State of Oregon

Department of Environmental Quality  Memorandum

Date:  November K, 2010

To:    Environmental Quality Commission

From:    Dick Pedersen, Director

Subject:  Agenda Item K, Action Item: Revisions to DEQ Regional Haze BART Rules for the PGE Boardman Power Plant

   December 9, 2010 EQC Meeting

Background and Need for Rulemaking

This report is organized into the following sections:

1. Summary of federal Regional Haze requirements and 2009 DEQ BART rule for the PGE Boardman coal-fired power plant

2. PGE and DEQ rule options developed in 2010 to explore BART controls with PGE Boardman closure.

3. New PGE proposal for BART with permanent closure of the Boardman coal-fired power plant no later than December 31, 2020.

4. Other issues affecting the future of the PGE Boardman facility.

5. DEQ recommendation to the EQC.

6. Summary of public comment received by DEQ on rule options.

1. Summary of federal Regional Haze requirements and 2009 PGE Boardman BART rule.

The federal Regional Haze Rule requires states to adopt plans to improve visibility in 156 Class I areas across the country. These plans must address Best Available Retrofit Technology (BART) for certain older industrial facilities built before 1977, by evaluating whether they cause significant visibility impacts in wilderness areas and national parks (Class I areas), and if so, requiring new pollution controls be installed within five years.

The PGE Boardman plant is a 600 megawatt coal-fired electric generating plant, which currently emits about 25,000 tons of air pollution per year. Originally permitted in 1977, PGE Boardman is Oregon’s only coal-fired power plant, and represents approximately 20 percent of PGE’s total energy generating capacity.

In 2009 the Environmental Quality Commission adopted the Oregon Regional Haze Plan, which included BART rules for the PGE Boardman coal-fired power plant, to address significant visibility impacts in 14 in Class I areas in Oregon and Washington, including the Columbia River Gorge National Scenic Area. The 2009 rules for the Boardman plant were a two-phased approach that would reduce total emissions by 81 percent, or about 21,000 tons per year, and reduce peak visibility impacts in the 14 Class I areas by an average of 83 percent, at a total cost of $498 million dollars¹. Phase one controls would cut nitrogen oxide (NO_x) emissions by 46 percent in 2011, and sulfur dioxide (SO₂) emissions by 80 percent in 2014. Phase two would further reduce NO_x emissions by an additional 36 percent in 2017 by requiring Selective Catalytic Reduction (SCR) controls. The plant would continue to emit about 4,700 tons per year for the remainder of the plant life.

The 2009 Plan contained a provision that if PGE decides an early closure of the plant is needed due to federal greenhouse gas regulations, PGE could submit a formal request to DEQ for a rule change.

Figure 1: Summary of emission reductions under the 2009 rules

2. PGE and DEQ rule options developed in 2010 to explore BART controls with PGE Boardman closure

Over the course of 2010, PGE submitted three separate proposals for revisions to DEQ’s 2009 BART rules for Boardman, which reflects PGE’s plan to close the plant in 2020. PGE’s first proposal included emission reduction controls that DEQ found to be inadequate for meeting federal BART requirements. In response, DEQ developed three separate emission reduction options to meet BART that contained three possible closure dates in 2015, 2018, and 2020. Before seeking formal public comment, PGE submitted a second proposal that was more closely aligned with DEQ’s middle option. All four proposals were taken out for public comment in September. Then in November, at the request of PGE and several stakeholder groups, DEQ reopened the public record to consider a third proposal from PGE that was different than the prior proposals, in that it included a permanent closure of the Boardman plant in 2020, eliminating the 2009 BART rules, and more stringent BART controls between 2018 and 2020 closure.

Below is a brief summary that provides more information on PGE’s proposals and DEQ’s options that were part of the first public comment period. Section 3 below describes PGE’s third proposal that lead to the re-opening of the comment period.

April 2010. PGE submitted their first proposal as part of a petition to the Commission to revise the 2009 rules for the Boardman plant. PGE proposed to meet the BART requirements by primarily burning low sulfur coal, and eliminate the other pollution control requirements, in conjunction with an early closure of the plant by December 31, 2020.

June 2010. The Commission denied PGE’s petition citing that the emission controls proposed by PGE were inadequate to meet BART, and instead directed DEQ to examine a wider range of possible BART pollution control options consistent with an early closure of the plant, and proceed with revisions to the 2009 rules.

July 2010. DEQ developed three emission reduction options, and solicited public input during the month on this rule proposal. A summary of these three options are provided in Table 1 below, as well as a comparison to DEQ’s 2009 BART rules for the Boardman plant. It should be noted that DEQ does not have authority to require closure of the PGE Boardman plant, and developed these options to give PGE a choice on different ways to meet the federal BART requirements.

Table 1: Summary of DEQ Three Emission Reduction Options

Option

Controls/Installation Date

Capital Cost

(million $)

Emission reduction tons/year

(+percent)

Closure Date

2011

(NO_x)

2014 (SO₂)

2017 (NO_x)

2009 Rules

(adopted)

LNB/MOFA

Semi-dry Scrubber

SCR

$497.6

20,800 (81%)

Option 1

2020

LNB/MOFA/

SNCR

Semi-dry Scrubber

-

$320.6

17,800

(69%)

Option 2

2018

LNB/MOFA/

SNCR

DSI*

-

$102.6

10,600

(41%)

Option 3

2015/16

LNB/MOFA

-

-

$35.7

4,800

(19%)

After closure, all Boardman pollution would be zero. This would reflect the permanent elimination of approximately 25,000 tons per year of haze pollution as well as mercury and greenhouse gas emissions

* Subject to pilot study evaluation

Table legend:

NOx Controls:

•  LNB/MOFA = Low NO_x burners with modified overfire air system.

•  SNCR = Selective Non-Catalytic Reduction system.

•  SCR = Selective Catalytic Reduction.

SO2 controls:

•  Semi-dry Scrubber, also known as semi-dry flue gas desulfurization system.

•  DSI = Dry Sorbent Injection

As noted in Table 1, each option pairs appropriate BART control technology with a different possible closure date. In general, the longer the facility operates, the more stringent BART controls are needed to satisfy federal requirements. For example, for a 2020 closure (Option 1), the appropriate BART controls are Low NOx burners with overfire air, and SO2 semi-dry scrubbers, but no Selective Catalytic Reduction (SCR) NOx controls as required by the 2009 rules. For a 2018 closure, the same Low NOx burners but less advanced SO2 controls, or Direct Sorbent Injection (DSI), which are more cost effective in this case. For a 2015 closure (Option 3), the same Low NOx controls, but no other SO2 controls. All three options were proposed as an addition to the existing rules, and thus give PGE the choice of different options or meeting the existing 2009 BART rules.

August 2010. To review the possible economic impacts of DEQ’s three options, DEQ convened a Fiscal Advisory Committee. Membership included a wide range of interests and stakeholders, including the Public Utilities Commission, Citizens Utility Board, PGE, Morrow County, Port of Morrow, business, environmental groups, and tribes. The committee found that there would likely be an indirect impact from increased electricity rates to small businesses and other customers served by the Boardman plant. See page x of this report for additional information on the fiscal impact associated with this rulemaking.

September 2010. DEQ started a 30-day public comment period, and held five public hearings in Portland, Eugene, Medford, Bend, and Hermiston. In addition to seeking comments on DEQ’s three options, DEQ also asked for comment on the following:

•  PGE’s BART III 2020 plan. PGE’s second proposal was very similar to DEQ’s Option 2, in that it included the same controls and costs, but would allow the plant to operate until 2020 instead of 2018. PGE also proposed a “pilot study” for the DSI controls to confirm they could meet the required emission limit without negatively impacting mercury controls or increasing particulate emissions, to the point where expensive additional particulate controls would be required. Because of the additional two years of operation than DEQ’s Option 2, this proposal represented a lower cost-effectiveness level for BART of $5,500, rather than the $7,300 in DEQ’s three options.

•  DEQ’s Cost Effectiveness Threshold. In addition to the three options, DEQ asked for comment on the appropriateness of the BART cost effectiveness threshold of $7,300/ton. This cost threshold reflected the high end of the range used by other states. DEQ believed this high threshold was warranted given the very large geographic scope and magnitude of PGE’s haze impacts. Emission control options costing more than $7,300/ton were not included.²

3. New PGE proposal for BART with permanent closure of the Boardman coal-fired power plant in 2020.

In late October, PGE and several citizen groups formally asked DEQ to re-open the public record to consider and take comment on a new proposal from PGE modifying their BART III plan. There are two crucial differences between PGE’s prior proposal and this new one.

First, PGE would install NOx and SO2 emission controls that meet federal BART requirements and would guarantee permanent closure of the Boardman coal-fired boiler by no later than December 31, 2020. All other BART options would be eliminated, including DEQ’s 2009 BART rule under which PGE could install expensive BART controls and continue operating the Boardman facility until 2040 or beyond.

Second, DEQ would establish increasingly stringent emission limits for SO2, beginning with 0.4 lb/MMBtu for the 2014 to 2018 timeframe, and then reducing to 0.3 lb/MMBtu from 2018 to closure in 2020.

The proposed plan, upon EPA approval, would repeal the 2040 option in the 2009 rules that requires an approximately $460 million dollar investment in controlling emission for sulfur dioxide and nitrogen dioxide, replacing it with a 2020 closure plan. The new plan would require approximately $44 million dollars for nitrogen oxide emission controls and $23 to $52 million dollars for sulfur dioxide emission controls in the 2011-2020 timeframe. By 2014, nitrogen oxide and sulfur dioxide emissions would be reduced by about 10,900 tons per year, with another 2,400 tons per year reduced by 2018, and all remaining emissions from the plant eliminated after 2020.

On October 29, 2010, DEQ reopened the public comment period for about two weeks to take additional comments on PGE’s new proposal. DEQ held two public hearings, in Portland and Boardman.

A summary of these comments and those from the first comment period can be found in Attachment B: Summary of Public Comments and Agency Response, and Attachment C: Hearing Officer’s Report on Public Hearings.

Need for DSI Pilot Studies

As noted above, both DEQ’s Option 2 and PGE’s proposal are based on the use of Dry Sorbent Injection or DSI control technology. DEQ has proposed an emission limit based on a DSI system achieving a 35 percent reduction in SO₂ emissions, which is a conservative level, given the fact that DSI has not been installed on at a facility as large as PGE Boardman. Therefore, PGE proposed to install the DSI system and conduct a pilot study to ensure that DSI did not negatively impact the mercury controls scheduled to be installed in 2011 as required by other DEQ rules, or result in increases in particulate emissions that could require additional controls. A second pilot study was proposed for after DSI is installed to determine if a lower SO₂ emission limit can be achieved.

List SO2 controls, timeline and emission limits linked with each pilot study, could use info from the EQC slide about fall back emission limits and how these are maximum limits, and day-to-day emissions should be less.

Removal of SNCR as a control requirement

In developing DEQ’s three emission reduction options described above, one of the BART controls used to set the emission limits for Options 1 and 2 was Selective Non-Catalytic Reduction (SNCR). However, upon further analysis, DEQ determined that SNCR was not cost effective due to the fact it provided very little additional visibility improvement in the affected Class I areas. ³ Another factor for rejecting SNCR was the possible side effect of excess ammonia emissions, which can produce fine particulate matter (PM_2.5) emissions, and potentially cause an adverse impact on the PM_2.5 ambient air quality standard.

4. Other issues affecting the future of the PGE Boardman facility.

Upcoming Federal Hazardous Air Pollutant Emission Standard

In March 2011, EPA is expected to propose new rules to address hazardous air pollutants from power plants like the PGE Boardman plant. Final adoption of these rules is expected in November 2011. It is anticipated that the rules will address acid gases (HCl and HF), as well as mercury. The same types of controls considered for the BART rules, or perhaps even more stringent controls, could be required by EPA under these new rules. This could affect PGE’s decision making on an even earlier closure. Since these rules have not yet been proposed, it is unknown how this could affect the Boardman plant.

PGE-Stakeholder Law Suit

Currently PGE is being sued by a coalition of environmental groups over alleged violations of DEQ’s air quality rules. This law suit may take years to resolve, and is one consideration for PGE in planning the future of the Boardman facility.

EPA Notice of Violation

In October, EPA issued a Notice of Violation (NOV) to PGE for possible violations of air quality requirements under the Clean Air Act. EPA is currently conducting its investigation. As with the law suit above, this matter may take years to resolve, and is one consideration for PGE in planning the future of the Boardman facility.

Oregon Public Utilities Commission

On November 23, 2010 the Public Utility Commission of Oregon acknowledged (with requirements) PGE’s 2009 Integrated Resources Plan (IRP) and 2010 Addendum. PUC staff recommended that the Commission (PUC) acknowledge PGE’s BART III proposal, adding that the Commission should not acknowledge PGE’s BART I backstop proposal, but instead require PGE to present an alternative proposal and supporting analysis in its next IRP update if the Environmental Quality Commission does not adopt PGE’s BART III approach.

5. DEQ recommendation to the EQC.

After reviewing all the public comments (see summary on page xx) and reevaluating all the proposals, DEQ recommends the changes outlined in A and B below:

A.  Revise DEQ rules to adopt PGE’s new BART proposaland the following:

•  Permanent closure of the Boardman coal-fired boiler no later than December 31, 2020.

•  Low NOx burners to meet BART as proposed by DEQ and described in Section 2.

•  DSI controls to meet BART as proposed by DEQ and described in Section 2.

•  A more stringent SO2 limit from 2018-2020, as noted below in Table 2.

•  Conducting pilot studies for DSI in 2014 and 2017, as described in Section 2.

•  Repealing the PGE Boardman BART rules adopted in 2009

Table 2 below summarizes the emission reductions and resulting visibility improvements from the recommended rule change.

Table 2: Summary of the new 2020 rule proposal

BART control technology

Compliance Date

Emission reduction tons/year

(+percent)

Mt. Hood Visibility Impacts

(dv)

Visibility Improvement

(dv)

Baseline

----

---

4.98

---

LNB/MOFA

7/1/11

4,800 (19%)

3.54

1.44

+ DSI-1 *

7/1/14

9,950 (39%)

2.57

2.41

+ DSI-2 *

7/1/18

12,400 (48%)

2.23

2.75

+ Plant Closure

12/31/20

25,500 (100%)

none

4.98

The total reduction in haze pollution (NOx + SO2+Particulate) upon closure would be approximately 25,000 tons per year.

The Boardman facility is permitted to emit a maximum level of approximately X tons/year. Closure will eliminate these allowable emissions as well.

* Subject to pilot study evaluation

Notes:

Baseline = visibility impact with no controls

LNB/MOFA = Low NO_x burners with modified overfire air system.

adds DSI 1 = Dry Sorbent Injection @ 0.40 lb/mmBTU SO₂ emission limit

adds DSI 2 = Dry Sorbent Injection @ 0.30 lb/mmBTU SO₂ emission limit.

B.  Adopt DEQ’s Option 3 as a contingency measure. As described earlier, a number of factors beyond BART requirements could lead to PGE desiring a BART/closure option earlier than 2020. DEQ’s Option 3 provides this contingency path for PGE if needed. DEQ’s Option 3 is summarized below in Table 3

Table 3: Summary of DEQ Option 3

Option

Controls/Installation Date

Capital Cost

(million $)

Emission reduction tons/year

(+percent)

Approved:

   Section:  ____________________________

David Collier, Air Quality Planning Section Manager

Division:  ____________________________

     Andy Ginsburg, Air Quality Administrator

Report prepared by: Brian Finneran

       Phone: 503-229-6278

2009 dollars.

Earlier closure dates increase the annualized cost per ton of emissions reduced for the same capital outlay, so options with earlier closure dates include less costly emission control options than options with later closure dates.

DEQ’s modeling showed an additional 0.18 deciview improvement in the Mt. Hood wilderness area, the highest impacted Class I area (and thus less improvement in the other Class I areas). In comparison, the level of a “perceptible change” in visibility is 0.50 deciview, so this improvement was considerably less than that.

2010-11-24T14:55:00
[DC1]
DEQ Build
This needs work

2010-11-26T10:29:00
[brf2]
brian roric finneran
Think this is same language as in our public notice

2010-11-24T14:56:00
[DC3]
DEQ Build
Needs work

2010-11-28T15:29:00
[brf4]
brian roric finneran
You mean change the order? Looks good as is.

2010-11-28T16:32:00
[brf5]
brian roric finneran
Is last part redundant?

2010-11-28T17:23:00
[brf6]
brian roric finneran
Don’t need it. Already a section for it in this report, unless you want to move it up here. Then it should come before our recommendation, not after.

2010-11-26T12:10:00
[brf7]
brian roric finneran
This makes it sound like PGE’s first two proposals did not include early closure.

2010-11-28T17:21:00
[brf8]
brian roric finneran
Should be footnote#2. Will fix later.

2010-11-28T14:50:00
[brf9]
brian roric finneran
Technically, it was given to us in October.

2010-11-28T17:28:00
[brf10]
brian roric finneran
Can’t we explain the SO2 controls under our recommendation?

2010-11-28T17:27:00
[brf11]
brian roric finneran
Can we explain the NOx controls under our recommendation?

2010-11-24T13:32:00
[DC12]
DEQ Build
Paul, can you help word this and the one below on the NOV)

2010-11-28T17:28:00
[brf13]
brian roric finneran
Can call it PGE’s “October” proposal if you want.

2010-11-24T15:39:00
[DC14]
DEQ Build
DSI-2viz benefit ???

2010-11-28T16:58:00
[brf15]
brian roric finneran
Will get this from Mark

2010-11-28T17:11:00
[brf16]
brian roric finneran
Is repeated below

2010-11-28T17:18:00
[brf17]
brian roric finneran
Can we move this after the next section? Shouldn’t DEQ rational come right after the recommendation?