Regional Air Quality Management: A Perspective from the Ozone Transport Commission

1. Regional Air Quality Management:A Perspective from the Ozone Transport Commission WESTAR Spring Business Meeting March 30, 2010

2. Topics • Ozone Transport Commission • Background, focus, transport of pollution and National Ambient Air Quality Standards (NAAQS) • OTC Structure and Process • Members, Meetings, Committees & Model Rules • Ozone History & Future • OTAG, NOx SIP Call and CAIR – the condensed version • S. 2995: the Clean Air Act Amendments of 2010 • Air Quality Challenges for States • OTC Lessons Learned • On implementing CAA transport requirements and provisions • On regional cooperation – what’s worked well and not as well

3. OTC Background • OTC was created under the Clean Air Act Amendments of 1990 and has been coordinating regional planning and control measure development • States submitted plans (SIPs) for 2005 attainment with the 1-hour standard that actually worked !!! • SIPs for attaining the tougher 1997 ozone standard (0.084 ppm)by 2010 have been submitted • OTC is beginning work on regional strategies for the new ozone standard (proposed in the range of 0.060 – 0.070 ppm)

4. CAA Authorization for OTC Clean Air Act, Amendments of 1990 Title I, Part D , Subpart 2, Section 184: Control of interstate ozone air pollution (excerpt) (a) Ozone transport regions A single transport region for ozone (within the meaning of section 176 a (a) of this title), comprised of the States of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, and the Consolidated Metropolitan Statistical Area that includes the District of Columbia, is hereby established by operation of law. The provisions of section 176a (a)(1) and (2) of this title shall apply with respect to the transport region established under this section and any other transport region established for ozone, except to the extent inconsistent with the provisions of this section. The Administrator shall convene the commission required (under section 176a (b) of this title) as a result of the establishment of such region within 6 months of November 15, 1990.

5. CAA Authorization for OTC Clean Air Act, Amendments of 1990 Title I, Part D, Subpart 2, Section 184: Control of interstate ozone air pollution (excerpt) (c)Additional control measures (1) Recommendations Upon petition of any State within a transport region established for ozone, and based on a majority vote of the Governors on the Commission (or their designees), the Commission may, after notice and opportunity for public comment, develop recommendations for additional control measures to be applied within all or a part of such transport region if the commission determines such measures are necessary to bring any area in such region into attainment by the dates provided by this subpart. The commission shall transmit such recommendations to the Administrator.

6. CAA Authorization for OTC Clean Air Act, Amendments of 1990 Title I, Part A, Section 106: Interstate air quality agencies; program cost limitations For the purpose of developing implementation plans for any interstate air quality control region designated pursuant to section 107 of this title or of implementing section 176a of this title (relating to control of interstate air pollution) or section 184 of this title…, the Administrator is authorized to pay, for two years, up to 100 per centum of the air quality planning program costs of any commission established under section 176a of this title (relating to control of interstate air pollution) or section 184 of this title… After the initial two-year period the Administrator is authorized to make grants to such agency or such commission in an amount up to three-fifths of the air quality implementation program costs of such agency or commission.

7. OTC Transport Issues • Ozone Pollution and its Precursors Cross State Boundaries: • As direct transport in the ground-level winds • Or in the upper atmosphere for hundreds of miles by before descending in another location • States Works Regionally Through OTC to: • Develop regional strategies to reduce ozone pollution • Provide comments and recommendations on national policies and rules • States also develop local measures to reduce pollution • Regional Cooperation • As the ozone standards become more stringent the transport pollution becomes a larger factor. Some pollution transported into the OTC regions already exceeds EPA standards • Regionally consistent regulations

8. OTC Structure and Process • The OTC Focuses on Reducing Ozone Levels • Goal is reducing ozone pollution and its precursor pollutants within the individual states and from states outside the region • OTC also considers co-benefits from ozone-reduction strategies and from non-ozone pollution reduction strategies • Developing Model Rules • OTC does not have regulatory authority – states take OTC model rules through their own rulemaking process • States often adopt regulations identical to or very similar to the model rules developed via the OTC process • Model rules have had one or more rounds of public comments • Additional public comment period occurs in state rulemaking process • States can adapt model rule as necessary

9. OTC Structure and Process OTC Holds Bi-annual Meetings to: • Conduct business on regional issues and strategies • Take action by means of: • Memorandum of Understanding – cooperative action among states • Resolution – action/approval of an OTC measure • Statement – comments on a policy debate • Charge – to Committee(s) for technical work on issues • Present the results of new research and studies • Offer stakeholders an opportunity to comment on OTC measures and current ozone-related policy topics

10. OTC Structure and Process OTC Committees • Comprised of state technical staff • Established on a sector-basis to analyze control options and make recommendations to the Commission • Perform technical work and seek stakeholder comments • Hold meetings and conference calls with stakeholders, and request, review and resolve written comments from them

11. OTAG, the NOx SIP Call and CAIR • OTAG began 1995 – memo from Mary Nichols, OAR/AA • States: how to model non-attainment when what upwind states are doing is unknown? • States’ commitment to OTAG approach by signing onto a letter would avoid CAA sanctions • Two years of meetings with many subgroups resulting in: • Recommendations, including a cap range for NOx emissions • Transport study, including technical information and cost of reductions • Key feature: Buy-in from EPA, states & stakeholders on technical work, results and recommendations

12. OTAG, the NOx SIP Call and CAIR • 1997 ozone standard was coming out – in August 1997, 8 Northeastern states filed S. 126 petitions • EPA implemented OTAG cap range via the NOx SIP Call – issued in September 1998 • Required 22 states & DC to reduce NOx emissions that cross state boundaries and affect downwind states’ attainment • Reduce summertime NOx emissions by 1.28 M tons (~28%) • Included a model NOx Budget Trading program option • EPA wanted to tie S. 126 petitions to the NOx SIP Call • Implement S. 126 petitions via the NOx trading program • EPA continued to tout trading programs (e.g. NOx SIP Call , Clear Skies, IAQR, etc.) as solution to transport and S. 126

13. OTAG, NOx SIP Call and CAIR • EPA analyses for 1997 ozone NAAQS showed that even substantial local emission controls would leave many areas with unhealthy air • CAIR issued Mar 10, 2005 involving 28 states and DC to reduce NOx and SO2 emissions by 70% • Achieved through an emissions cap and trade program OR • Meeting an individual state budget through own measures • But DC Circuit Court found CAIR to be “fundamentally flawed,” vacated the rule, then remanded it to EPA • Court said trading program unlawful – did not connect emission reductions with states’ significant contributions • Also said NOx and SO2 caps were arbitrary • CAIR replacement rule expected Apr/May 2010

14. Air Quality Challenges for States • Regional Transport • Despite major air quality gains, ozone continues to be a critical issue for the OTR states • Substantial levels of ozone come into OTR from multiple pathways • New NAAQS for Ozone • Proposed ozone NAAQS is more stringent • OTR states have taken significant regional and local actions to reduce emissions from a whole host of sources • Where to Get Additional Reductions? • States’ ability to address some source sectors, e.g., mobile, very limited • Critical need for strong national measures to both address transport and help states attain the new ozone standard

15. NOx Emission Trends Across the OTR

16. Current Design Values Projected 2007-09 Design Value Note: Includes two years of cooler and wetter weather and a down economy. 2009 data not yet final Only 2 sites over the 1997 standard Note: Red (■) and Black (+) symbols represent monitors > 75ppb Ozone

17. Westerly Transport - “Up … Over … Down”

18. 1997 8-hr ozone exceedance days(2003-2007) 96 days or appx. 19 days/year Source: Maryland Department of the Environment The Three Different Types of Transport City-to-City “Local” Transport Westerly Transport Night-time Southerly NLLJ Transport

19. When Transport Patterns Collide • Westerly, local and southerly/night-time low level jet (NLLJ) transport converge on the Mid-Atlantic area. • Sea and bay breezes act as a barrier or wall and funnel ozone and other air pollutants up the Northeast Corridor.

20. Maryland - 2008

21. 1997 8-hr ozone exceedance days(2003-2007) 96 days or appx. 19 days/year Source: Maryland Department of the Environment Baltimore: How Much is Transport? • Varies with changes in meteorology but best estimate is something like • 30 to 40% Westerly transport • 10 to 20% City-to-City “local” transport • 10 to 20% Night-time, southerly low level jet (NLLJ) transport • 10 to 20% local • Local controls on local emissions can only address this last 10 to 20%.

22. Recent and Newly Proposed NAAQS* • 1997 8-hr ozone NAAQS = 0.084 ppm • 1997 Annual PM 2.5 NAAQS = 15 µg/m3 • 2006 24-hr PM 2.5 NAAQS = 35 µg/m3 • 2006 24-hr PM 10 NAAQS = 150 µg/m3 • 2008 8-hr ozone NAAQS = 0.075 ppm (reconsidered) • 2010 8-hr ozone NAAQS proposed : 0.060 – 0.070 ppm • Includes a proposed new secondary standard at a different level and form from the 1997 and 2008 standards *CAA requires EPA to review the NAAQS at 5-year intervals and revise them as appropriate

24. Updated Timeline for OTC Planning States begin rule development process Identify control measures & develop technical information Final SIPs submitted to EPA Begin inventory work; do preliminary modeling Complete air quality modeling of measures States propose SIPs State Attainment Demonstration SIPs Due to EPA Dec. 2013 EPA Proposed Reconsidered Ozone NAAQS 12/2009 EPA Final Reconsidered Ozone NAAQS 8/2010 EPA Final Designations No later than 8/2011 Likely Attainment Dates for Reconsidered Ozone Standard Moderate – 2017 (Requires 3 years of clean data in 2014, 2015 and 2016) Serious – 2020 (Requires 3 years of clean data in 2017, 2018 and 2019)

25. Comparison of 3P (Zone1*)and CAIR NOx Caps 3P Bill (Zone 1) CAIR Annual Caps 1.50 Million Tons in 2009- 2014 1.30 Million Tons in 2015 and thereafter Seasonal NOx caps: 567,744 Tons in 2009-2014 484,506 Tons in 2015 and after Annual Caps • 1.39 Million Tons in 2012 – 2014 • 1.30 Million Tons in 2015 -2019 • 1.30 Million Tons or less in 2020 and thereafter, up to EPA Seasonal NOx caps: • Codifies CAIR seasonal caps • Provides for EPA to revise seasonal program not later than Jan 2020 & every 5 years after *Zone 1 States include all 28 CAIR states plus ME, NH, RI and VT

26. Additional Cost Effective Reductions are Available from EGUs Many EGUs are Uncontrolled*: • By 2020, with a CAIR-type program in place, EPA projected only about 40 -50% of total EGUs in the eastern US have controls for NOx and/or SO2 • Half of controls to meet 2010 cap were installed by 2007 • NOx Est. Cost per Ton (2015): • $700 average cost • $1,600 marginal cost • SO2 Est. Cost per Ton (2015): • $700 average cost • $1,000 marginal cost *Source: EPA CAIR analysis, 2004

27. What Do We Need for Ozone from the 3P Bill? • Annual NOx cap for Zone 1 states not greater than 1.0 million tons • Seasonal NOx cap proportional to the annual cap and the length of the ozone season • A disproportional seasonal cap pushes NOx tons into other months and can cause problems with winter NOx, PM 2.5 non-attainment, increased acid deposition from snow melt, and may result in lengthening the ozone season • Direction to EPA to complete analysis of transport in the eastern US and develop a transport rule • Reductions that occur in a timeframe to help with meeting the 2010 ozone NAAQS (2014, 2015,2016)

28. What Else Do We Need from the 3P Bill? • Discounting of banked allowances -- having a large bank jeopardizes attainment because sources use them instead of making reductions • No inter-plant Hg trading • Prefer unit-by-unit controls, but facility averaging ok • Ensure the bill language does not interfere with states’ rights – e.g., does not limit states’ options with respect to S. 126 petitions • Avoid tying EPA’s ability to do more in the future to meet current and new air quality standards

29. Lessons Learned: CAA Requirements • More stringent, directed measures are required more quickly as SIP elements in OTRs • On CAA transport requirements, what you see is not always what you get • Provisions of S. 110(a)(2)(D) have not been enforced as stringently as states expected • Response to S. 126 petitions has mostly been emission trading programs, which do not address transport sufficiently

30. CAA Requirements for an Ozone Transport Region (OTR) • Section 184(b) – Plan provisions for states in OTRs - Not later than 9 months from inclusion in an OTR, state submits a SIP requiring: • Compliance with vehicle I&M programs in MSAs > 100,000 pop. • Implementation of RACT for VOCs covered by control techniques guidelines issued before/after 11/15/90 • Implement vehicle refueling controls or measures capable of achieving comparable emission reductions • Major sources (pte ≥50 tpy) are subject to requirements for major sources in moderate non-attainment areas

31. CAA Requirements for an Ozone Transport Region (OTR) • Section 184(c) – Additional control measures – • Develop recommendations for additional control measures to be applied in all/part of the OTR if needed to bring region into attainment and transmit to EPA Administrator • Administrator is to provide for notice and hearing on the recommendations in the FR and commence a review of them • Review includes consultation by the Administrator with the states • Within 9 months of receipt, Administrator must act to approve/disapprove the recommendations and publish in FR • Administrator then issues finding that all approved measures be included in the SIPs of the states in the OTR within 1 year

32. CAA Section 110(a)(2)(D) Each state submits to EPA 3 years from promulgation of new/revised NAAQS a plan for implementation, maintenance and enforcement of the NAAQS • That includes adequate provisions to prohibit any source/activity in the state from emitting pollutants that contribute significantly to non-attainment or interfere with maintenance in another state or interfere with measures to prevent PSD or protect visibility and insures compliance with Section 126 and 115

33. Lessons Learned: Regional Cooperation • Key difference between OTC and other MSOs is that Governors/Commissioners are members and officers • Both technical and political expertise are at the table • Decisions can be made fairly quickly • States perform technical work jointly and have significant buy-in on issues and outcomes • OTC funding from EPA has 40% state match requirement, satisfied mostly from in-kind contribution from states • States do the greater part of the technical work, with some/limited contractor support

34. Lessons Learned: Regional Cooperation • Model rules often based on rules developed and adopted in an OTC member state or adapted from CARB • Get 1st hand experience of state that adopted rule, industry concerns, special circumstances, what worked and didn’t • Benefit from efficiencies of existing technical work and rule language • “Safety in numbers” and “first adopter” states facilitate adoption of model rules by other individual states • Stakeholders are not members of OTC • Public meetings and involvement are required under OTC’s by-laws

35. Thank You Anna Garcia OTC 202-508-3840 agarcia@otcair.org