Emissions Reduction Market System (ERMS) Account Officer Training 2012 Version

Basics

Purpose of ERMS  Contribute to attainment  Minimize costs of further reduction by using a “market based approach” providing flexibility and allowing sources to determine the best way to reduce emissions  Maintain the “status-quo” for current control programs 3

Past: Command and Control  Rules developed based on industry type (e.g., printing, coating, chemical manufacturing)  All companies required to implement the same reduction percentage • Cost not considered per company • • Sometimes had a threshold for implementation Usually not “one size fits all” 4

ERMS: Market Based  Overall reduction mandated  Allotments (emissions) given to the companies based on a baseline  Up to the companies to determine how/if reductions are made • • Make reductions and have allotments to sell May be cheaper to buy allotments rather than reduce 5

Possible Approaches  Upgrade control measures on existing units where it can be done most economically and effectively  Enhance control measures when existing units are replaced  Switch production out of the trading season  Purchase ATUs 6

Affected Sources  Stationary sources located in the Chicago ozone nonattainment area • Cook, DuPage, Kane, Lake, McHenry and Will counties • Aux Sable Township, Goose Lake Township in Grundy county and Oswego Township in Kendall county 7

Affected Sources - continued  Required to obtain a Clean Air Act Permit Program (CAAPP) permit OR Federally Enforceable State Operating Permit (FESOP)  VOM emissions of at least 10 tons per season (May 1 - September 30) 8

Affected Sources - Exemptions  Can accept a limit of 15 tons/season • 10 tons/season is the threshold for identifying you as a participating source, but accepting a limit of 15 tons/season will keep you out of being a participating source in ERMS  Make a reduction of 18% from your baseline • Participating sources make a 12% reduction 9

Types of ERMS Sources

Types of ERMS Sources  Participating Source  New Participating Source  General Participant  Special Participant 11

Participating Source  Operating prior to May 1, 1999  Located in the Chicago nonattainment area  Potential to emit >=25 tons/year of VOM  Required to obtain a Title V (CAAPP) or FESOP (Federally Enforceable State Operating Permit) permit  VOM emissions >=10 tons/season 12

New Participating Source  Not operating prior to May 1, 1999  Located in the Chicago nonattainment area  Potential to emit >=25 tons/year of VOM  Required to obtain a Title V (CAAPP) permit  VOM emissions >=10 tons/season  Do not get an annual allotment 13

General Participant  Not a Participating Source  Not a New Participating Source  Any person/entity that obtains a Transaction Account • Can think of this as a “broker”  Can buy and sell ATUs  Need to have a trained account officer 14

Special Participant  Any person/entity that registers with the Agency  Cannot sell ATUs  Can buy ATUs • Any purchased ATUs are immediately retired  No account officer training needed 15

Baselines, Allotments & Reconciliation

Allotment Trading Unit (ATU)  The “currency” of the ERMS  Equivalent of 200 pounds VOM emissions  Each ATU is valid for the season of issuance and the following season • Unless used for emission compensation 17

Baseline Emissions  Based on historical emission data • Adjusted upward for over-compliance • • Adjusted downward for non-compliance Can substitute years  Allotment of ATUs will be set from the baseline emissions • • generally reduced by 12% Allotment amount included in your permit 18

Exclusion from Further Reductions  Insignificant emission units  Emission units complying with NESHAP or MACT  Fuel combustion units (e.g., boilers and engines)  Emission units where a LAER demonstration was approved 19

Baseline Years  Average of the two highest years of 1994, 1995 or 1996 • No justification needed  Can substitute any year from 1990-1993 or 1997 if that year is more representative • Requires justification • Substitute one whole year 20

Emission Calculation Methodology  The methodology used to calculate baseline emissions will be included in your permit • Must be used to calculate emissions for the season – no deviations • Changes to calculation methodologies require a permit revision – Baseline and allotment will be recalculated based on the new methodology 21

Annual Allotment  Each year the number of ATUs in your permit will be deposited in your account automatically • • • Historically done in March/April No notification List will appear under the Allocation Reports menu option of the web page 22

Reconciliation Period  The three months (October – December) following seasonal allotment period  Time to compile actual seasonal emission data  Submit seasonal component of annual emission report 23

Reconciliation Period - continued  Conduct end of year trades • Can trade throughout the whole year  Only trades agreed to by December 31 st can be counted towards the seasonal emissions for that year • We don’t close the books at midnight December 31 st , but wait a few days for paper trades to come in 24

Seasonal Emission Reports

Seasonal Emission Reports  Applies to • Participating sources • • New Participating sources 18% reduction sources • 15 ton/season limit sources  Due date • October 31 for < 10 emission units • November 30 for >= 10 emission units 26

Seasonal Reports – Content  Actual VOM emissions from May 1 – September 30  Adjustments due to variance, consent order, emergency condition and so forth  Number of ATUs that equate to the seasonal emissions  HAP emissions for the season 27

Seasonal Report – HAPs  HAPS = Hazardous Air Pollutants  Report VOM HAPs if • Major for HAPs – >= 10 tons/year for any individual HAP – >= 25 tons/year for all HAPs combined • Subject to NESHAP/MACT – Report only those units subject to NESHAP/MACT • Report to TRI 28

Seasonal Reports – Checking  Signature  All emission units are reported  Emission calculations performed correctly • • We find many math errors Calculation methodology needs to be the same as in the permit • Production rate is used as a reasonableness check 29

Compensation and Excursions

Emission Compensation  This is the IEPA retiring (subtracting) the amount of ATUs, reported on your seasonal report, from your transaction account  Timing • Sometime in mid-January of each year when all previous year transactions have been entered and seasonal report has been accepted • Never before January 1 31

Excursion  Occurs when your account does not hold enough ATUs to cover your seasonal emissions  If an excursion occurs, you are not in violation  The ERMS rule gives a mechanism for resolving an excursion 32

Excursion Penalty  First excursion • Owe 1.2 times the amount of excursion  Second (or more) excursion in a row • Owe 1.5 times the amount of excursion  When multiplying by 1.2 or 1.5, if there is a fractional ATU, the value is always rounded up to the next higher ATU 33

Excursion Resolution  Will send an excursion compensation notice  Only two choices for resolution • • Purchase from ACMA (default) Take from next year’s allotment – Notify us within 15 days  Choice is yours • If choosing ACMA, you will be sent a bill 34

Annual “Flow” of ERMS  April: Allotment  May – September: Emissions  October – December : Reconciliation • • Submit seasonal report Trade as necessary (throughout the year)  January: Compensation and Excursion 35

Other Facets of ERMS

ACMA  Alternative Compliance Market Account  Reserve of ATUs managed by IEPA  Receives ATUs equivalent to 1% of each year’s allotment (about 1000 ATUs)  ACMA available during reconciliation period  Cost is lesser of 1.5 times the average market price or $10,000/ton 37

Shutdowns  All operations at a source shut down and the permit is withdrawn (or is revoked or terminated)  80% of allotted ATUs go to source and 20% to ACMA unless…  Source makes arrangement to trade whole allotment to a general participant before shutting down 38

Emission Reduction Generators  ATUs created for creditable reductions at permitted sources that are not participating sources  Source needs to become a general participant or have a partner in ERMS who gets the ATUs  Reductions must be real, actual and surplus (can’t be shifted elsewhere in the area) 39

Inter-Sector  Receive ATUs for making reductions in area source or mobile source categories • • Cars – Cash for clunkers Switch from gas to electric lawnmowers • Reformulate coatings purchased by the public (only Intersector to date) • Etc.

 Request reviewed by the Agency 40

Quick Facts

Quick Facts  About 140 participating sources  About 5 new participating sources  About 90 sources with 15 ton/season exemption  About 75 general participants  About 7 special participants 42

More Quick Facts  About 104,000 ATUs allotted each season • 100,000 from baseline • • 2700 from Emission Reduction Generators 1000 to ACMA  Around 40,000 ATUs retired each year  Around 59,000 ATUs expire each year 43

Buyers/Sellers  Around 20 sources need to buy ATUs each year  Remaining sources (around 120) are possible sellers  A few (1-3) sources go into excursion each year • Mainly due to inaction on their part to buy ATUs 44

ATU Prices ($/ATU)  2011 =  2010 = $20.10

 2009 = $19.32

 2008 = $18.22

 2007 = $14.86

 2006 = $17.01

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Transaction Account and Account Officers

Transaction Account  Database where ATUs are kept • Has a unique identification number for the entity • All allocations, trades, retirements and expirations occur in the database • Trade is not accepted until it is enacted in the database  Think of it as your bank account 47

Account Officer  A person who has been approved by the Agency who is responsible for one or more transaction accounts  Transaction account • • Must have at least one account officer Can have multiple account officers  An account officer may be associated with more than one transaction account 48

Account Officers  Remember… • An account officer can freely trade ATUs in and out of the transaction account as long as he is associated with the account • If an account officer leaves a company, it is best to notify the Agency of that fact and that you wish to have him removed from the account – Account officer can still represent other accounts 49

Expedited Approval of Account Officer  Used when an account officer unexpectedly leaves that position • • Requested by the company With expedited approval, the account officer can perform trades without training • Must take the account officer training within one year of request 50

Trades

Types of Trades  Trade • One-time only transaction  Transfer agreement • • Multi-year transactions (specify years) Will be performed once per year (can specify date) • Can be open-ended 52

Trades  Agency does not get involved • Up to the two parties to agree on price and any other issues  Must be submitted and approved by IEPA to be official  Confirmation of the trade will be sent to both parties 53

Trade Options  Trade oldest first • default  Specify number and expiration date • e.g., 50 ATUs expiring in 2013  Specify by ATU id • Not really necessary with option of specifying by expiration date 54

Submitting Trades  Mail  FAX • Must follow up with hard copy submittal  Via ERMS web page • Can’t do transfer agreements • Will execute over night 55

ERMS Forms

Transaction Account  113-ERMS  Use this form to • Establish a new account for – Participating source – New participating source – General participant • Update information for an account 57

Special Participant  114-ERMS  Use this form to • Establish a new account for – Special participant • Update account information for a special participant 58

Account Officer  111-ERMS  Use this form to • Establish a new account officer • • Update account officer information Allows an account officer to remove himself from an account • Request training/expedited approval 59

Account Officer Designation  112-ERMS  Use this form to • Link an account officer to a transaction account • Remove an account officer from a transaction account 60

Transaction Request  116-ERMS  Use this form to • Submit a trade request to the Agency • • Must be signed by both parties Can come in two parts (buyer and seller) but we prefer them to be together 61

Transfer Request  118-ERMS  Use this form to • Submit a transfer request to the Agency • • Must be signed by both parties Can come in two parts (buyer and seller) but we prefer them to be together 62

Cancel Transfer Agreement  122-ERMS  Use this form to • Stop the processing of a transfer agreement • • Must be signed by both parties Can come in two parts (buyer and seller) but we prefer them to be together 63

Emergency Conditions  110-ERMS  Use this form to • Submit an initial emergency conditions report • Submit the final emergency conditions report 64

Regular Access to ACMA  119-ERMS  Use this form to • Request a purchase of ATUs from ACMA 65

Special Access to ACMA  120-ERMS  Use this form to • Request a purchase of ATUs from ACMA  Unlikely to occur  Happens only if there are not enough ATUs in ACMA 66

Request Buy/Sell Notice  121-ERMS  Use this form to • Have the Agency create a buy or sell posting for you  This information can also be entered through the web page 67

Balance Correction Request  115-ERMS  Use this form to • Request the Agency to look at any ATU balance issues you may have  Or you can just e-mail 68

Seasonal Report Forms

Emission Summary  100-ERMS  Required  Use this form to • Summarize emissions from other seasonal report forms • Certify the report 70

Actual Seasonal Emissions  100A-ERMS  Required  Use this form to • Report the seasonal emissions for each VOM emission unit at the source  Include all emissions • Adjustments will be made on other forms 71

Units Constructed Prior to 1/1/1998  100B-ERMS  Shouldn’t really be occurring now  Use this form to • Report the seasonal emissions for emission units that had a construction permit prior to 1/1/1998 that don’t have three years of emission data 72

Major Modifications  100C-ERMS  Use this form to • Report the seasonal emissions for emission units that had a construction permit prior to 1/1/1998 that don’t have three years of emission data 73

Emergencies  100D-ERMS  Use this form to • Report the emissions for emission units that had an emergency  We will check to make sure you have submitted an initial and final emergency conditions report 74

Variance, Consent Order, Compliance Schedule  100E-ERMS  Use this form to • Report the emissions for emission units that are subject to – A variance – A consent order – A CAAPP compliance schedule 75

HAP Emissions  100F-ERMS  Required for participating and new participating sources  Use this form to • Report the HAP emissions for the source  Report only VOM HAPs 76

ERMS Web Page

Web Page 

www.epa.state.il.us/air/erms

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Web Page  Mainly HTML  Online Transaction Requests • • Requires download of Jinitiator – A java product from the Oracle Corporation – Safe to load on your computer Doesn’t work with Windows Vista or Windows 7 79

Contents  Various reports  Allocation reports  Historical Annual Performance Review Reports  News and Items of Interest  Overview  FAQ 80

Contents – continued  Agency contact information  Average ATU prices  ERMS Forms  Online Transaction Requests 81

Reports  Various reports available  Click on appropriate report  Some reports require selection criteria to be entered • Some can be entered in either/or – Starting/end account number and/or – Starting/ending date 82

Average ATU Prices  Lists • Last month and last four week average prices • Previous and current ACMA average price  ACMA average price calculated at the end of October, November, December and January 83

Online Transaction Requests  Options • Log In  View buy/sell postings • Don’t need to be logged in  View current account balance • • Don’t need to be logged in Can view any account 84

View Buy/Sell Postings  The screen allows you to select criteria to filter your selection  Usually there are very few buy/sell postings so it is better to leave the selection criteria as is and run the query. Doing so will select all active buy/sell postings 85

View Current Account Balance  Enter the account number you wish to view  Balance will be reported by ATU expiration date 86

Log In  Enter your account officer id and PIN  Will have additional options once logged in • Create/update buy/sell posting • • Create/update seller transactions Confirm buyer transactions • Change PIN 87

Create/Update Buy/Sell Posting  Do not use to make a trade • Used for the purpose of identifying people who want to buy or sell • Not used by the Agency in performing trades  Enter information as appropriate  Can always come back and change an active posting 88

Create/Update Seller Transaction  Used to perform an on-line trade  Must be initiated by the seller • Confirmed by buyer in a later step  Can be done in two parts (on-line and paper) but that is not the preferred method  Enter information as appropriate  Will get opportunity to review before saving 89

Seller Transaction  Can update the information on the transaction up until it is accepted by the buyer  Make sure information is correct and save  Notify the buyer that the transaction is available 90

Confirm Buyer Transactions  Once selected, a list of transactions available to approve will be displayed • The transactions you see are based on your account officer id when the seller created the transaction  Click on the Transaction ID field to view the transaction 91

Buyer Transactions  Review the information to ensure it is correct • It is both party’s responsibility to ensure the information is what they agreed to  If transaction is ok, accept it  Otherwise inform the seller the information is not correct • Buyer cannot change the information presented 92

On-line Transaction  Once accepted by the seller… • Cannot be revoked or updated by the seller • Cannot be revoked by the buyer  Transaction will be performed overnight • Can notify Agency if it is needed to be processed sooner • No confirmation letter sent (can get data from Reports option) 93

PIN  Best to change the PIN you are given  Never expires  Up to 8 characters/numbers  Case sensitive  No requirement in length, number of numbers, case, etc.

 Contact the Agency if you forget your PIN 94

Bureau of Air Air Quality Planning Section  Contact information • Buzz Asselmeier • • [email protected]

phone: (217) 524-4343 • Web: www.epa.state.il.us/air/erms 95

Training Completed  Send an e-mail to [email protected]

 Include • Your name and phone number • The fact that you have read through the training slides (you can always e-mail me for any questions you may have)  I will sent a certificate back to you 96