MEMORANDUM TO: OTAG Strategy and Controls Subgroup FROM: Don Schregardus, Co-Chair, and Robert Hodanbosi, Co-Chair SUBJECT: Summary of Subgroup Meeting, Washington, D.C., January 24, 1996 DATE: January 26, 1996 Thank you for attending the OTAG Strategy and Controls Subgroup meeting in Washington, D.C., on Wednesday, January 24. Following is a summary of the discussion. Opening Remarks Robert Hodanbosi opened the meeting by asking the Control Technologies and Options Workgroup, the Trading and Incentives Workgroup, and the Implementation Strategies and Issues Workgroup for an update on progress and a report on products. Report From the Control Technologies and Options Workgroup Steve Gerritson, co-chair of the Control Technologies and Options Workgroup, presented the following four reports to the subgroup: o Assessment of Control Technologies for Reducing Nitrogen Oxide Emissions From Nonutility Point Sources and Major Area Sources o Mobile Sources Assessment: NOx and VOC Reduction Technologies for Application by the Ozone Transport Assessment Group o Summary of Phase I Control Measures o List of Phase II Potential Controls Mr. Gerritson advised the subgroup that these documents should be considered as "draft final reports." These reports have also been provided to the Implementation Strategies and Issues Workgroup. He added that some disagreement about these reports remains within the workgroup, most of them relating to the cost of applying the technologies. To address these disagreements, the group has established a process for reaching consensus. If they are unable to reach consensus, they will deal with that eventuality when it occurs. Mr. Gerritson then notified the subgroup that the Control Technologies and Options Workgroup will accept comments on these four reports until February 15. At that point, the group will refine the reports and prepare revised versions for submission on February 29. Mr. Gerritson added that the names of the reports are self-evident and that, unless there were questions, further discussion was unnecessary. Mr. Hodanbosi asked whether comments had already been received from the workgroup. Mr. Gerritson responded affirmatively but explained that the workgroup is still trying to resolve remaining areas of disagreement; therefore, any comments should be directed to those areas. Mr. Gerritson stressed that this new comment period is not a "fresh start." Mr. Hodanbosi then asked for clarification of the source of the disagreements. Mr. Gerritson responded that disagreements have arisen over the numbers that are included in the reports and the numbers that are missing. Mr. Hodanbosi reminded the group of the February 15 comment deadline and requested that general comments be provided to Steve Gerritson or Laurel Schultz. In addition, comments on utilities should go to Danny Herrin, mobile sources to Marlin Gottschalk, and stationary and other area sources to Steve Gerritson. Mr. Gerritson informed the subgroup that his group is moving ahead with VOC consideration. He does not expect this process to take as long as was required to produce the NOx report. Mr. Hodanbosi asked whether there were any questions for the Control Technologies and Options Workgroup. When none were raised, he thanked Mr. Gerritson, Ms. Schultz, and the workgroup for their efforts in completing the work. Report From the Trading and Incentives Workgroup Jim Rue reported that the Trading and Incentives Workgroup has prepared a draft set of frameworks for trading large stationary sources of NOx. He added that the group reviewed the document in detail during its morning meeting, but several issues remain to be resolved. Mr. Rue notified the subgroup that he hopes to present by the February 29 meeting a rule that would apply to large industrial boilers for trading of NOx. At that point, his group will be ready to turn to other sources of ozone. He expects that they will be ready to address trading rules for mobile and area sources and possibly VOCs after February 29. He added that some group members would also like to examine how a trading rule could resolve some of the problems presented by an I/M program. At this point, Frank McDowell cautioned Mr. Rue against using the term "rule" when he should say "framework." Mr. Rue apologized and restated his group's product as a "framework of eight principles that will provide a minimum of consistency for states to trade between and among themselves." Don Theiler asked whether hot summer days have been addressed in terms of trading, especially in relation to utilities. Mr. Rue responded that this issue relates to banking provisions. For a trading rule to be effective, it must have a good banking provision. To get early reductions, one must have a bank available to account for those. Mr. Rue's group has chosen to examine banking separately because members want to finalize the basic framework before addressing banking. In other words, banking will be step 1.5 after addressing step 1, the framework, and before looking at step 2, other sources. The group raised no further questions for Mr. Rue. Mr. Hodanbosi then turned to the Implementation Strategies and Issues Workgroup for its report. Report From the Implementation Strategies and Issues Workgroup Merrylin Zaw-Mon began her report by forwarding three items to the subgroup. The first item was the following schedule for accomplishing remaining tasks. OTAG Implementation Strategies and Issues Workgroup Upcoming Activities January 24, 1996 Major tasks to be addressed Target Dates Evaluate NOx control measures Jan.-Feb., 1996 Develop initial control strategy options Mar. 1996 including both NOx and VOC measures Review output from OTAG base case, Apr.-May, 1996 sensitivity, and Phase I modeling; emissions inventory; and any new air quality data analysis Evaluate information on VOC control measures As available Develop revised control strategy options May-June, 1996 Review modeling results for initial June 1996 control strategies Reassess strategies and implementation issues July-Aug., 1996 Review modeling results for revised control Sept. 1996 strategies Report to subgroup on findings Sept. 1996 Ms. Zaw-Mon reviewed the schedule for the group, stressing the iterative nature of the process. The second item presented by Ms. Zaw-Mon was the following list of broad approaches, prepared by the Broad Approaches mini-workgroup. Ms. Zaw-Mon reported that an Ad hoc group had been formed this morning to make several revisions that are reflected in this list. The mini-workgroup will work closely with the Regional and Urban Scale Modeling group to match sensitivity runs with the amended broad approaches. Ms. Zaw-Mon added that the workgroup has reached consensus on these broad approaches. The third and final item presented by Ms. Zaw-Mon consisted of the following list of evaluation criteria prepared by the Criteria Evaluation mini-workgroup. Report From Implementation Strategies and Issues Workgroup January 24, 1996 Set 1--Criteria for Selecting Technologies--Final 1. Direct measurable economic costs of reducing the ozone precursor emissions. 2. Estimated improvements in the ozone levels, based on the air quality modeling sensitivity analyses for the areas required to submit State Implementation Plans for ozone. 3. Reliance on commercially available technologies. 4. Timeframes for getting ozone reduction benefits. 5. Estimated ozone precursor emissions reductions due to the technology. Set 2--Criteria for Evaluating Strategies--Working Draft These criteria are intended to be used to evaluate the relative cost-effectiveness of alternative control strategies. 1. Direct measurable economic costs (e.g., the total cost for implementing the strategy). 2. Estimated improvements in ozone levels, based on control strategy modeling results for areas required to submit State Implementation Plans for ozone. 3. Reliance on commercially available technology. 4. Timeframes for getting ozone reduction benefits. 5. Other costs and benefits. 6. Political feasibility/public acceptability. 7. Ease of implementation/simplicity. 8. Flexibility. 9. Equity. NOTE: Criteria 5-9 may not necessarily be used to rank the alternative strategies, but information will be provided on these criteria. According to Ms. Zaw-Mon, the workgroup has agreed on the set 1 criteria as well as the charge to the mini-workgroup to rank NOx control technologies. There is still some discussion on how the criteria will be applied. To discuss application of set 1 criteria to the control technologies and related information from the Control Technologies and Options Workgroup, Ms. Zaw-Mon presented Mr. Theiler. Criteria Evaluation Mr. Theiler began by reporting that his mini-workgroup had met the night before to discuss the template they developed for comparing and rating technologies and, during the meeting, the group agreed on how to proceed. According to Mr. Theiler, his group established a system to rate each technology against each of the following five criteria: o Cost o Availability of technology o Timeframes o Ozone improvement o Overall estimated reductions in ozone precursors. There are only four criteria to rate at this point, because sensitivity runs have not yet been completed. Without sensitivity run information, ozone improvement cannot be determined. Ultimately, Mr. Theiler continued, the technologies will be ranked on a scale of 1 to 3 with 1 being most favorable for inclusion in control strategy and 3 being least favorable. Mr. Theiler added that a subgroup of his mini-workgroup will develop the first set of cut points for placing each technology into a 1, 2, or 3 ranking by mid-February. His group will then have the technologies rated and will discuss these ratings in a conference call prior to the February 29 meeting. At the February 29 meeting, Mr. Theiler will be prepared to present initial ratings on four criteria for NOx technologies. If this process goes as planned, the group will proceed with VOCs and ultimately fill in gaps in the ratings and come up with overall ratings for technologies against NOx and VOCs. This approach will provide the group with better tools to develop the overall strategies that they will model. Ms. Zaw-Mon added that Mr. Gerritson's workgroup has agreed to participate in the ranking process as a joint exercise. Mike Stroben asked Mr. Theiler whether his group intends to assign a level of importance to each criteria. Mr. Theiler indicated that until they need to give an overall rating to a particular technology, they will try to obtain ratings only within individual criteria. For the record, Vince Albanese suggested that attempts to rank NOx reduction technologies at least partially negates efforts of trading and market incentives in allowing for the very flexibility that the ranking may diminish. Mike Koerber then asked the group which years they want to have modeled. He had been working under the assumption that both 1999 and 2007 should be modeled, but if the group wants only 2007, Mr. Koerber will have less difficulty in completing the work. Danny Herrin commented that in order to rank, the group needs to look at two different dates. The group discussed whether the years to be modeled had been determined by the other subgroup, whether modeling 1999 would be unnecessary because controls could not be put in place in time, whether the issue needs to be taken to the Policy Group, and whether states need to have SIPs to EPA by mid-1997. Ms. Schultz clarified that EPA seeks a recommendation by the end of 1996 so that by mid-1997, states can model and identify additional measures needed on the state level for an individual area to reach attainment. Following additional deliberation, Mr. Hodanbosi requested that both 1999 and 2007 be modeled. Having completed discussion of the third item forwarded by the Implementation Strategies and Issues Workgroup, Mr. Hodanbosi moved on to the first item, the revised schedule. Revised Schedule Jerry Golden commented that there was concern about the quick pace of the schedule and whether it allowed for the best science before it was revised; now the situation is even more tenuous. Mr. Hodanbosi acknowledged that the schedule is aggressive, but advised the group to attempt to meet the deadlines before considering any extensions. Dan Weiss asked whether variations in the rates at which the four different modeling centers proceed have been considered. He added that he would like to know how the modeling information will be shared and evaluated within the subgroup and the Policy Decision Group if there are wide disparities in adherence to the schedule. Mr. Hodanbosi responded that if this problem arises and it becomes necessary for the group to move ahead without modeling results from all four centers, the subgroup will determine the course of action. Michael Bradley then asked whether any other groups will be doing sensitivity runs and if so, what the review process would be. Following some discussion about how submission and review of additional modeling results should be handled, Mr. Hodanbosi proposed that the group establish a deadline for accepting outside modeling to fall a certain number of days after OTAG modeling is done. Although several group members objected to setting rigid deadlines for modeling results, Mr. Hodanbosi asserted that it is beneficial for the groups doing modeling to have a target date for completion. Mr. Golden added that the schedule should therefore be referred to as a "target schedule." In concluding discussion of the revised schedule, Mr. Hodanbosi encouraged group members to stay apprised of the modeling group's progress to ensure an opportunity to review parallel modeling efforts. Broad Approaches Before taking any questions on broad approaches, Ms. Zaw-Mon reminded the subgroup that no single approach will achieve the OTAG goal and that the approaches are not ranked in priority order. Mr. Herrin asked whether the Regional and Urban Scale Modeling Workgroup will model each broad approach separately. Mr. Koerber replied that the approaches are not strategies to be modeled, but there will be sensitivity runs that correlate in some way to each broad approach. At this point, David Parks reviewed the six broad approaches for the subgroup. Report of Implementation and Issues Workgroup Broad Approaches--January 24, 1996 The Workgroup is recommending the following broad approaches and respective subsets of broad approaches: 1. Full implementation of the Clean Air Act through 2007 (including estimated NOx reductions for Title IV Phase, Group 2 boilers and Phase 2 boilers). 2a. Extension of nonattainment area requirements to urban attainment areas. Basic I&M programs (also in Mobile Approach). Stage II vapor recovery. RACT (NOx and VOC). 15 percent VOC reduction. LAER and 1.15 to 1.0 offsets for major new sources. 49-state car (also in Mobile Approach). Reformulated/low RVP gasoline (also in Mobile Approach). Accelerated offroad/nonroad engine controls. Accelerated solvent rules. Incentives to retire/retrofit existing offroad/nonroad emissions and for scrappage programs. 2b. Extension of above nonattainment area requirements to full OTAG region. 3. Region-wide NOx reductions from utility and other industrial sources. 3a. Apply 0.15 lb/mmbtu rate or 75 percent reduction from 1990 emissions, whichever is less stringent, with comparable reductions for industrial sources. 3b. Apply 0.34 lb/mmbtu rate or 55 percent reduction from 1990 emissions, whichever is less stringent, with comparable reductions for industrial sources. 4. Mobile source approach. 48-state low emissions vehicle program. Reformulated gasoline. I&M programs (basic and/or enhanced). 5. Controls applied differently to subregions (to be defined and modified later in the process if necessary). Northeast Midwest Southeast Southwest 6. Combination stationary NOx and mobile source approach. 3a plus 4 3b plus 4 Working Principles To Guide Control Strategies Selection o Assume that the reduction associated with Clean Air Act requirements as currently written have been implemented, including Rate of Progress controls. o Both stationary and mobile source controls need to be examined; no potential controls will be eliminated at this point and the mix of controls will not be pre-determined. o Based on overall review of modeling to date, a mix of regional NOx and VOC controls needs to be examined. o There are no geographic constraints concerning coverage of controls. Controls will be considered throughout the OTAG area, including in attainment areas. Variations of controls within the OTAG area will be considered. o Technology forcing (performance-based) options are not initially excluded and will be examined as will the most common controls. o For purposes of selection of strategies to be evaluated, assume the current ozone standard stays in effect and remains the goal for attainment. To the extent feasible, in presenting results for evaluated strategies, display the implications of the strategies for alternative forms of the ozone standard as directed by the Policy Decision Group. o Seasonal controls are not excluded. Both annual and seasonal controls will be examined. The subgroup raised no questions on these broad approaches. Mr. Hodanbosi thanked the Implementation Strategies and Issues Workgroup for its work. Additional Business Having heard all of the workgroup reports, Mr. Hodanbosi asked the group whether there were additional issues for discussion. Nancy Hirshberg asked whether the proposed set 2 criteria should be presented before the Policy Decision Group at the next meeting. Ms. Zaw-Mon clarified that the workgroup hadn't discussed bringing this issue to the Policy Decision Group level. Although it has now been raised to the subgroup, additional discussion remains necessary at the workgroup level. Mr. Hodanbosi reiterated that the workgroup should attempt to resolve this issue at the workgroup level. He then reminded members that waiting 6 weeks for the next Policy Decision Group meeting would result in a substantial delay. Ms. Zaw-Mon added that only the set 1 criteria is final; the set 2 criteria that was presented to the subgroup is still in draft form. Margaret Claiborne restated Ms. Hirshberg's concern as follows: "With respect to the set 2 criteria and the subject of cost-effectiveness, there are two issues. The substantive issue concerns the definition of cost-effectiveness. The procedural issue concerns when the subgroup will discuss the set 2 criteria for evaluating control strategies and whether these criteria be submitted to the Policy Decision Group for review and approval. We do not want to apply the criteria before they have been approved by the Policy Decision Group." Ms. Zaw-Mon proposed that this matter be discussed during the next workgroup conference call and then included on the agenda for the next subgroup meeting. Mike Stroben added that the definition of cost-effectiveness can wait until after the criteria have been submitted to the Policy Decision Group, but in the meantime he has provided a recommendation for that definition to Mr. Theiler and will forward the same to Ms. Zaw-Mon. In response to a question from Mr. Hodanbosi about whether the group will address CO, Ms. Zaw-Mon stated that unless there is a compelling reason to look at CO, the group will probably focus only on NOx and VOC. Mark Brownstein then commented that trading should be factored into any attainment strategies that are considered because this variable has an impact on cost-effectiveness. Ms. Zaw-Mon acknowledged the importance of this reminder but urged the group not to get ahead of itself. After addressing several additional questions and concerns, Mr. Hodanbosi informed the group that he would be available to help the workgroups determine which, if any, matters should be presented to the Policy Decision Group at the next meeting. He reiterated that it is preferable for the workgroup to address issues on the workgroup level, where the bulk of activity takes place. Before concluding the subgroup meeting, Mr. Hodanbosi asked John Sykes, head of EPA's Office of Air Quality Planning and Standards, to provide the group with some insight on the EPA budget. Update on EPA Funding Mr. Sykes explained that in Congress, the speaker of the house and the senate majority leader had just announced that a continuing resolution would be signed to fund EPA through the 29th at approximately the same spending levels. Mr. Sykes has met with Mary Nichols and Mary Gade to discuss the processes necessary to get funding out as soon as possible. He has heard a lot of different numbers, primarily 75 percent of current funding levels, but assured the group that this is still a fair amount of funding. One of the first priorities is to get funding to regional offices and states so that they can get activities under way. There are also human resources and scheduling issues to discuss. Given this situation, Mr. Sykes cautioned that there is no reason to discuss changing schedules at this point. All pieces of the puzzle must be put together in terms of the implications on modeling and inventory work. In closing, Mr. Sykes informed the group that Ms. Nichols and Ms. Gade are not prepared to slip the schedule at this point. They plan to get the funding out first and then look at the schedule with the Policy Decision Group. Mr. Hodanbosi thanked Mr. Sykes for his update and concluded the subgroup meeting. The meeting adjourned at 3:25 p.m.