Allegheny Power 2011 Annual Report Download - page 68

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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 2011,
the EPA finalized the CSAPR, to replace CAIR,requiring reductions of NOx and SO2 emissions in two phases (2012 and 2014),
ultimately capping SO2 emissions in affected states to 2.4 million tons annually and NOx emissions to 1.2 million tons annually.
CSAPR allows trading of NOx and SO2 emission allowances between power plants located in the same state and interstate trading
of NOx and SO2 emission allowances with some restrictions. On February 21, 2012, the EPA revised certain CASPR state budgets
(for Florida, Louisiana, Michigan, Mississippi, Nebraska, New Jersey, New York, Texas, and Wisconsin and new unit set-asides in
Arkansas and Texas), certain generating unit allocations (for some units in Alabama, Indiana, Kansas, Kentucky, Ohio and
Tennessee) for NOx and SO2 emissions and delayed from 2012 to 2014 certain allowance penalties that could apply with respect
to interstate trading of NOx and SO2 emission allowances. On December 30, 2011, CSAPR was stayed by the U.S. Court of Appeals
for the District of Columbia Circuit pending a decision on legal challenges raised in appeals filed by various stakeholders and
scheduled to be argued before the Court on April 13, 2012. The Court ordered EPA to continue administration of CAIR until the
Court resolves the CSAPR appeals. Depending on the outcome of these proceedings and how any final rules are ultimately
implemented, FGCO's and AE Supply's future cost of compliance may be substantial and changes to FirstEnergy's operations may
result.
During 2011, FirstEnergy recorded pre-tax impairment charges of approximately $6 million ($1 million for FES and $5 million for
AE Supply) for NOx emission allowances that were expected to be obsolete after 2011 and approximately $21 million ($18 million
for FES and $3 million for AE Supply) for excess SO2 emission allowances in inventory that it expects will not be consumed in the
future.
Hazardous Air Pollutant Emissions
On December 21, 2011, the EPA finalized the MATS to establish emission standards for mercury, hydrochloric acid and various
metals for electric generating units. The MATS establishes emission limits for mercury, PM, and HCL for all existing and new coal-
fired electric generating units effective in April 2015 and allows averaging of emissions from multiple units located at a single plant.
Under the CAA, state permitting authorities can grant an additional compliance year through April 2016, as needed, including
instances when necessary to maintain reliability where electric generating units are being closed. In addition, an EPA enforcement
policy document contemplates up to an additional year to achieve compliance, through April 2017, under certain circumstances for
reliability critical units. On January 26, 2012 and February 8, 2012, FGCO, MP and AE Supply announced the retirement by
September 1, 2012 (subject to a reliability review by PJM) of nine coal-fired power plants (Albright, Armstrong, Ashtabula, Bay
Shore except for generating unit 1, Eastlake, Lake Shore, R. Paul Smith, Rivesville and Willow Island) with a total capacity of 3,349
megawatts (generating, on average, approximately ten percent of the electricity produced by the companies over the past three
years) due to MATS and other environmental regulations. In addition, MP will make a filing with the WVPSC to provide them with
information regarding the retirement of its plants. Depending on how the MATS are ultimately implemented, FirstEnergy's future
cost of compliance with MATS may be substantial and other changes to FirstEnergy's operations may result.
On February 24, 2012, PJM notified FirstEnergy of its preliminary analysis of the reliability impacts that may result from closure of
the older competitive coal-fired generating units. PJM's preliminary analysis indicated that there would be significant reliability
concerns that will need to be addressed. FirstEnergy intends to continue to actively engage in discussions with PJM regarding this
notification, including the possible continued operation of certain plants.
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, in June 2009. Certain
states, primarily the northeastern states participating in the RGGI 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 required FirstEnergy to measure
and report GHG emissions commencing in 2010. 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 regulated as “air pollutants” under the CAA. In April 2010, the EPA
finalized new GHG standards for model years 2012 to 2016 passenger cars, light-duty trucks and medium-duty passenger vehicles
and clarified that GHG regulation under the CAA would not be triggered for electric generating plants and other stationary sources
until January 2, 2011, at the earliest. In May 2010, the EPA finalized new thresholds for GHG emissions that define when permits
under the CAA's NSR program would be required. The EPA established an emissions applicability threshold of 75,000 tons per
year of CO2 equivalents effective January 2, 2011, for existing facilities under the CAA's PSD program.