Clean Air Mercury Rule (CAMR)

1. Clean Air Mercury Rule (CAMR) Presentation for WESTAR San Diego, CA September 2005 Peter Tsirigotis Director Emissions, Monitoring, and Analysis Division; U.S. EPA Office of Air Quality, Planning and Standards

2. Key Elements of CAMR • The Clean Air Mercury Rule establishes “standards of performance” to limit mercury emissions from new and existing coal-fired power plants and creates a market-based cap-and-trade program to reduce nationwide utility emissions of mercury in two distinct phases: • The first phase cap is 38 tons and emissions will be reduced by taking advantage of “co-benefit” reductions – that is, mercury reductions achieved by reducing sulfur dioxide (SO2) and nitrogen oxides (NOx) emissions under CAIR • In the second phase, due in 2018, coal-fired power plants will be subject to a second cap, to reduce emissions to 15 tons upon full implementation • New coal-fired power plants (“new” means construction starting on or after Jan. 30, 2004) will have to meet new source performance standards in addition to being subject to the caps • CAMR sets an emission reduction requirement for each State and Indian country, by distributing the national emissions cap among the States and Indian country • Provides an optional cap-and-trade program based on successful Acid Rain and NOx Budget Trading programs • Allows States flexibility on how to achieve the required reductions, including whether to join the trading program

3. Benefits of the Clean Air Mercury Rule • CAMR will build on EPA’s Clean Air Interstate Rule (CAIR) to significantly reduce emissions from coal-fired power plants -- the largest remaining sources of mercury emissions in the country. • When fully implemented, these rules will reduce utility emissions of mercury from 48 tons a year to 15 tons, a reduction of nearly 70 percent. • Because excess emissions reductions can be banked under the first phase, Hg emissions are projected to be 31 tons in 2010 - - a 35% reduction in total Hg emissions and a proportionally higher reduction of non-elemental mercury. • EPA’s modeling shows that CAIR will significantly reduce the majority of the coal-fired power plant mercury emissions in the United States, and those reductions will occur in areas where mercury deposition is currently the highest. • CAMR is expected to make additional reductions in emissions that are transported regionally and deposited domestically, and it will reduce emissions that contribute to atmospheric mercury worldwide. • Emission reductions occur while economic strength is preserved. • The U.S. maintains both low electricity prices and fuel diversity. The first-ever federal rule to permanently cap and reduce mercury emissions from coal-fired power plants.

4. CAIR and CAMR Implementation Timeline CAIR Phase I: CAIR NOx Programs (ozone-season and annual) (09) Early Reductions for CAIR NOx ozone-season program and CAIR SO2 program begin immediately because NOx SIP Call and title IV allowances can be banked into CAIR CSP Early Emission Reduction Period (annual CAIR NOx program) (07 and 08) SO2 Monitoring and Reporting Required (09) States develop SIPs (18 months) NOx Monitoring and Reporting Required (08) Phase II: CAIR NOx and SO2 Programs Begin (15) SIPs Due (Sep 06) Phase I: CAIR SO2 Program (10) CAIR Rule signed 08 05 06 07 09 10 11 12 13 14 15 16 17 18 Hg Monitoring and Reporting Required (10) CAMR Rule signed Phase II: Hg Program (18) SPs Due (Sep 06) Phase I: Hg Program (10) States develop SPs (18 months) CAMR Note: Dotted lines indicate a range of time.

5. Cap and Trade Mechanism: Allowance Allocation and Markets • Set state budgets • Establish trading program • and market procedures • Administer tracking systems • Define allowance allocation • parameters • State Plan detailing how it will meet its budget for reducing mercury from coal-fired power plants • Voluntary trading program • - Adopt rules/program in 18 months • - Allocate Hg allowances • EPA is working to provide a smooth transition to new trading program • Designed with existing cap and trade programs in mind • Integration with CAIR program EPA ROLE STATE ROLE

6. State Requirements under CAMR • States must submit a State plan under 111(d) that includes: • A description of control measures to meet the statewide mercury budget • Fully-adopted State rules for the mercury reduction strategy with compliance dates providing for control by 2010 • Each State must impose control requirements that demonstrate it will meet its assigned statewide Hg emissions budget. • States may join the trading program by adopting or referencing the model trading rule (40 CFR part 60, subpart HHHH) in State regulations or adopting regulations that mirror the necessary components of the model trading rule. • States’ responsibilities include: • Identification of affected sources, permitting and allocation of allowances • Verification: reviewing monitoring plans and approving certification applications; observing QA testing and performing audits • Lead in pursuing enforcement actions • State can choose to implement more stringent Hg emissions requirements.

7. Legal Challenges – 112 Revision Notice • State of NJ et al v. EPA (03-29-05) • DC Circuit No. 05-1097 • 10 Petitions for Review • 14 States (CA, CT, DE, IL, ME, MA, MN, NH, NJ, NM, NY, PA, VT and WI) • 10 Environmental Groups (NWF, Sierra, ED, CBF, CLF, WA, OEC, PIRG, NRCM and NRDC) • Administrative Stay • Denied June 24, 2005 • Judicial Stay • Denied August 4, 2005

8. Legal Challenges – 111 CAMR • State of NJ et al v. EPA (05-18-05) • DC Circuit No. 05-1162 • 15 Petitions for Review • 14 States and 1 City (CA, CT, DE, IL, ME, MA, MN, NH, NJ, NM, NY, PA, VT and WI; City of Baltimore) • 9 Environmental Groups (NWF, Sierra, ED, CBF, WA, OEC, PIRG,NRCM and NRDC) • 14 Industry Groups (IWSA, S. MT Elec. Gen & Trans. Coop., Am. Coal for Balanced Hg Reg, Coal Assoc. (AL, KY, MD, OH, PA, VA, WV), ARIPPA, UARG, UMW, Produce of Electric Reliability) • Administrative Stay • Denied August 19, 2005 • Judicial Stay • No request to date.

9. Administrative Petitions for Review – 112 Revision Notice • 2 Petitions for Review • Submitted to EPA on May 31, 2005 • 14 States (CA, CT, DE, IL, ME, MA, MN, NH, NJ, NM, NY, PA, VT and WI) • 5 Environmental Groupsand 4 Native American Groups • NRDC, CATF, OEC, PIRG, and NRCM • Aroostook Band of Micmacs, Houlton Band of Maliseet Indians, Penobscot Indian Nation and Passamaquoddy Tribe of Maine • EPA Action • By letter dated June 24, 2005: • Announced plans to initiate reconsideration process for the Section 112 rule; and, • Stated the Agency would not stay the rule pending completion of the reconsideration process

10. Administrative Petitions for Review – 111 CAMR • 4 Petitions for Review • Submitted to EPA on July 18, 2005 • 15 States (CA, CT, DE, IL, ME, MA, MN, NH, NJ, NM, NY, PA, RI, VT and WI) • 5 Environmental Groups (NRDC, CATF, OEC, PIRG, and NRCM) • Integrated Waste Services Association (IWSA) • Jamestown Board of Public Utilities • EPA Action • By letter dated August 19, 2005: • Announced plans to initiate reconsideration process for the Section 111 CAMR; and, • Stated the Agency would not stay the rule pending the reconsideration process