PENNSYLVANIA DRAFT MERCURY RULE

1. PENNSYLVANIA DRAFTMERCURY RULE Presented by Gail M. Conner, Esquire March 21, 2006

2. Background • August 9, 2004 Citizens for Pennsylvania’s Future (PennFuture) filed a petition with EQB requesting action to reduce mercury emissions from PA electric utilities. • May 18, 2005, PADEP completed its report on the PennFuture petition and concluded that neither the group’s suggested rule nor CAMR are best for PA. • August 16, 2005, EQB approved PADEP’s recommendation to develop a PA-Specific Mercury Rule to reduce emissions from EGUs with the commitment by PADEP to a HG Rulemaking public involvement process.

3. Background • The rulemaking process would • Examine mercury emission reduction strategies for electric generating units (EGUs); • Encourage the burning of cleaner PA coal • Discourage fuel switching; and • Consider capacity and reliability concerns for delivery of power over the grid. • The EQB approved the recommendation of PADEP to develop a “state-specific” Mercury Rule with a subsequent amendment for PADEP to confer with stakeholders, which included, but not limited to CAC.

4. PRESUMPTIONS • The federal Clean Air Mercury Rule (CAMR) for new and existing coal-fired EGUs is effective in PA. • The EQB directed the PADEP to develop a PA-specific Mercury Rule. • The State Plan for existing EGUs is due to the U.S.EPA, Region III by November 17, 2006 • The State Plan must be at least as stringent as CAMR.

5. PRESUMPTIONS • Mercury removal will be attained through differing strategies as determined by specific combustion unit and fuel mix. • PADEP will draft rule in consultation with CAC, Workgroup, and AQTAC. • CAC, Workgroup and AQTAC will consider the proposed rule prior to submission to the EQB.

6. PUBLIC INVOLVEMENT • Public involved began during the fall of 2005. • Presentations from various parties was freely permitted during the public involvement process including, but not limited to topics such as atmospheric fate and transport of mercury, Hg deposition in PA, other state regulations and PA Fish Advisories in PA for Hg • Delaware River Basin – 8 waterways; • Lake Erie Basin – 3 water bodies; • Susquehanna River Basin – 38 waterways; • Ohio River Basin – 29 waterways; • Potomac River Basin – 2 waterways.

7. Public Involvement - Presentations • Health Effects was another discussion during the Public involvement process which including the following information: • Low dose prenatal methyl mercury exposure associated with poor performance on neurobehavioral tests in young children. • About 600,000 children born in U.S. could have neurological problems because of prenatal methyl mercury exposure. • Methyl mercury is also known to be a toxic to adults causing permanent damage to the brain, kidneys, and cardiovascular system.

8. Final Hg Action Wisconsin Connecticut New Jersey Massachusetts Pending Hg Regulatory Action Illinois Maryland Indiana Virginia North Carolina Michigan Legislative Action Ohio New Hampshire Minnesota Illinois New York Montana Maryland Other States with Mercury Regulatory Action

9. Hg Emissions from Coal-fired Electric Generating Units (EGUs) in PA • 36 coal-burning power plants in PA • In 2003 emitted a total of 3.392 tons • 7.5% of national total • Third to Texas and Ohio

10. PA Lawsuit Challenging EPA’s CAMR and Revised “Appropriate and Necessary” findings that regulation under §112 is neither appropriate nor necessary which established the U.S.EPA basis for the “Cap and Trade” program

11. PA Position • CAMR is not the “control technology” approach contemplated under the hazardous air pollutant provisions of Section 112 of the CAA. • CAMR disadvantages electric generating units burning bituminous and anthracite coals with the most stringent requirements established for units burning waste coal. • Rulemakings do not adequately regulate a potent neurotoxin such as Hg.

12. Status of PA Filed Petitions • PA and others filed petitions for reconsideration on revision action and CAMR. • U.S.EPA granted reconsideration petitions on certain aspects of both final actions. • U.S.EPA took comments on those aspects. • It is anticipated that U.S.EPA will take final action no later than May 2006.

13. General Principals of Draft PA MERCURY Rule • No trading of Hg emission allowances. • Achieve greater reductions in Hg than EPA’s CAMR. • Maximize the Hg reduction co-benefits from other SO2 and NOx emission control programs such as CAIR. • Discourage fuel switching from bituminous coal. • No adverse impact on the capacity and reliability of power generation.

14. Components of Interim Draft PA Mercury Rule • Phase I – Deadline January 1, 2010 • Mercury Emission Standard • unit by unit basis, • Allows emission averaging among units at the same facility. • Compliance presumption – cold-side ESP, wet FGD and SCR where 100% bituminous coal is burned • Alternative emission standard/compliance schedule • Annual Emission Limits • Established for each EGU on ounces per year basis • Based on CAMR allocation distribution • Unit annual emission limit in Phase 1 will be identical to the Phase 2 limit • Provides regulatory assurance for PA to meet the EPA CAMR Hg budgets.

15. Components of Interim Draft PA Mercury Rule • Phase II – DeadlineJanuary 1, 2015 • Mercury Emission Standard – • unit by unit basis, • Allows emission averaging among units at the same facility. • Compliance presumption – cold-side ESP, wet FGD and SCR where 100% bituminous coal is burned • Alternative emission standard/compliance schedule • Annual Emission Limits • Established for each EGU on ounces per year basis • Based on CAMR allocation distribution • Unit annual emission limit in Phase 1 will be identical to the Phase 2 limit • Provides regulatory assurance for PA to meet the EPA CAMR Hg budgets.

16. Components of Interim Draft PA Mercury Rule • Alternative Emission Standard Compliance Application • An EGU can apply to PADEP for an alternative emission standard or schedule.

17. Components of Interim Draft PA Mercury Rule • Annual Emission Limitation Supplemental Pool • PADEP will establish an annual emission limit supplement pool to monitor annual non-tradable mercury allowances as per §123.209 • The pool of annual non-tradable mercury allowances will be administered according to the requirements in § 123.210 (relating to petition process) by PADEP. • There is an order of preference for additional allowances

18. Components of Interim Draft PA Mercury Rule

19. Tentative Hg Rule Timeline • May 3, 2006 – Submit proposed Hg rulemaking to EQB for consideration • May 17, 2006 – EQB action on the proposed rulemaking • Late June, 2006 – Publish Notice of Proposed Rulemaking in the PA Bulletin • July 2006 – Three public hearings in Southeast, Southcentral and Southwestern PA • July/August 2006 – Summarize public comments/develop final-form regulations. Meet with CAC/AQTAC/Workgroup to discuss final-form mercury regulation • September/October 2006 – EQB considers final-form mercury regulation • November 2006 – Independent Regulatory Review Commission Meeting • November 2006 – Publish final mercury rulemaking. • November 2006 – Submit State Plan to EPA Region III