Arkansas Public Service Commission ("APSC") (Collectively "The Agencies")
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Arkansas Department Arkansas Public of Environmental Quality Service Commission 5301 Northshore Drive 1000 Center; P.O. Box 400 North Little Rock, Arkansas 72118-5317 Little Rock, Arkansas 72203-0400 November 26, 2014 Via Electronic Mail Transmission via the Federal eRulemaking Portal and U.S. Mail Delivery Ms. Gina McCarthy Administrator Environmental Protection Agency EPA Docket Center (EP AlDC) Mailcode 28221 T Attention: Docket ID No. OAR-2013-0602 1200 Pennsylvania Avenue, NW Washington, DC 20460 Dear Administrator McCarthy: The attached comments document is submitted jointly on behalf of both the Arkansas Department of Environmental Quality ("ADEQ") and the Arkansas Public Service Commission ("APSC") (collectively "the Agencies"). The purpose of our comments is to provide to the Environmental Protection Agency ("EPA") our technical analysis of and recommendations for the "Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units" proposed rule that was published in the Federal Register on June 18, 2014 ("Proposed Rule"). The Agencies understand that the Attorney General of the State of Arkansas will comment on the legality ofthe Proposed Rule. As the agencies that regulate environmental issues and ensure reliable utility service at just and reasonable rates respectively in our state, ADEQ and APSC began collaborating in preparation for the release of EPA's Proposed Rule months before its publication. These comments are the result of our joint efforts in evaluating the components of the Proposed Rule as they pertain to Arkansas. Under the Proposed Rule, Arkansas would have one of the most stringent goals in the country for reducing the rate of carbon emissions from its electric generating units. As a state small in population, and which is a net exporter of electricity and is home to the nation's only super ultra- critical coal-fired power plant, Arkansas presents unique circumstances which are not adequately accounted for in the goal setting-formula within the Proposed Rule. The 2030 Arkansas goal, which is the sixth most stringent in the United States, is technically flawed and is unattainable under the contemplated timeframe. The Agencies urge changes in the Proposed Rule to avoid unreasonable and inequitable results that may include disruptions to electric service and significant cost impacts in Arkansas and in neighboring states. Also, the Proposed Rule should be clarified and changed in various ways to better enable compliance, particularly for states like Arkansas that can reasonably be expected to rely on net imports from renewable energy generators for some or all of their renewable electricity generation. We appreciate this opportunity to provide our comments to you and we hereby request that they be given your utmost consideration. J. Ryan Benefield, P.E. Colette D. Honorable ADEQ Interim Director APSC Chairman Contents I. Background and General Observations .......................................................... 1 A. Background ............................................................................................. 1 B. General Observations ............................................................................. 2 II. Baseline and Building Block 1 “Heat Rate Improvement” ........................... 5 A. Background ............................................................................................. 5 Table 1: Generator-Specific Emission Rate Method .................................. 5 B. New Plant Emissions (Turk) Almost Completely Excluded from EPA Goal-Setting Compliance Baseline ......................................................... 6 Figure 1: Generation (MWh) from Affected Units ...................................... 7 Figure 2: CO2 Emissions (Tons) from Affected Units ................................. 7 C. 6% HRI Not Reasonable for Existing Coal-Fired EGUs in Arkansas .. 9 Table 2: Arkansas Coal-Fired Plant Heat Rate Comparison ................... 11 III. Building Block 2 “Redispatch to NGCC” ................................................... 12 Table 3: 2012 Arkansas NGCC Emissions Rates Comparison, ............... 13 A. EPA’s Treatment of Combined Heat and Power ................................. 13 Table 4: Effects of UTO Inclusion Using EPA Historical Data ................ 14 Table 5: 2012 Arkansas NGCC Capacity Utilization Comparison .......... 15 Table 6: Generator-Specific Emission Rate Method ................................. 17 B. Effect of NGCC Utilization Patterns on Rate ...................................... 17 C. Nameplate vs. Summer–Rated Capacity ............................................. 17 Table 7: Nameplate Capacity v. Summer-Rated Capacity ....................... 18 D. Air Permit Limitations, Natural Gas Delivery Constraints, and Potential Transmission Constraints .................................................... 18 E. Unit-Level Data .................................................................................... 20 F. Establish ramp rate for redispatch to NGCC from other baseload generation .............................................................................................. 21 G. New-build NGCC .................................................................................. 22 IV. Building Block 3 “Renewable Energy” ....................................................... 22 Figure 3: Building Block 3—Comparison of RE Technical Potential ...... 24 V. Building Block 4 “Energy Efficiency” .......................................................... 26 VI. Rate-Based to Mass-Based Conversion ...................................................... 29 VII. Development and Submittal of State Plans and Compliance .................. 30 VIII. Regional Coordination ............................................................................. 31 A. Flexibility on the Form of Submission ................................................. 31 B. Regional Versus State-Specific Goals .................................................. 31 C. Variable Timing of Collaboration Across States .................................. 31 D. Extension of Time for Submittal of Plans Contemplating Multistate Coordination .......................................................................................... 32 E. Enforcement in a Multistate Context .................................................. 32 F. Support for State Planning and Implementation ................................ 32 IX. Conclusion ................................................................................................... 33 The Arkansas Department of Environmental Quality (hereinafter “ADEQ” or “the Department”) and the Arkansas Public Service Commission (hereinafter “the Commission”) (hereinafter collectively, “the Agencies”) comment below on the Clean Power Plan Proposed Rule (hereinafter “Proposed Rule”) published by the U.S. Environmental Protection Agency (hereinafter “EPA”) on June 18, 2014.1 The Agencies acknowledge that there will be those who comment on the legality of the Proposed Rule, including the Attorney General of the State of Arkansas. However, the purpose of these comments is not to focus on the legal framework and underpinnings of the Proposed Rule. Rather, the Agencies request that EPA consider these comments on the technical aspects of the Proposed Rule. Accordingly, the Agencies urge changes in the Proposed Rule to avoid unreasonable and inequitable results that may include disruptions to electric service and significant cost impacts in Arkansas and in neighboring states, and to clarify and enhance opportunities for state compliance. I. Background and General Observations A. Background The Proposed Rule provides guidelines for states to follow in developing plans to reduce CO2 emissions from electric generating units (hereinafter “EGUs”). The guidelines include a formula that would establish goals for each state to reduce the carbon intensity of EGUs located within its borders. The goals are expressed as emissions rates—pounds of CO2 emitted per megawatt-hour of net electricity generation (hereinafter “lbs CO2/MWh”). The formula establishes for each state an interim emissions goal for the period 2020-2029, and a final emissions goal for 2030. States meet their interim goals through an adjusted average emissions rate. Starting January 1, 2030, each affected state must meet its final goal on a three- calendar year rolling average. EPA bases the interim and final state emission goals on a proposed “best system of emissions reduction” (hereinafter “BSER”) for CO2 emissions from existing power plants. The proposed BSER includes the following four categories of potential emission reductions, or “building blocks” (hereinafter “Block”): 1. Improving efficiency at individual coal-fired units; 2. Increasing use of existing natural gas combined cycle units (hereinafter “NGCC”) in place of higher-emitting coal-fired units; 3. Expanding low- and zero- emissions generation, such as renewable energy (hereinafter “RE”) sources or nuclear energy; and 4. Implementing demand-side energy efficiency (hereinafter “EE”) measures. The goal-setting formula calculates the effect of applying these four policies to an initial fossil EGU emissions rate, which is the weighted average of the emissions rates of a state’s coal and natural gas EGUs during 2012. 1 Source: Docket ID, EPA-HQ-OAR-2013-0602. 1 For Arkansas, EPA’s calculated initial 2012 fossil EGU CO2 emissions rate is 1,722 lbs CO2/MWh. However, when existing renewables and “at-risk” nuclear