The Division of Air Resources is proposing a hybrid of the US EPA's Clean Air Mercury Rule (CAMR) cap-and-trade program and a traditional emission limit based program. In 2010, Phase I, the proposed State regulation, 6 NYCRR Part 246, will accept the New York State cap but will not allow emission trading between applicable coal-fired utility units in New York and other units in the State or with units outside of New York State. The facility-wide cap will be in effect from 2010 to 2014. In 2015, Phase II, in conjunction with other electric sector regulations such as the Regional Greenhouse Gas Initiative (RGGI) and the second phase of the CAIR, the State mercury regulation will implement a facility-wide specific mercury emission limit. The proposed rule, Part 246, will be submitted to EPA in lieu of the CAMR, satisfying the federally mandated requirements. Part 200.9 was revised to incorporate all references to 40 CFR Part 75 Continuous Emission Monitoring program and especially, 40 CFR Part 75, Subpart I, Mercury Mass Emission Provisions.

The Regulation, 6 NYCRR Part 246 is divided into the following sections:

246.1 – Definitions

To the extent that the definitions are not inconsistent with the specific definitions in this Part, the general definitions of Part 200 apply. Part 246 adds definitions addressing the automatic data handling systems, the specific differences between a Part 246 facility and a Part 246 unit and time frames used to determine compliance.

246.2 – Applicability

Owners or operators of coal-fired steam generating units with nameplate capacity of more than 25 MWe producing electricity for sale firing coal or coal-derived fuel, alone or in combination with any amount of any other fuel, during any year, including a unit that qualifies as a cogeneration unit during the 12-month period starting on the date the unit first produces electricity and with nameplate capacity of more than 25 MWe and supplying in any calendar year more than one-third of the unit's potential electric output capacity or 219,000 MWh, whichever is greater.

246.3 – Standard Requirements

The Standard requirement section has the following subdivisions: (1) addresses the applicability dates between new and existing facilities; (2) sets the requirements for coal sampling for mercury and chlorine and two years of stack testing to determine speciated mercury compounds, such as elemental mercury, divalent mercury and particle mercury from existing sources; and (3) sets timelines for record keeping submittals.

246.4 – Permit Requirements

This section addresses the requirements of submitting a Title V operating program renewal or modification. The owner or operator of a MRP facility must have a permit issued by the department pursuant to Part 201 of this Title.

246.5 – Mercury Reduction Program Facility Wide Cap

In the first phase of the Mercury Reduction Program rule beginning in 2010 the Division of Air Resources proposes to accept the federal 786 pounds per year allowance and distribute emissions to New York's applicable units but these emissions will be treated as facility-wide caps and not allowances for trading. The determination of facility-wide caps will be based upon the requirements in section 60.4142 of CAMR which state that allowances, or in our case caps, will be calculated from the average of the three highest heat input years from 2000 to 2004.

246.6 – Mercury Reduction Program Emission Unit Limits

For the second phase of the Mercury Reduction Program rule the Division of Air Resources will set a numerical limit for each applicable facility. This numerical limit will be 0.6 pounds per trillion Btu heat input and represents an overall statewide 90 percent mercury mass reduction from the 1999 Information Collection Request estimations.

246.7 – Monitoring and Reporting

The rule adopts the federal requirements of the Clean Air Mercury Rule (CAMR) for sources to install continuous emission monitors (CEMs) or sorbent traps for the measurement of total mercury by specific timelines and reporting deadlines. Any person who owns or operates a MRP facility must comply with the monitoring, record keeping, and reporting requirements as provided in this section, Part 201 of Title 6, and 40 CFR Part 75, Subpart I. Specifically, each facility must install all monitoring systems to monitoring mercury mass emissions and individual unit heat input (including all systems required to monitor mercury concentration, stack gas moisture content, stack gas flow rate, and carbon dioxide or oxygen concentration, as applicable, in accordance with 40 CFR 75.81 and 75.82 of Subpart I and Performance Specification 12A, 40 CFR 60 Appendix B.

246.8 – Initial Monitoring Certification and Recertification

This section includes the mandated federal requirements for the certification of the continuous emission monitoring system and the approved alternative sorbent trap monitoring system. For continuous emission monitoring systems, the applicable quality-assurance and quality-control requirements in 40 CFR 75.21 and 40 CFR 75 Appendix B apply. For sorbent trap monitoring system, the applicable quality-assurance and quality-control requirements of 40 CFR 75.15 and 40 CFR 75 Appendix K and sections 1.5 and 2.3 of 40 CFR 75 Appendix B apply. The section also addresses the monitoring requirements of stack testing for low mass mercury emission units.

246.9 – Missing Data Procedures and Out of Control Periods for Continuous Monitoring Systems

Whenever any monitoring system fails to meet the quality-assurance and quality-control requirements or data validation requirements of 40 CFR Part 75, data shall be substituted using the applicable missing data procedures in 40 CFR 75 Subpart D. Subpart D contains sections 40 CFR 75.30 through 75.39 and describes procedures for initial missing data periods, those occurring in the first 720 quality-assured monitor operating hours following initial certification, and standard missing data procedures for mercury CEMS and sorbent trap monitoring systems. Subpart D also deals with missing data for all other required monitoring including, but not limited to moisture, units with control devices, and missing data for heat input rate determinations. This section also covers out of control periods as described in 40 CFR 70.24 where the owner or operator shall take corrective action if an out-of-control period occurs to a monitor or continuous emission monitoring system and repeat the tests applicable to the “out-of-control parameter” as described in 40 CFR 75 Appendix B.

246.10 – Notifications

This is a federally mandated section requiring all Mercury Reduction Program units to notify the USEPA under 40 CFR 75.61. Notifications required include, but are not limited to: initial certification and recertification test notifications; new unit, newly affected unit, new stack, or new flue gas desulfurization system operation notification; unit shutdown and recommencement of commercial operation; and periodic relative accuracy test audits, 40 CFR 75 Appendix E retests, and low mass emissions unit retests.

246.11 – Recordkeeping and Reporting

This section is a federally mandated section requiring all Mercury Reduction Program facilities to submit reports on monitoring plans, certification and recertification plans and quarterly reports to the Department and USEPA Administrator. Record keeping requirements include those required by this section in addition to those applicable requirements contained in 40 CFR 75.84(a) through (c). Reporting requirements include those required by this section in addition to those applicable requirements contained in 40 CFR 75.84(d) through (f).

246.12 – Petitions

The owner or operator of a MRP unit may submit a petition under section 40 CFR 75.66 to the USEPA Administrator requesting approval to apply an alternative to any requirement of 246.8 through 246.13. Application of an alternative to any requirement of 246.8 through 246.13 is in accordance with this section and 246.8 through 246.12 only to the extent that the petition is approved in writing by the USEPA Administrator, in consultation with the Department.

246.13 – Additional Requirements to Provide Heat Input Data

The owner or operator of a MRP unit that monitors and reports Hg mass emissions using a Hg concentration monitoring system and a flow monitoring system shall also monitor and report heat input rate at the unit level using the procedures set forth in 40 CFR Part 75.

246.14 – Severability

Each section, or portion thereof, of this Part shall be deemed severable, and in the event that any section, or portion thereof, of this Part is held to be invalid, the remainder of this Part shall continue in full force and effect.

1. STATUTORY AUTHORITY

The statutory authority for this amendment is the Environmental Conservation Law (ECL) Sections 1-0101, 3-0301, 19-0103, 19-0105, 19-0301, 19-0303, 19-0305, and 19-0311. Section 1-0101 outlines the policy declaration for the Department of Environmental Conservation (Department) regarding the protection of New York State's environment and natural resources.

2. LEGISLATIVE OBJECTIVES

Article 19 of the ECL was enacted for the purpose of safeguarding the air resources of New York from pollution, to ensure the protection of the public health and welfare, the natural resources of the State, physical property, and industrial development. It is the stated policy of the State to require the use of all available practical and reasonable methods to prevent and control air pollution in New York. To facilitate this policy objective, the Legislature bestowed specific powers and duties on the Department, including the power to adopt and promulgate regulations for preventing, controlling and prohibiting air pollution. This authority specifically includes promulgating standards for the coordination of State and Federal pollution reduction programs.

On March 15, 2005 EPA announced the final Clean Air Mercury Rule (CAMR). CAMR limits mercury emissions from new and existing coal-fired electric steam generating units, and creates a market-based cap-and-trade program that will permanently cap utility mercury emissions nationwide in two phases: the first phase cap is 38 tons beginning in 2010; the second phase cap set at 15 tons beginning in 2018. EPA believes these mandatory declining caps will ensure that mercury reduction requirements are achieved and sustained. On May 18, 2005, EPA promulgated Emission Guidelines and Compliance Times for Coal-Fired Electric Steam Generating Units. (70FR 28606–28700) Pursuant to 40 CFR 60.4141, all States are required to submit to the Administrator their designated mercury allowances for each coal-fired electric steam generating unit by November 15, 2006. Regardless if a State is adopting the federal program or creating its own State control plan, all States must require applicable sources to limit mercury emissions at or below levels which meet the allocations designated in 40 CFR 60.4140. For New York State, these distributions equal 786 pounds per year of allowable mercury emissions in 2010–2017 and 310 pounds per year in 2018 and beyond.

The Department is proposing to adopt a mercury regulation which incorporates the Phase I emission cap established in the federal rule for the years 2010–2014 and beginning in 2015 establishes a facility wide average emission limit for each applicable unit. Phase I of the proposed State regulation, 6 NYCRR Part 246, will impose annual facility-wide mercury emission limitations, based upon the state mercury budget distributed to New York State by EPA. Applicable facilities will not be permitted to generate and trade mercury reductions with other facilities or other States. The annual facility-wide emission limitations will be in effect from 2010 to 2014. Starting in 2015, Phase II, in conjunction with other electric sector regulations such as the Regional Greenhouse Gas Initiative (RGGI) and the second phase of the Clean Air Interstate Rule (CAIR), the State mercury regulation will establish a unit-based emission limit for each applicable unit. The Department will submit Part 246 to EPA for approval in lieu of New York State accepting the model rule requirements CAMR.

3. NEEDS AND BENEFITS

Mercury is a toxic metal that persists and cycles in the environment as a result of natural and human activities. When mercury is released into the air, it is transported and eventually deposited back onto the earth. The distance of this transport and eventual deposition depends on the chemical and physical form of the mercury emitted. In aquatic ecosystems, inorganic mercury is transformed into an extremely toxic organic form of mercury, methylmercury. Methylmercury bioaccumulates up the food chain as humans and animals consume mercury-contaminated organisms, particularly fish. Two conditions common in the Northeast, acidified water bodies and elevated ozone levels, are thought to promote the deposition of mercury into the environment.

The term “hot-spot” has been used by the EPA and environmental organizations to describe a particular area vulnerable to sustained mercury deposition based upon different regulatory scenarios. One of the shortcomings of CAMR is that the federal cap-and-trade strategy will not mitigate the current “hot-spots” created by localized deposition from coal-fired electric utilities who buy allowances rather than installing pollution control to reduce emissions. The Department believes,¹ that the Adirondacks or the Northeast region is a “hot-spot” due in part to persistent deposition of mercury from the coal-fired electric utility sector. Consequently, the Department has opposed the trading of mercury allowances. Recent research in Ohio and Massachusetts has addressed the issue of localized deposition at near-by receptors from coal-fired electric utilities and municipal waste combustors respectively. New York State has implemented regulations² that are stricter than the federal National Emission Standard for Hazardous Air Pollutants for Municipal Waste Combustors to minimize localized deposition impacts, and anticipates that reductions achieved from the proposed Part 246 will do the same for the coal-fired electric utilities located in New York State.

The electric utility industry, along with municipal solid waste combustors and the Portland cement manufacturing sector comprise the largest point source categories of mercury emissions in New York State. Since 1999, New York State has reduced emissions from the municipal solid waste combustor sector by approximately 90 percent. New York State is currently examining technology to reduce emissions in the Portland cement manufacturing sector following the EPA's promulgation of a National Emission Standard for Hazardous Air Pollutants (NESHAP) which did not control mercury from this source category.³ With the proposed reductions targeted for 2015, the statewide reduction in mercury from 1999 levels will equate to 75 percent⁴ statewide for all point sources comprising of fuel burning equipment, incineration and manufacturing.

The Department has determined that federal cap-and-trade program would prolong the existence of “hot spots” in the Catskill and Adirondack region until 2020 and beyond. Allowing the banking and sale of mercury emissions to be sold to New York applicable facilities or to facilities in regions where westward winds prevail would not reduce the unacceptable mercury concentrations in fish and wildlife in New York's lakes, streams and estuaries. Regional concentrations will be reduced sooner through implementation of a New York State rule which controls unit-level mercury emissions five years earlier and to a greater extent than the federal rule.

4. COSTS

a.) Costs to Regulated Utilities

New York currently has thirteen coal-fired electric utility steam generating stations, two of which, AES Hickling and AES Jennison, have been on cold standby since 2001. The thirteen stations have electric generation capacities per plant ranging from 50 MW to 800 MW. There are two cogeneration facilities, Trigen Energy-Syracuse and WPS Niagara Generating Facility, generating steam for both electric production and process use. At this time, only those units which meet the federal definition of electric utility steam generating unit, including the thirteen coal-fired steam generating stations and the two co-generation units, will be subject to Part 246.

The future actual costs of regulating mercury emissions from the electric utility steam generating sector are directly related to any additional control device(s) required on a plant-by-plant basis, in addition to the volume and cost of reagent required, which in most cases consists of a powdered activated carbon or a carbon enhanced with a halogen such as bromine. The incremental cost of generation for New York coal-fired units implementing a standard or enhanced powdered activated carbon system will be in the range of 0.37 to 1.66 mills/kWh,^5,6. A mill is defined as one-tenth of a cent. This is approximately a one to eight percent increase on the 20 to 30 mills/kWh ($0.02/kWh to $0.03/kWh) most coal-fired power plants currently incur to produce electricity. For comparison, in the day ahead market during a summer month a kWh is sold by a generator for approximately $0.08 upstate and $0.15 downstate⁷. Monitoring, record keeping and reporting are being incorporated into Part 246 from CAMR and regulated facilities will incur the same costs with the Department's program or the federal CAMR. Costs of monitoring, record keeping, and reporting are going to be fixed as adoption of EPA's model rule is required for national reporting. Currently, mercury CEMS cost in the range of $130,000 to $200,000 installed with an approximate testing, maintenance, and operation cost of $89,500 per year⁸.

Most facilities in New York will need to install activated carbon injection systems to work in conjunction with existing cold-side ESPs, especially those facilities burning western sub-bituminous coals. Some facilities may need to install pulse jet fabric filter baghouse systems for particulate collection to achieve the higher rates of mercury capture proposed for 2015 than could be realized through operation of a cold-side ESP alone. For those facilities combusting sub-bituminous coals, high percentage sub-bituminous coal blends, or facilities with existing fabric filter baghouses, total capital requirements include the purchase and installation of dosing and storage equipment related to the powdered activated carbon injection (PACI) system. The PACI will be a nearly fixed cost of $984,000 (year 2003 dollars). Annualized over 20 years at an interest rate of approximately 10 percent this translates to a cost of $117,460 per year⁹.

A Department and the New York State Energy and Research Authority (NYSERDA) analysis compared a reference or business-as-usual case (absent either CAIR or mercury) to each of three policy cases: New York's proposed approach for implementing both CAIR and mercury, CAIR only, and mercury only. CAIR and Mercury policies (implemented together, as proposed) could increase wholesale electricity prices by an average of 1.7 percent or $1.14 per MWh over the 2010 to 2020 timeframe. For a typical residential customer (using 750 Kwh per month), this translates into a monthly retail bill increase of $0.86. Model runs assuming CAIR only (i.e., without a mercury control program) and mercury only control program (i.e., without CAIR) indicate that virtually the entire incremental electricity price impact of implementing CAIR and a mercury rule together is due to CAIR. There is virtually no incremental electricity price impact due to mercury control in conjunction with the sulfur and NOx CAIR program¹⁰.

b.) Costs to the State

The costs to the Department for promulgating Part 246 will include additional Central Office staff and Regional Office staff to modify permits and create monitoring conditions in the permitting database to assure uniformity from Region to Region. Approximately 15 Title V facility permits will have to be modified to incorporate Part 246 requirements. Department staff will be responsible to review stack test protocols, field witness the required stack tests, review final reports and CEM relative accuracy tests. Implementation of the federal or state rule requires quarterly submittals of compliance documentation which will need to be reviewed, tracked and acted upon if necessary.

The modification of a Title V permits require trained environmental engineers with knowledge of utility combustion systems, sulfur and particle control devices and knowledge of CEM documentation and stack testing. At the current staffing levels, the addition of new staff will be needed to continue some of the routine permitting and compliance work currently being performed by more experienced staff.

These costs however would be incurred whether the Department adopted Part 246 or implemented the federal rule as written. Indeed, the federal cap and trade program would likely entail more significant administrative costs since the Department would have to approve and keep track of trading allowances. Under Part 246, facilities in New York will not be allowed to trade mercury allowances.

c.) Source of Information upon which the cost analysis is based.

The information used to determine the costs to the affected industries is based upon the Department of Energy's National Energy Technology Laboratory (DOE/NETL). DOE/NETL continues to conduct pilot studies involving slip stream tests and full scale tests involving many innovative technologies to determine mercury control¹¹ from applicable CAMR facilities.

5. LOCAL GOVERNMENT MANDATES

The future actual costs of regulating mercury emissions from the electric generating utility sector are directly related to any additional control device required on a plant-by-plant basis. Jamestown Power's Samuel A. Carlson Generating Station operates four boilers in total, which are divided into two emission units. The facility exhausts flue gas through one stack per generator for a total of two stacks. Taking into consideration the installation an activated carbon injection system and use of an enhanced activated carbon at a rate of three lb carbon/MMACF; electric use to operate any additional pollution control equipment; and operating costs in addition to reagent materials and land filling of additional fly ash, the installation would have an associated incremental cost of generation (implementation cost) in the range of 0.23 to 0.63 mills/kWh. The facility would also be required to install, operate, and maintain a continuous emission monitoring system to measure and record mercury mass emissions. The installation of a mercury monitoring system is currently in the range of $130,000 to $200,000 per unit installed. An annualized cost per monitoring unit is predicted by EPA to be on the order of $89,500 per year for testing, maintenance, and operation¹². Any estimated impact on wholesale electricity price based on the cost of mercury emission control equipment would not directly reflect the implementation costs incurred by the affected generator owners, because coal generators generally do not set the marginal market price of electricity. However, the on-site cost of installing, operating, and maintaining mercury emission control equipment directly reduces the operating margin (similar in concept to profit) of the Mercury Reduction Program units.

6. PAPERWORK

Part 246 adopts the federal requirements for monitoring, reporting, and record keeping thereby eliminating redundant or duplicative reporting. Facilities will not incur additional costs in this regard. In addition, Part 246 does not implement the labor intensive cap-and-trade-portion of the federally mandated model rule, which requires the tracking of emission credits, reducing the regulatory burden on facilities to track allowances. Facilities subject to Part 246 are required to submit quarterly reports electronically, in accordance with federal requirements, and along with their compliance reporting for under the Acid Rain and the Clean Air Interstate Rule. The coordination of reporting for these three regulatory programs will reduce paperwork requirements substantially.

7. DUPLICATION

The proposed rule does not duplicate or conflict with any other New York or federal rule. The federal model rule, Emission Guidelines and Compliance Times for Coal-Fired Electric Steam Generating Units, is the first time the emission of a bio-persistent, bioaccumulating hazardous air pollutant has been controlled from an electric steam generating source. New York State has opted to not accept the model cap-and-trade rule, but in stead submit a State Plan containing an alternate strategy to reduce mercury emissions from coal-fired power plants in a shorter time frame requiring greater reductions.

8. ALTERNATIVES

The alternatives to adopting Part 246 are to: (1) take no action and submit a state regulation resembling the model rule, Emission Guidelines and Compliance Times for Coal-Fired Electric Steam Generating Units; (2) allow the federal government to run the program under a Federal Implementation Plan (FIP); or (3) adopt the suggested model rule from STAPPA/ALAPCO; or (4) submit a state specific, alternate plan with subsequent approval by EPA.

9. FEDERAL STANDARDS

The proposed regulation, Part 246, exceeds the minimum standards of the federal government in the following ways. First, the proposed rule disallows trading of excess mercury emissions within or out of state because the cap-and-trade program would maintain existing local hot spots of mercury deposition and more importantly, continue to contribute to widespread regional concentrations of mercury. Regional concentrations could be reduced much sooner through implementation of a New York State rule which limits mercury emissions earlier and to a greater extent. Second, the Part 246 shortens the timeframe for final compliance from 2018 to 2015. Third, the Part 246 does not allow “banking” of excess emissions to be sold and/or kept for future use after 2018. These last two items highlight the Department's goal of adopting a mercury rule which will not exacerbate or contribute to widespread deposition of mercury in New York State's sensitive Adirondack and Catskill mountain lakes areas and coastal estuaries.

The Department, in cooperation with NYSERDA, has calculated the costs of the proposed mercury rule and the federal Clean Air Interstate Rule (CAIR) on the citizens of New York in the form of their monthly electric bill increase due to these regulatory actions. The estimated New York retail electricity price impact showed that the costs to the consumer of implementing Part 246 to be $0.002 per month and for both regulations CAIR and Part 246 the cost will be $0.86 per month equating to 0.8 percent of their total monthly bill. For the industrial consumer, the cost increase for CAIR and Part 246 equals $193 per month or 1.7 percent of their monthly bill, the mercury only portion for the industrial user is $0.5 cents per month¹³. Thus the Department concluded costs associated with the adoption and implementation of Part 246 was reasonable given the significant benefits associated with reducing mercury deposition to the environment.

10. COMPLIANCE SCHEDULE

The compliance schedule for the proposed rule includes two Phases, Phase I, 2010 and Phase II, 2015. The first compliance date is mandated from the federal Emission Guidelines and Compliance Times for Coal-Fired Electric Steam Generating Units, and all electric generating units in the nation will be on the same compliance schedule. In Phase II, the proposed rule coordinates the requirements of the Clean Air Interstate rule and the Regional Greenhouse Gas Initiative. The Department believes that the regulated sources will have ample time to comply with the Phase II portion of the rule three years earlier than federally required because of the advances in mercury pollution control demonstrated by the Department of Energy's National Energy Technology Laboratory.

¹ Docket letter - OAR-2002-0056-5458, Comments on the Proposed Clean Air Mercury Rule, June 2004

² 6 NYCRR Parts 219-2 and 219-7, Municipal and Private Solid Waste Incineration Facilities and Mercury Emission Limitation for Large Municipal Waste Combustors Constructed on or Before September 20, 1994

³ NESHAP for Portland Cement Manufacturing, Subpart LLL, 6/14/99

⁴ NESCAUM inventory for 1998–2202 Mercury Study, A Framework for Action, February, 1998.

⁵ USDOE/NETL, Preliminary Cost Estimate of Activated Carbon Injection for Controlling Mercury Emissions from a Un-Scrubbed 500 MW Coal-Fired Power Plant, prepared by Science International Corporation, May 2003

⁶ Sorbent Technologies Corporation, Sid Nelson Jr. – Recipient Project Director, Advanced Utility Mercury-Sorbent Field-Testing Program: Semi-Annual Technical Progress Report

⁷ New York State Independent System Operator, July 26, 2005 – URL http://www.nyiso.com/public/market_data/zone_maps.jsp

⁸ Federal Register / Vol. 70, No. 95 / Wednesday, May 18, 2005 / Rules and Regulations / pp. 28634

⁹ USDOE/NETL, Preliminary Cost Estimate of Activated Carbon Injection for Controlling Mercury Emissions from a Un-Scrubbed 500 MW Coal-Fired Power Plant, prepared by Science International Corporation, May 2003

¹⁰ NYSDEC, NYSERDA, and ICF International, Modeling Results for CAIR and Mercury. May 18, 2006

¹¹ USDOE/NETL, Preliminary Cost Estimate of Activated Carbon Injection for Controlling Mercury Emissions from a Un-Scrubbed 500 MW Coal-Fired Power Plant, prepared by Science International Corporation, May 2003

¹² Federal Register / Vol. 70, No. 95 / Wednesday, May 18, 2005 / Rules and Regulations, pp 28634

¹³ NYSDEC, NYSERDA, and ICF International, Modeling Results for CAIR and Mercury. May 18, 2006

The Department is proposing to adopt 6 NYCRR Part 246 which will require coal-fired electric utility steam generating facilities above a certain size threshold to control emissions of mercury. New York currently has two cogeneration facilities and thirteen coal-fired electric utility steam generating facilities, two of which are on cold standby and have not operated since October 2000. The facilities have electric generation capacities per plant ranging from 50 MW to 800 MW. One of these coal-fired facilities is owned by a local government, the Samuel A. Carlson Generating Station owned by the Jamestown Board of Public Utilities. None of the facilities is owned or operated by a small business. As discussed in more detail below, and in the other rule making documents, the adoption of Part 246 is not expected to result in increases in electricity prices to consumers. The adoption of Part 246 will therefore not have an adverse impact on small businesses and/or local governments.

For the thirteen operating facilities to achieve compliance with the proposed regulation emission limits, the Department envisions two options for mercury control devices. The owner of a facility with an existing cold-side electrostatic precipitator (ESP) for particulate control may select the addition of a powdered activated carbon injection unit to work with the existing cold-side ESP or may choose to utilize a fabric filter baghouse to work in conjunction with a powdered activated carbon injection unit. Facilities installing control systems for the purpose of controlling SO or NO for the Clean Air Interstate Rule (CAIR) may realize mercury reductions at their facility as a co-benefit. Those co-benefit control systems may require some modification to achieve the year 2015, Phase II, level of control required in Part 246.

The Department will utilize the CAMR emission budgets to set facility-wide annual emission limitations in the first phase and a traditional unit level emission rate limit based program in the second phase. In 2010, Phase I, Part 246 establishes annual facility-wide emission limitations based on the New York State trading budget identified in 40 CFR 60.4140. Unlike CAMR, Part 246 will not allow mercury allowance trading between applicable coal-fired utility units in New York State or with units outside of New York State. The annual facility-wide emission limitation will be in effect from 2010 to 2014. In 2015 - Phase II, in conjunction with other electric sector regulations such as the Regional Greenhouse Gas Initiative (RGGI) and the second phase of the CAIR, establishes a facility average mercury emission rate at each facility representing a 90 percent overall State reduction of mercury emissions from 2005 levels. Part 246, will be submitted to EPA for approval as the State's mercury control plan in lieu of adopting CAMR.

1. EFFECT OF RULE:

Part 246 regulates private and public electric generating utilities and will not have any significant adverse impact on small businesses directly. The Department in coordination with the New York State Energy Research Authority (NYSERDA) estimates that the majority of cost passed on to the consumer in the form of electricity price increases, including small businesses, of the two rules, the federal Clean Air Interstate Rule (CAIR) and the New York State mercury rule, will be from CAIR. There is virtually no retail or wholesale electricity cost impact from the implementation of the proposed mercury rule. The modeled impact on the average New York wholesale electricity price resulting from the mercury proposal without CAIR is predicted to be $0.003/MWh or about 0.01 percent. It is important to recognize that the estimated impacts on wholesale electricity prices are not directly related to the implementation costs incurred by the affected generator owners, because coal generators generally do not set the marginal market price of electricity. The day-ahead and hour-ahead marginal market prices are more commonly set by those facilities utilizing fuels other than coal to generate electricity. Electric generation at those facilities is more costly primarily because of fuel cost. NYSERDA estimates the Department's proposed Part 246 will not be more costly than the federally mandated CAMR.

The one municipally owned electric generating facility affected by Part 246 is the Samuel A. Carlson generating Station in Jamestown, NY, Chautauqua County. All electric generators, including Jamestown Power, will experience a small increase in the cost of electric generation due to the adoption of Part 246 which will directly reduce the operating margin of the affected units¹.

2. COMPLIANCE REQUIREMENTS:

Facilities subject to Part 246 will have to achieve compliance with the annual facility-wide emission limitations during Phase I and meet emission rate requirements in Phase II. In addition, Mercury Reduction Program facilities (facilities) will be subject to recordkeeping and reporting requirements. The recordkeeping and reporting requirements imposed by Part 246 are mandated under the federal Clean Air Mercury Rule and are necessary to receive approval from the Administrator. Thus, these requirements would apply whether the Department adopted CAMR or Part 246.

Section 246.8, “Monitoring and Reporting,” requires facilities to install a continuous monitoring system, a continuous emission monitoring systems (CEMS) or sorbent trap monitoring system (STMS), to measure and record the mass of total mercury. This section also acknowledges an excepted monitoring methodology allowing facilities to deviate from continuous monitoring system requirement. This excepted monitoring methodology is available to those facilities that can qualify as low mercury mass emitters as identified in 40 CFR 75.81(b). EPA has adopted an annual mass of 464 ounces (29 lb) of mercury emitted per year as the qualifying low mass emission threshold. Section 246.9, “Initial Monitoring Certification and Recertification Procedures,” requires facilities to certify continuous emissions monitoring systems and any excepted sorbent trap monitoring system. Section, 246.12, “Recordkeeping and Reporting,” requires all facilities to submit reports detailing monitoring plans, certification and recertification plans, and quarterly reports to the Department and the Administrator.

3. PROFESSIONAL SERVICES:

Each coal-fired steam generating facility is unique in setup and site layout and requires site specific considerations in the planning, design, construction, and installation of an air pollution control device. The professional services that Jamestown Power will require will consist of engineering services from an environmental consulting firm and one or more vendors of pollution control equipment. In order to reduce the burden to the regulated community of complying with Part 246, CAIR, and RGGI, the department has coordinated the implementation of Part 246 with the other rules. All three rules have common implementation dates, enabling facilities to more effectively schedule construction timeframes and outage periods for the implementation of pollution control systems. Some control systems may provide a co-benefit control for emissions of sulfur dioxide, oxides of nitrogen, and mercury. Thus, mercury emissions can be reduced with the same pollution control technology that may be installed for the reduction of sulfur dioxide, particulate matter, and oxides of nitrogen.

4. COMPLIANCE COSTS:

The future actual costs of regulating mercury emissions from the electric generating utility sector are directly related to the costs of installing and operating additional pollution control devices, and are determined on a case-by-case basis. Jamestown Power's Samuel A. Carlson Generating Station, a municipally owned electric generating facility, operates four boilers in total, which are divided into two emission units; emission unit U-00003 contains boilers No. 9 and No. 12 (rated at 190 and 297 MMBtu/hr, respectively) exiting to a single stack, emission point 00003. U-00004 contains boilers No. 10 and No. 11 (each rated at 190 MMBtu/hr), exiting to a single stack, emission point 00004. The facility exhausts flue gas through one stack per generator for a total of two stacks. Taking for example the installation an activated carbon injection system and use of an enhanced activated carbon at an insufflation rate of three lb carbon/MMACF, electric use to operate any additional pollution control equipment and operating costs in addition to reagent materials and land filling of additional fly ash; the installation would have an associated incremental cost of generation (implementation cost) in the range of 0.23 to 0.63 mills/kWh. The facility would also be required to install, operate, and maintain a continuous monitoring system to measure and record mercury mass emissions, unless it qualifies as a low mass emitter and can implement an the excepted monitoring methodology as previously discussed. Based upon Staff discussions and interviews with mercury emissions monitoring companies, the Department estimates that the purchase and installation of a mercury monitoring system is currently in the range of $130,000 to $200,000 per unit. An annualized cost per monitoring unit is predicted by EPA to be on the order of $89,500 per year for testing, maintenance, and operation². Although increases may be minimal, the on-site cost of installing, operating, and maintaining mercury emission control equipment would directly increase the cost of generation associated with the Mercury Reduction Program units³.

5. ECONOMIC AND TECHNOLOGICAL FEASIBILITY:

For the Samuel A. Carlson Generating Station to achieve compliance with Part 246's emission limitations, the Department envisions two options for mercury emission control systems. Based on Staff research, a facility with an existing cold-side ESP for particulate control will select one of the following options: (1) the addition of a powdered activated carbon injection unit to work in series with an existing cold-side electrostatic precipitator; or (2) the installation of a fabric filter baghouse following the existing ESP, or a fabric filter baghouse replacing the existing cold-side ESP, working in conjunction with a powdered activated carbon injection unit. Facilities not requiring additional add-on control devices would be those already equipped with wet flue gas desulfurization systems (wet scrubbers), which in conjunction with the cold side ESPs, may demonstrate a near equivalent degree of control as a pulse jet fabric filter baghouse in combination with an activated carbon injection system. Jamestown may decide to install a wet scrubber or a dry lime injection system with fabric filtration for particulate capture for the control of sulfur dioxide to meet its obligations under CAIR and realize a co-benefit of mercury emission reductions. A future addition of an oxidizing catalyst or precipitant additive may be required if Jamestown installs wet scrubbers to promote further oxidation of elemental mercury with subsequent precipitation yielding greater capture and control.

The information used to determine costs to the affected industries is based upon the Department of Energy's National Energy Technology Laboratory (DOE/NETL). DOE/NETL have conducted over 20 pilot studies involving slip stream tests and full scale tests involving many innovative technologies to determine mercury control and have determined that mercury control⁴ is economically and technically feasible.

6. MINIMIZING ADVERSE IMPACTS:

Although the promulgation of Part 246 may result in a modest increase in the cost of electric generation, this cost is not expected to impact small business generators since none of the 13 facilities subject to the rule are owned by small businesses. Only one local government owned facility is subject to the rule. Part 246 does offer options for regulatory flexibility which will minimize the impact of installing pollution control equipment. During Phase I of the rule, facilities can choose which units to control to meet the facility-wide cap, enabling them to target the most economically feasible units. Phase one also allows facilities to realize a mercury emission reduction co-benefit through the installation of control devices for CAIR. Although a cap-and-trade program structure is feasible for other pollutants with different transport qualities, that are emitted in great quantities (i.e. tons), and that are produced by many fuel burning facilities involving all fuels, mercury is emitted in pounds an often measured in increments as low as ounces. The Department believes that the administrative expenses associated with a mercury cap-and-trade program could result in increased costs to both electric generators and consumers of electricity beyond costs projected for the implementation of Part 246.

The Department and NYSERDA have conducted an electricity system modeling analysis to estimate the incremental cost on the price of electricity realized through the implementation of the Clean Air Interstate Rule (CAIR) and a mercury rule in New York. Inputs to the modeling analysis included capital costs per kilowatt produced ($/kW), fixed operation and maintenance costs, and variable operation and maintenance costs. Model inputs were developed through use of the CUECost model⁵. The CUECost economic analysis workbook is a Y2K-compliant system designed to produce study level cost estimates (+30percent/−30percent accuracy) of the installed capital and annualized operating costs for air pollution control systems installed on coal-fired power plants to control sulfur dioxide, nitrogen oxides, and particulate matter. The workbook is capable of calculating estimates of an integrated air pollution control system or individual component costs for various air pollution control technologies currently used in the utility industry⁶.

The Department in coordination with NYSERDA compared a reference or business-as-usual case (absent either CAIR or a mercury control program) to each of three policy cases: New York's proposed approach for implementing both CAIR and a mercury control program, CAIR only, and mercury only. CAIR and Mercury policies (implemented together, as proposed) could increase wholesale electricity prices by an average of 1.7 percent or $1.14 per MWh over the 2010 to 2020 timeframe. For a typical residential customer (using 750 kWh per month), this translates into a monthly retail bill increase of $0.86. Model runs assuming CAIR only (i.e., without a mercury control program) and mercury only control program (i.e., without CAIR) indicate that virtually the entire incremental electricity price impact of implementing CAIR and a mercury rule together is due to CAIR. There is virtually no incremental electricity price impact due to mercury control in conjunction with the sulfur and NOx CAIR program⁷.

In satisfying the requirements of section 202-b for minimizing adverse impacts for small business, the requirements of the State Administrative Procedures Act (SAPA) require that each proposal address the following:

7. SMALL BUSINESS AND LOCAL GOVERNMENT:

The Department will directly notify interested parties on the requirements of Part 246, including the City of Jamestown. By law, the public, including small business and local governments will be able to comment on the proposed rule under the mandatory 30-day noticing of all Department regulations.

¹ Modeling results for CAIR and Mercury, New York State Energy Research and Development Authority - NYSERDA, May 18, 2006

² Federal Register / Vol. 70, No. 95 / Wednesday, May 18, 2005 / Rules and Regulations, pp 28634

³ Modeling results for CAIR and Mercury, NYS DEC and the New York State Energy Research and Development Authority - NYSERDA, May 18, 2006

⁴ USDOE/NETL, Preliminary Cost Estimate of Activated Carbon Injection for Controlling Mercury Emissions from a Un-Scrubbed 500 MW Coal-Fired Power Plant, prepared by Science International Corporation, May 2003

⁵ CUECost – Coal Utility Environmental Cost Model, developed for EPA by Raytheon Engineers & Constructors and Eastern Research Group, Version 1, November 25, 1998 (revised 2-9-00 as CUECost 3.xls)

⁶ cuecost.txt, version 2-9-00

⁷ NYSDEC, NYSERDA, and ICF International, Modeling Results for CAIR and Mercury. May 18, 2006

On March 15, 2005 EPA announced the final Clean Air Mercury Rule (CAMR). CAMR limits mercury emissions from new and existing coal-fired electric steam generating units, and creates a market-based cap-and-trade program that will permanently cap utility mercury emissions nationwide in two phases: the first phase cap is 38 tons beginning in 2010; the second phase cap set at 15 tons beginning in 2018. EPA believes these mandatory declining caps will ensure that mercury reduction requirements are achieved and sustained. On May 18, 2005, EPA promulgated Emission Guidelines and Compliance Times for Coal-Fired Electric Steam Generating Units. (70FR 28606–28700) Pursuant to 40 CFR 60.4141, all States are required to submit to the Administrator their designated mercury allowances for each coal-fired electric steam generating unit by October 31, 2006. Regardless if a State is adopting the federal program or creating its own State control plan, all States must require applicable sources to limit mercury emissions at or below levels which meet the allocations designated in 40 CFR 60.4140, the State trading budget. For New York State, the State trading budget equates to 786 pounds per year of allowable mercury emissions in 2010–2017 and 310 pounds per year in 2018 and beyond.

The Department is proposing to adopt 6 NYCRR Part 246 which utilizes the CAMR emission budgets to set facility-wide annual emission limitations in the first phase and a traditional unit level emission rate limit based program in the second phase. In 2010, Phase I, Part 246 establishes annual facility-wide emission limitations for subject facilities based on the New York State mercury budget. New York facilities will not be allowed to trade mercury emissions with other facilities. The annual facility-wide emission limitation will be in effect from 2010 through 2014. In 2015, Phase II, in conjunction with other electric sector regulations such as the Regional Greenhouse Gas Initiative (RGGI) and the second phase of the Clean Air Interstate Rule (CAIR), Part 246 establishes a facility-wide emission limit for each facility representing a 90 percent reduction of mercury emissions from 2005 levels. The Department will submit Part 246 to EPA for approval as New York's mercury state plan, in lieu of adopting CAMR.

TYPES AND ESTIMATED NUMBER OF RURAL AREAS AFFECTED

6 NYCRR Part 246 applies to coal-fired electric utility steam generating boilers or a coal-fired electric utility steam generating combustion turbines with nameplate capacity of more than 25 MWe (Megawatt electrical, or Megawatt produced as electricity) which produces or has produced electricity for sale firing coal or coal-derived fuel. In addition, Part 246 applies to cogeneration units which serve or have served a generator with a nameplate capacity of more than 25 MWe and supply in any calendar year more than one-third of the unit's potential electric output capacity or 219,000 MWh, whichever is greater, to any utility power distribution system for sale. The Department has identified 13 facilities in New York which are subject to Part 246. These facilities are large industrial sources that produce electricity for commercial sale. These units are located in both rural and urban areas in western New York and the Hudson River Valley. Facilities subject to Part 246 may dispose of fly ash in lagoons or onsite landfills. Depending on the mercury control strategy implemented at the facility and the capacity of the generating units, the proposed regulation may negatively increase the volume of fly ash generated, resulting in up to an additional 500 tons per year of fly ash disposed of in landfills¹.

REPORTING, RECORDKEEPING AND OTHER COMPLIANCE REQUIREMENTS

CAMR imposes certain minimum requirements, requirements that states must include in a state plan to be approved by EPA, for reporting and recordkeeping and other compliance requirements such as the requirement to meet the State mercury budget through facility-wide emission caps, and continuous emission monitors for mercury calculation. These requirements are not envisioned to affect local governments, except in the case of Jamestown which owns and operates an affected facility, or citizens of rural areas.

COSTS

Most facilities in New York will need to install activated carbon injection systems to work in conjunction with existing cold-side ESPs, especially those facilities burning western sub-bituminous coals. Some facilities may need to install pulse jet fabric filter baghouse systems for particulate collection to achieve the higher rates of mercury capture proposed for 2015 than could be realized through operation of a cold-side ESP alone. For those facilities combusting sub-bituminous coals, high percentage sub-bituminous coal blends, or facilities with existing fabric filter baghouses, total capital requirements include the purchase and installation of dosing and storage equipment related to the powdered activated carbon injection (PACI) system. The PACI will be a nearly fixed cost of $984,000 (year 2003 dollars)². Annualized over 20 years at an interest rate of approximately 10 percent this translates to a cost of $117,460 per year. Through research projects partially funded by DOE, it has been realized that mercury emissions from facilities burning sub-bituminous coals are more readily controlled than previously predicted through the use of an enhanced PACI system and brominated or treated carbons³.

The cost of land filling the additional carbon material can vary greatly, but can be approximated as $17/ton of fly ash through a 2001 report from the American Coal Ash Association⁴, which translates to an additional $2,000 to $20,000 for year 2004 disposal costs. Numerous studies have shown that mercury captured on activated carbon surfaces will not leach into liquid collection systems in landfills after disposal. Those facilities that are currently selling collected ash may have problems associated with carbon content of ash and may find it difficult to continue sale of the product. Average sales are approximately $18/ton of fly ash with 50 percent of the ash sold going to Portland cement companies as a kiln additive. An alternative control scheme would be to install activated carbon injection with a polishing baghouse after the primary particulate collection device, for example a cold-side ESP, so that fly ash composition and its sale would not be negatively affected.

The future actual costs of regulating mercury emissions from the electric utility steam generating sector are directly related to any additional control device(s) required on a plant-by-plant basis, in addition to the volume and cost of reagent required. With regards to costs to rural communities or rural entities it is not envisioned that Part 246 will affect these areas of the State.

MINIMIZING ADVERSE IMPACT

The objective of Part 246 is to reduce mercury emissions statewide. The Rural Area Flexibility Analysis (RAFA) under section 202-bb(2)(b) of the State Administrative Procedures Act requires State agencies to take into consideration issues which may impact the ability of regulated entities in rural areas to comply with regulatory requirements. The Legislature has stated that the ability of private and public sector interests in rural areas to respond to state agency regulations may be constrained by operating environments which are distinctly different from that found in suburban and urban areas, including, among other things, population sparsity, limited access to financial and technical resources, and lack of economies of scale. Agencies must assess the regulatory impact and alternatives for rural areas and whether alternative regulatory approaches such as differing compliance or reporting requirements, the use of performance or outcome standards, or exemptions from applicability are warranted.

The Department has considered these issues and determined that Part 246 will not have an adverse impact on rural areas. Notably, Part 246 affects large industrial electric generators who produce electricity for commercial sale, some of which are located in rural areas. The ability of a facility to meet the requirements of Part 246, which include the installation and operation of pollution control technologies and continuous emission monitors, and recordkeeping and reporting, will not be influenced by the location of the facility in a rural versus a suburban or urban area. Moreover, as a matter of federal law, the Department is constrained to adopt requirements no less stringent than CAMR, which include emission caps based on the New York State mercury budget and federal reporting requirements. Part 246 meets these minimum federal requirements.

Currently, mercury emissions continue to be a major threat to public health and natural resources in New York State's rural areas. Due to the high levels of mercury in freshwater fish, the Department and the New York State Department of Health have issued specific warnings advising that pregnant women and children should not consume any servings of specific fish species that are caught in 93 lakes and more than 265 miles of rivers in the State. The New York State Department of Health publication, ‘Chemicals in Game and Sportfish 2006–2007’, identified fifty-two new areas with elevated mercury levels in fish since the 2003–2004 edition, bringing the number of lakes in New York State with specific fish advisories for mercury to ninety-three⁵. Many of the lakes sampled are in remote rural and mountainous areas of the State that do not have any known mercury inputs other than atmospheric deposition. With the proposed regulation, the current deposition rate of mercury in all areas of New York State, urban and rural will be reduced to a much greater degree than would be achieved by the emissions caps sought to be established by EPA as part of the federal proposed cap-and-trade program.

The Western Adirondacks is considered a “hotspot” due to its unique geology and acidified lakes. A significant inverse relationship is found in Adirondack lakes between lower pH levels and increasing fish mercury levels and adult and juvenile loons⁶. The Department implemented the Acid Deposition Reduction Programs for Sulfur Dioxide and Nitrogen Oxides in 2003 and the federal Clean Air Interstate Rule will add to these reductions in 2009 and 2015. Part 246 is designed to work in conjunction with these regulations and their timeframes. The recovery of New York's lakes and rivers will be a slow process and the Department needs to act sooner than the federal program prescribes to protect New York's rural areas.

CAMR's cap-and-trade provisions which allow for the banking of mercury allowances, and the potential for New York's emission reductions to be sold to facilities located in upwind states, will prolong the “hot spots” in the rural Catskill and Adirondack region until 2020 and beyond. Regional concentrations will be reduced sooner through implementation of Part 246 which controls unit-level mercury emissions at least three years earlier than the federal cap-and-trade program and to a greater extent. CAMR's cap and trade provisions jeopardize the public health of New Yorkers and the natural resources of the State.

RURAL AREA PARTICIPATION

The State Administrative Procedures Act requires agencies to provide public and private interests in rural areas the opportunity to participate in the rule making process and or public hearings. The Department will hold public hearings on Part 246 in upstate areas and will notify interested parties of this proposed rule making.

¹ EPA Office of Solid Waste and Emergency Response, EPA 530-S-99-010, March 1999, Report to Congress: Waste from the Combustion of Fossil Fuels

² USDOE/NETL, Preliminary Cost Estimate of Activated Carbon Injection for Controlling Mercury Emissions from a Un-Scrubbed 500 MW Coal-Fired Power Plant, prepared by Science International Corporation, May 2003

³ Sorbent Technologies Corporation, Sid Nelson Jr. – Recipient Project Director, Advanced Utility Mercury-Sorbent Field-Testing Program: Semi-Annual Technical Progress Report

⁴ American Coal Ash Association, 2001 coal combustion product (CCP) production and use statistics

⁵ New York State Department of Health. 2006–2007 Health Advisories: Chemicals in Sportfish and Game. 2006. URL http://www.health.state.ny.us/nysdoh/fish/fish.htm

⁶ Internal DEC work, Bureau of Habitat, Division of Fish and Wildlife, H. Simonim, J. Loukmas, paper to be published 2006

The Job Impact Statement was not revised because the changes regarding the Phase II emission limitations from unit-wide emission limitations to facility-wide emission limitations was not part of the proposed Job Impact Statement.

The Department has received thousands of comments concerning the regulatory schedule for implementing Part 246's emission limitations and standards for coal fired electric generating units (EGUs). Some commenters stated simply that the Department should finalize a regulation requiring power plants to reduce mercury emissions by 2010. Some commenters stated that the Department should reduce emissions 90 percent by 2010 to protect the general health and welfare of humans and the environment. Other commenters express the view that the Department should finalize a regulation requiring power plants to reduce their mercury emissions by 90 percent by 2010 due to the adverse impacts of mercury on public health and the contamination of fish and wildlife and water bodies. Some commenters have stated that the Department's docket letter submitted to the EPA for the proposed National Emission Standard for Hazardous Air Pollutant (NESHAP) expressed the view that the NESHAP emission limits must be implemented within three years to comply with the Clean Air Act's Section 112 provisions for establishing Maximum Achievable Control Technology Standards (MACT). Other commenters have noted that some States are requiring 90 percent reductions in a timeframe more consistent with the MACT standard and so should New York.

The Department is anxious to reduce mercury emissions from coal-fired EGUs and believes a strict emission limit that will achieve an overall 90 percent reduction in mercury emissions is both necessary and feasible. The Department does not, however, believe this level of reduction can be achieved by 2010 for New York facilities. While the Department disagrees with the United States Environmental Protection Agency's (EPA) interpretation of Section 112 of the Clean Air Act (CAA), and the State is challenging that interpretation in federal court, the intent of Section 112 of the CAA is irrelevant to this rulemaking. The responsibility to establish appropriate National Emission Standards for Hazardous Air Pollutants (NESHAP) and/or standards of performance for new sources rests squarely with EPA, not the Department, and EPA has determined that mercury from coal-fired EGUs should be regulated pursuant to Section 111 of the Act, not Section 112. The purpose of this rulemaking is to address the problem of mercury emissions in New York State, while at the same meeting the State's obligations under the federal Clean Air Mercury Rule (CAMR).

The Department is promulgating Part 246 pursuant to its statutory authority under the New York State Environmental Conservation Law (ECL). Part 246 will fulfill New York's obligation under CAMR but Part 246 will be significantly more protective of the public health and welfare of the people of the State than the federal rule. Neither CAMR, nor the ECL, imposes a three year deadline to implement the Phase II mercury emission limit in Part 246. This is important because the Phase II emission limits represent substantial reductions in mercury emissions over and above CAMR, and are more ambitious than any NESHAP or New Source Performance Standard (NSPS) EPA has proposed. The Department, taking into account all relevant statutory and regulatory considerations, reached a different determination with respect to the Part 246 Phase II emission limit.

The need to reduce mercury emissions into the atmosphere has never been in doubt. Nor is there any question that coal-fired EGUs throughout New York State continue to emit significant quantities of mercury (Hg), estimated to total 21.6 percent of the State's total anthropogenic mercury emissions from stationary sources. These emissions impact the State's natural resources, as well as the health and welfare of New Yorkers, and pose a significant public health hazard, especially for children and pregnant women. Although the Department believes that effective nationwide control of mercury emissions can only be achieved through strict federal standards, we recognize that EPA's rules fall far short of providing adequate protection and are now moving forward with State regulations to reduce mercury emissions.

In determining the optimal schedule for implementing Part 246 emission reductions, the Department, as required by the ECL and SAPA, had to consider, along with the environmental and public health benefits of the rule, the impact of the rule on regulated entities. Specifically, the Department considered a number of relevant technical, economic, and regulatory factors, including: the feasibility of the 0.6 lb of mercury per TBtu emission limit; the extensive retrofit and reconfiguration of existing facilities that will be needed to achieve compliance with the 0.6 lb of mercury per TBtu emission limit; other State and Federal regulations that will come into effect during the same timeframe as Part 246; and the need for reliable supplies of electricity in the State.

The Department's decision with respect to the implementation of the 0.6 lb of mercury per trillion Btu (0.6 lb Hg/10¹² Btu) emission limit is driven in part by the stringency of the standard. For example, compared to the New Source Performance Standard promulgated by EPA of 2.0 lb of mercury per trillion Btu for electric generating units firing bituminous coal, Part 246's Phase II emission limit of 0.6 lb/10¹² Btu is significantly more stringent. Under the former standard, total mercury emissions from coal-fired utilities would be 500 lbs per year based upon the average fuel firing from 2000 to 2004; under the Phase II emission limit, emissions would be 150 lbs per year. Unlike CAMR, which allows facilities to emit mercury in excess of applicable emission limits by purchasing allowances, Part 246 requires facilities to achieve strict compliance with applicable emission limits. DEC recognizes that none of the eleven existing coal-fired EGUs currently operating in the State, or the two units that are on “cold standby”, can meet the Phase II emission limit with existing pollution control equipment or by switching from bituminous to sub-bituminous coal. These facilities will need to substantially reduce emissions of SO, NO and/or Particulate Matter, from current baseline levels and control these pollutants on an on-going basis in order to achieve compliance with the Phase II mercury emission limit.

The Department believes the 0.6 lb Hg/10¹² Btu limit is feasible, however, at the present time it is only being achieved by select facilities that have installed state of the art pollution control equipment within the past several years. The Department of Energy has funded demonstration studies/pilot projects at numerous coal-fired EGUs utilizing a variety of coal types, boiler types, control equipment testing the efficacy of mercury control technology by utilizing activated carbon, oxidation catalysts, advanced baghouse configurations, and implementing new continuous emission monitoring technology for the measurement of mercury. Trial studies involving slipstream tests and some full scale testing on a relatively short term basis have demonstrated significant reductions in mercury, but one of the most important aspects of the testing to date is that each electric utility is unique and one technology will not fit all scenarios. The most promising reductions were found using brominated activated carbon injection and subbituminous coal in achieving 90 percent mercury removal with varying particle control devices. But this does not represent the technology currently employed in New York and New York's facilities will need to make changes to their particle control devices to achieve similar results. The excellent work done by the Department of Energy's National Energy Testing Laboratory (DOE/NETL) has shown that technology does exist and can be utilized at electric utilities but plant operators and owners need to begin testing and implementing control strategies to determine which technology will work at their plant.

Part 246 is one of several regulations affecting electric generating units that will be implemented in the 2009–2015 timeframe and overlap in terms of affected pollutants. The Clean Air Interstate Rule (CAIR), Regional Greenhouse Gas Initiative (RGGI), State Acid Deposition rules and the next generation particulate regulations, which are based upon the required State Implementation Plan for PM, are being implemented on roughly the same schedule as Part 246. Each of these rules imposes significant and substantive requirements in terms of emission limitations and reduction targets, continuous emission monitoring and recordkeeping requirements. Since several rules target the same pollutants, most facilities will need to undertake construction projects to install state-of-the-art pollution control equipment and/or emission monitoring equipment. Most of the construction work will need to occur during non-peak operating periods (Spring and Fall) to avoid straining the electric generating system during peak operating periods (Summer cooling season and Winter heating season).

The Department believes it is essential for regulated entities to have a consistent timeframe for meeting these overlapping regulatory requirements to ensure compliance and reliability in the supply of electricity. Accordingly, in setting an effective date for the Phase II emission limits, the Department made a deliberate effort to ensure that the implementation of Part 246 requirements coordinated with other regulations. The second phase of Part 246 commences in 2015 in conjunction with both RGGI and the second phase of CAIR.

The significant reductions in emissions that will occur as a result of the implementation of Part 246 will produce significant environmental benefits for the State, including reducing mercury concentrations in fish. The consumption of sport fish is a significant exposure pathway.

Some commenters stated that most of the mercury emissions from electric generating facilities that remain after implementation of CAIR and CAMR are in the form of elemental mercury, which will not deposit in New York. The commenters state that CAIR will reduce reactive gas mercury (RGM) which can act more like a particle. As a result, deposition in New York is unlikely to change very much from increasing the reduction requirement from 70 percent to 90 percent because only elemental mercury remains after CAIR implementation. The Department finds this statement to be inaccurate. Part 246 is reducing the mass of mercury emissions and will require EGUs to capture more mercury than CAIR or CAMR would require, elemental mercury or RGM. The Department contends that the Northeast States are a hot-spot for the deposition of mercury based upon fish sampling the Department has conducted over the last thirty years.

Some commenters expressed the concern that a number of other states have finalized plant-specific mercury limits in a timeline more consistent with the MACT standard, and others are in the process of doing so. The Department does not believe it is appropriate to compare various States in terms of their mercury reduction programs. First, not all States are starting from the same baseline of mercury emissions per trillion Btu of heat input, (coal burned). Second, the number of affected facilities differs greatly in size, pollution control equipment and number of steam generating units per facility. Third, some affected facilities in other States have actively pursued Department of Energy grants and assistance.

Some commenters stated the Department was not clear on how mercury emissions were distributed to affected EGUs. The Department divided New York State's annual mercury budget of 786 pounds among the eleven currently operating coal-fired utilities, reserving a “set aside” of 40 pounds for new units and existing units on cold-standby, to establish an annual mercury emission limit. The Department created a mercury emission cap for each electric steam generating facility (Mercury Reduction Program Facility) according to the procedure used in the CAMR model rule. The Department opted to use the more conservative method in 40 CFR 60.4142 to establish the facility-specific emission caps.

Some commenters claimed that by not requiring 90 percent reduction by 2010, the Department will allow an additional 3000 pounds of mercury during the time period between 2010 and 2014. The Department does not believe that an additional 3000 pounds of mercury will be emitted. The Department estimates the annual emission rate from coal-fired EGUs to be approximately 600 pounds per year in 2000 to 2014. Affected facilities will need to start construction of any needed pollution control equipment some time prior to 2015 to allow ample time to build, test, and trouble shoot their pollution control systems. It is more likely that a facility would be at the 90 percent emission rate prior to 2015, in 2014 for example, rather than 2015. Therefore, while the potential excess mercury emissions from 2010 to 2014 could be 3000 pounds, the actual mercury emissions are expected to be closer to 1800 – 2000 pounds for the time period between 2010 to December 31, 2014. ((600 lb/yr -150)*4 years).

The Department determined the significance of this rule making action in accordance with SEQRA and the Department's implementing regulations at 6 NYCRR Part 617. The promulgation of Part 246 implicates none of the indicators of significant adverse impacts in 6 NYCRR 617.7(b), which include, a substantial adverse change in air or water quality or the creation of a hazard to human health. The adoption of Part 246 will have a significant positive impact on the environment by substantially reducing the amount of mercury emitted by coal-fired EGUs, one of the largest emitting source categories in the State.

The Department is revising the requirement for inlet testing in section 246.3(b)(2) to allow for fuel sampling. The second stack test requirement is intended to be satisfied with the stack testing requirements in the Relative Accuracy Test Audit (RATA) procedures in Part 75 or the low mass emission testing requirements of 40 CFR Subpart I.

Some commenters contend that the monitoring technology may be valid with respect to a cap-and-trade program but is not valid for Part 246, which establishes definite emission limitations. The Department disagrees. Control strategies employed in New York State will generate flue gas environments no different than any other state where a monitoring program and its associated monitoring systems are required. Part 246 will require the same level of sensitivity as those facilities participating in the federal cap-and-trade program under CAMR. EPA is confident that the CAMR monitor certification will be met, and the Department agrees. Part 246 and 40 CFR Part 75 also allow for alternate monitoring techniques such as sorbent trap monitoring, if CEMs do not appear appropriate for a particular facility. Also, the low emitter exemption is available for facilities using technology to reduce mercury. Existing EGUs have eight years until they will be required to meet the 0.6 lbs of mercury per trillion Btu limit (lbs Hg/10¹² Btu) or a stack concentration of 0.6 ug/m³.

In response to comments in connection with emission reporting, the Department has revised Part 246 to state “12 month rolling total, rolled monthly, reported quarterly.” The Department has revised the Phase II emission standard to reflect a facility-wide 30-day rolling average, rolled daily, reported quarterly.

The Department established the 0.6 lb/10¹² Btu standard based in part on the Proposed National Emission Standards for Hazardous Air Pollutants; and, in the Alternative, Proposed Standards of Performance for New and Existing Stationary Sources: Electric Utility Steam Generating Units; Proposed Rule, 69 FR 4652 – 4752 (January 30, 2004). In this proposal, EPA established a new source performance standard of 0.6 lb/10¹² Btu for bituminous coal and 2.0 lb/10¹² Btu for subbituminous coal. According to the ICR, New York State's average emission rate was 6.26 lb/10¹² Btu. The Department determined that a 0.6 lb/10¹² Btu emission limit was appropriate based upon the federal new source performance standard.

Commenters questioned the availability and reliability of continuous emission monitoring systems to meet the requirements of Part 246. Part 246 offers two mass emission monitoring options, continuous emission monitoring systems (CEMs) and sorbent trap monitoring systems. In addition, for those units that qualify for low mass emissions under 40 CFR 75 Subpart I, periodic emission testing to quantify mercury emissions will be required.

The Department believes that continuous emission monitor systems have been field tested and are currently available for field deployment and have sensitivities well below the future, Phase II Part 246 limit equivalent concentrations of 0.6 ug/scm (wet). In addition to CEMS, sorbent trap monitoring systems with ultimate analysis utilizing ambient air analyzers have the ability to monitor average mercury mass emissions over a time period of well below 0.1 ug/scm. Part 246 will require the same level of sensitivity as those facilities participating in the federal cap-and-trade program under CAMR. EPA is confident that the CAMR monitor certification deadline will be met, and the Department agrees.

Jamestown BPU commented that the Department's cost estimates were inaccurate. The Department used all appropriate and available cost and operational information regarding the Jamestown S. A. Carlson generating station to develop specific cost estimates for annual financial impact and incremental costs on generation. The Department believes the cost estimates for an activated carbon injection system under different carbon injection rates used in the RFA are most appropriate as a carbon injection system's capital cost is not scaled on electrical generation in the same fashion traditional air pollution control devices are.

The cost range provided in the Regulatory Flexibility Analysis estimates the additional cost of generation over the four boilers and two generators subject to Part 246. The incremental cost of generation is based on the purchase and operation of an ACI system in conjunction with the facility's existing pollution control equipment. To enable Jamestown and other facilities to target the most economically feasible units for mercury control, the Department is modifying Part 246 to allow the Phase II emission standard to be a facility-wide 30-day rolling average, rolled daily, reported quarterly.

The set-aside of 40 pounds would be in effect until December 31, 2014. At this time, the Department is aware of the installation of 43 MW of additional electric generating capacity by Jamestown and NRG announced the development of a 600 MW clean coal project in June of 2006 with an expected operational date of 2014. Two additional existing sources are on cold stand-by and equated to less than 1 pound of mercury emissions if they operated at their 2000 levels or 12 pounds if they operated at faceplate capacity for 8,760 hours a year, an unlikely scenario. Even with these two announced projects that could commence operation during Phase I, the Department is certain that neither the new source set aside nor the State's annual will be exceeded. After 2014, all existing facilities and new projects would need to meet the Phase II emission limit for mercury.

EPA sent a number of comments concerning Part 246 definitions and applicability criteria. The Department is revising Part 246 as a result of some comments submitted by EPA. None of these changes are substantial or significant and all are discussed in detail in the response to comments. The Department is complying with the minimal requirements of CAMR but is not adopting a cap-and-trade program.