CAIR Rural Area Flexibility Analysis
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 (the Department) is proposing to promulgate 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 U.S. 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.
Types And Estimated Number Of Rural Areas Affected
The promulgation of Parts 243, 244, and 245, apply to affected sources statewide. All public and private businesses subject to the regulations, regardless of location, including those in rural areas, will be affected. These requirements are not envisioned to affect local governments, except in the case of Jamestown Board of Public Utilities (JBPU) which owns and operates an affected facility, or citizens of rural areas.
Reporting, Recordkeeping and Other Compliance Requirements; and Professional Services
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.
Part 244 will require affected sources and units to comply with the emission limitation of the program beginning on 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 Budget 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.
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 on 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.
Costs
In the past, with a regulated electric utility industry, the capital cost of the emission control equipment required by the new regulation would have been added to the utility's rate base and recovered through increased electricity rates. In a competitive electricity market as exists now in New York State, there is no guaranteed recoupment of such expenditures.
The Department sought input from the New York State Energy Research and Development Authority (NYSERDA) and the New York Department of Public Service (DPS) with respect to the costs associated with compliance of CAIR and any impacts to the reliability of New York's energy supply. The Department in cooperation with NYSERDA, has conducted an electricity system modeling analysis to estimate the incremental cost of implementing CAIR and a mercury reduction rule in New York. The electricity system modeling analysis compared a reference or business-as-usual case (absent either CAIR or mercury) to each of three policy cases: New York's proposed approach for implementing both CAIR and mercury, CAIR only, and mercury only. CAIR and mercury policies (implemented together, as proposed) could increase wholesale electricity prices by an average of 1.7 percent or $1.14 MWh over the 2010 to 2020 timeframe. For a typical residential customer (using 750 Kwh per month), this translates into a monthly retail bill increase of $0.86.
Minimizing Adverse Impact
The objective of Parts 243, 244, and 245 is to reduce NOx and SO2 emissions statewide. The Rural Area Flexibility Analysis (RAFA) under section 202-bb(2)(b) of the State Administrative Procedures Act (SAPA) requires State agencies to take into consideration issues which may impact the ability of regulated entities in rural areas to comply with regulatory requirements. The Legislature has stated that the ability of private and public sector interests in rural areas to respond to state agency regulations may be constrained by operating environments which are distinctly different from that found in suburban and urban areas, including, among other things, population sparsity, limited access to financial and technical resources, and lack of economies of scale. Agencies must assess the regulatory impact and alternatives for rural areas and whether alternative regulatory approaches such as differing compliance or reporting requirements, the use of performance or outcome standards, or exemptions from applicability are warranted.
The Department has considered these issues and determined that Parts 243, 244, and 245 will not have an adverse impact on rural areas. Parts 243, 244, and 245 affect large industrial electric generators who produce electricity for commercial sale, some of which are located in rural areas. The ability of a facility to meet the requirements of Parts 243, 244, and 245, which may include the installation and operation of pollution control technologies and continuous emission monitors, and recordkeeping and reporting, will not be influenced by the location of the facility in a rural versus a suburban or urban area. As a matter of federal law, the Department is constrained to adopt requirements to control emissions no less stringent than defined by CAIR, which includes emission caps based on the New York State NOx and SO2 budgets and federal reporting requirements.
The promulgation of new Parts 243, 244, and 245, apply to affected sources statewide, including those located in rural areas. Since the regulations apply equally to affected facilities statewide, rural areas are not impacted any differently than other areas in the State. The Department is implementing the CAIR through a cap and trade program. Allowance based cap and trade systems are the most cost effective means for implementing emission reductions from large stationary sources, therefore the Department has attempted to minimize the adverse economic impacts of the program to all sources on a statewide basis.
Rural Area Participation
The SAPA requires agencies to provide public and private interests in rural areas the opportunity to participate in the rule making process and or public hearings. The Department will hold public hearings on Parts 243, 244, and 245 in upstate areas and will notify interested parties of this proposed rulemaking.
Department staff have held stakeholder meetings with affected parties and various representative coalitions and consultants to the electric and cement industry. Copies of the draft regulations were made available to all affected parties prior to initiating the promulgation of the regulations and interested parties afforded informal opportunities for public comment.
