CRS Report for Congress
Air Quality and Electricity:
Enforcing New Source Review
January 31, 2000
Larry B. Parker and John E. Blodgett
Resources, Science, and Industry Division

Congressional Research Service ˜ The Library of Congress

On November 3, 1999, the Justice Department filed seven lawsuits against electric utilities
in the Midwest and South charging them with violations of the New Source Review (NSR)
requirements of the Clean Air Act (CAA). In addition, the Environmental Protection Agency
(EPA) issued an administrative order against the Tennessee Valley Authority (TVA), alleging
similar violations. This report briefly reviews the NSR requirements and the suits; it identifies
the facilities involved; and it considers issues of possible congressional interest that could arise
from complications because of interactions of NSR with other provisions of the CAA and
because of changing practices in the electric generating industry. This report will be updated
as warranted.

Air Quality and Electricity: Enforcing New Source Review
On November 3, 1999, the Justice Department filed seven lawsuits against
electric utilities in the Midwest and South charging them with violations of the New
Source Review (NSR) requirements of the Clean Air Act (CAA). In addition, the
Environmental Protection Agency (EPA) issued an administrative order against the
Tennessee Valley Authority (TVA), alleging similar violations. Through a
“preconstruction” permitting process, NSR is designed to ensure that newly
constructed facilities, or substantially modified existing facilities, do not result in
violation of applicable air quality standards.
The suits represent a continuing effort by EPA to reduce pollution from existing
sources, particularly coal-fired electric generating facilities. The primary pollutants
of concern have been nitrogen oxides (NOx), and sulfur dioxide (SO2). The question
the EPA lawsuits raise is whether the specified facilities have engaged in rehabilitation
actions that represent “major modifications” of the plants, in which case the CAA
would require the installation of best available pollution control equipment. The
crucial definition of “major modification” derives from an EPA ruling that a life
extension project by Wisconsin Electric Power Company (WEPCO) triggered NSR
requirements. Since 1992, after considerable litigation and congressional debate, the
“test” to determine the applicability of NSR compares whether a facility’s projected
actual emissions after the modification are more than its actual emissions before the
modification. Utilities argue that the “modifications” that EPA cites in the suits were
just routine maintenance, which do not trigger NSR.
NSR is an attractive enforcement tool because EPA can ask the court to impose
substantial monetary penalties, and to require a violating source to install best
available control technology. Thus EPA states that these facilities could be required
to reduce their emissions of sulfur dioxide and nitrogen oxides by 85 to 95%.
Because the CAA is a complex piece of legislation built up over time, however,
the reductions that might result from successful prosecution of the NSR suits may not
be completely realized. In the case of SO2, any reduction achieved under NSR would
interact with a cap on emissions set under title IV of the CAA; because of the system
of tradable allowances established under title IV, reductions from NSR compliance
might be shifted to unaffected facilities. The situation with respect to NOx is also
confused, largely because of inconsistencies in EPA’s new and existing source NOx
regulations as a result of a partial remand of regulations by a court.
By seeking to enforce NSR requirements, EPA exploits an existing authority that
holds the potential for reducing emissions. EPA clearly believes that some sources
have been evading NSR requirements. However, the action appears to raise the
classic enforcement issue: will the outcome be reduced emissions, or just costly
litigation? The suits expose the complex interactions of NSR with other provisions
of the CAA – complexities that might compromise air pollution reductions sought
through the NSR suits. Knowledge gained through 30 years of CAA implementation
suggests options for updating the Act’s approach to regulating the utility industry’s
emissions; however, many of these require Congressional action to amend the Act.

Why EPA’s Enforcement Action?...................................3
Why NSR?....................................................7
Why Not Earlier?................................................9
What Has EPA done?...........................................11
What Could the NSR Enforcement Action Accomplish in Terms of Emission
Reductions? ............................................... 16
What Are the Alternatives?.......................................19
Conclusion: NSR – Ambiguous, Meaningless or Moot?.................21
List of Figures
Figure 1. SO2 and NOx Emissions from Coal-Fired Electric Generating
Facilities .................................................. 5
Figure 2. Coal-Fired Capacity, Generation, and Coal Consumption..........6
List of Tables
Table 1. Capacity Additions and Retirements: 1989-1998.................4
Table 2. Coal-fired Generation Capacity Factors and Heat Rates: 1989-1998...7
Table 3. Alleged New Construction Cited in DOJ/EPA Complaints.........12
Table 4. Alleged “Modifications” Cited in DOJ/EPA Complaints..........13
Table 5. Tennessee Valley Authority: Compliance Order.................15

Air Quality and Electricity: Enforcing New
Source Review
On November 3, 1999, the Justice Department filed seven lawsuits against
electric utilities in the Midwest and South charging them with violations of the New1
Source Review (NSR) requirements of the Clean Air Act (CAA). The seven utilities
affected are American Electric Power (AEP), Cinergy, First Energy, Illinois Power,
Southern Indiana Gas & Electric Company, Southern Company, Tampa Electric
Company, or their subsidiaries. Filed on behalf of EPA, the lawsuits represent one of
the largest CAA enforcement actions ever taken by EPA. Additional lawsuits have
been filed by the State of New York and Connecticut (jointly), Vermont, and New
Jersey against AEP,2 and by a coalition of environmental groups also against AEP.3
In addition, the Environmental Protection Agency (EPA) issued an administrative4
order against the Tennessee Valley Authority (TVA), alleging similar violations.
Enacted as part of the 1977 CAA Amendments and modestly modified in the

1990 CAA Amendments, NSR is designed to ensure that newly constructed facilities,

or substantially modified existing facilities, do not result in violation of applicable air
quality standards. The NSR provisions establish permit requirements for constructing
new major pollution sources as well as for making major modifications to existing
major pollution sources. The specific requirements dictated by NSR depend on where
the facility is sited. In attainment areas – those meeting the National Ambient Air
Quality Standard (NAAQS) for a pollutant – the governing requirements are the
Prevention of Significant Deterioration (PSD) provisions of the CAA. In non-
attainment areas – those not in compliance with a NAAQS for one or more pollutant
– the governing requirements are covered by non-attainment provisions. Some
facilities can be subject to a combination of both, if the area is in attainment for some

1 The lawsuits also allege violation of the major modification provisions of section 111,
involving the New Source Performance Standards (NSPS). Copies of the lawsuits can be
found at EPA’s website:
2 New York and Connecticut v. American Electric Power Co., S.D. Ohio, No. C2-99-1182
(November 29, 1999).
3 The environmental groups involved are the Natural Resources Defense Council (NRDC),
Citizens Action Coalition of Indiana, the Clean Air Council of Pennsylvania, the Hoosier
Environmental Council, the Izaak Walton League, the Ohio Citizen Action, the Ohio Public
Interest Research Group, Ohio Valley Environmental Coalition, the Sierra Club, U.S. Public
Interest Research Group, and the West Virginia Environmental Council.
4 In re TVA, EPA, No. CAA-2000-04-0008 (November 3, 1999).

criteria pollutants,5 but not others. Meeting these permitting requirements can be a
long and complex process, depending on the specific project, the pollutants involved,
and the specific state and federal regulatory authorities involved.6 In 1996, EPA
proposed changes to NSR to streamline it. However, the proposals have been subject
to considerable controversy, and a final rule has not yet been issued.7 These
complexities and controversies, particularly with respect to major modifications of
existing sources, become manifest in the enforcement suits filed by the Justice
Department for EPA, and in the responses to them.
The suits represent a continuing effort by EPA to reduce pollution from existing
sources, particularly coal-fired electric generating facilities. The primary pollutant of
concern has been nitrogen oxides (NOx), a criteria air pollutant that is also a
precursor to ozone (itself a criteria pollutant), acid rain, fine particulates, and regional
haze; other pollutants of concern include sulfur dioxide (SO2), a criteria air pollutant
and precursor to acid rain, fine particulates, and regional haze, and particulate matter
(also a criteria air pollutant). Efforts by EPA and other groups to reduce these
emissions have intensified recently both as a result of new regulatory proposals – to
increase the stringency of the ozone and particulate NAAQS8 and to reduce haze9
and as a result of the restructuring of the utility industry which some fear may result10
in increased emissions from existing plants.
EPA’s recent enforcement action raise several questions with respect to the NSR
and efforts to further control emissions from existing sources. Three of them are
discussed in this report: Why is EPA taking this action? Why use the NSR
provisions? How does the NSR interact with other EPA actions currently underway?

5 Pollutants for which EPA has set NAAQS are often called “criteria pollutants” after the
criteria documents EPA prepares for setting the standard. For background on NAAQS and
the criteria air pollutants and how the CAA is structured to ensure attainment of clean air, see
Environmental Laws: Summaries of Statutes Administered by the Environmental Protection
Agency, CRS Report RL30022, pp. 7-13; and John E. Blodgett, Larry B. Parker, and James
E. McCarthy, Air Quality Standards: The Decisionmaking Process, CRS Report 97-722
ENR (June 24, 1998).
6 Many of the activities under the CAA, including many requirements specifically involving
NSR, either reside with or can be and have been delegated to states (which can include
territories, Indian tribal governments, and the District of Columbia). In essentially all cases,
EPA can act in lieu of states to which authorities have not been delegated, or whenever states
fail to take required actions.
7 61 Federal Register 38249-38344 (July 23, 1996).
8 See John E. Blodgett and Larry B. Parker, Air Quality Standards: EPA’s Final Ozone and
Particulate Matter Standards, CRS Report 97-721 ENR.
9 See James E. McCarthy, John E. Blodgett, and Larry B. Parker, Regional Haze: EPA’s
Proposal to Improve Visibility in National Parks and Wilderness Areas, CRS Report 97-

1010 ENR.

10 For more information on air quality and electricity restructuring, see: Larry Parker and John
Blodgett, Electricity Restructuring: The Implications for Air Quality, CRS Report 98-615
ENR (July 16, 1999).

Why EPA’s Enforcement Action?
“The EPA believes that there should be a significantly higher rate of NSR
permits authorizing the construction of new or expanded facilities than is
currently taking place.”11
The CAA requires a preconstruction review of, and a permit for, almost any
major modification of an air polluting source or any major new source. Assuming that
a state has an EPA-approved State Implementation Plan (SIP), which spells out the
state’s strategy for complying with NAAQS, regulatory approval to construct the new
source or modify the existing source must come from the appropriate state agency.
To receive this “Permit to Construct,” the applicant must show that the proposed
source or modification will not result in, or exacerbate, violation of a NAAQS, either
locally or downwind. In addition, applicants must show that their proposal will not
result in local or downwind exceedences of increments of increased air pollution
allowed under Prevention of Significant Deterioration (PSD) regulations in areas
complying with NAAQS. It is this preconstruction review process that is called New12
Source Review (NSR).
The NSR process is triggered for any new source that potentially could emit 100
tons annually (or less in some areas13) of any criteria air pollutant, and by any
modification that will cause a significant increase in annual emissions (regulatorily
defined as 40 tons for SO2 and NOx14). The specific NSR requirements for affected
sources depend on whether the sources involved are subject to the PSD or the non-
attainment provisions.15 If covered by PSD, the source is required to install Best
Available Control Technology (BACT), which is determined on a case-by-case basis,
and which cannot be less stringent than the federally determined New Source
Performance Standard (NSPS) for that pollutant. If covered by non-attainment
provisions, the source is required to install Lowest Achievable Emission Rate (LAER)16
and obtain applicable offsets for that particular area. Like BACT, LAER must not
be less stringent than the federal NSPS.

11 Steven A. Herman, Assistant Administrator for Enforcement and Compliance Assurance,
EPA. Letter to Chairman Inhofe (March 26, 1999), p. 2.
12 Some restrict the term “NSR” to the review process in a non-attainment area only; the
review process in an attainment area being called “PSD pre-construction review”. This paper
will use the term to indicate both. In addition, new and modified sources must meet New
Source Performance Standards (NSPS).
13 Title I of the 1990 CAA Amendments reduced the threshold definition of a major source
for areas of the country substantially out of compliance with ambient air quality standards for
ozone, carbon monoxide, and particulate matter.
14 40 CFR 52.24
15 It should be noted that a source can be affected by the PSD requirements for one pollutant,
and by the non-attainment requirements for another pollutant.
16 For details on these provisions and their requirements, see Clean Air Act, Part C –
Prevention of Significant Deterioration of Air Quality, sections 160-169; and, Part D – Plan
Requirements for Nonattainment Areas, sections 171-178.

Despite the breadth of coverage suggested by NSR, few preconstruction permits
have been issued to coal-fired power plants over the program’s history.17 If this
situation is examined from the perspective of new construction, the lack of permits
is not too surprising. Current U.S. coal-fired electric generating capacity is about
300,000 megawatts (MW), and has remained steady at that level for the last ten
years.18 As indicated in Table 1, additions to coal-fired capacity, while greater than
retirements, have not been significant. Capacity that began operation between 1989-

1998 constitutes about 3% of total current coal-fired capacity.

Table 1. Capacity Additions and Retirements: 1989-1998
(net summer capacity)
CapacityRetirements (MW)
YearAdditions (MW)
Total 1989-19989,5072,063
Source: Energy Information Administration, Inventory of Power Plants in the
United States, various years.
At first glance, emissions trends for electric utilities appear to confirm the
generally static situation with respect to coal-fired capacity. As shown in Figure 1,
emissions of NOx from coal-fired electric generating facilities have remained constant
over the last ten years. In contrast, SO2 emission trends indicate a significant drop in
emissions in 1995, the first year of the acid rain control program under title IV of the
1990 CAA Amendments. Under title IV, 111 powerplants were required to reduce
their emissions by about 30% from baseline levels specified in the title. In addition,

17 Letter to Chairman Inhofe, p. 2.
18 Data represent net summer capacity. Energy Information Administration, Annual Energy
Review 1998, DOE/EIA-0384(98) (July 1999), p. 219.

many units were required to install Low-NOx burners to reduce NOx emissions.19
According to EPA, the affected phase 1 units emitted about 10 million tons of SO2
in 1990, a number reduced to 5.3 million tons in 1995. Likewise, the NOx provisions
reduced emissions from these plants in 1996 by about 0.4 million tons from their 1990
levels. 20
However, comparing the reductions achieved under title IV with the trends
indicated in figure 1 shows that some of the title IV reductions have been offset by
increases in emissions from other plants: specifically, while title IV caused a 4.7
million ton SO2 reduction by 1995, emissions data indicates that overall emissions
only went down about 3.6 million tons, as shown by Figure 1; likewise, while title IV
led to a 0.4 million ton reduction in NOx by 1996, figure 1 reveals an overall
reduction of only about 0.1 million tons. This slippage is not surprising as phase 1
does not cover all coal-fired facilities, but it does imply that within the relatively flat
trends for coal-fired capacity and for air emissions, there are some sources of
increasing emissions.

Figure 1. SO2 and NOx Emissions from Coal-fired Electric
Generating Facilities
6 NOx
1989 1990 1991 1992 1993 1994 1995 1996 1997
19 Because of regulatory delays, the NOx requirement was not implemented until 1996.
20 U.S. EPA, Acid Rain Program: Technology and Innovation (May 1996); EPA, 1996
Compliance Report: Acid Rain Program (June 1997). Compliance reports for 1997 and

1998 are also available.

The dynamism in coal-fired generation is the continuing operation of existing
coal-fired facilities. As indicated by Figure 2, despite the general lack of new plant
construction, coal-fired electricity generation and related coal consumption has
continued to climb over the past decade. This increase results from utility efforts to
optimize performance of existing coal-fired facilities despite their increasing age.
Historically, as plants age they become less reliable and less efficient, leading utilities
to derate them and move them from baseload to cycling duties. However, as indicated
in Table 2, contrary to historical expectations, utilization of coal-fired capacity has
increased over the past decade, and the efficiency of units has not decreased.
This suggests that the economics of plant maintenance has changed
fundamentally over the past decade or so, making it economic for utilities to spend
more to maintain their coal-fired capacity than was the case previously. The question
the EPA lawsuits raise is whether these efforts to maintain or even to expand
generation from existing coal-fired facilities – compared to the degradation of
capacity that would be expected – represent “routine maintenance” or a “major
modification” of those facilities under the CAA. If such maintenance does represent
a “major modification,” then the CAA would require the installation of pollution
control equipment; “routine maintenance,” on the other hand, would not trigger the
requirement for new controls. With the restructuring of the electric utility industry

placing ever-greater focus on plant economics, this issue is likely to intensify in the
future. 21
Table 2. Coal-fired Generation Capacity Factors and Heat Rates: 1989-
(based on net summer capacity)
YearCapacity FactorHeat Rate
Source: Net summer capacity, net generation, coal consumption data from Energy
Information Administration, Annual Energy Review 1998 (July 1999).
Why NSR?
“There are signs that many utilities will not use the term “life
extension” to describe their spending on old power plants, even though
extended life is one of the major goals of the spending program.
“The reason for the aversion to the term lies in the 1970 Clean Air
Act. That federal law requires all power plants constructed after August,
1971 to restrict emissions of air pollutants such as sulfur dioxide. Plants
built prior to 1971 are exempt, which includes most of the early candidates
for life extensions. The problem is that the law also says that
grandfathered plants can lose their exemption if they are “modified” or
“reconstructed” in a major way and emission of proscribed pollutants are
increased.” 22

21 See: Larry Parker and John Blodgett, Electricity Restructuring: The Implications for Air
Quality, CRS Report 98-615 ENR (July 16, 1999).
22 Robert Smock, Editor, “Power Plant Life Extension Trend Takes New Directions,” Power
Engineering (February 1989), p. 21.

Currently, there is considerable regulatory activity (and judicial response) with
respect to electricity generation and air quality. Regulatory activities include the
Ozone Transport Rule (also called the NOx SIP Call), several Section 126 Petitions,
a Regional Haze Rule, new NAAQS for Fine Particulates and a revised Ozone
NAAQS, a new NSPS for NOx for electric utilities, initiatives by the Ozone Transport
Commission, and several legislative initiatives. Why add NSR enforcement to the list?
As the primary permitting vehicle for stationary sources, NSR is also a primary
enforcement tool. Thus, the Department of Justice/EPA lawsuits under NSR
represent an attempt to enforce existing laws and regulations, not add new ones. In
this sense, the NSR actions are fundamentally different from the activities listed
above. Indeed, a different office within EPA handles enforcement as opposed to
regulatory development. EPA has explicitly stated that the enforcement action under
NSR is not linked or tied with the regulatory activities listed above.23 According to
EPA, the action results from an examination of coal-fired utilities that commenced in24
late 1996.
As an enforcement tool, NSR is attractive because of the remedial actions EPA
can seek the court to impose on affected utilities. Besides substantial monetary
penalties, EPA can ask the court to require an affected source that violates NSR to
install the most recent BACT at its facilities. For SO2, this would involve meeting the
percentage reduction requirement promulgated by EPA in 1978. This requirement
generally involves installing flue-gas desulfurization (FGD) units (commonly called
scrubbers) on coal-fired utility boilers. Likewise, EPA recently promulgated a new
NOx NSPS for new utility boilers; if this were imposed on existing boilers that EPA
alleges have been modified, it could require them to install selective catalytic
reduction (SCR) units in order to comply. These control devices would reduce
emissions by about 70-90% depending on the specific case.
For EPA, these controls could lead to substantial reductions in SO2 and NOx
emissions. Noting that the powerplants named in the lawsuits would emit 2.2 million
tons of SO2 and 0.66 million tons of NOx in 2000, Administrator Browner stated:
Controlling the sulfur dioxide and nitrogen oxides from these plants could
lead to an 85 to 95 percent reduction respectively in these pollutants.
Taken together, these reductions would be the equivalent of taking 26
million cars off the road and reduce acid rain by an estimated 15 percent.25
Besides the potential payoff in terms of emissions reductions, the focus on NSR
reflects a belief that continuing operation of aging coal-fired plants is not a short-term
event, but a wave of the future under electric utility restructuring. As indicated in a
previous CRS analysis, extending the life of existing coal-fired capacity is a very cost-

23 Steven A. Merman, Letter to Chairman Inhofe (March 26, 1999), p. 3.
24 Steven A. Merman, Letter to Chairman Inhofe, Answer to Questions #5 and #6 (March

26, 1999), p. 14.

25 Carol M. Browner, Administrator, EPA, “Remarks Prepared for Delivery,” Clean Air
Enforcement Press Conference, (Washington, D.C.: November 3, 1999), p. 2.

effective alternative to constructing new capacity.26 The more competitive generating
market of a restructured industry could further encourage the existing trend to
renovate existing coal-fired capacity. One means of mitigating the environmental
effects of such a trend would be to require BACT on such facilities through NSR.
Why Not Earlier?
“The agency [EPA] is bringing legal actions against the utilities for
the very maintenance activities it has approved implicitly for nearly three
The trend toward renovating existing coal-fired capacity is not new, but an28
increasing trend in the industry for almost two decades. Likewise, the potential
emissions impact of such life extension efforts were also recognized early in this time29
period. However, it wasn’t until October 1988 that EPA made a serious attempt to
enforce NSR on existing coal-fired electric generating facilities.
This apparent difficulty in enforcing NSR for existing coal-fired facilities could
be ascribed to several causes, including EPA budget constraints and priorities.
However, the primary substantive difficulty with NSR has been the definition of a
major modification. The CAA first used the term “modification” in the 1970 CAA
Amendments with respect to the NSPS program. The Act defined modification as
“any physical change in, or change in the method of operation of, a stationary source
which increases the amount of any air pollutant emitted by such source or which

26 Larry Parker and John Blodgett, Electricity Restructuring: The Implications for Air
Quality, CRS Report 98-615 (ENR, July 16, 1999).
27 Edison Electric Institute, Straight Talk About Electric Utilities and New Source Review
(January 2000), p. 11.
28 As CRS noted in 1985: “However, over the last five years, it has become apparent that the
actual lifespan of powerplants is not set, but relatively elastic. With new powerplants costing
over $1000 a Kilowatt to construct, utilities have powerful incentives to avoid construction
and to rehabilitate older facilities instead. This incentive is partially reinforced by
environmental regulations which permit facilities to be rehabilitated up to 50 percent of their
assessed value without being required to install NSPS (i.e., scrubbers). With such
rehabilitation estimated at about $500 a kilowatt (although that number can vary
substantially, operating existing facilities for upwards of 60 years seems to be a developing
trend.” Larry B. Parker, John E. Blodgett, Alvin Kaufman, and Donald Dulchinos, The Clean
Air Act and Proposed Acid Rain Legislation: Can We Get There from Here? CRS Report

85-50 ENR (February 21, 1985), p. 46.

29 See U.S. Congress, Office of Technology Assessment, Acid Rain and Transported Air
Pollutants: Implications for Public Policy, OTA-O-204 (June 1984), pp. 61-62: Larry B.
Parker, John E. Blodgett, Alvin Kaufman, and Donald Dulchinos, The Clean Air Act and
Proposed Acid Rain Legislation: Can We Get There from Here? CRS Report 85-50 ENR
(February 21, 1985), pp. 49-59; Larry B. Parker and Alvin Kaufman, Clean Coal
Technology and Acid Rain Control: Birds of a Feather? CRS Report 85-207 ENR (October

23, 1985), pp. 21-40.

results in the emission of any air pollutant not previously emitted.”30 In subsequent
regulations, EPA defined modification as any physical or operational change that
resulted in any increase in the maximum hourly emission rate (kilograms per hour) of31
any controlled air pollutant. In addition, EPA regulations stated that any
replacement of existing components that exceeded 50% of the fixed capital costs of
building a new facility placed the plant under NSPS, regardless of any change in
emissions.32 With the advent of NSR in 1977, a different approach to defining
modification was appropriate as the focus was shifted from enforcing NSPS emission
rates to compliance with NAAQS and PSD. In promulgating regulations for the PSD
and non-attainment programs, EPA defined “significant” increase in emissions in
terms of tons per year emitted by a major source. For sulfur dioxide and nitrogen33
oxides, the threshold is 40 tons. Facilities that exceed that threshold are subject to
Enforcing these thresholds has been more difficult than their apparent clarity
would suggest. EPA’s thresholds for the NSPS program generally represent no
practical constraint on life extension efforts by utilities. Most life extension efforts
improve the availability and reliability of generating units, not their capacity to
generate. Thus, their maximum hourly emission rate would not change. Likewise,
most life extension efforts cost far less than the 50% asset value threshold.
NSR review has a far more sensitive trigger – a tonnage increase in pollutant
output. Because life extension does improve availability and reliability, it is likely to
increase emissions over levels emitted before the life extension activities were
undertaken. But how does one measure the change? What are the baselines34?
These issues came to a head in the late 1980s when EPA decided to enforce NSR
against facilities undergoing life extension efforts. In 1988, the EPA ruled that a life
extension project by Wisconsin Electric Power Company (WEPCO) met the trigger
for NSR because of the potential for increased emissions from the facilities after the
project compared with actual emissions from the facilities before the project. After

30 CAA, section 111(a)(4), 42 USC 7411(a)(4).
31 40 CFR 60.14(a) (1975).
32 40 CFR 60.15 (1975).
33 For PSD, see 40 CFR 52.21(b)(23)(i); for nonattainment, see 40 CFR 52.24(f)(10)
34 Defining the baseline has been a key issue. Every powerplant has what is called
“nameplate” capacity, which indicates its theoretical size; but the actual output is defined by
its “operating capacity,” which is determined by the engineering and operational details of the
individual plant. Moreover, from an engineering perspective, the operating capacity declines
over time as a result of boiler deterioration, pipe clogging, and other predictable changes due
to use. The issue is, then, what level of capacity restored by renovations trigger NSR: only
renovations that increase capacity beyond the facility’s nameplate capacity? those that
increase capacity beyond the original operating capacity? those that increase capacity above
an engineering-defined capacity that projects declines over time? Or those that increase
potential emissions above the actual emissions before the modification?

considerable litigation35 and congressional debate, EPA modified this “actual to
potential” emissions trigger with respect to electric utilities in 1992.36 The new “test”
to determine the applicability of NSR compares a facility’s actual emissions before the
modification with its projected actual emissions after the modification (“actual to
future actual”). Specifically, “actual emissions” equal the facility’s average emission
rate during a 2-year period out of the preceding 5 years before the proposed change.
“Future actual” is the product of the facility’s projected emission rate after the change
and its projected actual utilization based on historical and other data. These are the
current NSR regulations for utility plants.
Utilities also responded to EPA’s interest in their life extension activities. In
defining a modification under NSR, EPA excludes maintenance, repair, and
replacement that it considers “routine.” In addition, increases in production rates that
do not involve capital expenditures do not constitute a modification. Responding to
this situation, utilities began to spread out their life extension efforts in an attempt to
make them fit into their routine maintenance schedules. Indeed, the term “life
extension” has fallen out of the professional literature, replaced with terms like
capital improvement, performance improvement and unit integrity, condition
assessment, life operation management, review of continued operating requirements,37
and asset management. The commonly used term currently is rehabilitation
program.38 By spreading out the life extension efforts and integrating them into
facilities’ operation and maintenance schedules, the distinction between
“modification” and “routine maintenance” is effectively blurred, and arguably,
What has EPA done?
“We expect no early resolution.”39
The Justice Department’s lawsuits (on behalf of EPA) represent an attempt to
enforce the New Source Review requirements of the Clean Air Act with respect to
(1) instances of “new construction” of coal-fired capacity by investor-owned utilities
and (2) instances in which changing investor-owned utility strategies for managing
existing coal-fired facilities become “modifications” that in EPA’s view trigger the
applicability of the WEPCO rules. In addition, EPA has issued a “Compliance Order”
concerning instances of modifications by the Tennessee Valley Authority of its coal-
fired power plants that EPA believes should have triggered new source reviews.

35 Wisconsin Electric Power Company v. Reilly, 893 F.2d 901 (7th Cir. 1990)
36 57 Federal Register 32314-32339 (July 21, 1992).
37 Robert G. Presnak and Bock H. Yee, “Life Extension: The Benefits are Real,” Power
Engineering (December 1993), pp. 25-27
38 For a current view of managing existing facilities, see Jason Makansi, “Rehab: Get the
Most from the Existing Asset Base,” Power (June 1999), pp. 30-40.
39 Statement of David Flanney, Midwest Ozone Group, reported in “Utility Suit to Drag in

2000,” Air Daily (January 3, 2000), p. 1.

Tables 3, 4 and 5 identify the facilities the Justice Department/EPA have cited as
violating NSR requirements and briefly note some of the kinds of rehabilitations that
EPA views as triggering the “modification” criterion for NSR. These tables are based
on the original complaints (see footnotes 1 and 4). The Justice Department/EPA has
said that these complaints may be modified (typically to add new allegations) and that
additional complaints may be issued as the agency’s investigations proceed.40
Table 3. Alleged New Construction Cited in DOJ/EPA Complaints
FacilityCharged with failure toCharged with failure to
obtain a PSD permit andcomply with NSPS Sub-
to apply BACTpart Da, e.g., to conduct
a performance test
Alabama Power &XX
Southern Company
Services, Inc., Miller
Unit 3
Alabama Power &XX
Southern Company
Services, Inc., Miller
Unit 4
Georgia Power &XX
Southern Company
Services, Inc., Scherer
Unit 3
Georgia Power &XX

Southern Company
Services, Inc., Scherer
Unit 4
40 E.g., see “Justice Department Amending Complaints in NSR Suit,” Air Daily, vol. 7, no.

17 (Jan. 25, 2000), 1.

Table 4. Alleged “Modifications” Cited in DOJ/EPA Complaints
FacilityCharged with failure toCharged with failure to
obtain a PSD permit andcomply with NSPS Sub-
to apply BACTpart Da, e.g., to conduct
a performance test
Alabama Power andX (specifically citing “a
Southern Companynew design spiral fin
Services, Inc., Barryeconomizer in Unit 5”)
Alabama Power andX (specifically citing “(1)
Southern Companya balance draft
Services, Inc., Gorgasconversion in 1985; and
(2) installation of a new
design spiral fin
economizer in 1994 and
a major upgrade of air
heaters in 1994”)
Georgia Power andX (specifically citing a
Southern Company“new economizer in Unit
Services, Inc., Bowen2”)
AEP Service Corp. andX (specifically citing 5
Indiana Michigan Power,sets of modifications,
Tanners Creek Plantincluding ones involving
Units 3, 4, and 5)
AEP Service Corp. andX (specifically citing 8X (specifically citing 5
Ohio Power,sets of modifications,modifications, including
Muskingum River Plantwhich involve Units 1ones involving Units 3,
through 5)4, and 5)
AEP Service Corp. andX (specifically citing 5
Ohio Power, Mitchellmodifications, involving
PlantUnits 1 and/or 2)
AEP Service Corp. andX (specifically citing 7X (specifically citing 5
Ohio Power, Cardinalmodifications, involvingmodifications, involving
PlantUnits 1 and/or 2)Units 1 and/or 2)
AEP Service Corp.,X (specifically citing 5
Appalachian Power,modifications, including
Ohio Power, and/orones involving Units 1
Central, Philip Spornthrough 5)


FacilityCharged with failure toCharged with failure to
obtain a PSD permit andcomply with NSPS Sub-
to apply BACTpart Da, e.g., to conduct
a performance test
PSI and/or Cinergy,X (specifically citing 5X (specifically citing the
Cayuga Plantmodifications, includingreplacement of
ones involving Units 1economizers on Units 1
and/or 2)and 2)
CG&E and/or Cinergy,X (specifically citing 5
Beckjord Plantmodifications, including
ones involving Units 1
through 5)
Southern Indiana GasX (specifically citing 4X (specifically citing
and Electric Company,modifications, involving“replacement activities”
Culley StationUnits 1, 2, and 3)at Unit 3)
Illinois Power Company,X (specifically citing 7X (specifically citing
Baldwin Power Stationmodifications, involving“replacement activities”
Units 1, 2, and/or 3)at Units 1 and 2)
Ohio Edison Company,X (specifically citing 11X (specifically citing
Pennsylvania Powermodifications, one orreplacement of Unit 6's
Company, subsidiaries ofmore involving each ofburners in 1992 and of
FIRSTENERGY Corp.,Units 1 through 7)its coal pulverizers in
Sammis Station1998)
Tampa ElectricX (specifically citing
Company, Big Bendreplacement of steam
drum internals in Unit 1
in 1994 and in Unit 2 in

1991; and the waterwall,

and high temperature re-
heater in Unit 2 in 1994)
Tampa ElectricX (specifically citing
Company, Gannon1996 furnace floor
replacement in Unit 3
and 1994 cyclone
replacement in Unit 4)

Table 5. Tennessee Valley Authority: Compliance Order
TVA FacilityCharged with failure toCharged with failure to
obtain a PSD permitcomply with NSPS Sub-
part Da, e.g., to conduct
a performance test
Paradise, Units 1, 2, & 3X (specifically citingX, Paradise Unit 3
replacement of the
cyclones, lower furnace
walls, and floor in 1985)
Colbert Unit 5X (specifically citing re-X
habilitation and modifi-
cation of boiler, turbine,
and controls in 1982)
Widows Creek Unit 5X (specifically citing the
replacement of the
reheater and secondary
superheater crossovers
and elements in 1989)
Allen Unit 3X (specifically citing the
replacement of the
reheater in 1991-2)
John Sevier Unit 3X (specifically citing the
replacement of all
waterwall and burner
wall tubes, and of
superheater platen
elements in 1988)
Cumberland Units 1 & 2X (specifically citing the
replacement of front and
rear secondary super-
heater outlet headers and
of the inlet terminal
tubes and main steam
piping tee in 1993)
Bull Run Unit 1X (specifically citing the
replacement of the
secondary superheater
outlet pendant elements
and of all economizer
elements in the “A” and
“B” furnace in 1987)

Basically, each of the complaints against investor-owned facilities seeks
injunctive relief and civil penalties of up to $25,000 per day of violation. The
injunctive relief typically calls for the defendants to comply in the future with all CAA
requirements; and to remedy any past NSR violations by installing BACT as
appropriate, to apply for permits, and to audit operations to assure compliance with
all NSR requirements. For TVA, EPA’s compliance order asks TVA to develop a
schedule for meeting all applicable requirements affecting the facilities specified, to
audit all its coal-fired power plants to determine NSR compliance and to develop a
schedule for remedying any noncompliance discovered during the audit, and to retire
SO2 allowances equal to any SO2 reductions that result from complying with the
The industry’s response to EPA’s enforcement action has focused on an
exemption under NSR for “routine maintenance.” NSR regulations state that a major
modification does not include “routine maintenance, repair, and replacement.”41 The
industry argues that although EPA has never explicitly defined this phase, EPA has
over the past 20 years not objected to utilities engaging in those very activities that
are now being cited in the complaints as triggering NSR. Industry further asserts that
these activities were well-publicized in journal articles and government reports.42 In
effect, industry is charging EPA with changing the rules in the middle of the game.
On the substance of the issue, the industry argues that the activities cited as violating
NSR are nothing more than those necessary to meet its responsibilities to provide for
the reliable, safe, and efficient operation of its plants through proper maintenance
practices – analogous to replacing worn tires on a car. That these activities might
serve to extend the life of the powerplants is coincidental, and thus should not trigger
the major modification criterion of NSR.
What Could the NSR Enforcement Action Accomplish in
Terms of Emission Reductions?
“Emissions cannot exceed the cap.
“Emissions won’t be below the cap either – allowances not used at one
source will be emitted somewhere else.
“If you still apply NSR to sources under the cap, other sources will
produce the pollution avoided by the source subject to NSR. This will all
occur at a higher cost.”43
In announcing the NSR suits, the EPA Administrator states that “controlling the
sulfur dioxide and nitrogen oxides from these plants could lead to an 85 to 95 percent

41 40 CFR 52.21(b)(2)(iii)(a)
42 For a review of industry’s position, see Edison Electric Institute, Straight Talk About
Electric Utilities and New Source Review, Edison Electric Institute (January, 2000).
43 Environmental Protection Agency, OAQPS, “An Emissions Cap Alternative to New Source
Review” (September 27, 1999), p. 8.

reduction respectively in these pollutants.”44 Based on her statement, this would
reduce SO2 emissions by 1.87 million tons and NOx emissions by 0.63 million tons.
(Compared to the slippage of title IV reductions noted earlier, these cuts in emissions
would more than compensate for the erosion in the original title IV reductions: for
SO2, by about 50% more than the slippage, and for NOx, by about double the
slippage.) Also, given the widespread nature of life extension efforts, it is reasonable
to assume that further reductions would be achieved as other utilities either installed
BACT or retired their offending facilities. Thus, at first glance, it would appear that
very substantial emission reductions could be achieved by EPA’s NSR action.
However, the CAA is a complex piece of legislation built up over time. In the
case of SO2 any reduction achieved under NSR would interact with reduction
requirements under title IV – a SO2 reduction program designed with different
premises than NSR. Specifically, title IV limits total SO2 emissions from utilities to

8.9 million tons beginning in the year 2000, with interim reductions required in 1995.

The cap is enforced through tonnage limitations at individual existing utility plants and
by an emission offset requirement for new facilities. SO2 emissions from most existing
sources are capped at a specified emission rate times a historical (1985-1987) average
fuel consumption level. Thus the tonnage limitation is based on preset and historical
data, not regulatory limits. To implement the program, title IV created a
comprehensive emissions allowance system. An allowance is a limited authorization
to emit a ton of SO2 during or after a specified year. Issued by EPA, allowances are
allocated to existing facilities in accordance with the emission rate/fuel consumption
formulas detailed in the law. Such allowances may be used at the plant they are
allocated to, or be traded or banked for future use or sale. The program has been
very successful with 100% compliance.
This 1990 CAA Amendments program does not integrate well with the 1977
CAA Amendments NSR program. Except that they both focus on existing facilities
and SO2, they have little in common. The NSR is concerned with modifications at
existing facilities and installation of BACT. Title IV doesn’t address whether existing
facilities continue operation or not, or whether a specific facility installs BACT or not;
compliance with the cap is the determining criterion. NSR is an enforcement
mechanism to assure compliance with individual plant standards; title IV is a program
to reduce aggregate SO2 emissions by permitting utilities considerable flexibility in
determining appropriate compliance strategies.
The current SO2 NSPS, the “floor” for any BACT or LAER determination, is a
percentage reduction requirement that reduces SO2 emissions by 70%-90%,
depending on the coal burned. However, the allocations under title IV for existing
coal-fired facilities is 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,
therefore, have excess allowances available for sale or to bank for future sale.
Because of this, any reductions achieved because of NSR enforcement could be
rendered moot by title IV, if the affected plant subsequently sold its SO2 reduction to

44 Carol M. Browner, Administrator, Remarks Prepared for Delivery, Clean Air Enforcement
Press Conference (Washington, D.C.: November 3, 1999).

some other facility not covered by a NSR action.45 Except for any TVA reductions,
the net result would be no reductions, at least theoretically. There is also no provision
in title IV for adjusting allowance allocations as a result of NSR enforcement. Indeed,
the law is explicit in that its allowance allocations are based on historical data, not on
any presumption of compliance with NSPS or SIP requirements. To avoid this
“allowance trap,” either Congress would have to change the law, or utilities would
have to voluntarily agree to surrender the excess allowances created by the NSR
The situation with potential NOx reduction is more complex. First, there is the
interaction of NSR and the NOx NSPS. Unlike the very stringent SO2 NSPS, the
NOx NSPS historically has not reflected the cutting edge in technology
development.46 Until the new standard was set in 1998, the NOx NSPS for coal-fired
facilities was 0.6/0.5 lb. of NOx per million Btu of heat input, depending on the type
of coal burned. This standard, set in 1979, could be met with fairly simple
combustion modifications or low-NOx burners, and did not require the installation of
pollution control devices such as selective catalytic reduction (SCR). Indeed, the
standard did not reflect the state of the art with respect to low-NOx burners.
In 1998, EPA promulgated a new NOx NSPS for coal-fired facilities of 0.15 lb.
of NOx per million Btu – a standard more in line with available technology.
However, this new standard was challenged in court. In September, 1999, the D.C.
Court of Appeals vacated the new NOx NSPS with respect to modified utility boilers,47
while upholding the NSPS with respect to new sources. By vacating the modified
standard, the NSPS for modified sources returns to the previous 1979 standard until
such time as EPA proposes a revised NSPS. As a result, the floor for determining
BACT or LAER for modified coal-fired sources is unclear at the current time. If the
floor is the current modified NSPS as set in 1979, reductions achieved by NSR
enforcement would be considerably less than anticipated by EPA. In contrast, if the
floor is the new 1998 NSPS, the reduction would be substantial, as suggested by
The confusion is exacerbated by the interaction of NSR and title IV. The NOx
reduction program under title IV differs substantially from the SO2 program. Like the
NSPS program, the title IV NOx program is based on emission rates, not tonnage
limitations. The difference is that the emission rate for the title IV program is set for
existing facilities to be achieved in 1995 or 2000 (depending on the facility),
regardless of whether the facility is modified or not. In addition, the rate limitation
for most boilers under title IV is 0.45 to 0.5 lb. per million Btu, or more stringent than
the 1979 NOx NSPS. Thus, you have the curious situation of some existing coal-
fired facilities having emission controls since 1995 that are more stringent than the

45 The TVA Compliance Order would require retirement of allowances equal to any SO2
reductions achieved as a result of the compliance order.
46 Larry Parker, Nitrogen Oxides and Electric Utilities: Revising the NSPS, CRS Report

96-737 ENR (October 13, 1998).

47 Lignite Energy Council v. Environmental Protection Agency, Order No. 98-1525, D.C.
Court of Appeals (September 21, 1999).

existing NSPS – a situation that continues currently with the court action on the
modified NSPS.
Surveying BACT determinations over the time period 1991-1995 sheds no light
on what BACT might be currently: data indicate permitted emission rates ranged from
0.15 to 0.5 lb. per million Btu.48 Thus, it is difficult at the current time to project what
any actual NOx reduction would be achieved by EPA’s NSR action.
What Are the Alternatives?
“EPA Offers Utilities Off-Ramp From NSR ‘Highway to Hell’”49
By seeking to enforce NSR requirements, EPA exploits an existing authority that
holds the potential for reducing emissions. EPA clearly believes that some sources
have been evading statutory requirements. However, according to some, the action
appears to raise the classic enforcement issue: will the outcome be reduced emissions,
or just costly litigation consuming agency and utility resources that might be more
effectively invested in other pollution controlling activities?
NSR was one approach that the Clean Air Act took to control emissions from
existing sources, but arguably more efficient and more effective methods to ensure
declining emissions from existing sources over time have been developed since NSR
provisions were added to the CAA in 1977. For example, title IV of the CAA,
enacted in 1990, explicitly and substantially reduces SO2 and NOx emissions from
existing utility plants. In fact, title IV reduced more SO2 emissions from coal-fired
electric generating facilities in its first year of implementation (1995) than NSR has
in its 20 years of existence. The “cap and trade” program has had 100% compliance
(indeed, substantial over-compliance); the implicit logic of EPA’s lawsuits suggests
NSR’s compliance has been near zero. The title IV program began without significant
delays (SO2 program on-time, NOx program 1 year late); the EPA lawsuits could take
years to resolve with uncertain results.
A first alternative is to expand and build on the success of title IV’s cap and
trade program. If the object of NSR enforcement is to reduce SO2 emissions from
coal-fired powerplants, the most straightforward alternative would be to lower the
cap on such emissions contained in title IV. The practical effect of the 1990 SO2 cap
was to reduce SO2 emissions from existing facilities to the level required by the 1971
NSPS. The effect on new sources was to reduce the NSPS to zero, as all emissions
now have to be offset. Lowering the existing cap by about two-thirds would achieve
roughly the same emission reductions as all existing powerplants meeting the 1978
NSPS, but utilities would have some flexibility in achieving such reductions.
Admittedly, utilities would get credit for shutdowns that they would not get under

48 Office of Air and Radiation, EPA, Analyzing Electric Power Generation under the CAAA
(July 1996).
49 Chris Holly, “EPA Offers Utilities Off-Ramp from NSR `Highway to Hell,’” The Energy
Daily (January 14, 2000), p. 1 [headline].

NSR enforcement; however, the administrative and cost advantages of the allowance
system might be considered worth it. In any case, it would require new legislation,
which could be a long drawn out process.
Similarly, a new “cap and trade” program for NOx would eliminate the
uncertainties involved in the NSR enforcement debate, and, potentially, in several
other EPA initiatives with respect to NOx emissions. Not surprisingly, EPA has been
strongly urging states to consider a regional cap and trade program in implementing
its currently stalled Ozone Transport Rule, and any possible compliance with Section
126 petitions. Indeed, EPA has gone so far as to make such a program a part of its
proposed Federal Implementation Plan (FIP) for states that do not submit adequate
SIPs under the OTR and its compliance plan for implementing approved Section 126
petitions. However, to implement a regionwide cap and trade program under the
stalled NOx SIP Call for NOx would require either extraordinary cooperation
between the states affected (because of the SIP process), or new EPA authority.
A second alternative to NSR is to focus on SO2 and NOx emissions through
other regulatory initiatives. There are several regulatory initiatives underway at
EPA that would reduce SO2 and/or NOx emissions in the future. Besides the
previously mentioned OTR and Section 126 petitions, EPA has promulgated a fine
particulate NAAQS and a regional haze rule. Both of these regulations will require
reductions in SO2 and NOx emissions as they are implemented. The problem with
them is that their implementation schedules are very long, with few reductions
occurring before the year 2010. Unlike the alternative of tightening the title IV SO2
cap and creating an NOx cap, these initiatives do not require further legislative
A third alternative to NSR would be to initiate controls on other pollutants
associated with coal-fired powerplants, such as mercury (Hg) and carbon
dioxide (CO2) – controls that would correlatively tend to reduce other emissions,
such as SO2 and NOx, as well. Currently, CO2 is not considered an air pollutant
under the CAA. Mercury is a hazardous air pollutant under the CAA, but regulation
of utility boilers is contingent upon an EPA determination of its appropriateness and
necessity.50 As a result, the process to begin controlling Hg emissions from electric
utility boilers has moved very slowly. EPA has argued that it has authority under the
CAA to regulate CO2; however, that opinion is very controversial.51 In lieu of a
potentially lengthy legal battle, any CO2 reductions in the near term would have to
result from either voluntary initiatives or through ratification of the Kyoto Protocol.
A final alternative is to reform NSR. One reform could be new legislation to
define “modification” in terms of plant age, not physical or operation change. For
example, the definition of modification could be altered to include any electric utility
generating facility that was 40 years or older, regardless of whether it had been

50 Clean Air Act, section 112(m)(1).
51 Jonathan Z. Cannon, General Counsel, EPA’s Authority to Regulate Pollutants Emitted
by Electric Power Generation Sources, Memorandum to Carol M. Browner (April 10, 1998).

“modified” or not. It would simplify the NSR trigger, but would required legislative
Another reform could emerge from a current EPA initiative. It is not surprising,
given the situation outlined above, that EPA has been considering reforms to NSR for
several years. One focus of that effort has been proposed “off-ramps” to NSR. One
off-ramp, called the “Clean Unit Exclusion,” would exclude existing units from the
complicated NSR applicability rules where they already have state-of-the-art pollution
control technology.52 This exclusion would recognize that NSR is unlikely to result
in significant emission reductions if units are already well-controlled. In the proposal,
a “clean unit” is defined as one that has installed BACT or LAER within the last 10
years. Such units could be modified in any fashion that would not increase the unit’s
maximum hourly emissions unit. However, how much of an improvement this is over
the current situation is debatable.
From EPA’s perspective, the problem with all the alternatives is their
contingency: they imply the need for legislation or for finalization of regulations,
which require time and which may be problematic. Of course, while EPA has the
existing authority to initiate its NSR suits, the outcome of the litigation is also
Conclusion: NSR – Ambiguous, Meaningless or Moot?
“EPA is embracing cap and trade programs for many pollutants.
“NSR is duplicative and counterproductive on top of a cap.
“Replacing NSR with a cap provides the same environmental protection53
with lower cost and greater environmental benefit.”
Much of the popular debate on NSR has focused on “grandfathered”
powerplants. One example from a 1998 report by a public interest group states:
The Clean Air Act of 1970, as amended in 1977 and 1990, contains a major
exemption that allows older coal-burning power plants to emit between 4
and 10 times the amount of pollution that new plants may emit under the
Clean Air Act. In part, this colossal loophole exists because industry
lobbyists argued successfully that its older plants would soon retire, and
that therefore it would be wasteful to require expensive retrofits to control
pollution from these plants. However, over 20 years later, many of these

52 61 Federal Register 38255 (July 23, 1996).
53 Environmental Protection Agency, “An Emissions Cap Alternative to New Source Review”
(September 27, 1999), p. 2.

same plants, built in the 30s, 40s, 50s and 60s, are still operating, largely
without environmental controls.54
The term “grandfathered powerplant” is a much used and little understood
concept employed in debate on emissions from existing powerplants. Specifically,
“grandfathered” is an ambiguous, and, in some cases, meaningless term generally used
to indicate whether a given powerplant is covered under Section 111 of the Clean Air
Act. Passed with the 1970 Clean Air Act Amendments, Section 111 requires the
EPA to promulgate regulations defining the minimum controls necessary for new
sources (including power plants) regardless of their location. Called New Source
Performance Standards (NSPS), they require major new sources constructed after
their promulgation to install the best system of continuous emission reduction which
has been adequately demonstrated according to EPA. Currently, there are NSPS
regulations for powerplants that cover three pollutants – sulfur dioxide (SO2),
nitrogen oxides (NOx) , and particulate matter. Typically, “grandfathered” refers to
those plants (usually coal-fired powerplants) that were constructed before the
effective dates of those NSPS regulations and, hence, not subject to them. NSPS
regulations for powerplants were first promulgated in 1971 and revised in 1979. The
NOx NSPS regulations for powerplants were revised again in 1998. Instead of NSPS
requirements, such “grandfathered” sources must meet emission rate limits established
by a State Implementation Plan (SIP).
Three aspects of the NSPS make the term “grandfathered” at best ambiguous,
and at worst, meaningless.
•Some pollutants of concern, such as carbon dioxide (CO2) and mercury (Hg) are
not criteria air pollutants, and, therefore, not covered by the NSPS for
powerplants at the current time. Hence, “grandfathered” is meaningless for
these pollutants as all powerplants (indeed, all major sources of these pollutants)
are “grandfathered.”
•EPA is required to review the NSPS every eight years, resulting in increased
stringency for covered pollutants as technology improves (and for
determinations of BACT and LAER). Therefore, what powerplants are
“grandfathered” is ambiguous as there is no set baseline. For example, the NSPS
for NOx was revised in 1998 to a stringency that only a couple of commercially
operating coal-fired powerplants currently met; by that standard, virtually all
coal-fired powerplants are “grandfathered” with respect to NOx emissions.
•Title IV of the 1990 Clean Air Act Amendments changed the regulation of
existing powerplants with respect to SO2 and NOx. In some cases, the
requirements under title IV for existing sources are more stringent than some of
the existing or previous NSPS. For example, under phase 1, some existing
“grandfathered” powerplants were required in 1995 to meet NOx standards
more stringent than then existing NSPS NOx requirements for new powerplants.
Likewise, under phase 2 of title IV, existing “grandfathered” coal-fired

54 United States Public Interest Research Group, Lethal Loophole, U.S. PIRG Education
Fund (June, 1998), p. 3.

powerplants are required in 2000 to meet SO2 standards that are essentially
equivalent to (if not more stringent than) the 1971 NSPS for SO2. The term
“grandfathered” is essentially meaningless under such circumstances.
If the focus of debate about “grandfathered” powerplants is NOx emissions, then
age of plant is not a relevant consideration – fuel source is. Coal-fired facilities,
regardless of age, are the relevant focus of any effort to increase NOx controls. If the
focus of debate about “grandfathered” powerplants is SO2 emissions, then the title IV
emissions cap is the relevant consideration. There, age was a consideration in
allocating emission credits; however, the relevant definition was not based on NSPS
compliance (or any other CAA compliance), but on whether the plant was
operational, under construction, or planned at the time of enactment. Indeed, the
NSPS for SO2 for new powerplants is in some ways moot – all new sources must
completely offset their emissions under the cap as they receive no allocation of
emission credits. The NSPS is effectively nil. Thus, if reducing SO2 from electric
generating facilities is the goal, shrinking the current cap on SO2 is the most logical
approach. Likewise, a cap on NOx emission is a logical extension for reducing NOx
emissions from electric generating facilities. Not coincidentally, EPA favors this
approach in addressing transported pollution programs in the Northeast, and the
agency has proposed state-by-state emissions caps.
The WEPCO decision precipitated public debate and congressional oversight,
and the DOJ/EPA actions on NSR may do likewise. Many of the same issues are
being raised: The suits depend on interpretations of the legislative intent of several
CAA provisions, especially with respect to modifications of existing sources. Also,
many alternatives for addressing NSR issues would require new legislation amending
the CAA, in order to bring consistency to the NSR provisions and to update the Clean
Air Act’s approach to regulation of the electric utility industry’s environmental effect
to reflect the knowledge gained by 30 years of CAA implementation.