER: CILCO or SIPCO?

MR. NILLES: SIPCO. Sorry.

MR. ROSS: Well, you say the City of

Springfield has agreed to lower emission rates in

a permit. I think I've seen those rates. I'm

KEEFE REPORTING COMPANY

154

not certain that they've been demonstrated.

There's no testing of those rates. They're

theoretically achievable emission rates; correct?

MR. NILLES: The Agency issued a

permit and the federal complied (inaudible).

COURT REPORTER: I'm sorry, I didn't

hear you.

MR. ROSS: I think the emission rate

you're referring to are attachment to the permit;

correct?

MR. NILLES: Correct.

MR. ROSS: They weren't limits set per

se by the Agency. They were limits that were

agreed to by -- agreed to by City Water, Light

and Power and Sierra Club is my understanding.

And to say that, I believe City Water, Light and

Power would be eligible for the set aside, for

any -- they would be eligible for NUSA, new

source set asides, new unit set aside.

MS. BASSI: Would they be eligible for

early adopter set aside possibly?

MR. COOPER: They wouldn't be

undertaking any projects.

MS. BASSI: Would they be eligible for

KEEFE REPORTING COMPANY

155

the control devices that they're putting in?

MR. ROSS: No, that's for existing

units.

MR. COOPER: That's where the rule

specifically states existing units have to be

commercially operated for a minimum of eight

years.

MR. ROSS: We're certainly not in any

way, shape or form punishing you, City Water,

Light and Power for agreeing to lower emission

limits. The fact of the matter is though that a

fluidized bed boiler is -- if City Water, Light

and Power would have chosen a fluidized bed

boiler they may have, I can't say this with

certainty, but they may have been able to agree

to even lower limits than what was agreed to

between the Sierra Club and City Water, Light and

Power, that being based upon the theory that they

be starting from a lower emission rate.

Fluidized bed boilers uncontrolled prior to the

installation of the control equipment emit less

NOX and SO2 than pulverized coal boilers. So city

Water, Light and Power is putting on pulverized

-- or installing, proposing to install a new

KEEFE REPORTING COMPANY

156

pulverized coal boiler with several items of

add-on control equipment in order to reach this

greed upon limit. They could perhaps, as I

mentioned, agree to an even lower limit with a

fluidized bed boiler.

MR. NILLES: I guess to get back, our

request is that you consider the way it's set up

now which seems to be helping the 2001 project

and there's a 2006 project being proposed as much

cleaner does not get the benefit because you're

depicting one technology, CFB, over pulverized

coal. And our point is what we care about is

emission rate so let's help emission rate

problems rather than technology. We're

reiterating our request that that be done.

MS. BASSI: Would such an emission

rate coincide with the heat input based for

allocation.

MR. ROSS: It's probably not

printable.

MR. HILLES: Page 29 of the

presentation, supply side energy efficiency

project, the last bullet.

MR. COOPER: Yes.

KEEFE REPORTING COMPANY

157

MR. NILLES: What are those?

MR. COOPER: I would refer back to the

document that was provided during outreach. It's

still available on our Website even yet today.

Are you looking for examples?

MR. NILLES: Yes, please.

MR. COOPER: Turbine upgrade,

performance optimization, smart software

management, high efficiency motors, pumps --

sorry, turbine upgrade, performance optimization,

smart software management, high efficiency

motors, pumps, compressors, steam systems, fans,

transformers, air pre-heaters or condensers and

as far as we're concerned these are effectively

parasitic losses from the plant. These are --

these are the types of things that chew out of

gross and then leaves net, potentially improve

maintenance activities, other heat rate

improvements. In that particular outreach

document there's actually an example provided

from the Southern Company, I believe, that

details one particular scenario and what their

effort were able to achieve.

MR. NILLES: Let me ask. We have a

KEEFE REPORTING COMPANY

158

challenge. We have 22 old, very old coal burning

power plants in the state. It's an ongoing

source of much discussion about should they be

retired, should they be upgraded, should they put

them on pollution control. And my question is:

Supply side energy efficiency projects seem to

get awfully close to overhauling power plants

which triggers a whole fleet of obligations under

the new source program and how -- how is the

Agency planning on making sure that facilities

aren't rebuilding and triggering their

obligations to put on modern pollution control

that many of us was thinking happened decades

ago?

MR. COOPER: The exact same way that

even without the CASA. Wipe the CASA off the

board today, what would prevent a company from

going in and performing anything that would

trigger new source review. Nothing. It's our

monitoring, our recordkeeping, our recording and

our inspection process that we catch new source

review violators and then through the subsequent

legal process do we enforce upon them and consent

court orders and whatnot. That same mechanism is

KEEFE REPORTING COMPANY

159

in place. This -- And I believe this exact

question was brought up during outreach. This

does not waive or negate the right, the

requirement for a EGU to file the appropriate

permit if necessary.

MR. BLOOMBERG: I might add it's an

additional piece of information that they will be

submitting to us, tell us that they're doing it

that they would not otherwise have to file with

us thereby possibly alerting us to any potential

issues.

MR. NILLES: And that emission will

all be public; right?

MR. ROSS: I believe so subject to a

Freedoms of Information Act request. So, yes, it

would be public, available to the public.

HEARING OFFICER KNITTLE: Ms. Bugel?

MS. BUGEL: Nothing further for me.

Thank you.

HEARING OFFICER KNITTLE: Let's wrap

up today. Thank you all very much for your time

and attention today. See you back here tomorrow

morning at nine.

(Hearing recessed at 5:45 p.m.)

KEEFE REPORTING COMPANY

160

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

156 pages comprise a true, complete and correct

transcript of the proceedings held on October

11th, 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 15th

day of October, 2006.

_____________________________

Beverly S. Hopkins, CSR, RPR

Notary Public, Fayette County

CSR License No. 084-004316

KEEFE REPORTING COMPANY

161