Allegheny Power 2010 Annual Report Download - page 132

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In August 2009, the EPA issued a Finding of Violation and NOV alleging violations of the CAA and Ohio regulations,
including the PSD, NNSR, and Title V regulations at the Eastlake, Lakeshore, Bay Shore and Ashtabula generating
plants. The EPA’s NOV alleges equipment replacements occurring during maintenance outages dating back to 1990
triggered the pre-construction permitting requirements under the PSD and NNSR programs. FGCO received a request
for certain operating and maintenance information and planning information for these same generating plants and
notification that the EPA is evaluating whether certain maintenance at the Eastlake generating plant may constitute a
major modification under the NSR provision of the CAA. Later in 2009, FGCO also received another information request
regarding emission projections for the Eastlake generating plant. FGCO intends to comply with the CAA, including the
EPA’s information requests, but, at this time, is unable to predict the outcome of this matter.
National Ambient Air Quality Standards
The EPA’s CAIR requires reductions of NOx and SO2 emissions in two phases (2009/2010 and 2015), ultimately capping
SO2 emissions in affected states to 2.5 million tons annually and NOx emissions to 1.3 million tons annually. In 2008, the
U.S. Court of Appeals for the District of Columbia vacated CAIR “in its entirety” and directed the EPA to “redo its analysis
from the ground up.” In December 2008, the Court reconsidered its prior ruling and allowed CAIR to remain in effect to
“temporarily preserve its environmental values” until the EPA replaces CAIR with a new rule consistent with the Court’s
opinion. The Court ruled in a different case that a cap-and-trade program similar to CAIR, called the “NOx SIP Call,”
cannot be used to satisfy certain CAA requirements (known as reasonably available control technology) for areas in non-
attainment under the “8-hour” ozone NAAQS. In July 2010, the EPA proposed the CATR to replace CAIR, which remains
in effect until the EPA finalizes CATR. CATR requires reductions of NOx and SO2 emissions in two phases (2012 and
2014), ultimately capping SO2 emissions in affected states to 2.6 million tons annually and NOx emissions to 1.3 million
tons annually. The EPA proposed a preferred regulatory approach that allows trading of NOx and SO2 emission
allowances between power plants located in the same state and severely limits interstate trading of NOx and SO2
emission allowances. The EPA also requested comment on two alternative approaches—the first eliminates interstate
trading of NOx and SO2 emission allowances and the second eliminates trading of NOx and SO2 emission allowances in
its entirety. Depending on the actions taken by the EPA with respect to CATR, the proposed MACT regulations discussed
below and any future regulations that are ultimately implemented, FGCO’s future cost of compliance may be substantial.
Management continues to assess the impact of these environmental proposals and other factors on FGCO’s facilities,
particularly on the operation of its smaller, non-supercritical units. In August 2010, for example, management decided to
idle certain units or operate them on a seasonal basis until developments clarify.
Hazardous Air Pollutant Emissions
The EPA’s CAMR provides for a cap-and-trade program to reduce mercury emissions from coal-fired power plants in two
phases; initially, capping nationwide emissions of mercury at 38 tons by 2010 (as a “co-benefit” from implementation of
SO2 and NOx emission caps under the EPA’s CAIR program) and 15 tons per year by 2018. The U.S. Court of Appeals
for the District of Columbia, at the urging of several states and environmental groups, vacated the CAMR, ruling that the
EPA failed to take the necessary steps to “de-list” coal-fired power plants from its hazardous air pollutant program and,
therefore, could not promulgate a cap-and-trade program. On April 29, 2010, the EPA issued proposed MACT
regulations requiring emissions reductions of mercury and other hazardous air pollutants from non-electric generating
unit boilers. If finalized, the non-electric generating unit MACT regulations could also provide precedent for MACT
standards applicable to electric generating units. On January 20, 2011, the U.S. District Court for the District of Columbia
denied a motion by the EPA for an extension of the deadline to issue final rules, ordering the EPA to issue such rules by
February 21, 2011. The EPA also entered into a consent decree requiring it to propose MACT regulations for mercury
and other hazardous air pollutants from electric generating units by March 16, 2011, and to finalize the regulations by
November 16, 2011. Depending on the action taken by the EPA and on how any future regulations are ultimately
implemented, FGCO’s future cost of compliance with MACT regulations may be substantial and changes to FGCO’s
operations may result.
Climate Change
There are a number of initiatives to reduce GHG emissions under consideration at the federal, state and international
level. At the federal level, members of Congress have introduced several bills seeking to reduce emissions of GHG in the
United States, and the House of Representatives passed one such bill, the American Clean Energy and Security Act of
2009, on June 26, 2009. The Senate continues to consider a number of measures to regulate GHG emissions. President
Obama has announced his Administration’s “New Energy for America Plan” that includes, among other provisions,
ensuring that 10% of electricity used in the United States comes from renewable sources by 2012, increasing to 25% by
2025, and implementing an economy-wide cap-and-trade program to reduce GHG emissions by 80% by 2050. State
activities, primarily the northeastern states participating in the Regional Greenhouse Gas Initiative and western states,
led by California, have coordinated efforts to develop regional strategies to control emissions of certain GHGs.
In September 2009, the EPA finalized a national GHG emissions collection and reporting rule that will require FirstEnergy
to measure GHG emissions commencing in 2010 and submit reports commencing in 2011. In December 2009, the EPA
released its final “Endangerment and Cause or Contribute Findings for Greenhouse Gases under the Clean Air Act.” The
EPA’s finding concludes that concentrations of several key GHGs increase the threat of climate change and may be