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( $ Figure  1  Level 1Level 2Level 3Level 4Level 5 !  _qY=-)`~0_ `EB_Fzq =(#=(#(#(# (#(#=(#=(#MEMORANDUM  0 April22,2002    FROM:0 ` InitiativesOversightCommitteex ` (#` (# TO:0  0` (#(#InterestedPartiesD ` (#` (# SUBJECT:0 ` DiscussionPaper:OptionsforPreservingtheWRAPsSO2AnnexinFederal ` MultiPollutantLegislationforElectricUtilitiesF` (#` (# TheInitiativesOversightCommittee(IOC)oftheWesternRegionalAirPartnership(WRAP)  invitescommentontheattacheddiscussionpapertitled OptionsforPreservingtheWRAPs  SO2AnnexinFederalMultiPollutantLegislationforElectricUtilities.  Thepurposeofthisdiscussionpaperistobeginadialoguewithallinterestedpartiestoidentify Z oneormoreacceptableoptionsforpreservingtheWRAPsSO2Annexinanyfederalmulti @ pollutantlegislationforelectricutilities.TheWRAPsIOChasidentifiedtwopotentialoptions &v whicharedescribedinthepaper.TheIOCisseekingcommentontheseoptionsfromall  \ interestedparties.TheIOCrecognizesthatthereareprobablyadditionalwaystopreservethe B Annexinfederalmultipollutantlegislationforelectricutilitiesandwelcomesanysuch ( suggestions.  TheIOCstressesthatthepurposeofthispaperissolelytobeginadiscussionthatwillresultin   identifyingoneormoreacceptableoptionsforpreservingtheWRAPsSO2Annexinfederal p!  multipollutantlegislationforelectricutilities.Atthistime,neithertheIOCnortheWRAPare V"! takinganypositionormakinganyrecommendationsorcommentsonotherpollutantsorother <#" programsaffectedbythePresidentsClearSkiesInitiative,SenateBill556introducedby "$r# Senator_Jeffords_,orotherlegislativeproposalstoaddressmultiplepollutantsfromelectric %X $ utilities. %>!% CommentsandsuggestionsshouldbesentbyMay10toWRAPCoDirector,PatrickCummins, ' #' at4 sO  5  pcummins@westgov.org6 O   7 F J Ԁ(3036239378).YoumayalsocontactmembersoftheIOCdirectly (#( (see4 %O  5  www.wrapair.org6 O1   7 _ ԀforinformationontheIOC). )$) Thankyouforyourinterest. R+&+   -n(- 8XXdd8  DiscussionPaper:OptionsforPreservingtheWRAPsSO2Annex  inFederalMultiPollutantLegislationforElectricUtilities  April22,2002 | PreparedbytheWRAPsInitiativesOversightCommittee  H   ItiscriticaltotheWestthatanyfederalmultipollutantlegislationforelectricutilitiespreserve  d theWesternRegionalAirPartnerships(WRAP)SO2Annex,submittedtoEPAinSeptember  J 2000.TheWRAPsAnnextotheReportoftheGrandCanyonVisibilityTransportCommission  0 represents10yearsofworkthroughawesternstakeholderprocessthatachievedaconsensus    approachforaddressingthepointsourcesulfurdioxidecontributiontoregionalhazeintheWest.    AnyfederallegislationneedstosupporttheAnnexandensurethattheintegrityofthis   agreementismaintained. x  Whilethetimingoffederallegislationremainsuncertain,westernstatesandtribesmust D  implementtheWRAPprogramunderestablishedregulatorydeadlines.AnEPAproposalto *z  reviseSection309oftheRegionalHazeRuletoincorporatetheAnnexisexpectedsoonandthe ` finalruleshouldbeinplacebytheendofthisyear.Regionalhazeplansimplementingthe F AnnexunderSection309oftheRegionalHazeRulesmustbesubmittedbyDecember31,2003. , KeyfeaturesoftheAnnexmilestonesandtradingprogramthatneedtobepreservedinclude:a   hardcapforthe9statetransportregion(theAnnexmilestones);allowancesetasidesfor  tribes,renewableenergy,andnewsources;thetimingofreductions,includinginterim t milestones;andimplementingacapandtradeprogramasabackstop,notastheprimary Z program.Itisalsoimportantthatstatesandtribesretaintheabilitytoaddresslocalizedvisibility @ impairmentproblemsatClassIareascausedbysourcescoveredbytheAnnexandtheRegional &v HazeRule.  \  Thepurposeofthispaperistobeginadiscussionwithallinterestedpartiestoidentifyone ( ormoreacceptableoptionsforpreservingtheWRAPsSO2Annexinanyfederalmulti  pollutantlegislationforelectricutilities. TheWRAPsInitiativesOversightCommittee(IOC)  hasidentifiedtwopotentialoptionswhicharedescribedbelow.   TheIOCisseekingcommentontheseoptionsfromallinterestedparties.TheIOCisalso V"! interestedinexploringadditionaloptionsforpreservingtheAnnexinanyfederalmultipollutant <#" legislationforelectricutilities.Commentssuggestingadditionaloptionsareencouraged. "$r#  TheIOCstressesthatthepurposeofthispaperissolelytobeginadiscussionthatwill %>!% resultinidentifyingoneormoreacceptableoptionsforpreservingtheWRAPsSO2 &$"& Annexinfederalmultipollutantlegislationforelectricutilities.Atthistime,neitherthe ' #' IOCnortheWRAParetakinganypositionormakinganyrecommendationsorcomments (#( onotherpollutantsorotherprogramsaffectedbythePresidentsClearSkiesInitiative, )$) SenateBill556introducedbySenator_Jeffords_,orotherlegislativeproposalstoaddress l*%* multiplepollutantsfromelectricutilities.  R+&+   8,', Option1MaketheAnnexthefederalSO2programfortheWest  MakingtheAnnexthefederalprograminthe9statetransportregionhastheadvantagesof | preservingtheAnnexinitsentirety,includingallowingtradingbetweenutilityandnonutility b sources(therebysatisfyingtheRHBARTrequirementfornonutilitysources),retainingtheset H asidesfortribes,renewableenergy,andnewsources,andimplementingatradingprogramonly . ~ asabackstopiftheestablishedmilestonesarenotmet.Itwouldalsoresultinfullparticipation  d intheAnnexregardlessofwhetherornotalleligiblestatesandtribeselectedtosubmit  J _SIPs_/_TIPs_ԀunderSection309.  0 PotentialdisadvantagesincludemandatingtheAnnex,whichiscurrentlyavoluntaryprogram,    andrestrictingemissionstradingtothewesternregionasopposedtoallowingwesternutilitiesto   tradeinanationalmarket. x  Option2WesternutilitysourcesparticipateinnationalSO2program,butlegislationrequires D  utilitySO2emissionsinthe9stateregiontomeetthelevelexpectedofthesesourcesunderthe *z  Annex. ` UnderthisapproachtheAnnexwouldremaininplaceasanoptinprogramforwesternstates , andtribes,butthefederalprogramwouldincludearequirementthatutilityemissionsinthe9  stateregionmeetanactualemissionslimitin2018consistentwiththeAnnex(275,000tonswith  somepotentialadjustmenttoreflectAnnexagreementsonheadroom,allowancesfornew  sources,and_CEMs_Ԁadjustments).This backstopinthefederalprogramwouldensurethatthe t Annextargetsforutilitiesemissionsaremetwhileallowingwesternutilitiestoparticipateina Z nationalprogramandtocomplywiththatprogramthroughthenationalbankingandtrading @ provisions. &v ItisimportanttorecognizethattheAnnexisdesignedtoachievetheemissiontargetin2018, B ratherthantriggeringaprogramtoachievethetargetsometimeafter2018.Therefore,any ( federalmultipollutantlegislationshouldincludeprovisionstoensuretheWRAPemissions  targetforutilitiesisachievedin2018.SuchprovisionscouldincludeanEPAadministered  nestedwesterncaponutilityemissionsbeginningin2018ifthewesterntargetisnotmet(the   Annexprovidesfora2013checkpointwhichallowstriggeringthetradingprogramearlyifitcan p!  bedemonstratedthatthecoveredsourceswillnotachievetheemissionstargetin2018)and/or V"! assessingtheemissionoffsetpenaltiesandfinancialpenaltiesdevelopedbytheWRAPand <#" incorporatedintheAnnex. "$r# PotentialadvantagesofthisapproachincludeallowingtheAnnexandthefederalprogramto %>!% operateindependentlywithnochangestotheAnnex(remainsavoluntaryprogram,tribes &$"& receivethetribalsetasideifthetradingprogramistriggered,etc.)whileallowingwesternutility ' #' sourcestoparticipateinthenationaltradingprogram(with flowcontroltoensuretheAnnexis (#( notundermined). )$) ***  R+&+ Undereitheroption1oroption2,itwouldbepossibletoexpandthewesternregiontoinclude  westernstatesbeyondtheninestatetransportregion,andtribeswithinthosestates.Both  optionswouldalsoallowAnneximplementationtomoveforwardonthecurrentscheduleand | mergewithafederalmultipollutantapproachforelectricutilitiesinthefuture(i.e.,iflegislation b isnotpassedbytheendof2003whenSection309plansimplementingtheAnnexaredue).