ISO-NE PUBLIC

Environmental Update

Patricio Silva S E N I O R A N A L Y S T , S Y S T E M P L A N N I N G

Environmental Advisory Group

N O V E M B E R 1 , 2 0 1 6 | H O L Y O K E , M A

ISO-NE PUBLIC

Timeline of EPA Regulatory Actions Impacting Electric Generators

2016 2017 2018 2019 2020 2021

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Mercury & Air Toxics

Costs Rulemaking

Initial Oil Compliance

Oil Compliance

Oil Compliance

Regional GHG Initiative

Program Review

3rd control period ends

4th control period begins

4th control period ends

Cooling Water

316(b) requirements added to renewing permits

Waste Water

Phase In

Sources: EPA, RGGI

Ozone Area Designations

EPA Reviews Areas

Good Neighbor SIPs due

Marginal Areas attain

Upwind Air Pollution

Phase II Rule

Clean Power Plan

Initial Plans Due

Final Plans due

Compliance begins in

2022 ?

ISO-NE PUBLIC

• Mercury & Air Toxics Standards (MATS): – Challenges over cost

considerations will be argued early in 2017

• Ozone National Ambient Air Quality Standard (NAAQS): – 2015 Ozone NAAQS (80 FR

65291) implementation rule due in late 2016

– State designation due – Litigation filed, briefing

continuing, arguments expected early in 2017

• Title V Permits: EPA Proposes Procedural Changes to Air Permit Challenges

• EPA Approves Connecticut State NOX Emission Trading Orders as Plan Measures

• EPA Proposes Approving Multi-State Interstate Transport of Air Pollution Rules

• Cooling Water Intake Structures: – Challenges over EPA not

requiring closed-cycle cooling as best technology available

– Briefing continuing into 2017

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Regulatory & Litigation Updates

ISO-NE PUBLIC ISO-NE PUBLIC

MERCURY & AIR TOXICS STANDARDS (MATS) IMPLEMENTATION Final Rule 77 FR 9304 (February 16, 2012) Supplemental Appropriate & Necessary Finding, 80 FR 75025 (December 1, 2015) Technical Corrections 81 FR 20171 (April 6, 2016)

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ISO-NE PUBLIC

• August 8, 2016: EPA denied two petitions for reconsideration of the startup and shutdown provisions finalized on April 30, 2015

• EPA denied the requests for reconsideration on procedural basis arguing that the concerns were not appropriately raised during the comment period

• October 6, 2016: petitioners for review filed in the D.C. Circuit challenging EPA’s denial of their administrative reconsideration on the startup and shutdown issues

• Parties challenging the final supplemental finding to consider costs submitted a proposed briefing schedule at the end of September

• Oral arguments have not yet bee scheduled by the D.C. Circuit

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MATS Implementation Update Petitions for Reconsideration Rejected; Litigation on consideration of costs, petition denials

Sources: EPA; MJ Bradley & Associates LLC

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Announced Coal-fired Generator Retirements 2016-2020 by ISO/RTO (MW)

ISO 2012 2013 2014 2015 2016 2017 2018 2019 2020 Total

PJM 6,275 2,636 2,127 7,317 335 327 0 0 155 19,172

MISO 394 220 215 1,152 3,092 3 0 0 344 5,420

SPP 35 15 38 335 988 0 0 0 0 1,411

ISONE 0 0 296 0 0 1,083 0 0 0 1,378

ERCOT 0 0 140 0 0 0 840 0 0 980

NYISO 84 74 0 0 380 0 0 0 0 538

CAISO 119 0 135 29 0 0 0 0 0 282

Other 2,666 3,065 1,506 5,828 1,721 3,318 1,628 379 1,255 21,366

Total 9,574 6,010 4,456 24,660 6,516 4,731 2,468 379 1,754 50,547

• Many coal-fired retirements between 2012-2015 attributed to MATS April 2015 compliance deadline; post-2015, unit economics perceived as primary retirement driver according to many regulatory analyses

Source: SNL Energy (S&P Global Market Intelligence)

ISO-NE PUBLIC ISO-NE PUBLIC

2016 OZONE SEASON

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ISO-NE PUBLIC

2016 Preliminary Ozone Season Monitoring Data Highest Ozone values in New England > 70 ppb

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9/14/2016

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ConnecticutMaine

Massachusetts

New HampshireRhode IslandVermont

2015: 82 exceedances 2016: 185 exceedances

Source: EPA, Preliminary 2016 Ozone Exceedances (Accessed October 20, 2016)

ISO-NE PUBLIC

Ozone Transport Commission (OTC): Monitoring Sites with Highest 2016 Ozone Season Values

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80 75 70

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1979 1997 2008 2015

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Source: Ozone Transport Commission (September 2016)

ISO-NE PUBLIC

OTC: Preliminary 2014-2016 Ozone Season Design Values

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States must submit nonattainment area designations to EPA by late 2016, current data suggests growing ozone nonattainment areas in southern New England

Source: Ozone Transport Commission (September 2016)

ISO-NE PUBLIC

OTC: Regional Modeled Annual NOx Emission Summary 2011, 2017 (Thousand Tons) New England Generator Emissions Much Lower Than Elsewhere

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0 11 17 11 17 11 17 11 17 11 17 11 17 11 17 11 17 11 17 11 17 11 17 11 17 11 17

CT DC DE MA MD ME NH NJ NY PA RI VA VT

2011 on left / 2017 on right Aircraft/

GSE Biogenic

Large EGU

Non-EGU

Non- point

Nonroad

Onroad

Rail/CMV Fires

Small EGU

2017

Source: Ozone Transport Commission (September 2016)

Aircraft/GSE

CMV/Rail

NONROAD

Small EGU

Non EGU

Large EGU

Onroad

Nonpoint

Biogenic

Fires

ISO-NE PUBLIC

New England All Fossil Monthly Generation (GWh) & NOX, SO2 Emissions (Short Tons)

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JAN FEB MAR APR MAY JUN JUL AUG SEP

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COAL NATURAL GAS OIL LANDFILL GAS METHANE REFUSE STEAM WOOD NOX SO2

Sources: EPA (emissions); ISO-NE (generation)

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AIR QUALITY MATTERS IMPACTING GENERATORS Cross State Air Pollution Rule

Permitting Changes

Transported Air Pollution

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ISO-NE PUBLIC

• October 26, 2015: EPA adopted more stringent ozone standard set at 70 parts per billion (ppb) – EPA estimated 241 counties

(mainly in California and Mid-Atlantic region) had ozone measurements > 70 ppb

• September 16, 2016: EPA revised exceptional events rule, exempting high ozone events during certain events

• October 2016: proposed 2015 ozone implementation rule released by Office of Management Budget (OMB), publication expected shortly – Area designations from States

due in late 2016 – EPA must act on designations

by late 2017 – Attainment due starting in

2020

• Litigation: D.C. Circuit has not scheduled arguments for consolidated challenges – Sierra Club v. EPA, 15-1490 (DC

Cir.)

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EPA 2015 Ozone National Ambient Air Quality Standard (NAAQS) Overview

Sources: EPA; MJ Bradley & Associates LLC

ISO-NE PUBLIC

Cross State Air Pollution Rule (CSAPR) Update Affects Fossil Generators Upwind, Outside of Region

CSAPR Update Adjust Allowance Budgets for Affected States • September 7, 2016: EPA updated

budgets for 22 eastern states that were found to significantly contribute to interstate transport of ozone season NOX – No New England generators are

subject to CSAPR – Massachusetts is proposing to

retain a slimmed down intra-state version of the older Clean Air Interstate Rule to comply with other Clean Air Act requirements

• Implementation begins in the 2017 ozone season, the last full ozone season prior to the July 2018 moderate nonattainment date

States Covered by Supplemental 2016 CSAPR Budget Update

15 Sources: EPA; SNL Energy (S&P Global Market Intelligence) Source: EPA (map)

ISO-NE PUBLIC

• August 24, 2016: EPA proposes revisions to the procedures for filing petitions for objections to Title V permits

• According to EPA, the proposed revisions would streamline and clarify the submission and review process, potentially reducing permitting delays

• Comment period closed on October 24, 2016 – 81 FR 57822

• Changes include: 1. clarify how petitions are to be

submitted; 2. describe the expected format

and content of petitions; 3. clarify that permitting authorities

are required to respond to public comments during the public comment period and provide the comments and response to EPA for its 45-day review period;

4. provide recommended practices for stakeholders to assure EPA has a complete record; and

5. provide information and EPA’s interpretation of steps to be taken after an EPA objection is granted

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EPA Proposes Procedural Changes to Air Permit Challenges

Sources: EPA 81 FR 57822; Dinsmore & Shohl LLP

ISO-NE PUBLIC

EPA Proposes Approving Multi-State Interstate Transport of Air Pollution Rules

States Adopt Rules Avoiding Transported Air Pollution from Fossil Generators

• August 23, 2016: EPA proposes to approve State Implementation Plan (SIP) amendments for: – Maine – New Hampshire – Rhode Island – Vermont

• Using interstate air pollution modeling used to justify CSAPR, EPA finds these States have adopted rules providing protection for avoiding emissions from generators affecting attainment of the 2008 ozone standard in surrounding States – 81 FR 57519

Modeled Contribution to Downwind Ozone Nonattainment, Maintenance Areas

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Maine NewHampshire

RhodeIsland

Vermont Threshold

Nonattainment

Maintenance

Source: EPA 81 FR 57519

ISO-NE PUBLIC

• September 9, 2016: EPA approves State Implementation Plan (SIP) revision for NOx control measures – Affects several classes of

generators

• Allows allowing facilities to create or apply NOx emission credits using NOX Emission Trading and Agreement Orders (TAOs) to comply with the NOX emission limits – CT RCSA § 22a-174-22 – 81 FR 62378

• TAO require peaking units to purchase seven tons of credits for every one ton of actual emissions during high electric demand days (HEDD)

• Addresses 2008 Ozone SIP requirements, not the 2015 ozone standard requirements

• Part of a significant backlog of regulatory approvals affecting 2008 and 1997 ozone standards, which will need updating for 2015 ozone standard

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EPA Approves Connecticut State NOX Emission Trading Orders as Plan Measures

Source: EPA 81 FR 62378

ISO-NE PUBLIC

2013 Petition to Enlarge Ozone Transport Region Litigation filed, EPA has yet to act on the Section 176A petition

Continuous Flow of Upwind State Pollution Frustrates Local Measures • October 6, 2016: New York, joined by

the states of Connecticut, Massachusetts, New Hampshire, Rhode Island, and Vermont filed a lawsuit in the U.S. District Court, Southern District of New York, asking the court to compel EPA to comply with its nondiscretionary duty under the Clean Air Act to approve or disapprove the petition

– New York v. Gina McCarthy, 16-7827 (SDNY)

• April 18, 2016: Northeastern states notify EPA of their intention to sue for EPA’s failure to act within 18 months as required by the Clean Air Act

Downwind States Seek Additional Controls on Upwind NOX Sources • December 10, 2013: Northeastern

states submitted a Section 176A petition asking EPA to add nine states shown through modelling and analysis to contribute to 2008 ozone standard, and are projected to contribute to 2015 standard, violations in the Ozone Region: – Illinois – Indiana – Kentucky – Michigan Ohio – Tennessee – Virginia – West Virginia

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ISO-NE PUBLIC

Connecticut Seeking NOX Reductions from Brunner Island Station (PA)

CT Identifies Seek Upwind Air Pollution Reduction from Upwind

• August 23, 2016: EPA extends review of petition for six months (81 FR 48348)

• June 1, 2016: Connecticut DEEP submits Section 126 petition to EPA, asserting NOX emissions from Brunner Island significantly contributes to nonattainment and interferes with maintenance of the 2008 ozone national ambient air quality standards (NAAQS) in Connecticut

Brunner Island Modeled Maximum Ozone Contribution

20 Source: CT DEEP

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WATER RULES UPDATE: COOLING WATER INTAKE STRUCTURES 316(B) RULE Proposed Rule 76 FR 22173(April 20, 2011)

Final Rule 79 FR 48299 (August 15, 2014)

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ISO-NE PUBLIC

• December 17, 2014: various industry and environmental petitioners challenge 316(b) requirements, including: – Whether EPA should have

designated closed-cycle cooling as best technology available for reducing adverse impact on aquatic life and habitat

– Control technology flexibility and discretion,

– New unit criteria and control requirements

• Originally brought before 4th Circuit, removed to 2nd Circuit – Cooling Water Intake Structure

Coalition, et al v. EPA, 14-4645

• February 6, 2017: Final briefs due from all parties

• October 12, 2016: EPA’s response brief due

• May 20, 2016: petitioner’s briefs due

• March 14, 2016: 2nd Circuit sets briefing schedule

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Cooling Water Intake Structure 316(b) Rule Litigation Update

Sources: EPA; MJ Bradley & Associates LLC

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