[Federal Register Volume 77, Number 99 (Tuesday, May 22, 2012)]
[Notices]
[Pages 30274-30278]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-12342]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. PL12-1-000]


 The Commission's Role Regarding the Environmental Protection 
Agency's Mercury and Air Toxics Standards; Policy Statement on the 
Commission's Role Regarding the Environmental Protection Agency's 
Mercury and Air Toxics Standards

Before Commissioners: Jon Wellinghoff, Chairman; Philip D. Moeller, 
John R. Norris, and Cheryl A. LaFleur.

    1. The Commission issues this Policy Statement to explain how it 
will provide advice to the Environmental Protection Agency (EPA) for it 
to rule on requests for Administrative Orders (AO) to operate in 
noncompliance with EPA's Mercury and Air Toxics Standards (MATS).\1\ As 
noted below, this Policy Statement does not represent the entirety of 
the Commission's efforts to monitor the impact of EPA regulations 
generally on bulk-power system reliability.
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    \1\ National Emission Standards for Hazardous Air Pollutants 
from Coal- and Oil-fired Electric Utility Steam Generating Units and 
Standards of Performance for Fossil-Fuel-Fired Electric Utility, 
Industrial-Commercial-Institutional, and Small Industrial-
Commercial-Institutional Steam Generating Units, http://www.gpo.gov/fdsys/pkg/FR-2012-02-16/pdf/2012-806.pdf.
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I. Introduction

    2. On December 21, 2011, the EPA released the MATS final rule 
pursuant to its authority under Section 112 of the Clean Air Act 
(CAA).\2\ The MATS final rule limits mercury, acid gases and other 
toxic emissions from power plants. Pursuant to Section 112(i)(3)(A) of 
the CAA, affected sources are required to comply within three years of 
the MATS effective date. Pursuant to CAA Section 112(i)(3)(B), some 
affected sources are eligible for a one-year extension (i.e. for a 
total of four years).\3\
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    \2\ 42 U.S.C. 7412(i)(3)(A) (2006).
    \3\ See id. Sec.  7412(i)(3)(B).
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    3. The EPA's Office of Enforcement and Compliance Assurance 
released a policy memorandum (EPA Policy Memorandum) dated December 16, 
2011 describing its intended approach regarding the use of CAA Section 
113(a) AOs with respect to sources that must operate in noncompliance 
with the MATS for up to a year to address a specific and documented 
reliability concern (i.e. for a total of five years).\4\
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    \4\ The Environmental Protection Agency's Enforcement Response 
Policy For Use Of Clean Air Act Section 113(a) Administrative Orders 
In Relation To Electric Reliability And The Mercury and Air Toxics 
Standard (Dec. 16, 2011), http://www.epa.gov/compliance/resources/policies/civil/erp/mats-erp.pdf.
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    4. On January 30, 2012, Commission staff issued a White Paper 
seeking comment concerning staff's position on how the Commission 
should advise the EPA on requests for extension of time to comply with 
EPA's MATS. The Commission has considered all comments received in the 
formulation of this Policy Statement, which is limited in scope to how 
the Commission will handle an AO filing under CAA Section 113(a) for 
noncompliance with the MATS. This Policy Statement does not address the 
entirety of the Commission's efforts to monitor the impact of EPA 
regulations generally on bulk-power system reliability.

II. Background

A. Compliance With EPA's Mercury and Air Toxics Standards

    5. Under Section 112(i)(3) of the CAA, affected sources must be 
compliant with MATS within three years, with an extension of up to one 
year available in certain cases.\5\ In addition to the up to four-year 
compliance period contemplated in Section 112(i)(3), the EPA Policy 
Memorandum describes a process by which certain affected sources can 
obtain an AO to operate in noncompliance for an additional year 
pursuant to Section 113(a) of the CAA. Specifically, the EPA Policy 
Memorandum contemplates that the EPA will receive AO requests: (1) 
Concerning electric generating units (EGUs) that may affect reliability 
due to deactivation; and (2) concerning EGUs

[[Page 30275]]

that may affect reliability due to delays related to the installation 
of controls.\6\
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    \5\ The EPA Policy Memorandum refers to the date by which 
affected sources must comply under Section 112(i)(3) of the CAA 
(which includes the possible one-year extension under Section 
112(i)(3)(B)) as the ``MATS Compliance Date.''
    \6\ EPA Policy Memorandum at 4.
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    6. The EPA Policy Memorandum states that an AO cannot be issued 
under Section 113(a) prior to the MATS Compliance Date in Section 
112(i)(3).\7\ However, provided an owner/operator has timely submitted 
a complete request and provided appropriate cooperation, the EPA 
expects to give an owner/operator ``as much advance written notice as 
practicable of the [EPA's] plans with regard to such an AO.'' \8\
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    \7\ Id. at 5.
    \8\ Id.
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    7. The EPA Policy Memorandum states that in evaluating a request 
for an AO, the EPA will seek advice, on a case-by-case basis, from the 
Commission and/or other entities with relevant reliability 
expertise.\9\ However, the EPA's issuance of an AO is not conditioned 
upon the approval or concurrence of the Commission or any other entity.
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    \9\ The EPA Policy Memorandum states that ``in light of the 
complexity of the electric system and the local nature of many 
reliability issues, the EPA will, for purposes of using its Section 
113(a) AO authority in this context, rely for identification and/or 
analysis of reliability risks upon the advice and counsel of 
reliability experts, including, but not limited to, the Federal 
Energy Regulatory Commission (`FERC'), Regional Transmission 
Operators (`RTOs'), Independent System Operators (`ISOs') and other 
Planning Authorities as identified herein, the North American 
Electric Reliability Corporation (`NERC') and affiliated regional 
entities, and state public service commissions (`PSCs') and public 
utility commissions (`PUCs'). The EPA will work with these and other 
organizations, as appropriate, to ensure that any claims of 
reliability risks are properly characterized and evaluated.'' EPA 
Policy Memorandum at 2.
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1. General Requirements for AO Requests
    8. The EPA Policy Memorandum provides that within one year after 
the MATS effective date, an owner/operator should submit written notice 
of its compliance plans (Notice of Compliance Plans) with regard to 
each EGU it owns or operates to the planning authority for the area in 
which the relevant EGU is located. According to the EPA, the Notice of 
Compliance Plans should identify: (1) The units the owner/operator 
plans to deactivate and the anticipated dates of deactivation; and (2) 
the units for which it intends to install pollution control equipment 
or otherwise retrofit and the anticipated schedule for completion of 
that work.
    9. The EPA Policy Memorandum states that an owner/operator should, 
generally no less than 180 days prior to the MATS Compliance Date,\10\ 
submit a written request to the EPA \11\ for an enforceable compliance 
schedule in an AO for the unit. An owner/operator should submit the 
following information for all AO requests:
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    \10\ The EPA Policy Memorandum also has provisions for an owner/
operator to, in certain circumstances, provide less notice to the 
EPA and the Commission.
    \11\ This request is to be submitted electronically to the 
Director of the Air Enforcement Division in the EPA's Office of 
Enforcement and Compliance Assurance and the Regional Administrator 
of the EPA region in which the EGU is located, with a copy to the 
Commission. At the same time, an owner/operator should provide 
notice that it is seeking an AO to: (1) The planning authority, (2) 
any state public utility commissions or public service commissions 
with regulatory jurisdiction with regard to the relevant EGU, and 
(3) any state, tribal or local environmental agency with permitting 
authority under Titles I and V of the CAA, and any tribal 
environmental agency that does not have such authority, with 
jurisdiction over the area in which the EGU is located 
(collectively, ``AO Notice Recipients'').
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    (1) Copies of the Notice of Compliance Plans provided to the 
planning authority or an explanation why it was not practicable to have 
provided such notice and a demonstration that such notice was provided 
as soon as it was practicable;
    (2) Written analysis of the reliability risk if the EGU were not in 
operation, which demonstrates that operation of the unit after the MATS 
Compliance Date is critical to maintaining electric reliability, and 
that failure to operate the unit would: (a) Result in the violation of 
at least one of the reliability criteria required to be filed with the 
Commission, and, in the case of the Electric Reliability Council of 
Texas, with the Texas Public Utility Commission; or (b) cause reserves 
to fall below the required system reserve margin;
    (3) Written concurrence with the reliability risk analysis, or a 
separate and equivalent analysis, by the planning authority for the 
area in which the relevant EGU(s) are located, or, in the alternative, 
a written explanation of why such concurrence or separate and 
equivalent analysis cannot be provided, and, where practicable, any 
related system wide analysis by such entity;
    (4) Copies of any written comments from third parties directed to, 
and received by, the owner/operator in favor of, or opposed to, 
operation of the unit after the MATS Compliance Date;
    (5) A plan to achieve compliance with the MATS no later than one 
year after the MATS Compliance Date, and, where practicable, a written 
demonstration of the plan to resolve the underlying reliability problem 
and the steps and timeframe for implementing it, which demonstrates 
that such resolution cannot be effected on or before the MATS 
Compliance Date; and
    (6) Identification of the level of operation of the EGU that is 
required to avoid the documented reliability risk and, consistent with 
that level, a proposal for operational limits and/or work practices to 
minimize or mitigate any hazardous air pollutant emissions to the 
extent practicable during any operation not in full compliance with the 
MATS.\12\
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    \12\ EPA Policy Memorandum at 6-7.
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2. Specific Requirements for AO Requests
    10. As stated above, the EPA Policy Memorandum states that the 
owner/operator of an EGU that wants to obtain an AO must, no less than 
180 days prior to the MATS Compliance Date, submit electronically a 
written request for an enforceable compliance schedule. To request an 
AO for any EGU that is required to run for reliability purposes that, 
due to factors beyond the control of the owner/operator, have delays in 
installation of controls or need to operate because another EGU has had 
such a delay, the EPA Policy Memorandum states that an owner/operator 
should: (1) Within a reasonable time of learning of a delay that it 
believes may result in an EGU being unable to comply by the MATS 
Compliance Date, provide to the planning authority for the area in 
which the relevant EGU(s) are located, written notice of the EGU(s) 
impacted by the delay, the cause of the delay, an estimate of the 
length of time of the delay, and the timeframe during which the owner/
operator contemplates operation in non-compliance with the MATS; (2) 
within a reasonable time of learning that it is critical to reliability 
to operate the identified EGU(s) in non-compliance with the MATS after 
the MATS Compliance Date, submit electronically to the AO Request 
Recipients a written request for an enforceable compliance schedule in 
an AO for the EGU(s), which includes information responsive to as many 
of the general requirements discussed above as it is possible to 
provide at that time; and (3) at the same time the owner/operator 
submits its request for an AO, provide notice that it is seeking such 
an AO to the AO Notice Recipients.

B. Energy Policy Act of 2005 and Mandatory Reliability Standards

    11. Section 215 of the Federal Power Act (FPA) requires a 
Commission-certified Electric Reliability Organization (ERO) to develop 
mandatory and enforceable Reliability Standards, which provide for the 
reliable operation of the Bulk-Power System, subject to Commission 
review

[[Page 30276]]

and approval.\13\ On February 3, 2006, the Commission issued Order No. 
672 to implement the requirements of section 215 of the FPA governing 
electric reliability.\14\
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    \13\ 16 U.S.C. 824o(d)(2).
    \14\ Rules Concerning Certification of the Electric Reliability 
Organization; and Procedures for the Establishment, Approval, and 
Enforcement of Electric Reliability Standards, Order No. 672, FERC 
Stats. & Regs. ] 31,204, order on reh'g, Order No. 672-A, FERC 
Stats. & Regs. ] 31,212 (2006).
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III. Commission Policy for Advice to the EPA Under the EPA's Policy 
Memorandum

    12. The EPA Policy Memorandum indicates that the EPA intends to 
seek advice, as necessary and on a case-by-case basis from the 
Commission, among others, as the EPA decides whether it will grant an 
AO to an owner/operator. The EPA Policy Memorandum makes clear that the 
EPA decision as to whether to grant an AO to an owner/operator is 
solely the decision of the EPA and that the concurrence or approval of 
any entity is not a condition for approval or denial of an AO 
request.\15\ The Commission believes that it is important to provide as 
much guidance to industry as possible as to how the Commission intends 
to provide advice to the EPA on any AO request. In developing this 
process, the Commission considered how to provide a fair and 
transparent process for communicating the Commission's expertise on 
reliability issues, while respecting that the EPA will seek the 
Commission's advice in a timely manner so that EPA can decide whether 
to grant certain AOs.
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    \15\ EPA Policy Memorandum at 7.
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A. Commission Process for Advising the EPA Under the EPA's Policy 
Memorandum

Submittal of Information to the Commission
    13. The EPA Policy Memorandum explains that when an owner/operator 
submits an AO request: (1) for EGUs that may affect reliability due to 
deactivation; and (2) for EGUs that may affect reliability due to 
delays related to the installation of controls, the owner/operator must 
provide a copy of the request to the Commission. This AO request must 
include an owner/operator's ``written analysis of the reliability risk 
if the unit were not in operation, which demonstrates that operation of 
the unit after the MATS Compliance Date is critical to maintaining 
electric reliability, and that failure to operate the unit would * * * 
result in the violation of at least one of the reliability criteria 
required to be filed with [the Commission] * * *.'' \16\ In addition, 
the AO request will include the Planning Authority's written 
concurrence with the owner/operator's analysis, or a written 
explanation of why the Planning Authority's concurrence cannot be 
provided.
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    \16\ Id.
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    14. As an initial matter, each AO request should be filed with the 
Commission. The Commission will treat any AO request filed with the 
Commission as an informational filing. The Commission will assign each 
informational filing a separate Administrative Docket (AD) number. The 
Commission's Office of Electric Reliability will be designated as the 
lead office tasked with processing an owner/operator's informational 
filing.
    15. Each informational filing should include the same information 
that the owner/operator submitted to the EPA pursuant to the EPA Policy 
Memorandum. While the Commission does not propose mandating that 
Planning Authorities undertake specific types of analyses, the 
Commission identifies below certain types of information that are 
already available today and that the Commission commonly reviews when 
examining potential violations of Reliability Standards.\17\ Including 
this information as part of the materials an owner/operator submits to 
the EPA, and therefore to the Commission, would aid in the Commission's 
review of the informational filing. It is essential that the Commission 
receive enough information to review the claims made by a requesting 
owner/operator so that the Commission can provide timely comments to 
the EPA. These types of information include, but are not limited to, 
system planning and operations studies, system restoration studies or 
plans, operating procedures, and mitigation plans required by the 
Reliability Standards.\18\ By suggesting what information would aid the 
Commission in its review, the Commission is not requiring any specific 
analysis be done or indicating that this information must be submitted 
or what the EPA should consider, but rather what the Commission would 
find informative when reviewing potential violations of Reliability 
Standards.\19\
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    \17\ The Commission does not believe it is necessary to identify 
specific factors that each planning authority must take into account 
in assessing system reliability outside of the NERC planning 
standards. The existing processes used by the Planning Authorities 
to conduct reliability assessments, which are based on the NERC 
planning standards and performed under NERC's oversight, appear to 
be sufficient. We encourage NERC to continue to work closely with 
the Planning Authorities to ensure that these existing processes 
adequately assess system reliability in the specific circumstances 
presented by compliance with EPA regulations. In addition, 
Commission staff is available to Planning Authorities and 
participants in these processes for consultation on these matters. 
Also, we expect Commission staff to monitor these processes through 
periodic outreach to Planning Authorities.
    \18\ The Commission reviews power flow, dynamic, or other 
simulation results that support the Reliability Standards as well as 
the modeling assumptions used in these simulations. Modeling 
assumptions may include factors such as the base case used, demand 
levels, modifications made to the base case, system transfers 
modeled, scheduled outages modeled, and contingencies tested.
    \19\ We understand that these types of information are readily 
available today so that their submission should not impose a burden 
on the owner/operator.
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    16. The Commission generally anticipates it would not have to seek 
additional information. The Commission is concerned that seeking 
additional information from an owner/operator of an EGU could delay or 
prevent the Commission from issuing timely comments to the EPA.\20\
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    \20\ However, the Commission reserves the right to seek 
additional information regarding a filing when necessary.
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B. Scope and Standard of Review for Informational Filings

    17. EPA states that the analysis provided in an AO request should 
demonstrate ``that operation of the unit after the MATS Compliance Date 
is critical to maintaining electric reliability, and that failure to 
operate the unit would: (a) result in the violation of at least one of 
the reliability criteria required to be filed with the Commission, and, 
in the case of the Electric Reliability Council of Texas, with the 
Texas Public Utility Commission; or (b) cause reserves to fall below 
the required system reserve margin.'' Commission review of an 
informational filing will be conducted pursuant to section 307(a) of 
the FPA, the Commission's general investigative authority. The review 
will examine whether, based on the circumstances presented, there might 
be a violation of a Commission-approved Reliability Standard.\21\ In 
addition, the Commission's comments to the EPA could also identify 
issues, pursuant to our other areas of authority, raised by the AO 
request for the EPA to consider as critical to reliability.\22\ 
Further, an

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EGU's continued operation may have reliability impacts beyond those 
implicated by the Commission's jurisdiction. The EPA should look to 
NERC and state commissions, among the other entities it has enumerated, 
for guidance in those areas.\23\
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    \21\ A statement by the Commission indicating that circumstances 
presented ``might'' result in the violation of a Reliability 
Standard would not constitute a final determination under section 
215 of the FPA that a Reliability Standard has or will be violated. 
That is, the Commission comments will reflect our preliminary view 
based on information presented about a possible hypothetical 
circumstance in the future, not a final agency action triggering 
civil penalties or other enforcement actions.
    \22\ For example, the Commission may determine that the 
potential closure of an EGU could trigger the Commission's 
jurisdiction outside of section 215 of the FPA. See e.g., Exelon 
Generation Co., LLC, 132 FERC ] 61,219 (2010).
    \23\ Commission staff will also be available to communicate with 
the EPA on any reliability-related issues to aid the EPA in its 
consideration of these issues.
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    18. The Commission's jurisdiction under section 215 is over the 
ERO, Regional Entities, and all users, owners and operators of the 
bulk-power system ``for purposes of approving Reliability Standards 
established under [section 215] and enforcing compliance with [section 
215].'' \24\ Further, section 215 states that ``this section does not 
authorize the ERO or the Commission to order the construction of 
additional generation or transmission capacity or to set and enforce 
compliance with standards for adequacy or safety of electric facilities 
or services.'' \25\ In addition, section 215 specifically preserves 
authority of states over safety, resource adequacy, and even 
reliability as long as the latter does not conflict with the 
Commission's Reliability Standards.
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    \24\ 16 U.S.C. 824o(b).
    \25\ Id. Sec.  824o(i)(2).
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    19. While our comments to the EPA are largely limited to whether 
the issue in question may result in the violation of a Reliability 
Standard, we recognize that the EPA is not so limited in what it may 
consider in reviewing a request for an AO. Indeed, the EPA Policy 
Memorandum indicates that the EPA may also seek advice and counsel of 
reliability experts, including, state public service commissions and 
public utility commissions, RTOs and ISOs, Planning Authorities, NERC 
and affiliated regional entities--and we encourage them to do so. 
Nothing in this Policy Statement precludes NERC, state agencies or 
others from providing the EPA with information regarding resource 
adequacy and other local reliability concerns that are not addressed in 
the Commission's comments to the EPA.
    20. The Commission will review the Planning Authority's analysis 
included in each informational filing to ensure that it was reasonable 
and sufficiently supported by the information supplied, recognizing the 
Planning Authority's knowledge of, and expertise on, local and regional 
conditions. The Commission would focus on whether the Planning 
Authority's reliability analysis has identified and supported, in a 
detailed and reasoned fashion, whether there might be a violation of a 
Commission-approved Reliability Standard.
    21. The Commission will advise the EPA, as contemplated by the EPA 
Policy Memorandum, by submitting written Commission comments to the EPA 
based on the Commission's review of the information provided in the 
informational filing.\26\ The Commission's comments would provide 
advice to the EPA on whether, based on the Commission's review of the 
informational filing, there might be a violation of a Commission-
approved Reliability Standard. As noted above, the Commission's 
comments may also identify issues within its jurisdiction other than a 
potential violation of a Commission-approved Reliability Standard. The 
Commission comments will not address the appropriateness of granting or 
denying an AO.
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    \26\ The Commission will vote on the Commission comments before 
submission to the EPA. Commission comments submitted to the EPA will 
be publicly posted on the Commission's eLibrary system under the 
applicable AD docket number. Differing views by any Commissioner 
will also be submitted to the EPA in writing and will be publicly 
posted on the Commission's eLibrary system.
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C. Intervention and Other Procedures

    The Commission's process will not provide for entities to intervene 
in the AD dockets.\27\ The EPA Policy Memorandum generally anticipates 
that an AO request will be filed 180 days prior to the MATS Compliance 
Date and the Commission is concerned that allowing interventions may 
inhibit the Commission's ability to timely provide advice to the EPA. 
In addition, interventions are not available generally in a matter 
under investigation pursuant to Section 307(a) of the FPA. Yet the lack 
of a formal intervention procedure does not preclude an interested 
entity from being heard. The EPA Policy Memorandum requires an owner/
operator requesting an AO to submit ``[c]opies of any written comments 
from third parties directed to, and received by, the owner/operator in 
favor of, or opposed to, operation of the unit after the MATS 
compliance date.'' \28\ These materials should also be included as part 
of the informational filing an owner/operator submits to the Commission 
under the requirements in the EPA Policy Memorandum.\29\ While the 
Commission is not imposing any additional requirements, we anticipate 
that owners/operators will, consistent with the EPA Policy Memorandum, 
provide third parties with an opportunity to offer ``written comments * 
* * in favor of, or opposed to, operation of the unit after the MATS 
compliance date'' before they submit their AO request.
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    \27\ While the Commission will not seek comments on these 
informational filings, if comments are received by the Commission, 
these would be placed in the associated AD docket. Because these 
would be informational dockets, while the Commission may consider 
these comments, it would not be required to do so. Due to the nature 
of the Commission's comments as non-final agency action and the 
limited time for the Commission to act, the Commission does not 
anticipate responding to any comments that may be submitted in an AD 
docket.
    \28\ EPA Policy Memorandum at 7.
    \29\ Id. at 5, 6.
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IV. Conclusion

    22. This Policy Statement explains how the Commission plans to 
advise the EPA under the EPA's Policy Memorandum. The Commission 
believes the process appropriately takes into account the need for 
timeliness, fairness, and transparency, while respecting the 
Commission's jurisdiction over electric reliability. As stated in the 
EPA Policy Memorandum, whether or to what extent the EPA considers or 
relies on the Commission's comments, and whether to grant an AO to an 
owner/operator, will rest entirely with the EPA.
    23. Additionally, we emphasize that this Policy Statement does not 
represent the entirety of the Commission's efforts to monitor the 
impact of EPA regulations generally on bulk-power system reliability. 
For example, the Commission intends to continue addressing these issues 
with state commissions in a regular public forum, the National 
Association of Regulatory Utility Commissioners/FERC Forum on 
Reliability and the Environment. The Commission and its staff will also 
continue to review plans, reports and other information generated by 
the Planning Authorities, industry and other stakeholders regarding the 
impact of compliance with EPA regulations. To the extent additional 
analysis or evidence would aid the Commission's efforts to monitor 
these issues, we will consider holding additional technical conferences 
or workshops.\30\
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    \30\ The Commission held a technical conference on these issues 
on November 30, 2011, in Docket No. AD12-1-000.
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    Finally, the Commission will monitor and promptly review proposals 
from regulated entities that may seek to modify their tariffs in order 
to reliably and efficiently comply with EPA regulations.

    By the Commission.

[[Page 30278]]

    Issued: May 17, 2012.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
[FR Doc. 2012-12342 Filed 5-21-12; 8:45 am]
BILLING CODE 6717-01-P