CAIR Regulatory Flexibility Analysis for Small Businesses and Local Governments
6 NYCRR Part 243, CAIR NOx Ozone Season Trading Program, 6 NYCRR Part 244, CAIR NOx Annual Trading Program, 6 NYCRR Part 245, CAIR SO2 Trading Program
The Department of Environmental Conservation (Department) proposes to adopt 6 NYCRR Part 243, CAIR NOx Ozone Season Trading Program, 6 NYCRR Part 244, CAIR NOx Annual Trading Program, and 6 NYCRR Part 245, CAIR SO2 Trading Program.
The proposed New York State Clean Air Interstate Rules (CAIR) will establish cap-and-trade programs designed to mitigate interstate transport of NOx and SO2 to help reduce ozone and fine particulate formation in CAIR states located in the eastern United States. On April 25, 2005, the United States Environmental Protection Agency (EPA) issued a final administrative action in which it made findings that numerous states, including New York State, had failed to submit State Implementation Plan (SIP) provisions that EPA determined are required under the federal Clean Air Act (CAA) Section 110(a)(2)(D) to address interstate pollutant transport with respect to the national ambient air quality standards (NAAQS) for ozone, and particulate matter with an aerodynamic diameter less than or equal to a nominal 2.5 micrometers (PM2.5). This will assist eastern states in attaining ozone and PM2.5 NAAQS. New York State was identified by EPA as a state that must address emissions of NOx and SO2 because it contributes to nonattainment of both the ozone and PM2.5 NAAQS in downwind states.
Effects on Small Businesses and Local Governments
No small businesses will be directly affected by the adoption of new Parts 243, 244, and 245.
One local government will be affected by the adoption of these programs. The Jamestown Board of Public Utilities (JBPU), a municipally owned utility, owns and operates the S. A. Carlson Generating Station (SACGS). The emissions monitoring at SACGS currently meets the monitoring provisions of CAIR. Therefore, no additional monitoring costs will be incurred as a result of implementation of CAIR. The costs associated with CAIR will be dictated by how JBPU decides to comply with the provisions of the regulation.
It should be noted that the CAIR rules will apply to JBPU even if New York State does not adopt this rule because EPA has established a Federal Implementation Plan (FIP) that would implement CAIR in states that do not adopt an approvable rule.
Compliance Requirements
The JBPU, as owner and operator of the SACGS, will need to comply with the provisions of CAIR, as described below.
Part 243 will require affected sources and units to comply with the emission limitation of the program beginning with the 2009 ozone season control period. In order to meet the necessary permit requirements, the authorized account representative of each CAIR NOx unit shall submit to the Department a complete CAIR NOx permit application for the source covering each CAIR NOx Ozone Season unit at the source at least 12 months before the later of May 1, 2009 or the date on which the CAIR NOx Ozone Season unit commences operation.
Each year, the owners and operators of each source subject to Part 243 and each unit at the source shall hold a number of NOx allowances available for compliance deductions, as of the NOx allowance transfer deadline (Midnight of November 30 or, if November 30 is not a business day, midnight of the first business day thereafter), in the source's compliance account that is not less than the total tons of NOx emissions for the control period. A unit is subject to this requirement starting on the later of January 1, 2009 or date the unit commences operation (for SACGS this date is January 1, 2009).
Part 244 will require affected sources and units to comply with the emission limitation of the program beginning January 1, 2009. In order to meet the necessary permit requirements, the authorized account representative of each CAIR NOx unit shall submit to the Department a complete CAIR NOx permit application for the source covering each CAIR NOx unit at the source at least 12 months before the later of January 1, 2009 or the date on which the CAIR NOx unit commences operation (for SACGS this date is January 1, 2009).
Each year, the owners and operators of each source subject to Part 244 and unit at the source shall hold a number of NOx allowances available for compliance deductions, as of the NOx allowance transfer deadline (midnight of March 1, or if March 1 is not a business day, midnight of the first business day thereafter), in the source's compliance account that is not less than the total tons of NOx emissions for the control period. A unit is subject to this requirement starting on the later of January 1, 2009 or date the unit commences operation.
Part 245 will require affected sources and units to comply with the emission limitation of the program beginning January 1, 2010. In order to meet the necessary permit requirements, the authorized account representative of each CAIR SO2 unit shall submit to the Department a complete CAIR SO2 permit application for the source covering each CAIR SO2 unit at the source at least 12 months before the later of January 1, 2010 or the date on which the CAIR SO2 unit commences operation.
Each year, the owners and operators of each source subject to Part 245 and unit at the source shall hold a number of SO2 allowances available for compliance deductions, as of the SO2 allowance transfer deadline (midnight of March 1, or if March 1 is not a business day, midnight of the first business day thereafter), in the source's compliance account that is not less than the total tons of SO2 emissions for the control period. A unit is subject to this requirement starting on the later of January 1, 2010 or date the unit commences operation (for SACGS this date is January 1, 2010).
Professional Services
The one local government affected by CAIR, the JBPU, may need to hire outside professional consultants to comply with new Parts 243, 244, and 245. This work would likely be associated with any analyses needed to determine the optimal manner in which to comply with the regulations. If it is determined that capital investments are needed to comply, design and construction management services will likely need to be procured.
Compliance Costs
The JBPU will need to either limit emissions at the SACGS to no more than its allowance allocations under Parts 243, 244, and 245 or purchase allowances equal to the number of tons emitted in excess of the number of allowances initially allocated to it. Given the highly variable nature of control equipment cost, the Department limited the analysis of control costs to the purchase of allowances to comply with the program and assumed that costs of allowances will be the sum of the EPA estimated marginal cost for the ozone season NOx program ($2,400 per ton of NOx in 2009 and $3,000 per ton of NOx in 2015) multiplied by the difference in allocation from Part 204 to Part 243; the EPA estimated marginal costs for the annual NOx program in the non-ozone season ($1,400 per ton of NOx in 2009 and $1,600 per ton in 2015), multiplied by the difference in allocation for Part 237 and Part 244 minus the difference in allocation for ozone season program; and the EPA estimated marginal cost for the annual SO2 program ($700 per ton SO2 in 2010 and $1,000 per ton in 2015) multiplied by the sum of the Title IV allowances allocated minus the product of the number of tons emitted times the CAIR SO2 retirement ratio (2 in 2010 and 2.85 in 2015). The cost of purchasing allowances to comply with the program is the maximum cost to the facility. Installing controls to reduce emissions may be a less expensive alternative. The Department estimated allocations for SACGS and subtracted those allocations from 2006 facility emissions. The estimated cost for purchasing allowances was determined to be approximately $1.4 million annually for the period from 2010 through 2014 and $2.4 million in 2015 and beyond. It should be noted that these costs will occur at this facility even if this rule is not adopted because EPA would implement this program through the FIP if New York State does not adopt these rules.
Economic and Technological Feasibility
The JBPU has the option to do any combination of the following to comply with CAIR: control NOx and SO2 emissions from the facility, increase operation of the lower emitting natural gas-fired turbine, or purchase allowances. There are NOx and SO2 control technology options available to the SACGS. The Department has not determined that any or all of these options are technologically or economically infeasible to apply to SACGS.
Minimizing Adverse Impact
The promulgation of new Parts 243, 244, and 245 do not directly affect small businesses. One local government is affected by CAIR - the JBPU. CAIR constitutes an emissions allowance based cap-and-trade program. Cap-and-trade systems are the most cost effective means for implementing emission reductions from large stationary sources. By implementing CAIR in such a manner, the Department has attempted to minimize the adverse economic impacts of the program on the JBPU.
Under 6 NYCRR Part 204, NOx Budget Trading Program, the SACGS was given a specific allocation for each year as opposed to being included in the formulaic allocation procedures. This is different than how SACGS will be allocated under CAIR. To determine the allocation procedures for Part 204, the Department convened a series of allocation workshops which resulted in an agreed upon allowance allocation procedure with all of the affected parties. This agreed upon procedure treated SACGS differently than the remainder of the sources through the allocation of a specific number of allowances prior to the remaining sources being allocated through the formulae. The Department felt it was proper to allocate SACGS differently because the allocation was based on a broad consensus among the affected parties. In the CAIR rule making, the Department did not convene such an allocation process because the intervening deregulation of the electricity generating industry put sources into a more competitive position and the prospect of an agreed upon allocation procedure was deemed to be remote. Instead, the Department devised an allocation procedure that it deemed fair and equitable to all affected sources. This procedure does not include a separate allocation mechanism for any one particular source. In other words, all affected electric generators are treated the same.
Small Business and Local Government
The Department will directly notify interested parties on the requirements of Parts 243, 244, and 245, including the City of Jamestown. The public, including small business and local governments, will be able to comment on the proposed rule during the comment period required by SAPA 202 and ECL Section 19.0303.
