Greenhouse Gas Permitting August 22, 2011

1. Greenhouse Gas PermittingAugust 22, 2011 Richard Angelbeck U.S. EPA Region 5

2. Overview • Background on GHGs • Current/Future Status of GHG Permitting • EPA Guidance on GHGs • GHG Tailoring Rule • GHG BACT • Comment Letters on GHG Permits • Region 5 GHG BACT examples (issued permits) • Questions

3. U.S. EPA Priorities • Taking action on climate change • Improving air quality • Assuring the safety of chemicals • Cleaning up our communities • Protecting America's waters • Expanding the conversation on environmentalism and working for environmental justice • Building strong state and tribal partnerships

4. Key Steps in the Permitting of GHGs • April 2, 2007 Supreme Court Decision • December 7, 2009 EPA Endangerment Finding • April 1, 2010 LDV Emissions Rule • June 3, 2010 EPA Tailoring Rule • All of the Above adds up to Large Emitters of GHGs being subject to PSD and Title V

5. Current Status of GHG Permitting • We’re in Step 2 of the Tailoring Rule • As of May 2011, 109 permit applications that include a GHG component have been submitted - They include source categories such as: - Biofuel Production - Cement Plants - Electric Generating Units - Lime Production Facilities - Outer Continental Shelf Exploration - Pulp and Paper Mills - Refineries Of these 109 permit applications, 30 include a GHG BACT analysis

6. Future of GHG Permitting • Step 3 of the Tailoring Rule • May lead to lower thresholds as low as 50,000 tpy • Possible permitting streamlining techniques • NSPS for Power Plants & Refineries to be proposed in near future (to include GHGs)

7. EPA Resources to Assist States and Industry To ensure that GHG permitting runs smoothly for the larger sources that remain covered, EPA has provided the following: • Guidance on key GHG Permitting topics (BACT, Biomass, etc.) • White Papers on – utilities, refineries, cement, large commercial/industrial/institutional boilers, pulp and paper, iron and steel, and nitric acid plants • Control Technology Clearinghouses – RACT/BACT/LAER, GHG Mitigation Strategies • GHG Permitting Action Team – Primary and Secondary Contacts for each EPA Regional Office • GHG Training for States, Industry and Other Interested Stakeholders – www.epa.gov/apti/broadcast2010.html#GHGTraining1210 • Website for GHG permitting resources: www.epa.gov/nsr/ghgpermitting – Contains links to White Papers, Clearinghouses, Permitting Action Team, etc. – Updated to include new Q&A’s as issued (3 posted; more likely) – Also updated to include EPA comment letters on proposed permits involving GHGs

8. EPA GHG Permitting Guidance • Issued November 2010; technical correction posted March 2011. • Explains that the PSD and Title V permitting requirements are generally no different for GHGs. • Emphasizes the importance of developing a good record. • Document is guidance, not a rule. – SIP-approved permitting authorities have discretion to establish alternative approaches, as long as they comply with CAA and Federal rules. – Permitting authorities have the discretion to be more stringent than the policies in guidance. • More information available at: http://www.epa.gov/NSR/actions.html

9. Highlights of GHG Permitting Guidance • GHG Applicability - Reiterates applicability framework from Tailoring Rule - GHG applicability based on mass (statutory thresholds) and CO2e (“subject to regulation”) emissions. - Results in 2-part test for new sources and a 4-part test for modifications. Demonstrates how to calculate CO2e-based emissions using global warming potential (GWP). GHG BACT - Long-standing and familiar permitting requirements and processes apply to GHGs. - BACT decisions continue to be state-and project-specific.

10. Highlights of GHG Permitting Guidance (cont.) GHG BACT - CCS could be considered an available BACT option in many cases, but costs will likely rule out CCS for now - Ranking of control options should be based on total CO2e, rather than total mass or mass for the individual GHGs. - Should focus on longer-term averages (e.g., 30- or 365-day rolling average) rather than short-term averages. Modeling and Monitoring - Since there are no NAAQS or PSD increments for GHGs, ambient modeling is not required for GHG emissions. - Applicants do not need to gather monitoring data to assess ambient air quality for GHGs.

11. GHG Guidance: Biomass • Deferral Rule issued final on July 1, 2011 • 3-year deferral of PSD and Title V permitting requirements to CO2 emissions from bioenergy and other biogenic stationary sources (biogenic CO2) • This includes CO2 emissions from the following: • Combustion of wood, wood waste, agricultural materials • Combustion of the biological portion of MSW and tire-derived fuel • Combustion of biogas from landfills and wastewater treatment plants • Fermentation at ethanol plants • It’s expected that permitting authorities will need to adopt the Deferral Rule into its rules to be able to use it • 3-year deferral of PSD and Title V permitting requirements (only for CO2) • Link to the Rule: http://www.epa.gov/nsr/actions.html#jul11

12. GHG Guidance: Biomass (cont.) • Interim Biomass CO2 Guidance document • Issued March 2011 • To be used when/if Deferral Rule not yet approved into States’ rules/SIP • Guidance to help permitting authorities analyze whether burning biofuels for energy is GHG BACT by itself for its CO2 emissions from a bioenergy facility. Provides a framework for analyzing the environmental, energy and economic benefits of biomass in BACT Step 4 • Would still be major for GHGs and go through BACT - need a numerical CO2e limit and operational limits requiring the burning of biomass • Link to the guidance document: http://www.epa.gov/nsr/ghgdocs/bioenergyguidance.pdf

13. GHG PAL • One can get a PAL for GHGs using actual emissions under 40 CFR 52.21(aa) but only on a mass basis not a CO2e basis. The significance level of zero on a mass basis (not 75,000 tpy). • More information available at: http://www.epa.gov/nsr/ghgdocs/ghgissuepal.pdf

14. GHG Tailoring Rule • Published Final in the Federal Register on June 3, 2010 http://www.gpo.gov/fdsys/pkg/FR-2010-06-03/pdf/2010-11974.pdf#page=1 • The Light Duty Vehicle Rule essentially made GHGs regulated pollutants thus triggering PSD and Title V for GHG-emitting sources, so, the Tailoring Rule tailors the existing PSD and Title V permitting thresholds • GHG applicability based on both mass and CO2e emissions, resulting in a 2-part test for new sources and a 4-part test for modifications • Whether CO2e emissions are over “regulated NSR pollutant” thresholds • Whether mass emissions are over the PSD thresholds

15. Tailoring Rule (cont.) • Phase-in approach (3 phases): • Step 1: January 2, 2011 – June 30, 2011 • Needed to be coming in for PSD for non-GHG • 75,000 tpy CO2e PTE threshold • Step 2: July 1, 2011 – June 30, 2013 • Continue Step I sources/modifications plus other large GHG emission sources/modifications • Can now be subject to PSD and Title V due to GHG emissions alone • Thresholds • New source: 100,000 tpy CO2e PTE and 100/250 mass • Modification: 100,000 tpy CO2e PTE and 75,000 tpy CO2e increase from change

16. Tailoring Rule (cont.) • Step 3: • To be completed by July, 2012 • May bring in additional sources • To establish thresholds from July 2013 to April 2016 • Thresholds could stay the same or go as low as 50,000 tpy • Potential Streamlining Techniques • General permits • Presumptive BACT • Defining PTE for smaller sources • Electronic permitting • Applying lean techniques to the permitting process

17. More of Step 2 (of the Tailoring Rule) • More sources are brought into permitting – a source can now be major due only to its GHGs emissions • NSR Thresholds (Step 2): • New sources: • Step 1 sources continue to be subject • PTE of 100,000 TPY CO2e and 100/250 mass basis • Modifications: • PTE of 100,000 tpy CO2e and 100/250 tpy mass basis AND causes a GHG emissions increase and net emissions increase of 75,000 tpy CO2e and greater-than-zero mass basis • Existing minor sources: • Modifications alone resulting in actual or potential GHG emissions of 100,000 tpy CO2e and 100/250 mass basis

18. More of Step 2 (of the Tailoring Rule) (cont.) • Title V: • There will be some sources subject to Title V that have never been subject to permitting before. • These newly-subject Title V sources must apply for a permit by July 1, 2012. • Title V Thresholds (Step 2): • PTE of 100,000 tpy CO2e and 100 tpy mass basis

19. More of Step 2 (of the Tailoring Rule) (cont.) • Two things to watch for in Step 2: • 1) If a source receives a minor permit and does not “Begin Actual Construction by July 1st, 2011 and their GHG PTE is over 100,000 tpy, they are then considered major for GHGs, and would need to go through GHG BACT or get a synthetic minor limit PRIOR TO CONSTRUCTION. This is only for minor permits, not major permits. • 2) For a Step 2 GHG-only major source: If it modifies, the significance levels of non-GHG criteria pollutants do not apply unless the modification causes and increase of over 75,000 tpy CO2e.

20. GHG BACT Analysis • Is the normal 5-step “top down” case-by-case determination • No less stringent than NSPS (upcoming for refineries and power plants) • Currently focus on BACT options that reduce GHGs by improving energy efficiency • In most cases, energy efficiency improvements will satisfy the BACT requirements for GHGs • BACT for a new source may consider source-wide emissions reductions resulting from energy efficiency at the source • May include, for example, non-emitting units such as electric fans, pumps that draw energy from emitting units • BACT for a modified source may consider energy efficiency reductions that are part of the changed emissions unit • Focuses on achieving the highest possible efficiency at the changed emitting unit(s) – e.g., evaluating a 58% turbine when a 57% unit is proposed

21. GHG BACT Analysis (cont.) • Numerical GHG emission limits should be set - (e.g., in lb/MW-hr, tpy) • All GHG BACT decisions should be well documented in the permit record • CO2 CEMS should be considered, but remember the other five GHGs

22. GHG BACT – Step 1 – Identify All Available Controls • Consider: • Inherently lower emitting processes/practices/designs • Add-on controls • Combinations of the two above • Methods/controls applied to similar sources categories that may be available through technology transfer • Clean fuels which reduce GHG emissions should be considered, but not if a change in primary fuel type would fundamentally redefine the source • Permitting authorities have discretion to conduct a broader analysis and consider changes in the primary fuel • Consideration of a cleaner version of the primary fuel is not considered redefining the source in most cases (e.g., cleaner coal types)

23. GHG BACT – Step 1 – Identify All Available Controls (cont.) • Greater use of a secondary fuel is not considered redefining the source in many instances (e.g., Turk Title V petition response – using natural gas as start-up, so it’s available – discuss if can use more of it) • Consider IGCC for coal-fired power plants • Benchmarking Efficiency: • Data on the efficiency of similar new units to “benchmark” facility, process, or facility energy efficiency

24. GHG BACT – Step 2 - Eliminate Technically Infeasible Options • Eliminate those not technically feasible (e.g. not demonstrated in practice successfully) • Carbon Capture and Storage: may be eliminated if any of the 3 components (capture, transport, and storage) working together are deemed technically infeasible • e.g., no space available for CO2 capture equipment at an existing facility; right-of-ways prevent building a pipeline or access to an existing pipeline; no access to suitable geologic reservoirs for sequestration or other storage options

25. GHG BACT – Step 3 – Ranking of Controls • Ranking options include: • Percent pollutant removed • Emissions rate (input- or output-based) • Emissions reduction over time • Ranking of control options should be based on total CO2e, rather than total mass or mass of the individual GHG • For GHGs, try to rank control options based on output-based metrics to fully consider the thermal efficiency of the options • Applicants should include information on: • Each technology’s control efficiency • Expected emissions rate • Expected emissions reduction (tpy)

26. GHG BACT – Step 4 – Economic, Energy and Environmental Impacts • Consider any identified economic, energy, or environmental impacts to confirm or deny the top control option as BACT • Should consider both direct and indirect (collateral) impacts of the control options • Can look at direct impacts in $/ton of pollutant removed (in COe) • This will be much lower than for other pollutants due to the considerable difference in the volume of emissions • Existing methodology for calculating cost effectiveness is appropriate for GHGs • Trade-offs between GHG and other pollutants • When conducting BACT reviews for both GHG and non-GHG pollutants at a source, permitting authorities continue to have discretion to evaluate the trade-offs associated with decreasing one pollutant versus increasing another.

27. GHG BACT – Step 4 – Economic, Energy and Environmental Impacts (cont.) • Use of the Biomass Guidance document • It is in GHG BACT Step 4 where one can use the guidance document to help analyze whether burning biofuel is itself BACT for GHGs (for its CO2 emissions while burning biofuels for energy) • CCS Costs: • Currently, CCS is an expensive technology and may often make the price of electricity from a power plant uncompetitive, even when underground storage of the captured CO2 exists near the power plant • Therefore,CCS will often be eliminated in Step 4 of a GHG BACT analysis based on cost (assuming it is not already eliminated earlier based on technical feasibility)

28. GHG BACT – Step 5 – Selecting BACT • BACT selection essentially should default to the highest level of control for which the applicant could not adequately justify its elimination in BACT step 4 • Permitting authority is responsible to fully justify the BACT decision in the permit record • Documentation and rationale presented must: • Ensure that the applicant has addressed all of the most effective control options that could be applied, and • Show that the applicant has adequately demonstrated that energy, environmental, or economic impacts justify any proposal to eliminate the more effective control options

29. GHG BACT – Step 5 – Selecting BACT (cont.) • Should include a numerical GHG BACT limit • Should focus on longer-term averages (30-day or 365-day rolling average) • Permits can also include conditions requiring the use of a work practice such as an Environmental Management System (EMS) focused on energy efficiency as part of that BACT analysis • The ENERGY STAR program provides useful guidance on the elements of an energy management program

30. EPA Comments on GHG Permits: • To date, EPA has provided comments on nine proposed GHG PSD permits. • Link to the permit comments: http://www.epa.gov/nsr/ghgcomment.html • 1/7/2011 Nucor Iron in Louisiana (direct reduced iron production) • 3/4/2011 WE Energies-Rothschild in Wisconsin (biomass co-gen) • 3/4/2011 PacifiCorp Lakeside in Utah (CC gas turbines) • 4/1/2011 Abengoa Bioenergy in Kansas (biomass) • 5/6/2011 MidAmerican Energy in Iowa • 5/19/2011 Wolverine Power in Michigan (coal/biomass CFB boilers) • 6/30/2011 US Steel-Keetac in Minnesota (taconite production) • 7/29/2011 Cricket Valley Energy in New York (CC gas turbines)

31. EPA Comments on GHG Permits (cont.) • Include adequate support and explanation for form of GHG BACT emissions limit • Numerical emissions limit, or design standard or some other type of requirement if numerical limit deemed infeasible • Ensure practical enforceability, adequate compliance monitoring to measure emissions or efficiency over time (e.g., CO2 CEMS) • Consideration of non-CO2 constituents – methane and N20 – for combustion sources • Provide adequate explanation for rejecting control options (e.g., CCS) based on feasibility or cost. The permit record should clearly show where in the top-down BACT analysis CCS was eliminated as a potential control technology • Proposing to install a “high efficiency” combined-cycle CT as BACT does not meet the definition of BACT (undefined, unenforceable design standard) • Bottom line: documentation of GHG control considerations and BACT limits is important for a proper permit record

32. GHG BACT permit for Wolverine Power: • Permit was issued final on June 29, 2011 • New 600 MW power plant (two CFB boilers to burn coal, pet coke, and biomass) • Permitted to emit up to 2.1 lb/kW-hr of CO2e, and 6,024,107 tpy of CO2e • The 2.1 lb/kW-hr limit is an output-based emission limit based on energy efficiency • Considered the following lower-emitting processes: • Burning natural gas in a gas turbine: decided that a gas supply was not currently available, and the flexibility to burn various fuels is vital to the project. • IGCC: decided it was cost prohibitive • 100% biomass combustion and biomass gasification: decided there was not an available and sustainable biomass fuel source. • Pulverized coal: decided this does not provide flexibility to burn various fuels including biomass

33. GHG BACT permit for Wolverine Power (continued) • Also considered carbon capture and sequestration: decided it was cost prohibitive • Energy efficiency measures considered/chosen: • Variable speed motors over 100 hp • Good combustion/efficient practices for the boilers and other fuel burning equipment • Development of an Energy Efficiency Management Plan (for the entire facility) • Decided on energy efficiency measures and burning 5% biomass - due to utility’s energy portfolio standard. Output-based CO2e BACT emission limits of 2.1 lb/Kw-hr, and a 6,024,107 tpy CO2e limit.

34. GHG BACT permit for WE Energies-Rothschild (cont.) • Permit was issued final on March 28, 2011 • New 50 MW biomass-fueled CFB combined heat and power boiler at an existing paper mill. Will provide steam to the paper mill as well as generate electricity. • Permitted to emit up to a 3,120 lb/mW-hr CO2 • The 3,120 lb/mW-hr limit is an output-based emission limit based on energy efficiency • Considered the following lower-emitting process: • Burning natural gas in a combustion turbine: decided that, (like Wolverine Power) they want to burn biomass because the Renewable Portfolio Standard requires utilities to increase their use of renewable fuel sources • Carbon capture and sequestration: decided it was not feasible because it’s not technically available for similar CFB boilers and there are no nearby sites to sequester CO2. • Energy efficiency measures considered/chosen: • Use of combined heat and power to maximize efficiency • Good combustion/efficient practices for the boilers and other fuel burning equipment • Decided on an energy efficient combined heat and power boiler, good combustion practices, and burning biomass - due to utility’s energy portfolio standard

35. Useful links: • EPA GHG Permitting Web Site: http://www.epa.gov/nsr/ghgpermitting.html • EPA’s GHG Tailoring Rule: http://www.epa.gov/nsr/actions.html#may10 • EPA’s Biomass BACT guidance: http://www.epa.gov/nsr/ghgdocs/bioenergyguidance.pdf • Biogenic CO2 Deferral Rule: http://www.epa.gov/nsr/actions.html#jul11

36. Questions?