March 5, 2019 Mr. David K. Paylor, Director, Virginia Department of Environmental Quality Mr. Michael G. Dowd, Director, Air and Renewable Energy Division Virginia Department of Environmental Quality 1111 E. Main Street Richmond, Virginia 23219 Dear Director Paylor and Director Dowd, The Virginia Forest Products Association (VFPA) offers the following comments regarding Virginia's reproposed "Regulation for Emissions Trading" for the CO2 Budget Trading Program. Our association previously filed comments on earlier versions of the proposed regulation on April 9, 2018, and we hereby incorporate those comments by reference. VFPA represents Virginia's sawmills and many other forest product related businesses such as paper mills and heavy equipment dealers. Founded as the Lumber Manufacturers Association of Virginia in 1958, we are a non-profit organization dedicated to promoting the forest products industry in Virginia. Most of our sawmills are family-owned and operated businesses, many in their third or fourth generation. These lumber mills are usually small businesses with under fifty employees and operate in every region of the Commonwealth. We respectfully request that the Regulation be revised to make clear that it applies only to greenhouse gas (GHG) emissions from fossil fuel combustion and not to emissions from biomass combustion. The GHG reduction regulation has been directed at those emissions from fossil fuel combustion. Therefore, we recommend that regardless of how "fossil-fuel fired" is defined, and whether a unit co-fires biomass with fossil fuel, the allowance requirements should be explicit that allowances are only required for emissions from the combustion of fossil fuel and that none are required for emissions from combustion ofbiomass. Specifically, the language "that have been generated as a result of combusting fossil fuel" should be inserted back into Section 9VAC5-140-6050 C 1 as it was in the previous version of the Regulation. As to the carbon neutrality of biomass, both the RGGI and the California cap and trade program do not require allowances allowances for eligible biomass combustion, and many international and domestic programs recognize the carbon neutrality of biomass. Further, Congress very recently enacted - and the President signed - appropriations legislation reaffirming that Federal regulatory policy should reflect the carbon neutrality of forest-based renewable biomass. Given these facts, Virginia should treat biomass combusted here in the same fashion. We are very concerned that doing otherwise would set an adverse precedent in the way biomass is treated - and this departure would have catastrophic affects on sawmill and forest product industries in Virginia and across the country. VFPA also submits that the Regulation should be amended to more explicitly exempt industrial facilities. From its beginning, the Regulation was intended to cover electric generation facilities and not manufacturing facilities that generate some electricity for their manufacturing operations. In fact, we do not believe any other RGGI state subjects industrial facilities to an allowance obligation. While the Regulation does exempt certain industrial facilities, the exemption applies only to units existing as of the beginning of 2019. This should be removed, otherwise new industrial facilities would be subject to the negative economic impact of having to obtain allowances for their emissions - therefore, putting these facilities at a serious economic disadvantage. Without question, this would be a disincentive to manufacturing industries looking at locating in Virginia. If the limitation on industrial facilities remains in the Regulation, the language should be clear that modifications, maintenance, or replacement of equipment do not cause the facility to lose its exemption. Thank you for your consideration of our comments. If you have any questions, please contact me at (804) 658-8659. Sincerely, Susan B. Seward Director of Government Relations