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88 504.3-504.4 [Reserved]

conditions subsequent so as to delay

the effectiveness of the prohibitions 8504.5 Prohibitions by order (certi.

contained in the final prohibition order fying powerplants under section

until the above events or permits have 301 of FUA, as amended).

occurred or been obtained. (a) In the case of existing powerplants, OFP may prohibit, in accord

(Approved by the Office of Management and

Budget under control number 1903-0077) ance with section 301 of the Act, as amended, the use of petroleum or nat (Department of Energy Organization Act, ural gas as a primary energy source

Pub. L. 95-91 (42 U.S.C. 7101 et seq.); Energy where the owner or operator of the

Supply and Environmental Coordination Act

of 1974, Pub. L. 93-319, as amended by Pub. L. powerplant presents a complete certifi

94–163, Pub. L. 95–70, and Pub. L. 95-620 (15 cation concurred in by OFP. The cer

U.S.C. 719 et seq.); Powerplant and Industrial tification, which may be presented at Fuel Use Act of 1978, Pub. L. 95 620, as any time, pertains to the unit's tech amended by Pub. L. 97–35 (42 U.S.C. 8301 et nical capability and financial feasi seq.); Omnibus Budget Reconciliation Act of bility to use coal or another alternate 1981, Pub. L. 97–35) fuel as a primary energy source in the

(47 FR 17044, Apr. 21, 1982) unit. The informational requirements necessary to support a certification are $504.6 Prohibitions by order (case-by. contained in 8504.6 of these regula

case). tions. A prohibition compliance sched

(a) OFP may prohibit, by order, the ule which meets the requirements of

use of natural gas or petroleum as a $504.5(d) shall also be submitted.

primary energy source in existing pow(b) If OFP concurs with the certifi

erplants under certain circumstances. cation, a prohibition order on the pow

In the case of certifying powerplants erplant's use of petroleum or natural

under section 301 of the Act, as amendgas will be issued following the proce

ed, the petitioner must present evidure outlined in $ 501.52 of these regula

dence to support the certification, retions. (c) The petitioner may amend its cer

quired by $504.6 (c), (d), (e), and (f). In

the case of electing powerplants, OFP tification at any time prior to the ef

must make the following findings refective date of the prohibitions con

quired by $ 504.6 (c), (d), (e), and (f), in tained in the final prohibition order in

order to issue a prohibition order to order to take into account changes in

the unit, pursuant to former section relevant facts and circumstances by

301 (b) or (c): following the procedure contained in 8501.52(d).

(1) The unit currently has, or pre(d) Prohibition order compliance sched

viously had, the technical capability to ule. The certification described above,

use an alternate fuel as a primary enwhich forms the basis for the issuance

ergy source; of a prohibition order to a powerplant,

(2) The unit has this technical capashall include a prohibition order com

bility now, or it could have the techpliance schedule. The compliance

nical capability without: schedule should contain the following:

(i) A substantial physical modifica(1) A schedule of progressive events

tion of the unit; or involved in the conversion project, in

(ii) A substantial reduction in the cluding construction of any facilities rated capacity of the unit; and for the production of fuel or fuel han- (3) It is financially feasible for the dling equipment, and contracts for the unit to use an alternate fuel as its pripurchase of alternate fuels, and esti- mary energy source. mated date of compliance with the ap (b) In the case of electing powerplicable prohibitions of the Act; and plants, OFP must make a proposed

(2) A schedule indicating estimated finding regarding the technical capadates for obtaining necessary federal, bility of a unit to use alternate fuel as state, and local permits and approvals. identified in paragraph (a) (1) of this Any prohibition order issued under the section prior to the date of publication certification provisions of 88 504.5, 504.6, of the notice of the proposed prohibiand 504.8 will be subject to appropriate tion. OFP will publish this finding in

The FEDERAL REGISTER along with the notice of the proposed prohibition.

(c) Technical capability. (1) In the case of electing and certifying powerplants, OFP will consider “technical capability” on a case-by-case basis in order to make the required finding. In the case of a certifying powerplant, the powerplant should present information to support the certification relevant to the considerations set forth below. OFP will consider the ability of the unit, from the point of fuel intake to physically sustain combustion of a given fuel and to maintain heat transfer.2

(2) OFP considers that a unit "had" the technical capability to use an alternate fuel if the unit was once able to burn that fuel (regardless of whether the unit was expressly designed to burn that fuel or whether it ever actually did burn it), but is no longer able to do so at the present due to temporary or permanent alterations to the unit itself.3

(3) A unit "has” the technical capability to use an alternate fuel if it can burn an alternate fuel, notwithstanding the fact that adjustments must be made to the unit beforehand or that pollution control equipment may be required to meet air quality requirements.

(d) Substantial physical modification. In the case of electing and certifying powerplants, OFP will make its determination on whether a physical modification to a unit is “substantial" on a case-by-case basis. In the case of certifying powerplants, OFP will consider the factors set forth below for the purpose of concurrence in the certification. OFP will consider physical modifications made to the unit as “substantial” where warranted by the magnitude and complexity of the engineering task or where the modification would impact severely upon operations at the site.5 OFP will not, however, assess physical modification on the basis of cost.

(e) Substantial reduction in rated capacity. In the case of electing and certifying powerplants, OFP will make this determination on the basis of the following factors. A certifying powerplant should present information to support its certification regarding these factors in order for OFP to make its review for concurrence.

(1) OFP regards a unit's derating of 25 percent or more, as a result of converting a unit from oil or gas to an alternate fuel, as substantial.

(2) OFP will presume that a derating of less than 10 percent, as a result of converting a unit from oil or gas to an alternate fuel, is not substantial unless

20FP will not ordinarily consider the nature or absence of appurtenances outside the unit. For example, OFP will examine the furnace configuration and ash removal capability but will not normally consider the need to install pollution control equipment as a measure of technical capability. Furthermore, OFP will not normally conclude that the absence of fuel handling equipment, such as conveyor belts, pulverizers, or unloading facilities, bears on the issue of a unit's "technical capability" to burn an alternate fuel.

3 For example, a unit which at one time burned solid coal but which could no longer do so because its coal firing ports and sluicing channels had been cemented over, would be classified as having "had” the technical capability to use coal. (The question of whether it again “could have" such capability without “substantial physical modification" is a separate and additional question.) "A unit designed to burn natural gas shall

resumed to have the technical capability to burn a synthetic fuel such as medium Btu gas from coal (assuming such gas is available

unless convincing evidence to the contrary is submitted in rebuttal). Also a unit designed to burn oil may, depending upon the chemical characteristics, be a unit that “has" the technical capability to burn liquefied coal. The fact that certain adjustments may be necessary does not render this a “hypothetical" as opposed to a "real" capability. Even an oil fired unit converting from the use of #2 distillate to #6 residual oil may be required to adjust or replace burner nozzles and add soot blowers,

5 Generally, modification of a unit to burn coal or an alternate fuel will be considered insubstantial if significant alterations to the boiler, such as a change to the furnace configuration or a complete respacing of the tubes, are not required. Minor alterations such as replacement of burners or additions of soot blowers, and additions or alterations outside the boiler, shall not cause the modification to be substantial.

convincing evidence to the contrary is submitted in rebuttal. 6

(3) OFP will assess units for which a derating is claimed of 10 percent or more, but less than 25 percent, on a case-by-case.

(4) In assessing whether a unit's derating is not substantial, OFP will consider the impact of a reduction in rated capacity of the unit taking into consideration all necessary appurtenances such as air pollution control equipment required to burn an alternate fuel in compliance with environmental requirements expected to be applicable at the date the prohibitions contained in the final prohibition order become effective. However, the potential order recipient may raise in rebuttal the impact of derating on the site at which the unit is located and on the system as well as on the unit itself, if under paragraph (e)(2), or case-by-case, if under paragraph (e)(3) of this section.

(f) Financial feasibility. In the case of certifying and electing powerplants, OFP will make this finding based on the following considerations. A certifying powerplant should present information to support its certification relevant to these considerations in order for OFP to make its review for concurrence. Conversion of a unit to burn coal or an alternate fuel shall be deemed financially feasible if the firm has the actual ability to obtain sufficient capital to finance the conversion, including all necessary land, coal and ash handling equipment, pollution control equipment, and all other necessary expenditures, without violating legal restrictions on its ability to raise debt or equity capital, unreasonably diluting shareholder equity, or unreasonably adversely affecting its credit rating. OFP will consider any economic or financial factors presented by the proposed order recipient in determining

the firm's ability or inability to finance the conversion including, but not limited to, the following:

(1) The required coverage ratios on the firm's debt and preferred stock;

(2) The firm's investment program; and

(3) The financial impact of the conversion, including other conversions which are or may be undertaken voluntarily by the proposed order recipient or imposed upon the recipient's system by the Act, and including pending or planned construction or reconstruction of alternate-fuel-fired plants and plants exempt from FUA prohibitions.? Where helpful in clarifying the longterm financial feasibility of a conversion, DOE may analyze the economic benefits anticipated from operation of the converted unit or units using coal or other alternate fuel relative to those from continued operation using petroleum or natural gas. (Approved by the Office of Management and Budget under control number 1903-0077) (Energy Supply and Environmental Coordination Act of 1974, Pub. L. 93-319, as amended by Pub. L. 94-163, Pub. L. 95–70, and 15 U.S.C. 719 et seq.; Department of Energy Organization Act, Pub. L. 95–91, 91 Stat. 565 (42 U.S.C. 7101 et seq.); Powerplant and Industrial Fuel Use Act of 1978, Pub. L. 95-620, 92 Stat. 3269 (42 U.S.C. 8301 et seq.); Omnibus Budget Reconciliation Act of 1981 (Pub. L. 97–35); E.O. 12009, 42 FR 46267, Sept. 15, 1977) [45 FR 53692, Aug. 12, 1980, as amended at 47 FR 17044, Apr. 21, 1982; 47 FR 50849, Nov. 10, 1982]

$ 504.7 Prohibition against excessive

use of petroleum or natural gas in mixtures-electing powerplants. (a) In the case of electing powerplants, if OFP finds that it is technically and financially feasible for a unit to use a mixture of petroleum or natural gas and an alternate fuel as its primary energy source, OFP may prohibit, by order, the use in that unit of

6 For example, units that are the subject of a prohibition order will not have installed any operating air pollution control equipment sufficient to burn coal in compliance with applicable environmental equipments. The installation and use of air pollution control equipment alone can, in many cases, produce a derating. Moreover, the shift to coal itself will, because of differences in energy density and fuel flow characteristics, typically involve some derating.

TOFP will not require the proposed order recipient to cancel or defer construction or reconstruction of any alternate-fuel-fired facility, or any facility exempt from the prohibitions of the Act, for which a decision to finance such facility has been made by the appropriate company official before the public cation of the prohibition order. The proposed order recipient may choose to cancel or defer any such facility.

petroleum or natural gas, or both, in and any concomitant reduction in amounts exceeding the minimum rated capacity are not relevant factors. amount necessary to maintain reli- So long as a unit as proposed to be ability of operation consistent with modified would be technically capable maintaining reasonable fuel efficiency of using the mixture as a primary enof the mixture.

ergy source under $504.6(C), this certifi(b) In making the technical feasi cation requirement shall be deemed bility finding required by former sec met. The criteria for certification of fition 301 (b) and (c) of the Act and para nancial feasibility are found at graph (a) of this section, OFP may $504.6(f). In addition, the powerplant's weigh "physical modification" or "de owner or operator must submit a prohirating of the unit," but these consider- bition compliance schedule, which ations, by themselves, will not control meets the requirements of 8504.5(d). the technical feasibility finding. A (b) If OFP concurs with the certifitechnical feasibility finding might be cation, a prohibition order against the made notwithstanding the need for unit's excessive use of petroleum or substantial physical modification. The natural gas in the mixture will be economic consequences of a substantial issued following the procedure outlined physical modification are taken into in $501.52 of these regulations. account in determining financial feasi (c) The petitioner may seek to amend bility.

its certification in order to take into (Energy Supply and Environmental Coordi

account changes in relevant facts and nation Act of 1974, Pub. L. 93-319, as amended

circumstances by following the proceby Pub. L. 94-163, Pub. L. 95–70, and 15 U.S.C. dure contained in 8501.52(d). 719 et seq.; Department of Energy Organiza

NOTE: The authority of OFP implemented tion Act, Pub. L. 95–91, 91 Stat. 565 (42 U.S.C. 7101 et seq.); Powerplant and Industrial Fuel

under this section should not be confused Use Act of 1978, Pub. L. 95-620, 92 Stat. 3269

with the other two fuel mixture provisions of (42 U.S.C. 8301 et seq.); Omnibus Budget Rec

these regulations. One is the general requireonciliation Act of 1981 (Pub. L. 97-35); E.O.

ment that petitioners for permanent exemp12009, 42 FR 46267, Sept. 15, 1977)

tions demonstrate that the use of a mixture

of natural gas or petroleum and an alternate (47 FR 17045, Apr. 21, 1982, and 47 FR 50850, fuel is not economically or technically feaNov. 10, 1982]

sible (See $504.15). The second is the perma

nent fuel mixtures exemption itself (See $504.8 Prohibitions against excessive

$504.56). use of petroleum or natural gas in mixtures-certifying powerplants.

(Approved by the Office of Management and

Budget under control number 1903-0077) (a) In the case of certifying power

(Department of Energy Organization Act, plants, OFP may prohibit the use of pe

Pub. L. 95–91 (42 U.S.C. 7101 et seq.); Energy troleum or natural gas in such power

Supply and Environmental Coordination Act plant in amounts exceeding the min

of 1974, Pub. L. 93–319, as amended by Pub. L. imum amount necessary to maintain

94–163, Pub. L. 95–70, and Pub. L. 95-620 (15 reliability of operation consistent with U.S.C. 719 et seq.); Powerplant and Industrial maintaining the reasonable fuel effi Fuel Use Act of 1978, Pub. L. 95-620, as ciency of the mixture. This authority amended by Pub. L. 97–35 (42 U.S.C. 8301 et is contained in section 301(c) of the seq.); Omnibus Budget Reconciliation Act of Act, as amended. The owner or oper

1981, Pub. L. 97–35) ator of the powerplant may certify at [47 FR 17045, Apr. 21, 1982] any time to OFP that it is technically capable and financially feasible for the

$ 504.9 Environmental requirements unit to use a mixture of petroleum or

for certifying powerplants. natural gas and coal or another alter Under 88 501.52, 504.5 and 504.6 of these nate fuel as a primary energy source. regulations, OFP may prohibit, in acIn assessing whether the unit is tech cordance with section 301 and section nically capable of using a mixture of 303 (a) or (b) of FUA, as amended, the petroleum or natural gas and coal or use of natural gas or petroleum, or another alternate fuel as a primary en- both, as a primary energy source in ergy source, for purposes of this sec- any certifying powerplant. Under section, the extent of any physical modi- tions 301(c) and 303(a) of FUA, as fication necessary to convert the unit amended, and 88 501.52, 504.6, and 504.8 of these regulations, OFP may prohibit he does not have any conflict of interthe excessive use of natural gas or pe- est, financial or otherwise, in the outtroleum in a mixture with an alternate come of either the environmental procfuel as a primary energy source in a ess or the prohibition order proceeding. certifying powerplant.

The agreement shall outline the re(a) NEPA compliance. Except as pro sponsibilities of each party and his revided in paragraph (c) of this section, lationship to the other two parties rewhere the owner or operator of a pow garding the work to be done or supererplant seeks to obtain an OFP prohi- vised. OFP shall approve the informabition order through the certification tion to be developed and supervise the procedure, and did not hold either a gathering, analysis and presentation of proposed prohibition order under the information. In addition, OFP will former section 301 of FUA or pending have the authority to approve and order under section 2 of ESECA, it will modify any statement. analysis, and be responsible for the costs of pre- conclusion contained in the third party paring any necessary Environmental

prepared environmental documents. Assessment (EA) or Environmental Im

(c) Financial hardship. Whenever the pact Statement (EIS) arising from

bona fide estimate of the costs associOFP's obligation to comply with

ated with NEPA compliance, if borne NEPA. The powerplant owner or oper

by the powerplant owner or operator, ator shall enter into a contract with an

would make the conversion financially independent party selected by OFP,

infeasible, OFP may waive the requirewho is qualified to conduct an environ

ment set forth in paragraphs (a) and (b) mental review and prepare an EA or

of this section and perform the necEIS, as appropriate, and who does not

essary environmental review. have a financial or other interest in the outcome of the proceedings, under (Approved by the Office of Management and the supervision of OFP. The NEPA Budget under control number 1903–0077) process must be completed and ap

(Department of Energy Organization Act, proved before OFP will issue a final Pub. L. 95–91 (42 U.S.C. 7101 et seq.); Energy prohibition order based on the certifi Supply and Environmental Coordination Act cation.

of 1974, Pub. L. 93-319, as amended by Pub. L. (b) Environmental review procedure. 94–163, Pub. L. 95–70, and Pub. L. 95-620 (15 Except as provided in paragraph (c) of

U.S.C. 719 et seq.); Powerplant and Industrial this section, environmental documents,

Fuel Use Act of 1978, Pub. L. 95-620, as

amended by Pub. L. 97–35 (42 U.S.C. 8301 et including the EA and EIS, where nec

seq.); Omnibus Budget Reconciliation Act of essary, will be prepared utilizing the

1981, Pub. L. 97–35) process set forth above. OFP, the powerplant owner or operator and the inde

[47 FR 17046, Apr. 21, 1982] pendent third party shall enter into an agreement for the owner or operator to

APPENDIX I TO PART 504-PROCEDURES engage and pay directly for the serv

FOR THE COMPUTATION OF THE REAL ices of the qualified third party to pre

COST OF CAPITAL pare the necessary documents. The

(a) The firm's real after-tax weighted averthird party will execute an OFP pre- age marginal cost of capital (K) is computed pared disclosure document stating that with equation 1.

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