Draft Final Annex to the GCVTC Report

September 25, 2000

Outline of Presentation

Contents of Annex Resolution of Outstanding Issues Ongoing work

The Annex

Description of Milestones and Trading Program– Executive Summary– Description of Decisions – Annex Recommendations– Model Rule (Attachment A)– Memorandums of Understanding (Attachments

B & C)

The Annex

Supporting Documentation– Greater Reasonable Progress than BART

demonstration (Attachment D)– List of BART Eligible Sources (Attachment E)– Distribution of Allocations by Industrial Sector

and State (Attachment F)– Reallocation of Tribal Set-Aside (Attachment G)– Other support documents (Attachment H)

The Annex

Other Supporting Documentation - numerous documents– Emissions Data Refinement– Economic Impact Study– Visibility Analysis– Others ...

Resolution of Outstanding Issues

Milestones– The Numbers– The Mohave Error– Compliance and Averaging– CEMS Bias

Allocations– New Source Set-aside– Individual Source Allocations

Opt-in/Opt-out - distribution of set-asides

Resolution of Outstanding Issues

Viability of the Market Audit and Reconciliation Greater Reasonable Progress than BART

Milestones - Principles

Achieve Steady Continuing Emissions Reductions

Provide Flexibility to Sources “Up-Front” for Greater “Back-End” Reductions

Policy driven Informed by best available information

2018 Milestone - Revised Basis

Baseline emissions projection 622,000 tons– Known reductions– Assumed retirements & tech. changes– New source & utility growth– Operational adjustments

Estimated BART reductions -168,000 Utility CEM adjustment - 10,000 Uncertainty/Headroom + 35,000 Total (rounded to nearest 5,000) 480,000 Smelter Set-aside + 30,000 2018 Milestone 510,000

SO2 Milestones

831

723 720 715

655

510

480

682677

625

0

100

200

300

400

500

600

700

800

900

1990 2000 2010 2020 2030 2040

GC

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C R

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Ann

ual S

O2

of T

ons

(000

)

w/ Smelter Set-aside w/o Smelters

13% Reduction

52% Reduction

Compliance with Milestones(hypothetical case)

500

550

600

650

700

750

2003 2005 2007 2009 2011 2013 2015 2017 2019

GC

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C R

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nnua

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2 T

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(000

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Compliance with Milestones - 2003 thru 2006

500

550

600

650

700

750

2003 2005 2007 2009 2011 2013 2015 2017 2019

GC

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C R

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(000

)

Compliance with Milestones - 2003 thru 2006The Mohave Problem Solved

650

675

700

725

750

775

2003 2004 2005 2006

GC

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C R

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2 T

ons

(000

)

w/o Mohave Post-control Mohave Pre-control Mohave

MilestoneCommitted Emissions Reductions

Compliance with Milestones - 2003 thru 2006The Mohave Problem Solved

650

675

700

725

750

775

2003 2004 2005 2006

GC

VT

C R

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nwid

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nnua

l SO

2 T

ons

(000

)

w/o Mohave Post-control Mohave

Milestone

Compliance with Milestones(hypothetical case)

500

550

600

650

700

750

2003 2005 2007 2009 2011 2013 2015 2017 2019

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(000

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Milestone Emissions 3yr Avg. Emissions

2013 Avg.Milestone

2014 Avg.Milestone

2 yr average

1 yr Check

1 yr Check

CEMS Bias

Blanket adjustment of milestones would be spurious

Protocol to be developed that will revise milestones based upon documented impact of new technology and revised procedures on a source-by-source basis.

Adjustment of milestones may require SIP revisions

Allocations

New Source Set-aside– Estimated 27,000 tons of growth 2003-2018– 9,000 tons per five year period– Available on first-come first-served basis– Unused tons would roll-over to next period– New sources needing to buy credits would be

first in line for next five year period

Allocations

Individual Source Allocations– Actual allocations not necessary - need to

submit allocation method– Estimates prepared - See Appendix F– Final determination of individual source floors

for non-utilities needed

Opt-in/Opt-out

Existing source allocations Distribution of set-asides

– New source growth based on projections developed by ICF and Pechan-Avanti on a state-by-state geographic area basis

– Tribal allocation (See Appendix G)

Penalties for Exceeding Allowances

$5,000/ton, CPI adjusted from 2000 base year

Mitigation - 2 ton credit reduction in allocation for each ton over-emitted

Better Reasonable Progress Than BART

Provides both remedy for existing and prevention of future impairment.

More sources and total tonnage covered. New source growth capped for the region. Mass-based cap on actual emissions. Greater total tonnage reduction. Regional haze visibility improvement not

distinguishable from application of BART.

Other Issues

Audit and Reconciliation– Working with EPA to include in program

Viability of Market– Majority of reductions in Colorado, Wyoming

& Arizona– Hire contractor to evaluate

Continuing Work

Allocations Polished Annex for submittal October 2 Draft Revisions to §51.309 Final resolution of outstanding EPA issues

Other Questions?