1. ILLINOIS POLLUTION CONTROL BOARD
    2. THE PROPOSAL
 
ILLINOIS POLLUTION CONTROL BOARD
October 15, 2009
IN THE MATTER OF:
NITROGEN OXIDE (NO
x
) TRADING
PROGRAM SUNSET PROVISIONS FOR
ELECTRIC GENERATING UNITS (EGUs):
NEW 35 ILL. ADM. CODE 217.751
)
)
)
)
)
)
R 09-20
(Rulemaking - Air)
Adopted Rule. Final Opinion and Order.
OPINION AND ORDER OF THE BOARD (by S.D. Lin):
On April 21, 2009, the Illinois Environmental Protection (Agency) filed this proposal for
rulemaking under Sections 10, 27, and 28 of the Environmental Protection Act (Act), 415 ILCS
5/10, 27, 28 (2008). The proposal would add a single new section, 35 Ill. Adm. Code 217.751, to
35 Ill. Adm. Code 217.Subpart W. Beginning with any control period in 2009, the new section
would “sunset”, or render inapplicable, the provisions of the Nitrogen Oxides (NO
x
) Trading
Program for electrical generating units (EGUs) found at 35 Ill. Adm. Code 217.Subpart W. But,
the provisions of 35 Ill. Adm. Code 217.Subpart W will remain in effect for violations that
occurred in control periods prior to 2009.
By order of May 7, 2009, the Board denied the Agency’s motion for expedited
consideration. But, as the Agency had also requested, the Board ordered immediate publication of
the rules for first notice in the
Illinois Register
under the Illinois Administrative Procedure Act
(APA), 5 ILCS 100/1-1
et seq
(2008).
See
, respectively, 35 Ill. Adm. Code Sections 102.202(g) and
101.512. The proposal was published at
33 Ill. Reg. 8880 (June 26, 2009). The Board held
hearings on the proposal on June 18, 2009 and July 23, 2009, and received three public
comments on or before August 25, 2009.
The Board adopted its second notice opinion and order on September 17, 2009, adopting
the first notice proposal without substantive change. The Joint Committee on Administrative
Rules voted a certificate of “no objection” at its October 14, 2009 meeting.
By today’s action, the Board adopts new Section 217.751 as a final rule, and directs that the
adopted rule be filed with the Secretary of State, to become effective upon filing.
The Board finds
that this record demonstrates that the proposed rule if adopted is technically feasible,
economically reasonable, and, in the words of Section 27 (b) of the Act, will have no “adverse
economic impact on the people of the state of Illinois.” 415 ILCS 5/27(b) (2008). The proposal
contains no substantive changes from the first notice proposal. However, the table of contents of
Part 217 has been revised to include Subparts D through M, due to the recent completion of other
air rulemakings.
See
, Section 27 Proposed Rules for Nitrogen Oxide (NO
x
) Emissions From
Stationary Reciprocating Internal Combustion Engines and Turbines: Amendments to 35 Ill.
Adm. Code Parts 211 and 217, R07-19 (July 23, 2009) and Nitrogen Oxides Emissions From
Various Source Categories, Amendments to 35 Ill. Adm. Code Parts 211 and 217, R08-19 (Aug.
 
2
20, 2009). Adoption of the final rules today grants the request of the Agency and other
participants that this rulemaking be completed by the end of November 2009.
This final opinion will set out the proposal for the adopted amendment and its background,
and discuss the evidence presented and public comments made concerning the economic
reasonableness and technical feasibility of the rule.
THE PROPOSAL
In the proposal’s six-page statement of reasons (SR), the Agency states that the Board
adopted the Part 217 NO
x
Trading Program rules in Proposed New 35 Ill. Adm. Code 217.
Subpart W, The NO
x
Trading Program for Electrical Generating Units, and Amendments to 35
Ill. Adm. Code 211 and 217, R 01-9 (Dec. 21, 2000). SR. at 1. Part 217.Subpart W regulates
NO
x
emissions from utility boilers or EGUs. Part 217.Subpart W received approval by the
United States Environmental Protection Agency (US EPA) as part of the Illinois State
Implementation Plan (SIP) for ozone on November 8, 2001.
See
66
Fed. Reg.
56449 (Nov. 8,
2001). Illinois was required to regulate these sources pursuant to USEPA's NO
x
SIP Call for
EGUs pursuant to Sections 110(a) (2) and 126 of the federal Clean Air Act (CAA) and 40 CFR
51.121.
See also
63
Fed. Reg.
57356 (Oct. 27, 1998). SR at 1-2. IEPA reports that the emissions
reductions helped the two Illinois ozone nonattainment areas in Illinois to attain the 1997 8-hour
ozone National Ambient Air Quality Standard (NAAQS). In addition, the continued
implementation of the federal NO
x
, Trading Program was required under Phase I of the 8-hour
ozone implementation rule.
See
40 CFR 51.905(f).
Id.
at 2.
On May 12, 2005, USEPA adopted the federal Clean Air Interstate Rule (CAIR) to
replace the NO
x
SIP Call Trading Program beginning with the 2009 control period and to add
two new trading programs addressing annual emissions of NO
x
and sulfur dioxide.
See Rule to
Reduce Interstate Transport of Fine Particulate Matter and Ozone; Revisions to Acid Rain
Program; Revisions to the
NO
x
SIP Call,
70
Fed. Reg.
25162 (May 12, 2005). SR at 2. While
the IEPA states that the Board adopted the CAIR rules in the still-pending R06-22 proceeding, in
fact the CAIR rules were adopted by the Board in Proposed New Clean Air Interstate Rule
(CAIR) SO
2
, NO
x
Annual and NO
x
Ozone Season Trading Programs, 35 Ill. Adm. Code 225,
Subparts A, C, D, E and F, R 06-26 (Aug.23, 2007). The CAIR rules, by their terms, were to
replace the NO
x
Trading rules in 2009. The Illinois CAIR rules were approved by USEPA on
October 16, 2007.
See
72
Fed. Reg.
58528(Oct. 16, 2007).
The CAIR provisions as set forth in 35 Ill. Code Part 225.Subpart E include a trading
program for control of NO
x
emissions during the ozone season that replaces the provisions in
Part 217.Subpart W for EGUs beginning with the 2009 control period (May 1 through September
30) and thereafter. Part 225.Subpart E incorporated in large part applicable provisions from the
federal CAIR rule as required for federal approval. SR at 2.
After the adoption of Illinois CAIR, the United States Court of Appeals reached a
decision on a number of petitions for review it had received concerning the federal CAIR rule.
On July 11, 2008, the Court of Appeals vacated the federal CAIR rule in its entirety and
remanded the rule to USEPA for revision.
North Carolina
v.
USEPA,
531 F.3d 896 (C.A.D.C.
Cir. 2008). The court’s July 2008 opinion stated that pending the remand of the CAIR program
3
to USEPA, the provisions of the federal NO
x
SIP Call Trading Program would remain in place.
But, the parties petitioned the court for rehearing on the decision to vacate and requested that the
federal CAIR rule be reinstated during the remand. On December 23, 2008, the court granted the
rehearing and “unvacated” the federal CAIR rule with implementation to begin with the original
control period in 2009.
North Carolina v. USEPA,
550 F.3d 1176 (C.A.D.C. Cir. 2008). SR at 2-
3.
1
The Board's Part 217 NO
x
Trading Program rules have continued to be in full force and
effect. The Agency states that, with the reinstatement of the federal CAIR program, Illinois'
EGUs must now comply with two sets of duplicative administrative requirements (
e.g.
,
permitting, reporting) for the 2009 ozone season and beyond: namely, the Illinois CAIR rule
requirements at Part 225 and the Illinois NO
x
Trading Program at Part 217.
In 40 CFR 51.123(bb)(1)(i), USEPA has provided that states such as Illinois with
approved CAIR programs may revise their applicable SIP so that the provisions of the NOx SIP
Call Trading Program do not apply to affected EGUs. IEPA’s proposal requesting the Board to
amend the Illinois rules is the first step to revision of the SIP. Upon completion of this
rulemaking, IEPA may then submit rules to USEPA for formal approval and SIP inclusion.
To address and remove this duplication, the proposal would “sunset” the provisions of the
NO
x
Trading Program, by adding a new Part 217.751. The full text of the proposed rule is:
Section 217.751 Sunset Provisions
The provisions of this Subpart W shall not apply for any control period in 2009 or
thereafter. Noncompliance with the provisions of this Subpart that occurred prior
to 2009 is subject to the applicable provisions of this Subpart.
(Source: Added at 33 Ill. Reg. ___ effective ______ )
The Agency states that this proposal is consistent with the provisions of 40 CFR
51.123(bb)(1)(i), which provide that states with approved CAIR programs may revise their
applicable SIP so that the provisions of the NO
x
, SIP Call Trading Program do not apply to
affected EGUs. SR at 3.
As to the scope of the rule, the Agency states that the entire State of Illinois was subject
to the NO
x
, SIP Call and is now subject to CAIR. The proposed regulations will affect existing
EGUs. There are approximately 229 existing EGUs that are currently subject to the NO
x
SIP Call
Trading Program. For the NO
x
SIP Call Trading Program, existing units are those that
commenced operation before May 1, 2006. Of these units, 170 are gas and oil fired boilers, 59
are coal-fired boilers, and the remainder are gas and oil-fired combustion turbines. SR at 3.
1
There has been no final action by USEPA on its CAIR rules. The Board has never been asked
to construe what effect, if any, the status of the federal CAIR rules has on the Board's Part 225
CAIR NO
x
rules.
4
The statement of reasons indicates that the Agency did an electronic e-mail outreach to
the 229 existing EGUs that are subject to the Part 217 NO
x
Trading Program rules, and has
identified no significant issues. SR. at 4-5.
The Agency accordingly concludes that
the rule is being proposed to prevent a burden and replaces a rule that is no longer
being implemented by USEPA. The adoption of the proposal will not result in
injury or substantial prejudice, nor an abrupt departure from a well established
practice. Hence, adoption of this proposal is appropriate to prevent a burden on
affected EGUs.
The amendments to Part 217.Subpart W are being proposed to ensure consistency with
the CAIR ozone season program and prevent EGUs from being subject to duplicative
monitoring, reporting, permitting and recordkeeping requirements. USEPA has stopped
allocating NO
x
allowances for the NO
x
SIP Call Trading Program. As this proposal
sunsets regulatory provisions, it would impose no new requirements or costs on affected
sources. Hence, the proposal is both technically and economically feasible. SR at 5.
PROCEDURAL HISTORY
As previously stated, the Agency filed this proposal on April 21, 2009. The Agency also
filed a motion (Mot.) requesting the Board to expedite consideration of the proposal.
See
415
ILCS 5/28 (2008); 35 Ill. Adm. Code 102.202(g) and 101.512. The motion to expedite requested
that the Board cause immediate first notice publication of the proposal under the APA, 5 ILCS
100
et seq.
(2008), without Board comment on the merits and schedule public hearings as soon
as possible. Mot. at 2-3.
By order of May 7, 2009, the Board denied the Agency’s motion for expedited
consideration, but did authorize first-notice publication of the proposal in the
Illinois Register
without comment on the proposal’s merits, and directed the hearing officer to promptly schedule
hearings. Nitrogen Oxide (NO
x
) Trading Program Sunset Provisions for Electric Generating
Units (EGU's): New 35 Ill. Adm. Code 217.751
, R09-20 (May 7, 2009).
By hearing officer order of May 13, 2009, hearings were set for June 18, 2009 in Chicago
and July 23, 2009 in Springfield.
2
The hearing officer order also set deadlines for the pre-filing
of testimony. By letter of October 18, 2008, the Board requested the Director of the Department
of Commerce and Economic Opportunity (DCEO) to request an economic impact study (EcIS)
concerning this rulemaking as required by Section 27 (b) of the Act. 415 ILCS 5/27(b) (2008).
DCEO has not responded to the Board’s request at any time.
The first hearing was held in Chicago on June 18, 2009, conducted by Hearing Officer
Kathleen M. Crowley. At the first hearing, the Agency presented testimony timely pre-filed on
2
The transcripts for these hearings are not sequentially numbered. The transcript for the first
hearing will be cited as “6/18/09 Tr.” and the second as “7/23/09 Tr.”
5
June 1, 2009 by Mr. Yoginder Mahajan. Mr. Mahajan has been employed by the Agency since
March 1992 as an Environmental Protection Engineer in the Air Quality Planning Section in the
Bureau of Air. This testimony was also entered into the record as Exhibit 1. 6/18/09 Tr. at 8.
Counsel for Midwest Generation, Kathleen Bassi of SchiffHardin, LLP, posed questions
concerning enforcement and distribution of unused allowances that Mr. Mahajan was not
prepared to answer. 6/18/09 Tr. 8-15. Counsel for the Agency, Rachel Doctors, stated that
another witness would be provided at the second hearing: David Bloomberg. 6/18/09 Tr. 9. Ms.
Bassi represented that she might file additional questions for the Agency to answer at the next
hearing.
First notice publication of these rules appeared in the
Illinois Register
on June 26, 2009.
See
33 Ill. Reg. 8880 (June 26, 2009). This publication started the 45-day public comment period
under the APA, requiring the Board to accept all comments filed through August 10, 2009.
By e-mail of July 8, 2009, Ms. Bassi informed Ms. Crowley that she would not be filing
any additional questions, and that Ms. Bassi might not be in attendance at hearing. On July 10,
2009, the Agency pre-filed the testimony of another witness, Mr. David E. Bloomberg. No other
pre-filed testimony was received.
The second hearing was held on July 23, 2009 in Springfield, conducted by Hearing
Officer Webb.
3
At the hearing, the Agency presented testimony timely pre-filed by Mr.
Bloomberg. Mr. Bloomberg, an Agency employee for nearly 18 years, for the last five years has
been the Compliance Unit Manager in the Compliance Section within the Agency’s Division of Air
Pollution Control.
The Bloomberg testimony was also entered into the record as Exhibit 2.
7/23/09 Tr. at 8. No questions were asked of Mr. Bloomberg.
The hearing officer noted that DCEO had not responded to the Board’s May 13, 2009
EcIs letter. The hearing officer relayed that Section 27(b) requires the Board to hold a hearing
on the economic impact of the rules, any EcIS submitted, and on any explanation DCEO
provides for not conducting an EcIS. The hearing officer also explained that Section 27(b)
allows the Board to dovetail the economic impact hearing with any other hearing. 7/23/09 Tr. at
5-6. The hearing officer asked whether any person wished to address EcIS issues, and no one
responded. 7/23/09 Tr. at 8-9.
Section 102.108 (b) of the Board’s procedural rules also provides that the Board will
accept comments for 14 days after the receipt of the hearing transcript, or at any other date set by
the hearing officer. The close of the comment period was set for Friday, August 21, 2009.
7/23/09 Tr. at 14.
The first post hearing comment (PC 1) was timely filed by Southern Illinois Power
Cooperative (SIPC) on August 21, 2009. SIPC suggested changes to the proposal that would
have required the Agency to disburse allowances. The Agency filed a comment and response in
opposition to the SIPC comment on August 25, 2009 (PC 2); this was accompanied by a motion
3
Hearing Officer Crowley explained that the second hearing might be conducted by Springfield-
based Hearing Officer Carol Webb, to economize on Board travel expenses. 6/18/09 Tr. at 23.
6
for leave to file, which is here granted. Also on August 25, 2009, SIPC responded by e-mail to
the Agency’s query as to whether it would accept e-mail service. SIPC agreed that it would, but
disagreed with the Agency’s statement of facts; this e-mail was docketed as PC 3 to allow for
consideration of SIPC’s substantive remark.
The Board adopted its second notice opinion and order on September 17, 2009. JCAR
considered the rule at its October 14, 2009 meeting, and voted a certificate of no objection.
HEARING TESTIMONY
Mahajan Testimony
As previously stated, the only witness at the first hearing was the Agency’s Yoginder
Mahajan. Mr. Mahajan has been employed since March 1992 as an Environmental Protection
Engineer in the Air Quality Planning Section in the Bureau of Air. He worked for various metal
fabrication companies for nine (9) years. Mr. Mahajan’s educational background includes a
Bachelor of Engineering Degree in Mechanical Engineering from Bhopal University at Bhopal,
India. Prior to his employment by the Agency, Mr. Mahajan worked for various metal
fabrication companies for nine years. Exh. 1 at 1.
As part of his regular duties in the Air Quality Planning Section, Mr. Mahajan has been
involved with preparing emissions estimates for various source categories used in the
development of the 1990 ozone season weekday emissions inventories; evaluating control
technologies applicable to VOM emissions sources utilized in the preparation of the Rate-of-
Progress plans for the Chicago and St. Louis ozone nonattainment areas; and assisting in the
development of regulations for the control of VOM emissions from the source categories
included in the Rate-of-Progress plans. Regarding the R09-20 proposal, Mr. Mahajan testified
that he has been involved in the development of the regulations to control nitrogen oxides (NOx)
emissions from electrical generating units. Exh. 1 at 1.
Mr. Mahajan related that the rules adopted in Proposed New 35 Ill. Adm. Code 217.
Subpart W, The NO
x
Trading Program for Electrical Generating Units, and Amendments to 35
Ill. Adm. Code 211 and 217
, R 01-9 (Dec. 21, 2000) were intended to comply with the NOx SIP
Call promulgated by USEPA in October 1998.
See
63 FR 57356 (October 27, 1998). The NOx
SIP Call Trading Program was an ozone season trading program administered by USEPA.
USEPA adopted the federal CAIR rules in 2005.
See
70 FR 25162, May 12, 2005. The
Board adopted Illinois CAIR rules in Proposed New Clean Air Interstate Rule (CAIR) SO
2
, NO
x
Annual and NO
x
Ozone Season Trading Programs, 35 Ill. Adm. Code 225, Subparts A, C, D, E
and F
, R 06-26 (Aug.23, 2007). The sources affected by CAIR are the same electrical generating
units that were affected by the NO
x
SIP Call rules in Subpart W of 35 Ill. Adm. Code 217. The
NOx SIP Call rules and CAIR are cap and trade programs that require affected sources to hold
NOx allowances equal to their NO
x
emissions. The monitoring and reporting of NO
x
emissions
in both programs are substantially identical.
Mr. Mahajan testified that, for Illinois, USEPA allocated 30,701 NO
x
allowances in
Phase I of the CAIR ozone season NOx trading budget. This is the same number of NO
x
7
allowances allocated in the NOx SIP Call trading budget. After deducting 30% of the
allowances for the new unit set-aside and clean air set-aside, the Agency allocated 21,491 NO
x
allowances for each ozone season in 2009 through 2011 to the 249 affected units pursuant to
procedures set forth at Part 225. Subpart E. The estimated NO
x
emissions reductions from NO
x
SIP Call were 85,777 per year from 2007 base year NO
x
emissions. In Phase II of CAIR, starting
with the 2015 ozone season, USEPA allocated 28,981 NO
x
allowances per ozone season. Mr.
Mahajan stated that the Agency believes that the CAIR NO
x
ozone trading will provide
reductions in NO
x
emissions equal to or greater than the estimated reductions in NO
x
emissions
achieved from the NO
x
SIP Call rules.
In the preamble to the CAIR rule published at 70 FR 25162 (May 12, 2005), USEPA
stated that it would not administer the NO
x
SIP Call Ozone Season Trading Program after
September 30, 2008. CAIR provided for the NO
x
SIP Call Trading Program to be replaced by
the CAIR Ozone Season NO
x
Trading Program.
As to the specifics of the R09-20 proposal, Mr. Mahajan noted that the proposed Sunset
Provisions, Section 217.751 of 35 Ill. Adm. Code would require that the provisions of Subpart W
not apply for any control period in 2009 or thereafter. Noncompliance with the provisions that
occurred prior to 2009 would remain subject to the applicable provisions of Subpart W.
Adoption of this proposal will eliminate duplicate requirements for the affected sources. Mr.
Mahajan stated that the Agency that this proposal is consistent with U.S. EPA’s requirements
and it will not adversely impact the affected sources or the air quality in Illinois.
Counsel for Midwest Generation, Kathleen Bassi of SchiffHardin, LLP, posed questions
concerning enforcement and distribution of unused allowances that Mr. Mahajan was not
prepared to answer. 6/18/09 Tr. 8-15. Counsel for the Agency, Rachel Doctors, stated that
another witness would be provided at the second hearing: David Bloomberg. 6/18/09 Tr. 9.
Mr. Mahajan clarified units of measurement in his testimony in response to questions
from the Board. After the close of questioning, counsel for the Agency stated that the Agency
“hoped” that the rule could be “fully adopted” no later than November 30, 2009. Tr. at 20.
Counsel for Midwest Generation stated the client
does support this sunsetting rule proposal. And we appreciate the Agency’s
concern with the double -- the duplicative requirements that would apply
otherwise. And so, November 30th is a really good target date, so there’s not
double recordkeeping to be done. Tr. at 21.
Bloomberg Testimony
Mr. David E. Bloomberg appeared at the second hearing to provide testimony regarding
questions that arose during the first hearing on this matter. Mr. Bloomberg remarked that, while
the issue of distribution of allowances goes beyond the intended scope of this rulemaking, he was
providing background testimony at the request of the Board. Mr. Bloomberg has served for the
last 5 years as the Compliance Unit Manager in the Compliance Section within the Agency’s
Division of Air Pollution Control. He was previously an Environmental Protection Engineer in
8
the Air Quality Planning Section for twelve and a half years. Mr. Bloomberg’s academic
credentials include a Bachelor of Science degree in ceramic engineering from the University of
Illinois at Champaign-Urbana, as well as completion of all graduate coursework required for a
Master’s degree in the same field. Exh. 2. at 1.
Mr. Bloomberg stated that, among other duties, he supervised Illinois’ portion of the
now-defunct NO
x
trading program run under the NO
x
SIP Call, as well as supervising Illinois’
portion of the current CAIR NO
x
trading program. Both of these programs involved determining
or approving the determination of which sources are eligible to receive certain types of
allowances, such as early reduction credits and new source set-asides; determining or approving
the determination of apportionment of allowances given to such sources or to other sources
eligible to receive allowances; collecting or overseeing the collection of monies for sales of
certain NO
x
allowances; informing USEPA how to distribute NO
x
allowances to Illinois sources;
serving as the designated account representative for the State of Illinois; answering questions
concerning the Illinois NO
x
rules; and related tasks. Exh. 2. at 1.
Mr. Bloomberg relayed that, in addition, as manager of the Compliance Unit, he approves
Agency reviews of emissions and monitors testing conducted for sources subject to NO
x
regulations, participates in decisions regarding enforcement of the Board’s air pollution
regulations, interacts with USEPA regarding federal enforcement cases in Illinois, and oversees
the process of sending out Violation Notices and related activities. During his tenure at the
Agency, Mr. Bloomberg has been involved in designing, writing, implementing, and enforcing a
wide variety of air pollution regulations, including those for NO
x
trading, CAIR, mercury, the
Emissions Reduction Market System (ERMS), and several industry-specific rules. Exh. 2. at 1.
Mr. Bloomberg first addressed whether the last truly applicable provisions of 35 Ill. Adm.
Code.Subpart W occurred at the end of the 2008 ozone season. Mr. Bloomberg stated that “The
answer to this is yes, if this rulemaking goes through.” With CAIR replacing the NO
x
SIP Call
trading program, there are no more NO
x
SIP Call allowances and thus no requirements relating to
such. However, Mr. Bloomberg clarified that there are recordkeeping and reporting requirements
which would be duplicative and potentially contradictory with CAIR requirements for affected
sources, which is a major reason the Agency has proposed this sunset rulemaking. Exh. 2. at 1.
Mr. Bloomberg next addressed the question of whether the Agency presently knows, or
would know within a short time period whether or not there have been violations under 35 Ill.
Adm. Code.Subpart W. Mr. Bloomberg in the negative, stating there is no guarantee the
Agency would know in a short time period whether or not there were violations. Sometimes, it
may take several years to determine that such a violation took place. For example, in one case,
an emissions test had been completed incorrectly but the problems were not determined for two
or three years. Once they were, the source’s NO
x
emissions for the past several years had to be
recalculated, causing the source to be in noncompliance with the NO
x
SIP Call trading program
for those previous years. At least one other case similarly involved noncompliance that was
discovered two or more years after the NO
x
allowances should have been provided. For this
reason, Mr. Bloomberg believes it is necessary to retain the Subpart W regulations in order to
preserve the Agency’s ability to enforce these regulations, should situations arise where it
becomes necessary. Mr. Bloomberg believes this is a fairly standard practice when revising air
9
pollution regulations, and stated that he has been involved in several rulemakings where
regulations were changed but older versions of the regulations were maintained on the books for
precisely this enforcement purpose. Exh. 2. at 2.
Mr. Bloomberg then testified as to whether all allowances that have been provided by
USEPA to Illinois under the NO
x
SIP Call program been distributed to EGUs. Mr. Bloomberg
said that
The answer to that is no, because the current regulations do not provide for such
distribution. The correct number of allowances greater than three percent (3% ) of
the New Source Set-Aside (NSSA) is in the process of being distributed to EGUs,
pursuant to 35 Ill. Adm. Code 217.764 and 217.768. However, that is the only
pertinent distribution provided for under these regulations. As such, this also answers
another question, which is when the other allowances will be distributed – they will
not, until and unless the Agency makes a decision to do so and a new regulation is
passed by the Board to provide for such. However, the Agency is not seeking
authority to distribute such allowances at this time and, as noted previously, such
allowance distribution falls outside the scope of this rulemaking.
The same answer also applies to the final question that was raised, asking if there are
other allowances falling outside the umbrella of those already described. There are
some other allowances that reside in Illinois’ account for which no distribution is
currently planned. Some of these are from the non-EGU trading budget under Part
217.Subpart U , some are for allowances that were part of some other distribution but
were left over due to rounding when allocating on a pro-rata basis. These allowances
would presumably be addressed in the same manner as described earlier.
Exh. 2. at 2.
Finally, Mr. Bloomberg gave verification that NO
x
SIP Call allowances indeed became
CAIR allowances. Exh. 2. at 2.
PUBLIC COMMENTS
PC1: SIPC
In its public comment, signed by Leonard F. Hopkins, P.E., Southern Illinois Power
Cooperative (SIPC) stated that SIPC is an entity affected by the proposed rulemaking which
participated in the Agency’s pre-proposal outreach program. SIPC operates a coal-fired power
plant located near Marion, Illinois, and is subject to the NO
x
Trading Program rules at 35 Ill.
Adm. Code Part 217.Subpart W as well as the Illinois CAIR rules at 35 Ill. Adm. Code Part 225,
Subparts D and E, and the Illinois mercury rule, 35 Ill. Adm. Code Part 225.Subpart B. PC 1 at
1.
SIPC generally supports the Agency’s proposal to sunset the provisions of Part 217.
Subpart W, and agrees that the duplicative recordkeeping and reporting created by the NO
x
Seasonal CAIR are unnecessary and burdensome. PC 1 at 1. However, as SIPC told the Agency
10
during outreach, SIPC believes that
if the Board is going to sunset Subpart W, it should do it completely. That is, the
Board should, in this rulemaking, address the distribution of NO
x
Budget
allowances remaining in the Agency’s account. . . .Since the authority to
distribute allowances lies in the Board’s rule, then the Board can alter that
authority in this sunset rulemaking by providing that the Agency distribute all
remaining NO
x
allowances. To accomplish this, SIPC suggests the following
language:
The provisions of this Subpart W shall not apply for any control period in
2009 or thereafter. All allowances remaining in the Agency’s accounts shall be
distributed pursuant to the provisions of Section 217.764(b)(4)(A) and (B) of this
Subpart. Noncompliance with the provisions of this Subpart that occurred prior to
2009 is subject to the applicable provisions of this Subpart. PC 1 at 1-2
(underlining of new proposed language in original).
SIPC contends that if the Board does not address distribution of the remaining NO
x
allowances in this rulemaking, then either the Board will have to hold a second rulemaking to
address this deficiency in this proposed rule or the allowances will, effectively through neglect,
be subject to the retirement provisions of the CAIR rules, citing 35 Il1.Adm.Code 225.545(i) and
225.575(b)(4). PC 2 at 2. SIPC suggests that Subpart W generally provided for distribution of
excess allowances to existing electric generating units, while CAIR focuses on the retirement of
excess allowances.
Id.
SIPC states that
These are diametrically opposed means of addressing excess allowances. The
Agency’s direction in Subpart W should continue to apply to the remaining NO
x
Budget allowances rather than allowing the Agency to apply the direction of the
CAIR by not addressing disposition of the remaining allowances at this time.
This issue is properly before the Board at this time, as the question of the
unallocated allowances was raised at the first hearing and addressed in testimony
at the second hearing (citations omitted). There are a total of at least 1,212 New
Source Set-Aside (“NSSA”) allowances remaining plus a number of allowances
from the general pool not distributed due to rounding.
See
Agency Trading
website:
<www.epa.state.il.us/air/nox/> and
<www. epa.state.il.us/air/nox/allowances.htrnl>. In 2007 and 2008, the Agency
set aside 614 allowances into the NSSA
4
4
PC 1 contains a footnote 1 at this point in the original text which reads “This
information was on the Agency’s website shortly after the June 18 hearing, but has since
apparently been removed.” PC 1 at 3.
. 35 Ill. Adm. Code § 217.760(a)(2).
Only 16 allowances were distributed from the NSSA in 2007, and none were
distributed in 2008, leaving 1,212 undistributed allowances in the NSSA. PC 1 at
3.
11
SIPC concludes that it is timely and appropriate for the Board to address the issue of the
undistributed NO
x
Budget allowances remaining in the Agency’s account, and SIPC requests that
the Board amend the proposed rulemaking with the addition of direction to the Agency to
distribute the remaining NOx Budget allowances. PC1 at 3.
PC2: the Agency
In PC 2, the Agency responds to SIPC’s assertions in PC 1 (referring to the
commenter as SIPCo). In summary, the Agency requests that the Board adopt the rule as
proposed at first notice. The Agency states that
SIPCo is requesting that Board address the distribution of NOx Budget
allowances remaining in the Illinois EPA’s account. SIPCo raises the specter that
if the allowances are not distributed pursuant to this rulemaking they will be
retired under 35 Ill. Adm. Code Section 225.545(i) or 225.575(b)(4). This is false
because the transfer of the NO
x
SIP Call allowances from the Illinois EPA’s NO
x
budget account to its Clean Air Interstate Rule (“CAIR”) NO
x
Ozone Season
account by the United States Environmental Protection Agency (“USEPA”) does
not confer any additional authority on the Illinois EPA to distribute or retire these
allowances beyond the authority originally given by the Board under Subpart W.
In addition, the Board has not given the Illinois EPA the authority under either
Section 225.545(i) or 225.575(b)(4) to retire NO
x
SIP Call allowances. Section
225.545(i) applies to allowances from the CAIR New Unit Set-Aside (“NUSA”).
As the NO
x
SIP Call allowances are not part of the CAIR NO
x
Ozone Season
Budget as set forth in Section 225.525, these allowances are not part of the
portion of the budget that has been set-aside for new-units in 2009, hence, these
allowances are not subject to the retirement provisions of subsection (i) of Section
225.545(i). Similarly, Section 225.575(b)(4) refers to allowances that have been
portioned from the CAIR NO
x
Ozone Season Budget for the Clean Air-Set Aside
(“CASA”). As the NO
x
SIP Call allowances are not part of the CAIR budget, they
cannot be distributed under the CASA provisions and are not subject to the
provisions of that Section. Just because the allowances in question were New
Source Set-Aside allowances under the NO
x
SIP Call does not make them
allowances in the NUSA under Illinois’ CAIR program. There is no provision for
such allowances to be transferred into the NUSA category, because there is no
provision for how these allowances will be treated under the CAIR program. PC
2 at 1-2.
The Agency does not believe that a second rulemaking will be needed if the allowances
that were not allocated under the NO
x
SIP Call trading program are not addressed in this docket.
The Agency states that it will be reopening Part 225 after USEPA addresses the vacatur and
remand of the CAIR rule under the
North Carolina v. EPA
, No. 05-1244 (D.C. Cir. 2008)
decision. PC 2 at 2.
12
The Agency strongly disagrees with SIPC’s contention that this rulemaking provides an
appropriate vehicle for considering the issue of the unallocated allowances. The Agency reminds
that it has repeatedly stated that the unallocated allowances are outside the scope of its proposal
here. The Agency argues that SIPC has never put forth a proper justification for this proposal at
the appropriate point in this rulemaking, and has failed to make any assertion that it would be
prejudiced by waiting for the Agency to address this issue in a later proposal. The Agency
suggests that interested persons have had no opportunity to address the merits of SIPC’s
proposal, suggesting the proposal is faulty:
Further, it should be noted that SIPCo’s proposed amendment that provides
“All allowances remaining in the Agency’s accounts shall be distributed pursuant
to the provisions of Section 217.764(b)(4)(A) and (B),” does not address the issue
as it applies only to the fourth year of the program (2007) which has passed.
Hence, the adoption of such amendment would result in no distributions
whatsoever as the fourth year of the program has come and gone. PC 2 at 3.
The Agency urges that no changes to the proposal are necessary at this time and
that no prejudice will result from bundling an amendment to distribute these allowances (should
such an amendment be deemed appropriate at that time) with a future Agency proposal for
amendments to Part 225. The Agency continues to believe that SIPC’s proposed amendment
falls beyond the scope of the current rulemaking. The Agency requests that the Board adopt the
proposed rules to address substantive and duplicative requirements that face both the Agency and
affected EGUs. PC 2 at 3.
PC3: SIPC
When filing PC2, the Agency addressed electronic copies to persons on the service list,
stating that it would supply hard copies to anyone who objected to such service. SIPC replied to
the Agency and the Board; the reply was docketed as PC 3 due to the nature of the reply. PC3
states in its entirety:
The electronic service is fine.
While I disagree with your opinion of the facts, there is no need to waste paper with a
hard copy for the sake of service. Also, there certainly was no intent on the part of SIPC
to wait until the last minute with these comments, but there have been a large number of
environmental issues this summer that has absorbed the time of our VERY small staff
(2). PC3
DISCUSSION AND CONCLUSION
The facts presented here are clear. The entire State of Illinois was subject to the NO
x
,
SIP Call and is now subject to CAIR. The proposed amendment to 35 Ill. Adm. Code
217.Subpart W will affect existing EGUs. There are approximately 229 existing EGUs that are
currently subject to the NO
x
SIP Call Trading Program. For the NO
x
SIP Call Trading Program,
existing units are those that commenced operation before May 1, 2006. Of these units, 170 are
13
gas and oil fired boilers, 59 are coal-fired boilers, and the remainder are gas and oil-fired
combustion turbines. SR at 3.
Only two of the 229 EGUs affected have commented in this rulemaking: Midwest
Generation and SIPC. Both support the language of the Agency proposal, although SIPC argues
that it does not go far enough. While economic benefits have not been quantified in this record,
the Agency and commenters agree that removal of duplicative requirements will present an
economic benefit in the form of reduced recordkeeping and reporting.
The Board finds that the facts presented in support of the Agency’s proposal are
uncontroverted. USEPA has stopped allocating NO
x
allowances for the NO
x
SIP Call Trading
Program. The amendments to Part 217.Subpart W are being proposed to ensure consistency with
the CAIR ozone season program and prevent EGUs from being subject to duplicative
monitoring, reporting, permitting and recordkeeping requirements. As this proposal sunsets
regulatory provisions, it would impose no new requirements or costs on affected sources. The
Board accordingly finds that this record demonstrates that the proposed rule if adopted is
technically feasible, economically reasonable, and, in the words of Section 27 (b) of the Act, will
have no “adverse economic impact on the people of the state of Illinois.” 415 ILCS 5/27(b)
(2008).
The 2009 ozone season control period (May 1, 2009, through September 30, 2009) is
over. But, the record is also clear that it would be beneficial if the proposed rules are adopted
and effective on or before November 30, 2009. The Board finds that it would be impossible to
conclude this rulemaking under that timetable if the Board were to consider the issue of
unallocated allowances now. The Board declines to add the language proposed by SIPC.
As the Agency points out, the regulated community and members of the public have had
no meaningful opportunity to comment on whether the issue of unallocated allowances should be
addressed in Part 217 at all, let alone by insertion of the language as proposed by SIPC. SIPC
has failed to support its proposed additional language with convincing evidence and argument.
If SIPC believes that it cannot wait for the Agency to address this issue in some future
rulemaking to amend 35 Ill. Adm. Code Part 225, SIPC is free to file a regulatory proposal that
complies with the requirements of Section 27 of the Act and the Board’s procedural rules at 35
Ill. Adm. Code 102.
For all of the foregoing reasons, the Board adopts as a final rule Section 217.751 set forth
below. The rule text itself is unchanged since first notice publication. But, the table of contents
of Part 217 now lists Subparts D through M, added in rulemakings completed during the
pendency of this R09-20 proceeding.
See
, Section 27 Proposed Rules for Nitrogen Oxide (NOx)
Emissions From Stationary Reciprocating Internal Combustion Engines and Turbines:
Amendments to 35 Ill. Adm. Code Parts 211 and 217, R07-19 (July 23, 2009) and Nitrogen
Oxides Emissions From Various Source Categories, Amendments to 35 Ill. Adm. Code Parts 211
and 217, R08-19 (Aug. 20, 2009).
14
ORDER
The Board directs the Clerk to submit the following adopted rules to the Secretary of
State for filing, to become effective upon the date of filing:
TITLE 35: ENVIRONMENTAL PROTECTION
SUBTITLE B: AIR POLLUTION
CHAPTER I: POLLUTION CONTROL BOARD
SUBCHAPTER c: EMISSION STANDARDS AND LIMITATIONS
FOR STATIONARY SOURCES
PART 217
NITROGEN OXIDES EMISSIONS
SUBPART A: GENERAL PROVISIONS
Section
217.100
Scope and Organization
217.101
Measurement Methods
217.102
Abbreviations and Units
217.103
Definitions
217.104
Incorporations by Reference
SUBPART B: NEW FUEL COMBUSTION EMISSION SOURCES
Section
217.121
New Emission Sources (Repealed)
SUBPART C: EXISTING FUEL COMBUSTION EMISSION UNITS
Section
217.141
Existing Emission Sources in Major Metropolitan Areas
SUBPART D: NO
x
GENERAL REQUIREMENTS
Section
217.150
Applicability
217.152
Compliance Date
217.154
Performance Testing
217.155
Initial Compliance Certification
217.156
Recordkeeping and Reporting
217.157
Testing and Monitoring
217.158
Emissions Averaging Plans
15
SUBPART E: INDUSTRIAL BOILERS
Section
217.160
Applicability
217.162
Exemptions
217.164
Emissions Limitations
217.165
Combination of Fuels
217.166
Methods and Procedures for Combustion Tuning
SUBPART F: PROCESS HEATERS
Section
217.180
Applicability
217.182
Exemptions
217.184
Emissions Limitations
217.185
Combination of Fuels
217.186
Methods and Procedures for Combustion Tuning
SUBPART G: GLASS MELTING FURNANCES
Section
217.200
Applicability
217.202
Exemptions
217.204
Emissions Limitations
SUBPART H: CEMENT AND LIME KILNS
Section
217.220
Applicability
217.222
Exemptions
217.224
Emissions Limitations
SUBPART I: IRON AND STEEL AND ALUMINUM MANUFACTURING
Section
217.240
Applicability
217.242
Exemptions
217.244
Emissions Limitations
SUBPART K: PROCESS EMISSION SOURCES
Section
217.301
Industrial Processes
16
SUBPART M: ELECTRICAL GENERATING UNITS
Section
217.340
Applicability
217.342
Exemptions
217.344
Emissions Limitations
217.345
Combination of Fuels
SUBPART O: CHEMICAL MANUFACTURE
Section
217.381
Nitric Acid Manufacturing Processes
SUBPART Q: STATIONARY RECIPROCATING
INTERNAL COMBUSTION ENGINES AND TURBINES
Section
217.386
Applicability
217.388
Control and Maintenance Requirements
217.390
Emissions Averaging Plans
217.392
Compliance
217.394
Testing and Monitoring
217.396
Recordkeeping and Reporting
SUBPART T: CEMENT KILNS
Section
217.400
Applicability
217.402
Control Requirements
217.404
Testing
217.406
Monitoring
217.408
Reporting
217.410
Recordkeeping
SUBPART U: NO
x
CONTROL AND TRADING PROGRAM FOR
SPECIFIED NO
x
GENERATING UNITS
Section
217.450
Purpose
217.452
Severability
217.454
Applicability
217.456
Compliance Requirements
217.458
Permitting Requirements
217.460
Subpart U NO
x
Trading Budget
217.462
Methodology for Obtaining NO
x
Allocations
217.464
Methodology for Determining NO
x
Allowances from the New Source Set-Aside
217.466
NO
x
Allocations Procedure for Subpart U Budget Units
17
217.468
New Source Set-Asides for "New" Budget Units
217.470
Early Reduction Credits (ERCs) for Budget Units
217.472
Low-Emitter Requirements
217.474
Opt-In Units
217.476
Opt-In Process
217.478
Opt-In Budget Units: Withdrawal from NO
x
Trading Program
217.480
Opt-In Units: Change in Regulatory Status
217.482
Allowance Allocations to Opt-In Budget Units
SUBPART V: ELECTRIC POWER GENERATION
Section
217.521
Lake of Egypt Power Plant
217.700
Purpose
217.702
Severability
217.704
Applicability
217.706
Emission Limitations
217.708
NO
x
Averaging
217.710
Monitoring
217.712
Reporting and Recordkeeping
SUBPART W: NO
x
TRADING PROGRAM FOR
ELECTRICAL GENERATING UNITS
Section
217.750
Purpose
217.751
Sunset Provisions
217.752
Severability
217.754
Applicability
217.756
Compliance Requirements
217.758
Permitting Requirements
217.760
NO
x
Trading Budget
217.762
Methodology for Calculating NO
x
Allocations for Budget Electrical Generating
Units (EGUs)
217.764
NO
x
Allocations for Budget EGUs
217.768
New Source Set-Asides for "New" Budget EGUs
217.770
Early Reduction Credits for Budget EGUs
217.774
Opt-In Units
217.776
Opt-In Process
217.778
Budget Opt-In Units: Withdrawal from NO
x
Trading Program
217.780
Opt-In Units: Change in Regulatory Status
217.782
Allowance Allocations to Budget Opt-In Units
18
SUBPART X: VOLUNTARY NO
x
EMISSIONS REDUCTION PROGRAM
Section
217.800
Purpose
217.805
Emission Unit Eligibility
217.810
Participation Requirements
217.815
NO
x
Emission Reductions and the Subpart X NO
x
Trading Budget
217.820
Baseline Emissions Determination
217.825
Calculation of Creditable NO
x
Emission Reductions
217.830
Limitations on NO
x
Emission Reductions
217.835
NO
x
Emission Reduction Proposal
217.840
Agency Action
217.845
Emissions Determination Methods
217.850
Emissions Monitoring
217.855
Reporting
217.860
Recordkeeping
217.865
Enforcement
217.APPENDIX A
Rule into Section Table
217.APPENDIX B
Section into Rule Table
217.APPENDIX C
Compliance Dates
217.APPENDIX D
Non-Electrical Generating Units
217.APPENDIX E
Large Non-Electrical Generating Units
217.APPENDIX F
Allowances for Electrical Generating Units
217.APPENDIX G
Existing Reciprocating Internal Combustion Engines Affected by the NO
x
SIP Call
217.APPENDIX H
Compliance Dates for Certain Emissions Units at Petroleum Refineries
AUTHORITY: Implementing Sections 9.9 and 10 and authorized by Sections 27 and 28.5 of the
Environmental Protection Act [415 ILCS 5/9.9, 10, 27 and 28.5 (2004)].
SOURCE: Adopted as Chapter 2: Air Pollution, Rule 207: Nitrogen Oxides Emissions, R71-23,
4 PCB 191, April 13, 1972, filed and effective April 14, 1972; amended at 2 Ill. Reg. 17, p. 101,
effective April 13, 1978; codified at 7 Ill. Reg. 13609; amended in R01-9 at 25 Ill. Reg. 128,
effective December 26, 2000; amended in R01-11 at 25 Ill. Reg. 4597, effective March 15, 2001;
amended in R01-16 and R01-17 at 25 Ill. Reg. 5914, effective April 17, 2001; amended in R07-
18 at 31 Ill. Reg. 14271, effective September 25, 2007; amended in R07-19 at 33 Ill. Reg. 11999,
effective August 6, 2009; amended in R08-19 at 33 Ill. Reg. ______, effective _______;
amended in R09-20 at 33 Ill. Reg. ___, effective _______.
19
SUBPART W: NO
x
TRADING PROGRAM FOR ELECTRICAL
GENERATING UNITS
Section 217.751 Sunset Provisions
The provisions of this Subpart W shall not apply for any control period in 2009 or thereafter.
Noncompliance with the provisions of this Subpart that occurred prior to 2009 is subject to the
applicable provisions of this Subpart.
(Source: Added at 33 Ill. Reg. ___, effective ______ )
I, John T. Therriault, Assistant Clerk of the Illinois Pollution Control Board, certify that
the Board adopted the above opinion and order on October 15, 2009, by a vote of 5-0.
__________________________________
John T. Therriault, Assistant Clerk
Illinois Pollution Control Board

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