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.

Background and Need for Rulemaking

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. 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. The facility currently emits about 25,000 tons of air pollution per year.

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. At an estimated cost of $498 million, the controls required the Boardman plant to reduce nitrogen oxide (NO_x) emissions by 46 percent in 2011, sulfur dioxide (SO₂) emissions by 80 percent in 2014, and further reduce NO_x emissions by an additional 36 percent in 2017.

Earlier this year in April, PGE submitted a formal request to change the 2009 rules for the Boardman plant, based on the intent of closing this facility in December 2020. In June, the Commission directed DEQ to examine a wide range of pollution control options that would meet federal BART requirements, consistent with an early closure of the plant, and to proceed with revisions the 2009 rules. In July, DEQ developed three draft emission control options, and solicited informal feedback from the public. In August, DEQ convened a Fiscal Advisory Committee to review and comment on DEQ’s fiscal and economic impact analysis of the costs and benefits of the three proposed options for PGE Boardman. In September, DEQ started the 30-day public comment period, which included five public hearings in various locations around the state. In late October, DEQ reopened the comment period and held two more public hearings, to take additional comments from the public on a new proposal it received from PGE.

During these two public comment periods, DEQ received over x,xxx comments. The public was asked to provide comment on several proposals related to PGE’s plan for an early closure of the Boardman plant:

1. DEQ’s BART analysis and the three control options for PGE Boardman.

At the direction of the EQC, DEQ conducted a BART evaluation for the PGE Boardman plant consistent with an early closure. DEQ examined a wide range of pollution controls and developed three emission reduction options. These were presented to the public as Options 1, 2, and 3, and are described in Table 1 below. Each option represented a different level of stringency for meeting BART, based on different closure date choices for PGE. Option 1 contained a 2020 closure date, and was the most stringent, including emission limits based on the pollution controls under the 2009 rules, except for Selective Catalytic Reduction (SCR). As a result, this option cost about 35 percent less than the 2009 rules. Option 2 contained a 2018 closure date, also excluded SCR controls, and set emission limits based on Dry Sorbent Injection (DSI) rather than semi-dry scrubbers. Due to the relatively high cost of SCR and semi-dry scrubbers, this option cost 75 percent less than the 2009 rules. Option 3 contained a 2015 or 2016 closure date, based on the requirement to install BART controls within five years of federal approval of a state regional haze plan.¹ This option set emission limits based on installing only low NOx burners in 2011. This option cost over 90 percent less than the 2009 rules. All three options were proposed as being added to the existing rules, allowing PGE to choose between three different closure dates or to continue to operate the plant indefinately.

Table 1: Summary of DEQ and PGE proposals for this rulemaking

Option

Controls/Installation Date

Capital Cost

(million $)

Cost savings from 2009 rules

(million $)

Emission reduction (tons/year + percent)

Additional Emission reduction after close date (tpy)

2011

(NO_x)

2014 (SO₂)

2017 (NO_x)

2009 Rules

LNB/MOFA

Semi-dry Scrubber

SCR

$497.6

-

20,800 (81%)

n/a

Option 1 (2020)

LNB/MOFA/SNCR

Semi-dry Scrubber

-

$320.6

$177

17,800

(69%)

7,700

Option 2 (2018)

LNB/MOFA/SNCR

DSI

-

$102.6

$395

10,600

(41%)

14,900

Option 3 (2015-16)

LNB/MOFA

-

-

$35.7

$462

4,800

(19%)

20,900

PGE “BART III”

LNB/MOFA

DSI

-

$102.6

$395

10,600

(41%)

14,900

PGE revised proposal

LNB/MOFA

DSI

-

$102.6

$395

11,000?

(43%)?

14,500?

Effects of Rule

Key to Table:

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.

In addition to seeking comment on these three options, DEQ also asked for comment on its use of $7,300/ton for reducing emissions as a cost effectiveness threshold. This selected threshold reflected the high end of the range used by other states, based on PGE’s Boardman’s visibility impacts in a total of 14 national parks and wilderness areas (Class I areas) in Oregon and Washington. Emission control options costing more than $7,300/ton were not included.²

2. PGE’s proposal for “BART III” 2020 plan.

At the same time as DEQ was seeking comment on the three options above, DEQ also asked for public comment on a proposal from PGE referred to as “BART III”. This proposal was 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 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.

3. PGE’s revised proposal and reopening of the comment period.

After the first comment period closed on October 1, PGE submitted a revised proposal to DEQ that contained several changes to PGE’s BART III 2020 plan that were significant enough to reopen the comment period. PGE proposed a new approach that would require the Boardman plant to close in 2020, eliminate the 2009 rules that allow the plant to operate indefinitely, and establish a more stringent SO₂ emission limit (using DSI controls) from 2018 to closure. The repeal of the 2009 rules would be subject to EPA approval, and the same pilot study of DSI would be conducted as under PGE’s previous proposal. The cost would be the same as well, but there would be addition reduction of xxxx tons of SO2 emissions after 2018, under the more stringent limit.

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

DEQ’s Recommendation on this rulemaking.

After reviewing all the public comments, DEQ developed a proposal in response to the key issues raised, and reopened the public comment period. xxxxxxx

DEQ’s proposal addresses two key issues:

Key issue 1: PGE’s BART III proposal was similar to DEQ’s Option 2, which established an SO₂ limit of 0.4 lb/mmBtu, using Dry Sorbent Injection (DSI), under a 2018 closure date. PGE’s BART III proposal was based a 2020 closure date, using the same DSI controls, but included a pilot study to confirm DSI can achieve the required SO₂ limit without increasing particulate emissions, and triggering the need for expensive additional particulate controls.

Recommendation 1: DEQ is proposing Option 2, with a 2020 closure date, but require in 2018 a more stringent SO₂ emission limit of 0.3 lb/mmBtu, based on findings from the DSI pilot study requested by PGE.

Key issue 2: As described in the summary of DEQ’s proposed rulemaking below, DEQ was proposing to adopt all three emission control options and closure dates into the rules. This would give PGE the choice of selecting one of the options, or comply with the existing 2009 rules, which were based on continued operation of the plant until at least 2040.

Recommendation 2: Based on PGE’s stated intent to close the plant in 2020, DEQ is proposing to adopt only the alternative to DEQ’s Option 2 noted above, and upon EPA approval of this revision to the BART rules, repeal the existing 2009 rules. Only the 2020 requirements in Recommendation 1 would apply to the Boardman plant.

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

1. xxxxx

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), the committee found that the capital cost of the controls and annual operating costs would likely 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 0.4 percent to just over 3 percent. PGE also included estimates of electricity rate increases which reflected additional costs associated with decommissioning the plant, potential replacement power costs, and other costs if PGE decides to close the plant. PGE’s estimate of possible rate increases ranged from 3 to 4 ½ percent. These potential rate increases would be subject to future actions taken by the Oregon Public Utilities Commission. DEQ also included information about the potential economic impacts of an early closure on the local economy, job loss, and local government tax revenue, again based on whether PGE decides to close the plant.

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

As noted above, in August 2010 DEQ convened a fiscal advisory committee to review the economic impacts associated with this proposed rulemaking. The 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.

Public Comment

The first public comment period was from

DEQ reopened the comment period for one week, starting Friday, October 29, 2010, and closing at 5 p.m. Monday, November 15, 2010.

Summary of the public comments

Comment Summary. At this hearing, the public comments were evenly divided between support of PGE’s “BART III” 2020 plan, and closing the plant in 2015 or sooner. Only a few comments were made in support of DEQ’s proposed Option 3 (reflecting a 2015-16 closure).

Supporters of PGE’s BART III proposal included not only PGE employees, but also representatives of chambers of commerce and business associations. 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, and 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 this replacement power. Many of the commenters expressed 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 included the following: (1) it ends reliance on coal and provides a smoother transition into other types of energy; (2) it eliminates all emissions from the plant after 2020; (3) it provides significant cost savings to DEQ’s proposed options, and thus lowers the overall economic impact; (4) rather than using the highest thresholds 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 DEQ’s proposed 3 options do provide PGE with some flexibility, but are unworkable and too costly. They said their BART III proposal would meet EPA approvability requirements and result in significant air quality and environmental benefits after 2020, and prior to that date, 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.

Supporters of an earlier closure of the PGE Boardman plant than 2020 included environmental groups, students, and private citizens. These comments supported plant closure in 2015 or as soon as possible. The reasons cited focused primarily on concerns about the health effects from the burning of coal, and the need to address global warming now. 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’s 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. Those who supported DEQ’s Option 3 said that closure in 2015 was less expensive than the other options and would provide significant air quality benefits. 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.

Summary of key comments and DEQ responses

•  

Key Issues

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