Clean Air: New Source Review Policies and Proposals
CRS Report for Congress
Clean Air: New Source Revi ew
Policies a nd Proposals
Specialist in Energy Po licy
Resources, Sc ience, and Industry Division
Congressional Research Service ˜ The Library of Congress
Clean Air: New S ource Review Policies and Proposals
On November 22, 2002, the Environmental P rotection Agency (EPA) finaliz ed
revisions to several aspects o f t he Clean Air Act’s (CAA) New S ource Revie w
(NSR) requirements. At the s ame time, EPA proposed rules t o clarify the d efinition
of “routine m aintenance” under NSR. The proposed and final rules h ave generated
controversy. The Bush Administration has argued that the new rules wi l l reduce
pol l u t i o n and i n crease energy effi ci ency. In cont rast , t he S t at e and Terri t o ri al Ai r
Pollution P rogram Administrators (STAPPA) and Associ ation of Local Air P ollution
Control Officials (ALAPCO) argue that th e revis i o ns will “undermine efforts t o
achi eve and s ust ai n cl ean, h eal t h ful ai r.” Ni ne Nort heast ern st at es fi l ed s ui t agai n st
the final rules i ssued by EP A o n December 31, 2002 in the U.S . C ourt o f Appeals for
the D.C. C ircuit, and P ennsyl vania filed a separate lawsuit o n J anuary 27, 2003; on
J anuary 30, ei ght s tates, mostly from t he Midwes t and the S outh, filed a petition i n
support o f t he final rule.
In to the 1970s, coal-fired electric generating facilities were built with a
proj ect ed useful l i fe o f 30-40 years. Over t i m e a powerpl ant ’s effi ci ency decl i n ed,
until it would b e replaced or put on standby for u se during emergencies. As t he CAA
evolved, it es tablished s tringent pollution control requirements o n newly constructed
facilities, but not on older ones unless t hey underwent a modification t hat i ncreases
emissions (or emitted pollutants t hat ex ceed ed health-based air q u ality standards).
By the early 1980s, however, i t b ecame t echnica lly feasible to refurbish a powerplant
t o preserve i t s effi ci ency, s o p l ant s could continue in regu lar operation.
Thus, “life ex t ension” became m ore advantageous than building n ew facilities
that would i ncur capital and operating costs of CAA-required pollution controls. The
cruci al i ssue was whet her l i fe ex t ensi on t riggered t he “modification” provision of the
C AA: In promulgating regulations in 1975, EPA h ad ex empted certain activities
from t he definition o f m odification, includi ng “maintenance, repair, and replacement
which t he Administrator determines to be routine for a s ource categor y....” In
response, utilities b egan to sp read out their p lant rehabilitation efforts i n an attempt
to fit t hem i nto t heir routine m aintenance schedules.
If one believes t hat EPA’s routine m ai ntenance ex em ption was limited and did
not permit the rehabilitation of ex i sting facilities, then one would conclude that many
of the indust ry’s rehabilitation activities of t he last 20 years go beyond what NS R
allows. F r o m t h i s p erspective, current law requires ex i sting s ources undergoing
refurbishment t o m eet stringent NSR standards. This is the p erspective underlyi ng
the C linton Administration’s enforcem ent i nitiative, an initiative for which t he Bush
Administration h as stated its support. In c ontrast, i f one believes t hat an ex emption
for routine m aintenance is appropriate and s hould b e d efine d i n t e r m s o f current
industry p ra c t i c es, t hen one would argue that NSR d iscourages plant o wners from
upgrading facilities operating with worn-out, i nefficien t components, thereby
f o rego ing opportunities t o conserve en ergy and t o reduce emissions by installing
newer, more efficient components. This pe r s pective t hat NSR discourages energy
efficiency is reflected in the Bush Administration’s proposed revisions to routine
maintenance published i n December 2002. This report will not be updated.
What HasHappened? ...........................................1
What Is theControversy? ........................................5
What Is aModification? .........................................8
Emissions Impact .............................................14
Proposed Alternatives .............................................18
R eform NSR t o P ermit Current Utility Rehabilitation P ractices : T h e
Administration P roposal ...................................18
Replace NSR with Multi-pollutant Legi slation ......................21
Reform NSR t o R educe Emissions From Ex isting Facilities ...........22
Conclusion: NSR – Ambiguous, M eaningl ess or M oot? ..................23
Figure1: TrendofPowerPlantHeat Ratewith Age ......................12
Fi gure 2: Im pact of Power P lant Aging on R eliability of Fossil-Fi red Units 50 to 200
Table1:NSR FinalRule: SummaryofMajorProvisions ...................4
Table 2 : U.S. C o a l - f i red E lectric Gen erating C apacity Additions, 1989-2000 (net
Table 3 : C oal C onsumption and Coal-fired Generation,
Table 4 : C oal-fired Generation C apacity Factors and Heat Rates: 1989-2001(based
on net summer capacity)
Table 5 : E IA’s 2010 NSR R eference Cases: Emissions from C oal-fired Electric
Generating Facilities ..........................................15
Clean Air: New Source Review
Policies and Proposals
On November 22, 2002, the Environmental P rotection Agency (EPA) finaliz ed
revisions to several aspects o f t he Clean Ai r A ct ’s (C AA) New S ource R evi ew
(NS R ) requirements. These revisions became effective with their publication i n t he
Federal Register on December 31, 2002. At the s ame time, EPA proposed a rule t o
clarify t he definition o f “routine m ai ntenance” under NSR. T he proposed and final
rul es h ave generat ed cont roversy. The Bush A dm i n i s t rat i o n h as argu ed t h at t h e n ew1
rules will reduce pollution and increas e energy effici ency. In contrast, t he State and
Terri t o rial Air P ollution P rogram Administrat ors (STAPPA) and Associ ation of
Local Air P ollution C ontrol Offici al s (ALA P C O ) argue that the revisions will
“undermine efforts t o achieve and s ustain clean, h ealthful air.”2 The attorneys
general i n nine Northeas tern stat es filed s uit against the final rules i ssued by EPA on
December 31, 2002 in the U.S . C ourt o f Appeals for the D.C. C ircuit.3 Pennsyl vania
filed a separate lawsuit on J anuary 27, 2003. On J anuary 30, the attorn e ys general
in eigh t s tates, mostly from t he Midwest and the S outh filed a petition i n s upport of4
What Has Happened?
This is not the first time the NSR provisions of the C lean Air Act (CAA) have
engendered controversy. Enacted as part of the 1977 CAA Amendments and
modified in the 1990 C A A A mendments, NSR is design ed to ensure that newly
constructed facilities, or substantially modified ex isting facilities, do not result in
viol at ion of applicable ai r quality standards. NSR provisions outline permitting
r e quirements both for construction o f new major pollution sources an d f o r
modifications to ex isting m aj or pollution s ources . S peci fic requirements dictated by
NSR depend on where the facility is sited. In attainment areas – t hose m eeting t he
1 Envi ronmental Protection Agency, New Source Review (NSR) I mprovements, November
2STAPPA/ALAPCO, “EPA’s New Source Revi ew Reforms W ill Undermine Environmental
Protection, Say State/Local Air Pollution Control Age ncies,” November 22, 2002.
3 T hey are: Connecticut, M aine, M aryl and, Massachusetts, New Hampshire, New J ersey,
New York, Rhode Is land, and V ermont. S ee: “Nine States Sue Bush Admi nistration f or
Gutting K ey Component of Cl ean Ai r Act,” Press r elease, De partme nt of Law, State of New
York (December 31, 2002).
4 T hey are: Indiana, Kansas, Nebraska, North Dakota, South Carolina, South Dakota, Ut ah,
National Ambient Air Quality Standard (NAAQS) for a pollutant – t he governing
requirements are the P revention o f S ignifi cant Deterioration (PSD) p rovisions of the
CAA. In nonattainment areas – t hose not in compliance with a NAAQS for one or
more pollutant – t he governing requi rements are co v e r e d b y nonattainment
provisions. S ome facilities can be subject to a combination of both, if the area i s i n
attainment for some criteria pollutants,5 but not others. M eeting t hese permitting
requirements can be a l ong and complex pro cess, depending on the s pecific p roject,
the pollutants i nvolved, and t he specific s tate and federal regu latory authorities
involved. 6 In 1996, EPA proposed changes t o NSR to streamline it.7 However, the
proposals were s ubject to considerable cont roversy, and a final rule was not issued
under t he Clinton Administration. These compl ex ities and controversies, particularly
wi t h respect t o m odi fi cat i ons of ex i s t i n g s ources, b ecam e m ani fest i n t he Novem b er
1999 enforcement s uits filed b y t he J u stice Department for EPA, and in the responses
to them .8
The C linton Administration’s enforcem ent initiative rai sed questions within the
Bu sh Administration. In May 2001, Vice Pres ident C heney’s energy t ask force called
on the J ustice Department to review the l egality of the l awsuits. 9 In J anuary 2002,
the J ustice Department found the l awsuits to be supported i n l aw and fact.10 In
addition, the energy t as k force as ked EPA to review the impact of NSR on new utility
and refi n ery generat i o n capaci t y, energy effi ci ency, and envi ronm ent al p rot ect i on.
In J u n e 2002, EPA reported t o t he Presiden t t hat: (1) NSR had not significantly
impeded investment in new power plants or refi neri es; (2) NS R h ad i m p eded proj ect s
at ex isting facilities t hat would m ai ntai n and improve reliability, effici ency and
s afety; and (3) NSR does result i n s ignificant environmental and public health
5 Pol l u t a nt s f or whi c h EPA ha s s e t NAAQS a r e o f t e n c a l l e d “ c r i t e r i a pol l u t a nt s ” a f t e r t he
criteria documents EPA prepares f or setting t he standard. For backgr ound on NAAQS and
the criteria air pollutants and how the CAA is st ructured to ensure attainment of clean air,
see Clean Air Act: A Summary of the Act and Its M ajor Requirements, CRS Repor t
6 Many of the activities under t he CAA, including many requirements s pecifically involving
NSR, either reside with or can be and have been delegated t o s t a t e s ( which can include
territories, Indian tribal governments, and t he Di strict of Columbia). In essentially all cases,
EPA can act in lieu of s t a t e s t o w h i ch authorities have not been delegated, or whenever
states fail to take required actions.
7 61 Federal Register 38249-38344, J uly 23, 1996.
8 Larry B. Parker and J ohn E. Blodgett, Air Quality and Electricity: Enforcing New Source
Review, CRS Report RL30432.
9 Report of t he National Energy Policy Development Group , M ay 2001 (Chapter 7, p. 14)
10United States Department of J ustice, Office of Le gal Policy, New Source Review: An
Analysis of the Consistenc y o f Enforcement Actions with the Clean Air Act and
Implementing Regulations , J anuary 2002, p. vi .
benefits. 11 Based o n its findings, EPA recommended s everal revisions to NSR.12
There were t wo parts t o t he recommendatio n s . T h e f i rst consisted o f four
recommendatio n s t h at would complete t he 1996 Clinton Administration’s
rulemaking process. The s econd was a recommendation t o p ropose a regulation t o
cl arify t he definition of “routine m ai ntenance.”
A s p u b l i s hed i n December 2002, the final rule’s provisions fall into fo u r
categories b ased on EPA’s J une 2002 recommendations, 13 and whi ch t h e E P A
believes completes the rulemaking p roces s begun under t he Clinton Administration
in 199614: (1) Plantwide Applicability Limits (PALs); (2) Clean Unit Ex cl usion; (3)
Pollution C ontrol an d P r ev ention P roject s; and (4) Emissions Calculation Test
Methodology. Table 1 briefly s ummariz es t he major d ifferences between the
regulations ex isting at t he time of the rulem aking, the C linton A dministration’s
proposed rule; and EPA’s 2002 final rule. EPA’s fin a l r u l e p r o v ides a d etailed
discussion of what it proposed in 1996 an d what i t finaliz ed in November.15
The s econd rulemaking is a proposed cl arification of t he definition of routine
maintenance.16 Movi ng away som ewhat from i t s current “case-by-case” approach t o
determining routin e m ai ntenance, the revisions would carve out two categories o f
activities t hat would automatically constitute routine m aintenance under NSR. The
first category, “Annual M aintenance, Repair, and Replacement Allowance,” would
provide an ex em ption for safety, reliability, and effici ency activities whose capital
and non-capital cost fall b elow a s pecifi c cost t hreshold. The s eco n d c atego ry,
“Equi pm ent R epl acem ent Approac h , ” woul d p rovi de an ex em pt i o n for repl aci ng
safety, reliability and efficiency rated components with new, functionally equivalent
equipment i f t he cost of the replacement components i s b elow a s pecific t hreshold.
The p roposal includes s everal options f o r i m p lementing each of these approaches,
and asks for comments o n how the t wo approaches should i nteract and whether the
second approach is sufficient alone.
11 Envi ronmental Protection Agency, New Source Review: R e p o r t t o t he President (J une
12U.S. Envi ronmenta l Protection Agency, EPA Announces Steps t o I ncrease Energy
Efficiency, Encourage Emissions Reductions (J une 2002).
13Some documents released by EPA r efer to five “improvements” because they include in
the Emi ssions Calculation T est M ethodology category t wo improvements: ( 1 ) b a s e line
change ; a nd (2) t est c hange.
1461 Federal Register 142 (J uly 23, 1996), pp. 38250-38344.
1567 Federal Register 80185-80314 (December 31, 2002). An i nternet version is available
at : ht t p: / / www.epa.gov/ nsr / nsr f i nal .pdf
1667 Federal Register 80290-80314 (December 31, 2002).
Table 1: N SR Final R ule: Summary of M ajor Provisions
Provision Prior E xisting 1996 Clinton 2002 EPA
Regulation Proposed Rule Final Rule
Pl antwide none V oluntary e mi ssion Emission cap
Applicability cap based on most basedonany
Limits recent 2-yr. consecutive 24-
average plus a monthperiodover
reasonable the past 10 years
operating margi n and valid for 10
that is less than the years
Cl ean Unit none If unit meets a If unit meets a
Exclusion BACT or LAER BACT or LAER
limit set i n t he last limit set since
would not be RACT or
triggered by undertook
change s unless unit pollution
increases hourly prevention efforts,
potential emi ssions it would be
Pollution Control none Excludes P2 Excludes P2
and Prevention proj ects from NSR proj ects from NSR
Pr oj ect s ( P2 unless emi ssion unless emi ssion
proj ects) increase would increase would
contribute t o contribute t o
vi olation of vi olation of
NAAQS, PSD, o r NAAQS, P SD or
air quality related air quality related
values in a Class I values in a Class I
area. Permitting area. EPA will
authority provide a list of
responsible for air presumptively
Provision Prior E xisting 1996 Clinton 2002 EPA
Regulation Proposed Rule Final Rule
Emissions Actual to potential Proposed options Applies t he
Calculation T est test for all ranging from utility’s actual t o
Methodology industrial s ources applyi ng the actual future actual t est t o
(baseline and test except electric to future actual t est all i ndustrial
change s) utilities which have to only electric sources based on a
an actual t o f uture utilities or t o all facility’s emissions
actual t est based on industrial s ources, over two
a f acility’s or eliminating i t consecutive years
emissions over 24 within the most
consecutive recent t en-year
months within the period
What Is the Controversy?
The C AA requires a precon s t r u c t i o n review o f, and a permit for, almost any
modificat i o n o f an air polluting s ource or any m ajor new s ource. Assuming t hat a
stat e has an EPA-approved S tate Im plem entation P lan (SIP), which spells out the
state’s s trategy for complying with NAAQS , regulatory approval t o construct t he new
source or modify the ex i sting s ource must come from t he appropriate state agency.
To receive this “P ermit to Construct,” t he applicant m ust s h o w t h at the p roposed
source or modification will not result in, o r ex acerbate, v iolation o f a NAAQS , either
locally or downwind. In addition, applicants must show that their p roposal will not
r esul t i n l o cal or downwi n d ex ceedences of i n crem ent s of i n creased ai r pol l u t i o n
allowed under P revention o f S i g n i f i c ant Deterioration (PSD) regulations in areas
complying with NAAQS . It i s t his p reconstruction review p rocess t hat i s called New17
Source Review (NSR).
The NSR process i s t riggered for any n ew source that potentially could emit 100
tons annually (or l e s s i n s ome areas) o f any criteria air pollutant, and by any
modification t hat will cause a s ignificant increase i n annual emissions (regu latorily
defined as 4 0 t ons for S O2 and NOx 18). The s pecific NS R requi rem ent s for affect ed
sources depend on whether t he sources involved are subject to the PSD or the non-
attainment provisions. 19 If covered b y P S D , t h e source is required t o i nstall Best
Available C ontrol Technology (BACT), which is determi ned o n a case-by-case b asis,
and which cannot be less stringent t han t he federall y d e t e r m i n ed New S ource
Performance Standard (NSPS) for t hat pollutant. If covered by non-attainment
17 S o me r e s t rict the t erm “NSR” to the r eview process i n a nonattainment area only; the
revi ew process i n an attainment area being called “PSD pre-construction r evi e w ” . T his
paper will use t he term to indicate both. In addition, new and modified sources must meet
New Sour ce Per f o r mance St andar d s ( NSPS) .
18 40 CFR 52.24(f)(10) for nonattainme nt; 40 CFR 52.21(b)9230(i) for PSD.
19 It should be noted that a s ource can be affected by the PSD requireme nts f or one pollutant,
and by t he nonattainme nt requireme nts f or another pollutant.
provisions, t he source is required t o i ns tall Lowes t Achievable Emission Rate
(LAER ) and obt ai n appl i cabl e offset s for t h at part i cul ar area. 20 Li ke BACT, LAER
must not be less stri ngent t han t he federal NSPS.
Despite the breadth of coverage suggested by N S R , few permits have been
issued to coal-fired power plants o v e r t he program’s h istory. 21 If this situation i s
ex amined from t he perspective of new construction, the l ack of permits is not too
surp rising. C urrent U.S. coal-fired electric generating capacity is about 300,000
m egawat t s (MW ), and has rem ai ned s t eady at t hat l evel for t he l ast t en years.22 As
i ndi cat ed i n t abl e 2 , addi t i ons t o coal -fi red capaci t y, w hi l e great er t h an ret i rem ent s ,
have not been s i gn i f i cant. Capacity that began operation b etween 1989-2000
constitutes about 3% of total current coal-fired capacity.
Table 2: U .S. C oal-fired Electric Generating C apacity Additions,
Year Cap a city Ad d i tion s Retiremen ts (MW)
T otal 1989-2000 9,578 2,295
So urce : E ne r gy I nfo r ma tio n Ad ministr atio n, I n ven to ry o f Po wer P la n ts in th e Un ited S ta tes,
20 For details on these provi sions and t heir requirements, see Cl ean Ai r Ac t , Part C –
Prevention of Significant De terioration of Air Quality, s ections 160-169; and, Part D – Plan
Requirements f or Nonattainment Areas, sections 171-178.
21 Envi ronmental Protection Age ncy, Letter t o Chairma n Inhofe ( March 26, 1999), p. 2.
22 Data represent net summer capacity. Energy Information Administration. Annual Energy
Revi ew 1998, DOE/EIA-0384(98), J uly 1999. P. 219.
The dynamism i n coal-fired generation i s t he continuing operation of ex i sting
co al -fired facilities. As indicat ed by table 3, des pite the general lack of n e w p l a n t
const ruct i on, coal -fi red el ect ri ci t y ge neration and relate d coal consumption h as
continued t o climb over t he past decade. This increase results from u tility efforts t o
optimize performance of ex istin g c o a l - fired facilities des pite thei r i ncreas ing age.
Historically, as plants age they become less reliable and less effici ent, leading utilities
t o derat e t h em and m ove t h em from b asel oad t o cycl i n g dut i es. However, as i ndi cat ed
in table 4, contrary to historical ex p e ct ations, utilization of coal-fired capacity has
i n creased over t he past decade, and t he effi ci ency of uni t s has not decreased.
Table 3: C oal C onsumption and Coal-fired Generation,
Year Coal Consumption Net Gen erati on
(thousand short tons) (billions Kw h)
1989 781,672 1,584
1990 790,244 1,591
1991 793,666 1,591
1992 805,140 1,621
1993 842,153 1,690
1994 848,796 1,691
1995 860,594 1,709
1996 907,209 1,795
1997 931,949 1,845
1998 946,295 1,874
1999 949,802 1,881
2000 994,933 1,966
2001 975,570 1,904
So urce : N et ge ne r a tio n, co al co nsump tio n d ata fr o m E ne r gy I nfo r ma tio n Ad ministr atio n, Annual
Energy Review 2001 , J uly 2002.
This suggests t hat t he economics o f plant maintenance has changed
fundamentally over t he past decade o r so, making it economic for utilities t o s pend
more to maintain thei r coal-fired capacity than was t he cas e previously. The question
the EPA lawsuits raise i s w h e t her thes e efforts t o m ai ntai n or even t o ex pand
generation from ex i sting coal-fired facilities – compared to the degradation of
capaci t y t h at woul d b e ex p ect ed – represent “rout i n e m ai nt e n a n c e” o r a
“m odification” of those facilities under the C AA. If such maintenance does represent
a “ m odification,” then the C AA would require the i nstallation o f pollution control
equi pm ent ; “rout i n e m ai nt enance,” o n t he other h and, would not trigger t he
requirement for n ew controls. W ith the res tructuring of the electric utility industry
pl aci ng ever-great er focus o n p l ant econom i cs, t h i s i s s u e h as i n t ensi fi ed i n recent
Table 4: C oal-fired Generation C apacity Factors and Heat Rates:
Year Capacity Fa ctor Heat Rate
Source: Net summer capacit y, net generation, coal co nsump t i o n d a t a fr o m E ne r gy I nfo r ma t i o n
Ad mi ni st r a t i o n, Annual Energy Review 2001 , J uly 2002.
What I s a M odi fi cati on?
As noted above, t here i s n o f i r m data th at NSR h as seriously obstructed t he
construction and operation o f n ew power pl ants. The controversy o ver NSR with
respect to power generation focuses on ex isting facilities and under what conditions
they meet the m odification t rigger t ha t would require them t o undergo NSR. As
defined under t he 1970 Clean Air Act, a modi fication i s “any physical change in, o r
change in the m ethod of operation o f, a s tationary source which i ncreases the amount
of any air pollutant emitted by s uch s ource or which res ults in the emission of any air
23 See: Larry Parker and J ohn Bl odgett, El ectricity Restructuring: The I mplications for Air
Quality, CRS Report 98-615 ENR, J u ly 16, 1999.
pollutant not previ o u s l y emitted.”24 In subsequent regu lations issued in 1975 with
respect to New S ource Perform an ce S t andards (NSPS), EPA defined modification
as any physical or operational change t hat resulted i n any increase i n t he max imum
hourly emi s sion rate (kilograms p er hour) of any controlled air pollutant.25 In
addition, EP A regul ations stated that an y replacement o f ex i sting components t hat
e x ceeded 50% of the fix ed capital costs of building a new facility placed the p lant
under NSPS, regardless of any ch a nge i n emissions. 26 W ith the advent of NAAQS
non-attainment provisions (Part D), Prev ention o f S i g n i ficant Deterioration
provisions (Part C ), and NSR in 1977, a d ifferent approach to defining modification
was appropriate as the focus w a s s h i f t ed from enforcing NSPS emission rates t o
compliance wi t h NAAQS and P S D. In p romulgating regulations for t he P S D and
non-attainment programs, EPA defined “significant” increase i n emissions in terms
of tons per year emitted by a major s ource. For s ulfur diox i de and nitrogen ox ides ,
the t hreshold i s 4 0 t o n s per year. 27 Facilities t hat ex ceed that threshold are subject
Enforcing t hese thresholds has b een m o r e d i f ficult t han t heir apparent clarity
would s uggest. EPA’s thresholds for t he NS P S program general l y represent n o
practical constrai nt on life ex t ension efforts by utilities. Most life ex t ension efforts
i m p ro v e the availability and reliability of generating units, not thei r capacity t o
generate. Thus, t heir max imum hourly emission rate would not change. Likewise,
most life ex t ension efforts cost far less than the 50% asset v alue threshold.
NSR review h as a far m o r e sensitive t rigger – a t onnage increase i n pollutant
output. Because life ex t ension does improve av ailability and reliability, i t i s likely
to increa s e emissions over l evel s emitted before t he life ex t ension activities were
undertaken. But how does one measure t he change? W hat are the b aselines 28?
These i ssues came t o a head in the l at e 1980s when EPA d ecided t o e n f o r c e
NSR against facilities undergoing life ex t en sion efforts. In 1988, the EPA ruled t hat
a life ex t ension project b y W i sconsin Electric P ower Company (W EPCO) met t he
trigger for NSR b ecause of the potential for increased emissions from t he facilities
after t he project compared with act ual emissions from t he facilities before t he project .
25 40 CFR 60.14(a) (1975).
26 40 CFR 60.15 (1975).
27 For PSD, s ee 40 CFR 52.21(b)(23)(i); for nonattainme nt, s ee 40 CFR 52.24(f)(10)
28 Defining the baseline has been a key issue. Every powerplant has what is c a l l e d
“nameplate” capacity, which indicates its theoretical size; but the actual output is defined
by its “operating capacity,” which i s determi ned by t he engi neering and operational details
of the i ndivi dual plant. M oreover, from an engineering perspective, the operating capacity
declines over t i me a s a result of boiler deterioration, pipe cloggi ng, and other predictable
changes due to use. T he i ssue i s, then, what l evel of capacity restored by renovations trigger
NSR: only r enovations that increase capacit y b e yond the f acility’s nameplate capacity?
t h o s e t hat i ncrease capacity beyond the original operating capacity? t hose t hat i ncrease
capacity above an engineering-defined capacity that proj ects declines over time? Or those
that increase potential emi ssions above t he actual emi ssions before the modification?
After considerable litigation29 and congressi onal d ebat e, EP A m odi fi ed t h i s “act ual
to potential” emissions trigger with respect to electric utilities i n 1992.30 The n ew
“t es t” to determine t he applicability of NSR compares a facility’s act ual emis s i ons
before the m odification with its project ed act ual emissions after t he modification
(“actual t o future actual”). Specifica lly, “actual em i s s i o n s ” equal t he facility’s
average em i ssi on rat e duri n g a 2-year peri od out of t h e p recedi n g 5 years b efore t he
proposed change. “Fu ture actual” is the p roduct o f t he facility’s projected emission
rate after t he change and its project ed act ual utilization bas ed on historical and other
data. These are t he current NSR regulations for utility plants.
How Does Routi ne M ai ntenance Fi t?
Fundamental to the d ebate o n NSR enforcement with resp ect to ex isting
facilities i s t he notion of “routine m ai ntenance.” In promulgating implem e n ting
regulations, EPA ex em pted certai n activities from t he definition of physical or
operational change. Among thos e activities ex empted was : “maintenance, repair, and
repl acem ent whi ch t h e Adm i n i s t rat or det erm i n es t o be rout i n e for a s ource
category....”31 In addition, increases in productio n rates that do not involve capital
ex penditures d o not constitute a m odification. Responding to this situation, utilities
began t o s pread out their life ex t ension efforts i n an att e m p t to make them fit i nto
t h e i r r o u t i n e m ai nt enance schedul es. 32 Indeed, t he term “life ex t ension” has fallen
out of the professional literature, replaced wi t h term s like capital improvement,
performan ce i m provement and unit i ntegrity, condition assessment, life operation
management, review of continued operating requirement s, and asset m anagem ent . 33
The commonly used t erm currently is rehabilitation program . 34 By spreading out the
life ex t ension efforts and integrating t hem i nto facilities’ operation and maintenance
schedul es, t h e d i st i n ct i o n b et ween “m odi fi cat i on” and “rout i n e m ai nt enance” i s
effectivel y b lurred, an d arguably, eliminat ed .
29 Wi sconsin Electric Power Company v. Reilly, 893 F.2d 901 (7th Cir. 1990).
30 57 Federal Register 32314-32339 (J uly 21, 1992).
3140 CFR 60.14(e)(1)
32 As observe d by Robert Smock, Editor, “Power Plant Life E x t e n s i o n T r end T akes Ne w
Directions,” Power Engineering (February 1989): “T here are signs t hat many utilities will
not use t he term “life extension” to describe their s pending on old power plants, e ve n t hough
extended life i s one of the maj or goals of t he spending program. T he r eason for t he aversion
to the t erm lies i n t he 19 7 0 C l e a n Ai r Act. T hat f ederal law r equires all power plants
constructed after August, 1971 to restrict emi ssions of air pollutants s uch as s ulfur dioxide.
Plants built prior t o 1971 are exempt, which i ncludes most of t he early candidates f or life
extensions. T he problem is that the l aw also says that gr andfathered plants can lose their
exemption i f t hey a re “modified” or “ recons t r ucted” in a maj or way a nd emission of
proscribed pollutants are increased.”(p. 21)
33 Robert G. Presnak and Bock H. Yee, “Life Extension: T he Ben e f i t s Ar e Real,” Power
Engineering (December 1993), pp. 25-27
34 For a curre nt view of managing existing f acilities, see J ason Makansi, “Rehab: Get the
Most from t he Existing Asset Base,” Power (J une 1999), pp. 30-40.
Thes e “rehabilitation” practices that ex tend the d es i gn life of a power plant
represent s a change i n w hat h a d e a r l i er b een consi d ered accept ed m ai nt enance
practices: Before t he early 1980s, power plan ts were generally assumed t o h ave fix ed
l i v es – 30-40 years – aft er w hi ch t h ey woul d b e repl aced or rel egat ed t o cycl e or
peaking dutie s. In its 1981 Technical Assessment Guide, T he El ect ri c P ower
Research Institute (EPRI) defined a unit life as follows:
Unit life i s an estimate of t h e book life of t he plant. T he maintenance costs
include sufficient f unds to replace mi nor equipment t h a t w e a r s out before the
unit life s hown.35
In i t s cost anal ys es for coal -fi red powerp l ant s , t hi s uni t l i fe was assum ed t o b e 3 0
years.36 By its 1986 Technical Assessment Guide, t he definition of unit life was the37
same, but the assumed unit life for a coal-fired powerplant was 40 years.
The flux i n t he notion o f fix ed powerplant lives was evident in the early 1980s
debate on proposed acid rain l egislation. In utility analys es o f anticipated cost of
retrofitting t heir ex isting powerplants with additional pollution controls, utilities s plit
o n t h e i ssue of retirem ent, either as a pollution control s trat egy, or as utility poli c y
in general. Fo r ex ample, American Electric P ower, a leading opponent of such
legi slation, conducted its cost analys is with assign ed specific retirement d ates for its
ex i s t i n g powerpl ant s rangi n g f r o m 30-40 years. Indeed, i t consi d ered earl y
retirem ent t o be a viable, cost effective pollution control option. 38 In contrast,
anal ys es by other utilities assumed neither any s peci fic retirem ent dat es , nor early
retirement as a control option. 39
Up to this time, routine m ai ntenance practices did not attempt t o arres t or
reverse t he normal d eterioration o f t he powerpl ant ’s p erform ance over i t s l i fe s pan.
Industry agi ng trends with respect to powerplant p erfor m a n c e with standard40
maintenance practices (as s uggested by the EPRI definition) are wel l documented.
In general, aging affects both t h e e f f i c i ency of the powerplant along with its
rel i ability and availability. Degradation o f k ey components, such as turbines,
w a t e r w a l l t ubi ng, and reheat ers, sl owl y reduces a powerpl ant ’s effi ci ency i n
35El ectric Power Research Institute, TAG – Technical Assessment Guide ,PaloAlto:EPRI,
(May 1982), p. App B-48.
37El ectric Power Research Institu t e , T A G – Technical Assessment Guide (v olume 1:
Electricity Supply – 1986), Palo Alto: EPRI ( December 1986), p. B-43.
38 See: American Electric Power, “Acid Rain Control Costs,” in Aci d Rai n: A Techni cal
Inquiry, Hearings b efore the Committee on Environment and Public Works, U.S. Senate,
May 25 a nd 27, 1982, p. 736.
39For e xample, s ee: ibid., Re spon s e s t o W ritten Questions, pp., 748 (Southern Company
Services), 756 (Public Service of Indiana), 767 (Indianapolis Power & L i gh t ) , 7 9 0 (Ohio
40In particular, s ee: H. H. Heiges and H. G. Stoll, “Power P l a n t a n d T u rbine-Generator
Upgr ading Economics,” presented at EPRI and EEI’s Fossil Plant Life Extension W orkshop,
converting h eat to steam and s team to electricity. The result is a h igher h eat rate and
less output. As s hown i n Figure 1 , “average i ndustry m aintenance practice” results
in heat rates i ncreasing b y about 0.3 percent annually dur i n g t he first t en years o f
operation, dropping to below 0.2 percent after that.41
Figure 1 : Trend of Pow e r P lant Heat Rate w i th Age
Fi gure 2: Impact of Pow er Plant Aging on Reliability of Fossil-Fi red Units 50
41ibid., pp. 12-2 - 12.3.
Li kewise, t he aging o f components event ually increases the forced outage rate
of powerplants as component failure beco mes m ore frequent. As i ndicated in Fi gu re
2, reliability of co al -fi red facilities peak at between 10 and 20 years of service and
then begi ns to deteriorat e. By 35 years of operation, a facility’s forced-outage rat e
has i ncreas ed by 10 percentage points. In particular, older facilities begin to have
significantly longer outages as they age, in line with the failure of major equipment,
such as t h e t urbi ne-generat or. 42
As i ndi cat ed by t h e d at a p resent ed i n t able 3 , t hese documented t rends based o n
fired facilities are remaining rel ativel y s table while cap aci ty fact ors are increas ing
substantially. It i s obvious that the reh abilitation programs utilities i nitiat e d i n t he
1980s and continuing to the p r e s e n t have been successful in dramatically reducing
the agi ng process with respect to c o a l -fi red facilities. However, is this success a
violation of t he modification definition of NSR? If “routine m ai ntenance” is defined
in terms o f “average i ndustry m aintenance practice” at the time of the 1970 or 1977
C l ean Ai r A ct A m e n d m ent s , t hen a st rong case can be m ade t h at i t i s – m aj or
components are being replaced or upgraded t hat would not have been under average
industry m aintenance practices of that time. Yet, i f “routine m aintenance” is
interpreted t o m ean industry p ractices at the current time, t hen one can argu e t h a t
rehabilitation has become routine over t he past 20 years, and t hus does not repres ent
This is fundamental to the way one views t he propo s e d c l a r i f i cations to the
definition of routine maintenance proposed by EPA. If one believes t hat EPA’s
routine m aintenance ex emption as e nunciated i n t he 1970s was delimited and not a
license to rehabilitate ex isting facilities, then one would conclude that many of the
industry’s rehabilitation activities of t he last 20 years go b eyon d w h a t NSR
requirements allow. Thus, any argu ment by the current Admini s t r at i o n t hat its
proposed NSR revisions would reduce emi ssions beyond that required under current
l aw woul d b e unt enabl e as enforcem ent o f current l aw woul d requi re ex i s t i n g s ources
subject to NSR t o m eet the s tringent standards of either BAC T o r LA E R . This
p e rs p ect i v e t h a t a p p l yi n g N S R r eq u i rem e n t s t o r eh abilitation would reduce e m i s s i o n s
is consisten t w i t h the enforcem ent i nitiative of t he Clinton Administration, an
initiative for which t he Bush Administration has stated its support.
In contrast, i f o ne believes t hat an ex emption for routine m ai ntenance is
appropriate and s houl d b e defined in terms of current industry practices , t hen one
would conclude that the pote n t i a l t h r eat of NSR (and t he installation o f BACT o r
LAER) p revents o wners from m aking cost-effective improvements i n t he overall
performance and efficiency of their existing facilities (e.g., improved heat rates).
From this perspective, NSR discourages plan t o w ners from upgrading facilities
o p e r a t i n g w i t h o l d , w o r n - o u t , i n efficient components, thereby foregoing opportuniti e s
to conserve energy and t o reduce carbon diox ide emissions by installing newer, m ore
efficient components. This perspective that NSR discourages ene r gy efficiency is
42ibid., pp. 12-3 - 12.5.
reflected in the Bush Administration’s p roposed revisions to routine m ain t e n a n c e
published i n December, 2002. 43
This second view that rehabilitation i s i n fact routine also reflect s t he defense
of many of the utilities s ued by t he J us tice Department under t he Clinton
Administration. For t hem, rehabilitation p rograms are the norm for the i ndustry and,
therefore, should not trigger NSR. In its proposed revi s i o n s to the d efinition o f
routine m ai ntenance, the Bush Administration cited analyses by the Tennessee Valley
Authority (TVA) and First Energy that they would h ave “lost” 32% and 39% of their
coal-fired capacity respectively, if they had capped t heir emissions under a “narrow”
rout i n e m ai nt enance ex cl usi on. 44 With the dec i s i o n o f t he Bush Administration t o
support revisions to NSR, utilities s ubject to litigation origi nating under t he Clinton
Administration’s enforcem ent i nitiative are using EPA’s new pol i c y p o s ition as a
In announcing t he NSR s uits in 1999, the EPA Administrator stated that
“controlling t he sulfur diox ide and nitrogen ox ides from t hese plants co u l d l ead to
an 85 to 95 percent reduction respectivel y i n t hese pollutants.”46 Basedonher
st at em ent , t h i s woul d reduce S O 2 emissions by 1.87 million t ons and NOx emissions
by 0.63 million t ons. Also, gi ven t he widespread nature of life ex t ension efforts, it
is reas onable t o assume that further reductions would be achieved as other utilities
either installed BACT or retired thei r offending facilities. Thus, at first gl an ce, i t
would appear that very substantial emissi on reductions could b e achieved b y rigorous
enforcem ent of NSR’s regulations using t he ex isting d efi n i tion of “routine
maintenance” rather than EPA p roposed new one.
The best analysis of future possibilities under current NSR regulations is by the
Energy In format i o n A d m i n istration (EIA). 47 The t hree relevant scenarios are: (1)
4367 Federal Register 80290-80314 (December 31, 2002).
4467 Federal Register 80302 (December 31, 2002)
45For e xample, on J anuary 8, 2003, Southern Indiana Gas & Electric Company (SIGECO)
filed a “notice of supplemental authority” with the U.S. District Cour t f o r t he Southern
District of Indiana arguing that EPA’s proposed revi sions undercuts t he gove rnme nt’s case
against it. Specifically, t he company argues t hat its activities t hat i nvoke t he lawsuit are far
smaller t han t hose t hat would be a llowed under t h e r e vised r ule, and t hat l anguage i n t he
proposal supports its argument that th e company did not receive fair notice of t he
interpretation underlyi ng the e nforcement action. On February 18, 2003, the U.S. District
Court f or the Southern Di strict of Indiana r ej ected the claims by SIGECO, calling t estimony
by SIGECO experts on t he routine maintenance issue “irrelevant and unpersuasive.” T his
follows a r uling on February 13, 2003 by the s ame Court t hat “ EPA’s i n t e r pretation f or
routine maintenance is reasonable and persuasive.”
46 Carol M. Browner, Administrator, Remarks Prepared for Delivery, Cl ean Ai r
Enforcement Press Conference (Washington, D.C.: November 3, 1999).
47Energy Information Administration, Strategies for Reducing M u ltiple Emissions from
reference: no en forcem en t (incl uding halting current lawsuits); (2) NSR 32:
enforcem ent limited t o t he current lawsuits; and (3) NSR All: enforcem ent ex panded
to include all coal-fired p lants over 2 5 m egawatts. The projected 2010 sulfur diox ide
(S O 2) and nitrogen ox ides (NOx ) results under t hese three s cenarios are presented i n
t abl e 5 . As i ndi cat ed, d ependi ng on on e ’ s ex p ect at i o n wi t h respect t o NS R
enforcement i n lieu o f t he EPA p roposed rule on routine m aintenance, the d ifference
in emissions could b e o n t he order o f a factor of five.
Table 5: EIA’s 2010 NSR R eference Cases: Emissions from
Coal-fired Electric Generating F acilities
Scenario NOx E mi ssions SO2 E missions
(million tons) (million tons)
Reference 4.20 9.70
Source: EIA, S tra teg ies fo r R ed u c in g Mu ltip le Emissio n s fro m Po wer P la n ts, table 20.
However, the C AA is a complex piece of legi slation built up over time. In t he
case o f S O 2 any reduction achieved under NSR would i nter a c t w ith reduction
requir ements under title IV – a SO2 reduction p rogram design ed with different
premises than NSR. Speci fically, title IV limits total S O2 emissions from utilities t o
The cap is enforced through t onnage limitations at individual ex i sting u tility plants
and by an emission offset requirement for new facilities. SO2 emissions from m ost
ex isting s ources are capped at a specified emission r a t e times a historical (1985-
1987) average fuel consumption l evel. Thus the t onnage limitation i s b ased on preset
and historical data, not regulatory limits. To implement the program , title IV creat ed
a comprehensive emissions al lowance s ys tem. An allowance i s a limited
authorization t o emit a t on of SO2 duri n g o r aft er a s peci fi ed year. Issued by EP A,
a l lowances are allocated to ex isting facilities i n accordance with the emis s i o n
rate/fuel consumption formulas det ailed i n t h e l a w . Such allowances may be used
at t h e p l ant t h ey are al l o cat ed t o , o r t hey can be t raded or banked for fu t u re use o r
sale. T he program h as been very su ccessful with nearly 100% compliance.
This 1990 CAA Amendments program does not i n tegrate well with the 1977
CAA Amendments NSR program . Ex cept t hat t hey both focus on ex isting facilities
and S O2 , t hey have little in common. The NSR is concerned with modifications at
ex isting facilities and ins t al l a t i on of BACT. Title IV doesn’t addres s whether
ex isting facilities cont i n u e o p eration or not, or whether a speci fic facility installs
BACT or not; compliance w ith the cap is the det ermining criterion. NSR i s an
enforcem ent m echanism t o assure compliance with individual plant standards; title
Electric Power Plants with Advanced Technology Scenarios , chapter 5: Potential Impacts
of New Source Revi ew Actions (October 2001), pp. 57-63.
IV i s a p rogram t o reduce aggregat e S O 2 emissions by p e rm i tting utilities
considerable flex ibility in determining appropriate compliance s trat egies.
The current S O2 NSPS, the “fl oor” for any BAC T or LAER det ermination, is
a p ercent age reduct i o n requi rem ent t h at reduces S O2 emissions by 7 0 % - 9 0 %,
depending on the coal burned. However, the allocations under title IV for ex i sting
coal -fired facilities i s not as stringent and can be met with low-sulfur coal . Thus, any
facility that installed BACT under NSR would “overcontrol” SO2 under title IV, and,
t h erefore, have ex cess al l o wances avai l a ble f o r s a l e or to bank for future u se.
C onsequent l y, any reduct i ons achi eved b ecau s e o f NS R enforcem ent coul d b e
rendered m oot by title IV, i f t he affect ed plant subsequently sold its SO 2 reduction
to some other facility not covered by an NSR action.48 Ex cept for any T VA
reductions, t he net res ult would be no reductions, at l eas t t heoretically. Title IV does
not provide for adjusting allowance allocations as a result o f NSR enforcement.
Rather, t he law ex plicitly b a s e s its allowance allocations on historical data, not on
any presumption of compliance with NSPS or SIP req u i r ements. To avoid t his
“allowance t rap,” either Congress would have t o change t he law, or utilities would
have t o agree t o s urrender t h e e x c e s s al l o wances creat ed by any N S R enforcem ent
action. Indeed, NSR settlements and agreem ents in princi ple res ulting from EPA’s
enforcem ent i nitiative have i ncluded t he retirem ent of S O2 al l o w a n c es t h at t h e
utilities could have used t o emit additional pollution elsewhere. 49
The s ituation with potential NOx reduction i s m ore complex . First, t here is the
interaction of NSR and t he NOx NSPS. Unlike t he very stri ngent S O2 NSPS, the
NOx NSPS hist o r i c ally has not reflected the cutting edge i n t echnology
development.50 Until the n ew standard was s et in 1998, the NOx NSPS for coal-fired
facilities was 0.6/0.5 lb. o f NOx per million Btu of heat input, d epending on the t yp e
o f coal burned. This standard, s et in 1979, could b e m et with fai r l y s i m p l e
combustion m odifications or low-NOx burners, and did not require the i nstallation
of pol l u t i o n cont rol d evi ces such as sel ect i v e cat al yt i c reduct i o n (S C R ). Indeed, t he
standard did not reflect the s tate of the art with respect to low-NOx burners.
In 1998, EPA p romulgated a n ew NOx NSPS for coal-fired facilities o f 0.15 lb.
of NOx per million Btu – a standard more in line w i t h av ailable t echnology.
However, this new s tandard was challenged in court. In September, 1999, the D.C.
Court o f Appeals v acated the n ew NOx NSPS with respect to modified utility boilers,
while later upholding the N S P S with respect to new s ources.51 By vacat i n g t he
48 T he T V A Compliance Order would r equire retirement of a llowances equal t o a n y SO2
reductions achieved as a result of the compliance order.
49For example, s ee U.S. Envi ronmental Protection Agency, “United States and New J ersey
Announce Clean Ai r Act Coal-f ired Powe r Plant Settleme nt With PSEG Fossil LLC Effect
Will Cut New J ersey Industrial Sulfur Dioxi de Emissions by 32%,” EPA Press Release,
50 Larry Parker, Nitrogen Oxides and El ectric Utilities: Revising the NSPS , CRS Report 96-
51 Lignite Energy Council v. Environmental Protection Agency , Orde r No. 98-1525, D.C.
modified standard, t he NSPS for m o d i f i e d sources returned to the p revious 1979
standard until such time as EPA proposes a revised NSPS. As a res ult, the floor for
determining BACT or LAER for modified coal -fi red s ources i s uncl ear at t h e current
time. If t he floor is the current modified NSPS as set i n 1979, reductions achieved
by NSR enforc e m e n t would b e considerably less than that suggested by some. In
co n t rast, i f t he floor is the new 1998 NSPS, the reduction would be substan t i a l .
Surveying BACT d eterminations over t he time period 1991-1995 sheds n o light on
what BACT might be currently: dat a i ndicat e permitted emission rates ranged from
0.15 to 0.5 lb. per million Btu. 52 Thus, i t i s difficult at the current time to project what
any act ual NOx reduct i o n w oul d b e achi eved b y i ncreased NS R enforcem ent .
The confusion i s ex acerbated b y t he interaction of NSR and title IV. The NOx
reduction p rogram under title IV di ffers substantially from t he SO2 program. Li ke the
NSPS program , the title IV NOx program is b ased on emission rates, not tonnage
limitations. The difference i s t hat t he emission rate for t he title IV program i s s et for
ex isting facilities t o b e achieved i n 1 9 9 5 or 2000 (depending on the facility),
regardless of whet her t he facility is modified or not. In addition, the rat e limitation
for m ost boilers under t itle IV is 0.45 to 0.5 lb. per million Btu, or more stringent
than the 1979 NOx NSPS. Thu s , yo u have the curious situation of s ome ex i sting
coal-fired facilities h aving emission contro ls since 1995 that are m ore s tringent than
the ex i sting NSPS – a situation t hat continues currently with the court action on t he
A t hird interaction i s bet ween NSR and the NOx SIP call. The NOx SIP C al l
( al s o cal l ed t he Oz one Transport R ul e), requi res 2 1 east ern and m i d west ern S t at es
and t he Distr i c t of Columbia to reduce emissions of NOx to prevent i nterstate
transport of oz one pollution. 53 To achieve the n ecessary reductions, EPA stipulates
an emission budget for each of the affected states, with each state free t o d ecide on
what controls to use t o m aintain emissions within those budgets. W ith much of the
reduction likely t o come from coal-fired el ect ri c powerpl ant s , E P A i s recom m endi ng
S t at es agree t o a regi onal cap and t rade program t o implement the reduction program .
The pot ent i al i nt eract i o n b et ween t h i s program and an NS R enforcem ent i s uncl ear,
as t h e al l o wances used i n any NOx t radi n g p rogram woul d h ave a regu l at o ry, rat her
than a s tatutory, bas is.
Court of Appeals ( September 21, 1999). In a separate opinion issued December 21, 1999,
the court upheld the NSPS with respect to new s ources.
52 Office of Air a nd Radiation, EPA, Analyzing Electric Power Generation under t he CAAA
53Envi ronmental Protection Agency, Fi ndings of Significant Contribution and Rulemaking
for Certain States in the Ozone Transport Assessment Group Region for Purposes of
Reducing Regional Transport of Ozone ,63Federal R e gister 57356-57538, October 27,
1998. Further litigation r emoved the s tate of Wisconsin from t he list of s tates affected by
Proposed Al ternatives
Alternatives to the current NSR s it u a t i o n focus on either energy or
environmental con siderations. For ex ampl e, the Administration’s p roposed revisions
to routine m aintenance are an outgrowth of the P resident’s National Energy P olicy
and are i n t e n d e d “to provide greater regu latory certainty without sacrificing t he
current level o f e n v i r o nmental p rotection....” The policy goal i s not to reduce
emissions. As s tated i n t he proposed rule:
What these [ EPA’ s] analys es indicate, ho we ver, is that regardless of which
scenario is closest t o what comes to pass, none of the proposed provisions related
to the RMRR [routine maintenance, repair, r eplacement] exclusion will have a54
significant i mpact on emissions from t he power sector.
The Bush Administration’s NSR focus on energy policy contrasts directly with
the focus of the C linton Administration’s enforcem ent i nitiative where, by s eeking
to enforce NSR requirements, EPA attempted t o ex ploit an ex isting authority toth
reduce emissions. Likewise, proposed legi slation i n t he 107 Congress to define a
modification i n t erms of a power plant’s age was another attempt t o u se NSR as an
emissions reduction p rogram.
NS R i s one approach t h at t h e C l ean Ai r Act takes t o control emissions from
ex isting s ources, but argu ably more effici ent and more effective m ethods to ensure
declining emissions from ex i sting s ources over time have been developed s ince NSR
was added t o t he CAA i n 1977. Fo r ex ample, title IV of the C AA, enacted in 1990,
ex pl i c itly and substantially reduces SO2 and NOx emissions from ex i sting utility
p l ants. In fact , title IV reduced more SO 2 emissions from coal-fired e l e c t r i c
generating facilities i n its first year of implementation (1995) than NSR h as in its 20
years o f ex i stence. The “cap and t rade” p rogram has h ad nearly100% compliance
(indeed, s ubstantial over-compliance); t he implicit logi c of EPA’s lawsuits suggests
NSR’s compliance with respect to el ect ric generating facilities has been n ear zero.
The title IV program b egan without sign ificant d elays (SO 2 program on-time, NOx
program 1 year late); the EPA lawsuits could t ake years t o res olve with uncertain
Reform NSR t o Permit Current Utility Rehabilitation
Pr acti ces: The Admi ni str a ti on Pr oposal
Published i n December, 2002, the Bush Ad ministration’s p roposed definition
of routine m ai n t enance would permit current utility rehabilitation practices to
continue without the t hreat of triggering NSR. As s u gge sted above, t he proposed
chan ges t o t he definition of routine m ai ntenance are focused on energy policy
considerations, not environmental considerations. If one’s baseline i s current utility
emissions, EPA believes, as stated a bove, t he proposed changes will have no
significant impact on emissions.
54 67 Federal Register 80304 (December 31, 2002).
The p roposed rule suggests t wo approaches for d etermining whether a u tility’s
activities exceed routine m aintenance. Both approaches involve the u se of a cost
trigger, and EPA suggests t hat t he two could b e u sed t ogether, or the s econd approach
could s tand alone. T he first category, “Annual M a i n t enance, Repair, and
R epl acem ent Al l o wance,” woul d p rovi de an ex em pt i o n for safet y, rel i a b i l i t y, and
ef ficiency activities whose capital and non-capital cost fell b elow a s pecific cost
t h reshol d. The s econd cat ego r y, “ E qui pm ent R epl acem ent Approach,” woul d
provide an ex em ption f o r replaci ng safety, reliability, and effici ency rated
comp onents with new, functionally equivalent equipment i f t he cost of the
replacement components i s b el ow a s pecific t hreshold. Obvious l y, u s i ng a cost
t h reshol d t o d efi n e rout i n e m ai nt enance m eans t hat t he st ri ngency of NS R wi t h
respect to an ex isting s ource would depend s ubstantially on the cost estimate used to
However, no proposed estimates are p r ovided i n t he proposed rule for an
“annual, m a i n t enance, repair and replacement allowance.” EPA’s quantitative
d i s c u s sion of such estimates i n t he rule consists of noting t he IR S val ues f o r s u ch
items (ranging from 0.5% to 20% of invested costs, depending on industr y); and
estimates contained i n s tandard reference m anuals for t he chemical process i ndustry
(ranging from 2 % t o 10% for t hat i ndustry). From t his literature review, EPA
concludes: “Based on information contai ned i n t he resources mentioned above, t he
appropriate annual m aintenance percen tages would b e i n t he range o f 0.5% to 20%,
depending on the industry.”55 Even this broad conclusion is more preci se than the
actual p roposal as the p roposal also states that EPA i s considering whether or not to
ex clude from t he allowance calculation cos ts associated with replacing components
that ex perience unanticipated fa ilure or a catastrophic failure. 56
W ith regard to a cost t rigger with respect to the s econd approach EPA anchors
its discussion on the 50% of the assessed value reconstruction cost t ri gge r o f t he
T hus, we believe that the 50% capi t al replacement t hreshold used under t he
NSPS mi ght constitute an appropriate limitation on when i de n t i cal or
functionally equivalent replacement should qualify a s RMRR under t he
equipment r eplacement provi sion without regard to other considerations.57
EPA does not provide any analyses to reinforce its belief t ha t 5 0 % is an
appropri at e cost t ri gger for i t s repl acem ent approach, and not es t h at “t here are o t h er
conside r a t i o n s pointing i n favor of a t hreshold l ower than the 50% reconstruction
threshold t hat m ay be appropriate to bound the equipment replacement p rovision.”58
This position by EPA appears t o reflect two s omewhat contrasting perceptions
with respect to NSR.
5567 Federal Register 80298 (December 31, 2002).
5667 Federal Register 80299 (December 31, 2002).
5767 Federal Register 80301 (December 31, 2002).
Fi rst , EP A b el i eves t hat i t i s not reasonabl e for t h e r e p l acem ent approach t o
ex clude from NSR activities t hat i nvolve the t otal replacement o f an ex i sting entire
process.59 However, a 50% cost trigger would, in fact , permit such activities, at leas t
for power plants. As CRS noted in reports beginning in 1985, the 50%
reconstruction t rigger i s not a s erious constrai nt on utility rehabilitation activities. 60
Ind eed, a review of EPA’s Applicability Determination Index (ADI) dat abas e
i n d i c a t es no i n st ance where t he reconst ruction provisions of the NSPS regulations
has been applied t o an elect ric generating facility.61 EPA appears to recognize the
potential t hat a 50% cost trigger would n ever be invoked and, therefore, suggests a
limiting principle for rehabilitation program s bas ed on “functional equivalence” of
replaced components. Even this may h ave p roblems, as stated by EP A:
We recognize t hat i t may sometimes be difficult to determine where to draw the
line between an activity that should be t reated a s an excluded r eplacement
activity and one that should be viewed as a physical change that mi ght constitute
a maj or modification when t he replacement of equip me n t with identical or
functionally equivalent equipment i nvolves a large portion of an exi s t i n g unit.
At the same time, we believe it is important to provide some clear parameters for62
maki ng this determination.
W h et her t hose p aram et ers w oul d b e cl earer t h an t h e current NS R t ri gger rem ai ns t o
Second, whi l e EP A b el i eves t hat com pl et e r econs t r uction should not be allowed,
it al so believes t hat t he breadth of ex cl usion permitted by any d e finition of routine
maintenance i s i rrelevant in terms of reducing powerplant emissions. In a qualitative
discussion of utility b e h a v i or and t he potential emissions impact of a “narrow”
definition of routine m ai ntenance, EPA states:
...a narrow RMRR exclusion that is clearly established i s not expected to achieve
significant r eduction i n historic emi ssion levels, and mi ght even l ead to area wi de
emissions increases. M ost f acilities would t ake l awful s teps to avoid having t o
obtain an NSR permit that would i mpos e s trict limitations, even when
replacements would be f ound under t his narrow exclusion to be non-routine.63
If the breadth of definition does no t affect em i ssions, i t i s not cl ear why i t
matters whet her a utility can completely reconstruct a facility. If EPA’s concerns are
primarily energy p o licy d riven and focused o n p roviding industry with clear
parameters, a simple cost trigger without any functional restraint is well within the
rationales p resent e d in its routine m aintenance proposal. Indeed, t he Bu sh
Administration has stat ed that it believes t hat m ulti-pollutant legi slation would be
m o re effect i v e and effi ci ent i n reduci n g pollutants t han rigorous NSR enforcement.
60Larry Parker, et. al., The Clean Air Act and Proposed Acid Rain Legislation: Can We Get
There From Here? CRS Report 85-50 (February 21, 1985), p. 46.
61 T e lephone conversation with EPA, February 3, 2003.
6267 Federal Register 80301 (December 31, 2002)
6367 Federal Register 80302 (December 31, 2002)
Thus, t he Administration “Clear Skies” proposal includes an ex emption from NSR
for facilities complyi ng with provisions contai ned i n t he bill.64
Repl ace NSR w i t h M ul ti -pol l utant Legi sl ati on 65
If the object of the C linton Administration’s NSR enforcem ent i nitiative was to
reduce S O 2 emissions from coal-fired powerpl ants, t he most straightforward
alternative would be t o l ower the cap on such emissions contai ned i n title IV. The
practical effect of the 1990 SO2 cap was t o reduce S O 2 emissions from ex i sting
facilities t o t he level required by t he 1971 NSPS. The effect on new s ources was t o
reduce t h e NSPS to zero, as all emissions now have to be offset. Lowering t he
ex isting cap by about two-thirds would achieve roughly t he same emission reductions
as all ex i sting powerplants meeting t he 1978 NSPS, but utilities would have some
flex ibility in achieving such reductions. Admittedly, utilities would get credit for
shu t d o w n s that they would not get under NSR enforcement; however, t he
administrative and cos t ad v a n t ages of the allowance s ys tem might be considered
worth it. In any case, it would require new l egislation, which could b e a l ong drawn
Similarly, a new “cap and t rade” p rogram for NOx would eliminate t h e
uncertainti e s involved i n t he NSR enforcem ent d ebate, and, potentially, i n s everal
other EPA initiatives with respect to NOx emissions. In t hat contex t, EPA has been
strongly urgi ng states to consider a regi onal cap and t rade program i n implementing
its NOx SIP C all, and any possible compliance with Section 126 petitions. Indeed,
EPA m ade s uch a program a part of its proposed Federal Implementation P lan (FIP)
for s tates t hat d o not submit adequate SIPs under t h e S IP C a l l and its compliance
plan for imp l e m e n t ing approved S ection 126 petitions. However, t o implement a
regi onwide cap and t rade program under t he NOx SIP C all for NOx would require
either ex traordinary cooperation b etween th e s t ates affected (because of the S IP
process), o r n ew EPA authority.
The Administration apparently agrees with this position. In February 2002, the
Bu sh Administration announced its “Clear Skies” proposal to place emission caps o n
el ect ric utility emissions of S O 2, NOx and m ercury (Hg). Im p l em ent ed t h rough a
tradeable allowance program the emissions caps would b e i m p o s ed in two phases:
2010 (2008 in the case o f NOx ) and 2018. It was i ntroduced as part of a complete
rewrite of Title IV of the C lean Ai r Act on J uly 26, 2002, as H.R . 5266. It was
introduced in the S enate o n J uly 2 9 as S . 2815. No action was taken o n t he proposal
in the 107th Congress.
In addition t o t he emission cap s , H . R. 5266/S. 2815 would have s ubstantially
modified or eliminat ed several provisions in the C lean Air Act w i t h respect to
64Introduced in the 107th Congress as H.R. 5266 and S. 2815.
65For a comprehensive discussion of multi-pollutant strategi es, s ee: Larry Parker and J ohn
Blodgett, El ectricity Generation and Ai r Quality: M ulti-Pollutant Strategies , CRS Re por t
RL30878 (March 13, 2001); f or a comparison of multi-pollutant legi sl a tion i ntroduced inth
the 107 Congress, see Larry Parker and J ohn Blodgett, Ai r Quality: M ulti-Pollutant
Legislation, CRS Report RL31326 (October 22, 2002).
el ect ric generating facilities. With respect to ex isting facilities, the bills provided an
ex em ption from NSR (and other provisions) for ex isting facilities t hat m eet speci fic
requirements p rovided i n t he legi slation.
Rep l a c i ng NSR with a cap and t rade program i s not without controversy.
Indeed, a report b y EPA Regi on IX found that NSR i s v ery compatible with a cap and
trad e program.66 After ex amining implementation of C alifornia’s R ECLA IM
program from its inception i n 1993 to the p resent, EPA concluded:
R E C LAIM’s experience seems t o demonstrate t hat cap and t rade (CAT ) c a n
wor k wi t h Cl e a n Ai r Ac t ( CAA) Ne w S our c e Re vi e w ( NSR) . T h i s ma y b e a
function of t he types of s ources inc l u d ed or t he controls in place at many
facilities. This lesson i s contrary to the commonly r eported f e deral vi ew and
should be f urther researched.67
Others al so see a conflict bet ween NSR and multi-pollutant legi slation. Multi-th
p o l lutant legi slation i ntroduced by Senator C arper i n t he 107 Congress, S. 3135,
included provisions modifying NSR. Under S . 3135, NSR would h ave b een triggered
if the capital costs o f r eplacement components ex ceeded 50% of the construction
costs of a n e w facilities (similar t o current reconstruction regulations and t he
A d m i n i s tration’s p roposed second option) or if the rate o f emissions (in t erms o f
pounds per m e g awatt-hour) i ncreased. Unlike t he Administration’s regulatory
proposal, t his m odification of NSR would occur within the contex t of a
comprehensive s eries of emissions caps on S O2,NOx,Hg,andCO2 t h at are l ai d out
in the bill. The Administration’s C lear Skies p roposal does not include CO2.
Reform NSR to Reduce Emissions Fr om Existing Facilities
While the above proposal sees a l essening of NSR for ex isting facilities, either
for energy policy reasons or to reduce poten tial conflict with a cap and t rade program,
other p roposals s ee an aggressive defin ition o f m odification as complementing a capth
and t rade program. Fo r ex ample, i n t he 107 Congress, H.R. 1256 (W ax man), and
S . 556, as reported b y t he Senate Committee on Environment and Public Works,
contained p rovisions that would h ave re q uired all powerplants 30 years o r o lder to
meet current NSPS requirements. Essentially, this legislation would have defined
“modification” in terms o f p lant age, not physical or operation change. It would b e
relativel y easy t o implement, and, as indicat ed in table 5 previo u s l y, a n “al l NSR”
scenario would result i n s ubstantial emission reductions.
Similar t o S . 3135, the p roposals i ntroduced abo v e m o d i fy NSR within the
contex t o f a comprehensive s eries o f emissions caps o n S O 2, NOx , and CO2, along
with unit-by-unit emission limitations on Hg. C urrently, NSR for powerplants can
only result i n reduced emissions of SO2, NOx , and particulate m atter . T h e re i s n o
NAAQS or NS P S for either Hg or CO2. Thus, t o control t hese additional pollutants,
66U.S. Envi ronmental Protection Agency, An Evaluation of the Sout h Coast Air Quality
Management District’s Regional Clean Air Incentives Market – Lessons in Environmental
Markets and Innovation (November, 2002).
67ibid., p. 68.
additional control regimes would b e n ecessary, p art i cul arl y for C O2. By combining
NSR with multi-pollutant legi slation, one provid e s a fairly cl ear pict ure as t o t he
direction of emission control regulation for the lifetime of a powerplant.
However, this cl ari t y comes at t he price of flex i bility with respect to utilities
complying with the em i s s i o n s caps. Instead of using m arket m echanisms, such as
trading of emissions credits, t o creat e a cost-effective reduction i n all four pollutants,
the 30-year rule means t hat BACT o r LAER for SO2, NOx , and particul a t e m atter
would have t o be i nstalled on given plants, regardless o f what a more comprehensive
compliance s trategy might suggest. Thus, i t i s possible t hat combining a s tringent
NSR with multi-pollutant legi slation i n the manner s uggested by H.R. 1256 and S .
Conclusion: NSR – Ambiguous, M eaningless or
Much of the popular debate on NSR h as focused o n “ gr a n d fathered”
powerplants. One ex ample from a 1998 report b y a public interest group states:
The Clean Air Act of 1970, as amended in 1977 and 1990, contains a maj or
exemption t hat a llows older c oal-burning power plants to emit between 4 a nd 10
times the a mount of pollution t hat new plants ma y e mi t under t he Clean Air Act.
In part, t his coloss al l oophole exist s because industry l obbyists argued
successfully that its older plants would s oon retire, and t hat t herefore it would be
wasteful to require expensive r etrofits to control pollution from t hese plants.
However, over 20 years l ater, many of t hese same plants, built in t h e 3 0 s , 40s,68
The t erm “grandfather e d p owerpl ant” is a m uch used and little understood
concept em p l o yed i n d ebat e o n em i ssi ons from ex i st i n g powerpl ant s . S peci fi cal l y,
“grandfathered” is an ambiguous, and, in some cases, m eaningl ess t erm generally
used to indicate whether a given powerplant is covered under S ection 111 of the
Clean Air Act. P assed with the 1970 Clean Air A c t A m e n d m e n t s , S ection 111
requires the EP A t o p romulgate regulations defining the minimum controls necessary
for n ew sources (including power pla n t s ) r egardless of their location. Called New
Source Perform ance Standards (NSPS), t hey require major new sources constructed
after t heir promulgation t o i nstall the best s ys tem o f continuous emission reduction
whi ch h as been a d e q u at el y dem onst rat ed accordi n g t o E P A . C urrent l y, t here are
NSPS regu lations for powerplants that cover t hree pollutants – sulfur diox ide (SO2),
ni t rogen ox i d es (NOx ) , and p art i cul at e m at t er. Typi cal l y, “grandfat hered” refers t o
those p lants (usually coal-fired powerp l a n ts) t hat were constructed b efore t he
e f f e c t i v e d ates of those NSPS regu lations and, hence, not subject to them. NSP S
regu lations for powerplants were first p romulgated in 1971 and revised in 1979. The
NOx NSPS regu lations for powerplants were revised again in 1998. In stead of NSPS
68 United States Public Interest Research Group, Lethal Loophole , U.S. P IR G Education
Fund (J une, 1998), p. 3.
requirements, such “grandfat hered” sources must meet em i s sion rate limits
established by a Stat e Implementation P lan (SIP).
Three aspects o f t he NSPS make the t erm “grandfathered” at best ambiguous:
S ome emissions of concern, such as carbon diox ide (CO 2) and mercury (Hg) are
not criteria air pollutants, and, therefore, not covered b y t he NSPS for
powerplan ts at the current time. Hen ce, “grandfat hered” would not ap p l y for
thes e pollutants as all powerplants (indeed, all major s ources of thes e pollutants)
EPA is required t o review t he NSPS every eight years, resulting i n i ncreas ed
stringen c y for covered pollutants as t echnology improves (and for
determinations of BACT and LAER). Therefore, what power p l a n ts are
“grandfathered” is ambiguous as there i s n o s et baseline. Fo r e x a m p l e , t he
NSPS for NOx was revised in 1998 to a s t r ingency t hat only a couple o f
commercially operating coal-fired powerplants met at t he time; by t hat s tandard,
virtually all coal-fired powerplants are “grandfat her e d ” w i t h respect t o NOx
Title IV of the 1990 Clean Air Act Amendments changed t he regu lation o f
ex isting powerplants with respect to SO2 and NOx . In s om e cases , t he
requirements under title IV for ex i sting s ources are m ore s tringent than some of
the ex i sting or previous NSPS. For ex ample, under phase 1, some ex isting
“grandfathe red” powerplants were required i n 1995 to meet NOx standards
more stringent t han t hen-ex isting NSPS NOx requireme n t s f or new
powerplants. Likewise, under phase 2 o f title IV, ex i sting “grandfathered” coal-
fired powerplants were required i n 2000 to meet SO2 standard s t hat are
essentially equivalent to ( i f n o t more stringent t han) the 1971 NSPS for S O2.
The t erm “grandfathered” is essentially meaningl ess under s uch circumstances.
If t h e f o c u s o f d e b a t e about “grandfath e r e d ” p o w e r p l a n t s i s N O x e m i s s i o n s , t h e n
age of plant is not a rel evant consider at i o n – f u e l s ource is. C oal-fired facilities,
regardl ess of age, are t he rel evant focus o f any effort t o i n crease NOx cont rol s . If t he
focus o f d e b a t e a bout “grandfathered” powerplants is SO2 emissions, t hen t he title
IV em i ssi ons cap i s t h e rel evant consi d e r a t i on. There, age was a consi d erat i o n i n
allocating emission credits; however, t he relevant definition was not based on NSPS
compl i a n c e (or any o ther CAA compliance), but on whether t he plant was
operational, under construction, or planned at t h e time of enactment. Indeed, t he
NSPS for SO2 for new powerplants is in some ways m o o t – all new s ources must
completely of f s e t t h eir emissions under t he cap as they receive no allocation o f
em i ssi on credi t s . T he NS P S i s effect i v el y z ero n et em i ssi ons. T hus, i f reduci n g S O2
from elect ric generating facilities i s t he goal , s hrinking the current cap on SO2 is the
m o st l o gi cal approach. Li k ewi s e, a cap on NOx em i ssi on i s a l ogi cal ex t ensi o n for
reducing NOx emissions from elect ric generating facilities. EPA favors t his approach
in addressing transported pollution programs i n t he Northeast where the agency h as
proposed state-by-state emissions caps.
The W EPCO decision precipitated public debate and congressional oversight,
and t he Bu sh Administration’s p roposed revisions t o N S R h a v e done the s ame.
Unlike p revious efforts t o address NSR, t he focus o f t he Administration’s p roposed
routine m ai ntenance rule is not to reduce pollution, but to facilit at e e l ectricity
production. The p roposed rule’s attempt t o r educe b arriers t o energy p roduction b y
widening the definition of routine m ai ntenance is not attached to legi slation t o reduce
any emissions effect s. The Administration has introduced legi slat i o n t o reduce
emissions from powerplants, but promulgation o f its proposed routine m aintenance
rule is not contingent on passage of that legi slation. The Administration believes t he
linkage is not critical as it believes t hat t he definition of ro u t i n e m ai ntenance will
have no effect on emissions. Others m ay disagree.