Why this is Important

Earlier this year, Portland General Electric notified DEQ of its plan to close the Boardman coal-fired power plant in 2020, and requested a change to DEQ rules adopted for the plant last year that would require a major investment in pollution controls prior to this date. After an extensive public comment process, DEQ is providing a recommendation for rule revisions in response to the early closure of the plant as proposed by PGE.

DEQ Recommendation and EQC Motion

The Department of Environmental Quality recommends that the Environmental Quality Commission adopt the following revisions to the Oregon State Implementation Plan:

•  Proposed revisions to the Regional Haze Rules in Division 223, and the State of Oregon Clean Air Act Implementation Plan in Division 200, as presented in Attachment A-1.

•  Proposed revisions to 2009 Oregon Regional Haze Plan, as presented in Attachment A-2.

After extensive review and consideration of over x,xxx public comments, DEQ is recommending adoption of rule changes that would eliminate the 2009 rules, and establish control requirements that meet the federal regional haze rule and allow PGE to permanently close the Boardman plant in 2020, or an earlier date, if they so choose.

PGE new proposal

LNB/MOFA

DSI*

-

?

12,400

(48%)

13,100

* Subject to pilot study evaluation

Notes:

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

SNCR = Selective Non-Catalytic Reduction system.

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

DSI = Dry Sorbent Injection

SCR = Selective Catalytic Reduction.

All of the above proposals would still require the Boardman plant to comply with DEQ’s current mercury regulations in 2012.

4. Other Considerations

The DSI pilot study

As noted above, DEQ’s Option 2 proposed DSI controls, for which PGE has agreed to consider after first conducting a pilot study to determine for the feasibility of these controls. PGE raised concerns that DSI could negatively impact the mercury controls scheduled to be installed in 2011 as required by other DEQ rules. PGE was also concerned that due to the sorbent injection process, the resulting particulate emissions may trigger DEQ’s Prevention of Significant Deterioration (PSD) rules by causing an increase in PM_2.5 emissions greater than the significant emission rate (10 tons/yr). If that occurred, PGE would be required to install best available control technology and conduct an air quality impact analysis to ensure the increase does not exceed the PSD increment or ambient air quality standards for PM_2.5. DEQ cannot determine what will be required until accurate emission estimates are available. However, it is possible that the existing electrostatic precipitator at the Boardman plant may satisfy the best available control technology requirement. In addition, the emission increase may not be great enough to cause a significant impact on the PSD increment or ambient air quality standard for PM_2.5. DEQ agrees conducting a pilot study has merit.

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). At a cost of about $12 million dollars, this was estimated to provide a 9 percent reduction in NOx emissions when added to the low-NOx burners under these options. However, upon further analysis, DEQ determined that SNCR was not cost effective due to the fact it provided a 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.

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.

5. DEQ’s Recommendation

After reviewing all the public comments and reevaluating the proposals, DEQ is recommending revising its rules to include PGE’s permanent 2020 closure date, repealing of the 2009 rules, and adding DEQ’s Option 3 with an earlier closure date option of 2015/16.

Setting a firm closure date in 2020 eliminates approximately 25,500 tons of air pollution per year, which would provide significant visibility benefits, reduce acid deposition, toxic air contaminants, and mercury emissions, including about four million tons of greenhouse gas emissions. During the interim, PGE Boardman would be reduced by about 20 percent in 2011, 39 percent in 2014, and 43 percent in 2018. Although the 2009 rules provided greater emission reductions (81%) during this time, they also allowed the plant to continue to emit approximately 4,700 tons per year of air pollution indefinitely. Repealing the 2009 rules removes the $498 million dollar investment that was estimated for these controls, and replaces it with approximately $100 million dollars during the same timeframe. Including DEQ’s Option 3 in the rules would allow PGE to close in 2015 or 2016, should they decide not to install any additional controls beyond those required in 2011.

The table below summarizes the emission reductions and resulting visibility improvements from this proposed rule change.

Table 2: Summary of the new 2020 rule proposal

BART control technology

Compliance Date

Emission reduction in tons/year

and 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%)

?

?

+ Plant Closure

12/31/20

25,500 (100%)

none

4.98

* 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.

It should be noted that establishing an early closure in these rules does not preclude the owners of the plant from applying for a new permit to construct a new power plant at the Boardman site using an alternative fuel. The new plant could use equipment other than the Foster-Wheeler boiler from the existing plant, but it would need to be permitted as a new facility without relying on the emission reductions from the existing plant and in compliance with all applicable state and federal requirements.

Effects of Rule

As described above, if this proposed rulemaking is adopted, it would have the following effects:

1. Upon EPA approval, repeal the existing regional haze rules for PGE Boardman plant, and establish new emission limits that will require new NOx and SO₂controls in 2011 and 2014, and then require closure of the plant no later than December 2020.

2. Establish an earlier closure date in the rules that allows PGE to close the plant in 2015

3. Require a pilot study of DSI controls in 2014 and 2017…

4. Plant closure would eliminate approximately 25,000 tons etc etc…

Fiscal Impact:

In August 2010, DEQ convened a fiscal advisory committee to review and comment on DEQ’s draft fiscal and economic impact analysis, including the costs and benefits of the proposed three options for PGE Boardman. The committee also assessed the impact of the proposed rulemaking on small businesses. While the rulemaking applies directly to large businesses (PGE and co-owners of the Boardman plant), it is expected that the capital cost of pollution control equipment and the annual operating costs would be passed on to customers served by the Boardman plant through increases in electricity rates. DEQ provided estimates of these electricity rate increases, which ranged from 1 to 3 percent. There was some criticism expressed by PGE that DEQ’s estimates did not factor in other costs, such as decommissioning the plant and the replacement power costs. DEQ responded by including PGE estimates of electricity rate increases which reflected these additional costs. These estimates indicated possible rate increases of 3 to 4 ½ percent. Any future rate increases would be subject to actions taken by the Oregon Public Utilities Commission. DEQ also addressed concerns about potential adverse economic impacts if PGE decided to close the plant, by including preliminary information about the potential impacts on the local economy, job loss, and major reductions in tax revenue and funding for government, schools and other services in the region.

For a more detailed summary of the fiscal and economic effects of this proposal see Attachment X: Statement of Need and Fiscal and Economic Impact.

Commission Authority

The commission has authority to take this action under ORS 468.020, 468A.025, 468A.035, 468A.310 and 477.013.

Stakeholder Involvement

DEQ solicited initial public input on the three draft control options during the month of July 2010, well in advance of the public comment period. The public was encouraged to send comments to DEQ’s website, and these were considered by DEQ in developing the proposed options. As noted above, in August 2010 DEQ also consulted with a fiscal advisory committee, to provide additional input on the likely costs of this proposed rulemaking. This committee had a wide range of interests and stakeholders, including members from the Public Utilities Commission, Citizens Utility Board, PGE, Morrow County, Port of Morrow, business, environmental groups, and tribes. Prior to opening the public comment period, PGE submitted its BART III 2020 proposal, which DEQ subsequently included with its three control options when seeking comments during first public comment period in September. Upon receiving the second proposal from PGE in October, DEQ reopened the comment period, ending in mid-November.

Public Comment

As noted above, there were two public comment periods associated with this rulemaking. The first was from September 1 to October 1, 2010, and the second was from October 29 to November 15, 2010. There were seven public hearings held at different locations, including Portland, Hermiston, Boardman, and The Dalles. A total of 359 persons attended the hearings, and 167 provided testimony. DEQ received over 4,000 comments, mostly via email and postcards. Over 150 written letters were received.

DEQ Summary of the public comments

The summary of public comments and DEQ’s responses can be found in Attachment B: Summary of Public Comments and Agency Response, and Attachment C: Hearing Officer’s Report on Public Hearings.

Summary from the first comment period

During the first comment period, the public comments were generally split between support of PGE’s “BART III” 2020 plan, or closing the plant much sooner (such as 2015, or as soon as possible). Other comments from EPA, federal land managers, and others, supported DEQ’s three emission reduction options.

1. Support for PGE BART III Proposal. Supporters of PGE’s BART III proposal included PGE employees, private citizens, and numerous representatives of city/county government, chamber of commerce, and business and economic development associations, specifically in the Portland and Hermiston areas.

Many of the comments focused on concerns about the economic impact of the plant closing early, and the need to provide PGE with sufficient time (10 years) to buy or build replacement power that is affordable, reliable, cost effective, and includes the potential for renewable and “greener” options. It was pointed out that the PGE Boardman plant is currently an important “base load” source of power, and that it would take time to find replacement power. Many expressed the concern that while closure of the Boardman plant would worsen the current economy and affect many jobs, PGE’s BART III proposal was clearly better than DEQ’s proposed three options. Other comments in support of PGE’s proposal stated that it (1) ends reliance on coal and provides a smoother transition into other types of energy; (2) eliminates all emissions from the plant after 2020; (3) provides significant cost savings to DEQ’s proposed options, and thus lowers the overall economic impact; (4) rather than using the highest cost effectiveness threshold in the nation, it represents a lower and reasonable cost effectiveness level that is more consistent with what other states have adopted for BART; (5) avoids a hasty shutdown that could lead to increased electricity rates and impacts on low-income citizens and small businesses; and (6) gives PGE the ability to verify that the proposed dry sorbent injection (DSI) controls are technically feasible by conducting a pilot test study first. Representatives of PGE stated that the BART III proposal would meet EPA approvability requirements and result in significant air quality and environmental benefits after 2020, and includes the installation of $75 million in pollution controls for nitrogen oxide (NOx) and sulfur dioxide (SO2) emissions, significantly reducing these emissions over the next 10 years. They stated that PGE’s proposal has no legal barriers in terms of federal approvability or enforceability, and represents a unique opportunity to end coal combustion 20 years early, as an alternative to the plant continuing to operate to 2040 and beyond. They added that PGE is still moving forward to meet DEQ’s mercury rules a year ahead of the required 2012 compliance date, which will reduce these emissions by 90 percent.

See DEQ responses to these comments in Section 2, pages xx-xx, of Attachment B.

2. Support of early or immediate plant closure. Supporters of an earlier closure of the Boardman plant included many environmental groups, a few health organizations, and numerous students and private citizens.

Most of these comments were divided between closure in 2015, or closing the plant as soon as possible. The reasons cited focused primarily on concerns about the health effects of burning of coal, and the need to address global warming. Health concerns pointed to the plant’s current emissions of approximately 25,000 tons of air pollution, as well as mercury emissions, and that these emissions cause significant health problems, including asthma, lung cancer, and other respiratory issues. Global warming concerns pointed to the plant currently emitting about 4 million tons of greenhouse gas emissions, the largest in the state. There was strong support to end reliance on coal technology, to pursue cleaner and renewable energy resources. Others commented that allowing PGE to operate until 2020 was too long, would significantly harm public health and the environment, and that PGE does not need 10 years to find affordable and reliable replacement power, as cleaner forms of power generation are available now. Other comments included (1) from a cost standpoint, the earliest closure would avoid making unnecessary investments in expensive controls for an “outdated plant”; (2) transitioning to renewable energy could create more “green jobs”; (3) urging DEQ to repeal the existing rules for PGE Boardman which allow the plant to continue operate if PGE decides against any of the options, (4) opposition to giving PGE another 10 years to operate when the plant has avoided installing any major pollution controls since it was constructed in 1977, and (5) criticism of DEQ for not taken action during this time to require controls or close the plant.

See DEQ responses to these comments in Sections 1 and 3, pages xx-xx, of Attachment B.

3. Support of DEQ three options. This support was mostly reflected in comments from EPA, the National Park Service, Forest Service, and a few environmental groups. In their comments, EPA and the federal land managers emphasized the visibility and air quality benefits of an early closure. Some of these comments urged more stringent pollution controls prior to closure. A smaller number of the general public supported DEQ’s three options than those who supported the positions in #2 above. Out of the three options, more favored Option 3 than the other options, citing the benefits of an earlier shutdown and avoiding additional major investments in continued operation of the coal plant.

See DEQ responses to these comments in Section 1, pages xx-xx, of Attachment B.

Key Issues

Should DEQ repeal the existing rules that allow operation until 2040?

DEQ’s three emission reduction options were proposed as individual BART options that would be added to the existing rules, giving PGE the choice between early shutdown and continued operation. [MORE – one reason DEQ reopened the comment period was that eliminating the existing rules was not initially proposed, etc.]

Should PGE be provided 10 years or 5 years for continued operation?

PGE’s request for a single closure date of 2020 emphasized the importance of having a full 10-year time period to make the necessary transition away from coal burning, to lessen the economic impact of an early plant closure, and to develop replacement power, among other concerns. Conversely, there was considerable public support for an earlier closure in 2015, or sooner. As has been clearly pointed out in this rulemaking, DEQ does not have the legal authority to close the plant, but in adopting BART rules for this facility, can place enforceable dates in the rules should PGE and the co-owners decide to close the plant. [MORE]

Should DEQ require DSI or semi-dry scrubbers for a 2020 closure?

DEQ’s Option 1identified semi-dry scrubbers as being cost-effective BART controls, under a 2020 closure date. DEQ’s Option 2 identified DSI controls as BART, subject to a 2018 closure date. [MORE – comments that DSI can achieve 80-90% control, and concerns about the pilot study outcome meeting BART, etc.]

Next Steps

•  If approved, DEQ will submit the revised rules and revisions to the Oregon Regional Haze Plan to EPA as a revision to the Oregon State Clean Air Act Implementation Plan.

Attachments

A.  Proposed Rulemaking

1.  Revisions to Division 223 and Division 200.

2.  Revisions to the 2009 Oregon Regional Haze Plan

B.  Summary of Public Comments and Agency Responses

C.  Hearing Officer’s Report on Public Hearings

D.  Relationship to Federal Requirements Questions

E.  Statement of Need and Fiscal and Economic Impact

F.  Land Use Evaluation Statement

Available Upon Request

1.  DEQ’s Fiscal Impact Report

2.  Proposed Rulemaking Announcement

3.  Written comments received

4.  DEQ’s BART Report for PGE Boardman

5.  Rule Implementation Plan

6.  Legal Notice of Hearing