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Pennsylvania Electric Company (Pennelec)

Mr. R.P. Lantzy
Pennsylvania Electric Company
1001 Broad Street
Johnstown, PA 15907

Dear Mr. Lantzy:

EPA has completed its review of the proposal from Pennsylvania Electric Company (Pennelec), GPU Generation Corporation (Genco), and New York State Electric & Gas Corporation (NYSEG) for the Homer City, PA facility. Thank you for submitting this proposal to Project XL. I want to stress that EPA's decision on whether to accept or decline XL proposals are, by definition, judgment calls. In making its decisions regarding XL projects, EPA is guided by the criteria and issues laid out in EPA's May 23, 1995, Federal Register notice on Project XL. In addition, I have received a copy of the letter that you sent to Kathleen McGinty of the Council on Environmental Quality and have carefully evaluated the issues that you raise. I am sorry to inform you of my decision not to pursue your proposal as an XL project because it does not meet the broader goals and specific criteria of the XL program.

XL is designed to test new approaches to environmental protection under controlled conditions. The Federal Register notice sets forth eight criteria that EPA considers in selecting XL projects. We consider each criterion individually, but we also consider the eight criteria as a whole to assess a proposal's overall merit (this is why comparing the performance of one project on one criterion to another project on that criterion is not a valid comparison). The Homer City proposal did not meet important individual criteria, and, overall, did not offer a compelling reason for EPA to accept the proposal as an XL project.

The Pennelec/Genco/NYSEG proposal did not meet a crucial criterion for XL:  superior environmental performance. An XL project should lead to environmental results that are better than what would have happened in its absence. EPA does not consider marginal improvements in performance to constitute superior environmental performance. The decision as to how much improvement suffices is, again, a judgment call that must necessarily be made on a case-by-case basis considering all environmental benefits stemming from the project.

The environmental performance for all XL projects is determined by comparing future actual performance in the absence of the XL project (the "benchmark") to future actual performance with the project. Voluntary controls in place at the time the project is proposed will generally be included in the benchmark because EPA assumes that these controls would have remained in place absent the project. EPA sees no reason to depart from these general principles for this project, and, therefore, considers your proposal's emission reduction to be at most 2.5 percent. EPA does not consider this reduction in actual emissions to constitute superior environmental performance.

This conclusion is supported by our previous experience promulgating a compliance bubble for the Central Illinois Power Station (CIPS). In promulgating this bubble, we required significantly greater reductions than Pennelec/Genco/NYSEG offered in its proposal and provided less flexibility than the implementation of the Pennelec/Genco/NYSEG proposal would require. The proposal that you submitted to us on August 27, 1996, and presented to us on February 7, 1997, would average compliance across units subject to subpart D of the New Source Performance Standards ("NSPS") and units not subject to these standards. In the CIPS example, EPA allowed a facility to average compliance only across units subject to NSPS subpart D. All of the CIPS units were already subject to the level of control required by the NSPS (which generally requires substantially more stringent standards than those to which non-NSPS sources are subjected), yet the promulgated bubble required much larger reductions in actual emission rates than the proposed bubble at Homer City Station. While EPA is not suggesting the bubble it approved for CIPS is a precedent as a legal matter, it offers compelling evidence to EPA that your proposal does not offer superior environmental performance for the purposes of Project XL, a program designed to demonstrate excellence and leadership.

In addition, XL projects are intended to serve as pilot projects from which EPA can learn about new approaches to environmental protection. As mentioned above, the Pennelec/Genco/NYSEG proposal describes the bubbling of sources subject to subpart D of the NSPS with similar non-NSPS sources. While this type of bubbling has not been tried previously, the CIPS example described above involved EPA approval of the bubbling of subpart D NSPS units. We do not believe that the lessons learned from attempting the bubble proposed by Pennelec/NYSEG/Genco would provide us with significant new information.

If you have any questions, please feel free to contact Lisa Lund, Deputy Assistant Administrator for Project XL at (202) 260-4333, or to contact me directly. Once again, thank you for your intest in Project XL and your continued support of environmental protection.


David Gardiner
Assistant Administrator

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