Air Quality and Electricity: Enforcing New Source Review

Congressional research reportJan 31, 2000

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Air Quality and Electricity: Enforcing New

Source Review

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Specialist in Energy and Environmental Policy

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January 31, 2000

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RL30432

CRS Report for Congress

Prepared for Members and Committees of Congress

Air Quality and Electricity: Enforcing New Source Review

Summary

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.

Congressional Research Service

Air Quality and Electricity: Enforcing New Source Review

Contents

Why EPA’s Enforcement Action? ................................................................................................2

Why NSR?..................................................................................................................................6

Why Not Earlier? ........................................................................................................................7

What has EPA done? ...................................................................................................................9

What Could the NSR Enforcement Action Accomplish in Terms of Emission Reductions? ........ 13

What Are the Alternatives?........................................................................................................ 15

Conclusion: NSR – Ambiguous, Meaningless or Moot?............................................................. 17

Figures

Figure 1. SO2 and NOx Emissions from Coal-Fired Electric Generating Facilities ......................4

Figure 2. Coal-Fired Capacity, Generation, and Coal Consumption: 1989-1998 ...........................5

Tables

Table 1. Capacity Additions and Retirements: 1989-1998 ............................................................3

Table 2. Coal-fired Generation Capacity Factors and Heat Rates: 1989-1998...............................5

Table 3. Alleged New Construction Cited in DOJ/EPA Complaints............................................ 10

Table 4. Alleged “Modifications” Cited in DOJ/EPA Complaints ............................................... 10

Table 5. Tennessee Valley Authority: Compliance Order............................................................ 11

Contacts

Author Contact Information ...................................................................................................... 19

Congressional Research Service

Air Quality and Electricity: Enforcing New Source Review

n 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).1 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 administrative order

against the Tennessee Valley Authority (TVA), alleging similar violations.4

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 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 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: http://es.epa.gov/oeca/ore/aed/

coal/index.html.

New York and Connecticut v. American Electric Power Co., S.D. Ohio, No. C2-99-1182 (November 29, 1999).

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.

In re TVA, EPA, No. CAA-2000-04-0008 (November 3, 1999).

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 CRS Report 97-722, Air Quality Standards:

The Decisionmaking Process, by (name redacted) and (name redacted).

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.

61 Federal Register 38249-38344 (July 23, 1996).

Congressional Research Service

Air Quality and Electricity: Enforcing New Source Review

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 NAAQS 8 and to reduce haze9 –

and as a result of the restructuring of the utility industry which some fear may result in increased

emissions from existing plants.10

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?

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 New Source Review (NSR).12

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

See John E. Blodgett and Larry B. Parker, Air Quality Standards: EPA’s Final Ozone and Particulate Matter

Standards, CRS Report 97-721 ENR.

See (name redacted), 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.

For more information on air quality and electricity restructuring, see: (name redacted) and (name redacted),

Electricity

Restructuring: The Implications for Air Quality, CRS Report 98-615 ENR (July 16, 1999).

Steven A. Herman, Assistant Administrator for Enforcement and Compliance Assurance, EPA. Letter to Chairman

Inhofe (March 26, 1999), p. 2.

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).

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.

Congressional Research Service

Air Quality and Electricity: Enforcing New Source Review

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) and obtain applicable offsets for

that particular area.16 Like BACT, LAER must not be less stringent than the federal NSPS.

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 19891998 constitutes about 3% of total current coal-fired capacity.

Table 1. Capacity Additions and Retirements: 1989-1998

(net summer capacity)

Year

Capacity

Additions (MW)

Retirements (MW)

1989

1,967

379

1990

3,063

175

1991

792

377

1992

498

254

1993

104

1994

540

461

1995

1,036

1996

1,611

1997

293

1998

9,507

2,063

Total 1989-1998

Source: Energy Information Administration, Inventory of Power Plants in the United States, various years.

40 CFR 52.24

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.

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.

Letter to Chairman Inhofe, p. 2.

Data represent net summer capacity. Energy Information Administration, Annual Energy Review 1998, DOE/EIA0384(98) (July 1999), p. 219.

Congressional Research Service

Air Quality and Electricity: Enforcing New Source Review

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 coalfired 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, 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 coalfired capacity and for air emissions, there are some sources of increasing emissions.

Figure 1. SO2 and NOx Emissions from Coal-Fired Electric Generating Facilities

SO2

NOx

1989

1990

1991

1992

1993

1994

1995

1996

1997

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

Because of regulatory delays, the NOx requirement was not implemented until 1996.

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.

Congressional Research Service

Air Quality and Electricity: Enforcing New Source Review

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.

Figure 2. Coal-Fired Capacity, Generation, and Coal Consumption: 1989-1998

Coal consumption in quads

Net generation in trillion kilowatt-hours

Capacity in thousands of megawatts

2000

Coal Consumption

Net Generation

1500

1000

500

Coal-fired Capacity

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

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: 1989-1998

(based on net summer capacity)

Year

Capacity Factor

Heat Rate

1989

59.8%

10,290

See: (name redacted) and (name redacted),

Electricity Restructuring: The Implications for Air Quality, CRS Report 98-615

ENR (July 16, 1999).

Congressional Research Service

Air Quality and Electricity: Enforcing New Source Review

Year

Capacity Factor

Heat Rate

1990

59.4%

10,378

1991

59.1%

10,335

1992

59.9%

10,286

1993

62.2%

10,244

1994

62.0%

10,336

1995

62.8%

10,278

1996

65.6%

10,334

1997

67.6%

10,347

1998

68.7%

10,354

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

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

Robert Smock, Editor, “Power Plant Life Extension Trend Takes New Directions,” Power Engineering (February

1989), p. 21.

Steven A. Merman, Letter to Chairman Inhofe (March 26, 1999), p. 3.

Congressional Research Service

Air Quality and Electricity: Enforcing New Source Review

According to EPA, the action results from an examination of coal-fired utilities that commenced

in late 1996.24

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-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 decades.”27

The trend toward renovating existing coal-fired capacity is not new, but an increasing trend in the

industry for almost two decades. 28 Likewise, the potential emissions impact of such life extension

Steven A. Merman, Letter to Chairman Inhofe, Answer to Questions #5 and #6 (March 26, 1999), p. 14.

Carol M. Browner, Administrator, EPA, “Remarks Prepared for Delivery,” Clean Air Enforcement Press Conference,

(Washington, D.C.: November 3, 1999), p. 2.

(name redacted) and (name redacted),

Electricity Restructuring: The Implications for Air Quality, CRS Report 98-615

(ENR, July 16, 1999).

Edison Electric Institute, Straight Talk About Electric Utilities and New Source Review (January 2000), p. 11.

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

(continued...)

Congressional Research Service

Air Quality and Electricity: Enforcing New Source Review

efforts were also recognized early in this time period. 29 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

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) of any controlled air pollutant.31 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 nitrogen oxides, the threshold is 40 tons.33 Facilities that

exceed that threshold are subject to NSR.

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?

(...continued)

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.

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.

CAA, section 111(a)(4), 42 USC 7411(a)(4).

40 CFR 60.14(a) (1975).

40 CFR 60.15 (1975).

For PSD, see 40 CFR 52.21(b)(23)(i); for nonattainment, see 40 CFR 52.24(f)(10)

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

(continued...)

Congressional Research Service

Air Quality and Electricity: Enforcing New Source Review

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 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, and asset management. 37

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, eliminated.

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

(...continued)

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?

Wisconsin Electric Power Company v. Reilly, 893 F.2d 901 (7th Cir. 1990)

57 Federal Register 32314-32339 (July 21, 1992).

Robert G. Presnak and Bock H. Yee, “Life Extension: The Benefits are Real,” Power Engineering (December 1993),

pp. 25-27

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.

Statement of David Flanney, Midwest Ozone Group, reported in “Utility Suit to Drag in 2000,” Air Daily (January 3,

2000), p. 1.

Congressional Research Service

Air Quality and Electricity: Enforcing New Source Review

“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. 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

Charged with failure to

obtain a PSD permit and

to apply BACT

Facility

Charged with failure to

comply with NSPS

Sub-part Da, e.g., to conduct

a performance test

Alabama Power & Southern

Company Services, Inc.,

Miller Unit 3

Alabama Power & Southern

Company Services, Inc.,

Miller Unit 4

Georgia Power & Southern

Company Services, Inc.,

Scherer Unit 3

Georgia Power & Southern

Company Services, Inc.,

Scherer Unit 4

Table 4. Alleged “Modifications” Cited in DOJ/EPA Complaints

Facility

Charged with failure to

obtain a PSD permit and

to apply BACT

Alabama Power and Southern

Company Services, Inc., Barry

X (specifically citing “a new design

spiral fin economizer in Unit 5”)

Alabama Power and Southern

Company Services, Inc., Gorgas

X (specifically citing “(1) a balance

draft conversion 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 and Southern

Company Services, Inc., Bowen

X (specifically citing a “new

economizer in Unit 2”)

AEP Service Corp. and Indiana

Michigan Power, Tanners Creek

Plant

X (specifically citing 5 sets of

modifications, including ones involving

Units 3, 4, and 5)

Charged with failure to

comply with NSPS

Sub-part Da, e.g., to conduct

a performance test

E.g., see “Justice Department Amending Complaints in NSR Suit,” Air Daily, vol. 7, no. 17 (Jan. 25, 2000), 1.

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Air Quality and Electricity: Enforcing New Source Review

Charged with failure to

obtain a PSD permit and

to apply BACT

Charged with failure to

comply with NSPS

Sub-part Da, e.g., to conduct

a performance test

AEP Service Corp. and Ohio

Power, Muskingum River Plant

X (specifically citing 8 sets of

modifications, which involve Units 1

through 5)

X (specifically citing 5 modifications,

including ones involving Units 3, 4, and

AEP Service Corp. and Ohio

Power, Mitchell Plant

X (specifically citing 5 modifications,

involving Units 1 and/or 2)

AEP Service Corp. and Ohio

Power, Cardinal Plant

X (specifically citing 7 modifications,

involving Units 1 and/or 2)

AEP Service Corp., Appalachian

Power, Ohio Power, and/or

Central, Philip Sporn Plant

X (specifically citing 5 modifications,

including ones involving Units 1

through 5)

PSI and/or Cinergy, Cayuga Plant

X (specifically citing 5 modifications,

including ones involving Units 1 and/or

CG&E and/or Cinergy, Beckjord

Plant

X (specifically citing 5 modifications,

including ones involving Units 1

through 5)

Southern Indiana Gas and Electric

Company, Culley Station

X (specifically citing 4 modifications,

involving Units 1, 2, and 3)

X (specifically citing “replacement

activities” at Unit 3)

Illinois Power Company, Baldwin

Power Station

X (specifically citing 7 modifications,

involving Units 1, 2, and/or 3)

X (specifically citing “replacement

activities” at Units 1 and 2)

Ohio Edison Company,

Pennsylvania Power Company,

subsidiaries of FIRSTENERGY

Corp., Sammis Station

X (specifically citing 11 modifications,

one or more involving each of Units 1

through 7)

X (specifically citing replacement of

Unit 6’s burners in 1992 and of its coal

pulverizers in 1998)

Tampa Electric Company, Big

Bend

X (specifically citing replacement of

steam drum internals in Unit 1 in 1994

and in Unit 2 in 1991; and the

waterwall, and high temperature reheater in Unit 2 in 1994)

Tampa Electric Company, Gannon

X (specifically citing 1996 furnace floor

replacement in Unit 3 and 1994

cyclone replacement in Unit 4)

Facility

X (specifically citing 5 modifications,

involving Units 1 and/or 2)

X (specifically citing the replacement

of economizers on Units 1 and 2)

Table 5.Tennessee Valley Authority: Compliance Order

TVA Facility

Charged with failure to

obtain a PSD permit

Charged with failure to

comply with NSPS

Sub-part Da, e.g., to conduct

a performance test

Paradise, Units 1, 2, & 3

X (specifically citing replacement of

the cyclones, lower furnace walls, and

floor in 1985)

X, Paradise Unit 3

Colbert Unit 5

X (specifically citing re-habilitation and

modifi-cation of boiler, turbine, and

controls in 1982)

Congressional Research Service

Air Quality and Electricity: Enforcing New Source Review

TVA Facility

Charged with failure to

obtain a PSD permit

Widows Creek Unit 5

X (specifically citing the replacement

of the reheater and secondary

superheater crossovers and elements

in 1989)

Allen Unit 3

X (specifically citing the replacement

of the reheater in 1991-2)

John Sevier Unit 3

X (specifically citing the replacement

of all waterwall and burner wall tubes,

and of superheater platen elements in

1988)

Cumberland Units 1 & 2

X (specifically citing the replacement

of front and rear secondary superheater outlet headers and of the inlet

terminal tubes and main steam piping

tee in 1993)

Bull Run Unit 1

X (specifically citing the replacement

of the secondary superheater outlet

pendant elements and of all

economizer elements in the “A” and

“B” furnace in 1987)

Charged with failure to

comply with NSPS

Sub-part Da, e.g., to conduct

a performance test

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 order.

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

40 CFR 52.21(b)(2)(iii)(a)

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).

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Air Quality and Electricity: Enforcing New Source Review

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 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

Environmental Protection Agency, OAQPS, “An Emissions Cap Alternative to New Source Review” (September 27,

1999), p. 8.

Carol M. Browner, Administrator, Remarks Prepared for Delivery, Clean Air Enforcement Press Conference

(Washington, D.C.: November 3, 1999).

Congressional Research Service

Air Quality and Electricity: Enforcing New Source Review

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 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 action.

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, while upholding the NSPS with respect to new sources.47

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 EPA.

The TVA Compliance Order would require retirement of allowances equal to any SO2 reductions achieved as a result

of the compliance order.

(name redacted),

Nitrogen Oxides and Electric Utilities: Revising the NSPS, CRS Report 96-737 ENR (October 13,

1998).

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

21, 1999).

Congressional Research Service

Air Quality and Electricity: Enforcing New Source Review

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 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

Office of Air and Radiation, EPA, Analyzing Electric Power Generation under the CAAA (July 1996).

Chris Holly, “EPA Offers Utilities Off-Ramp from NSR `Highway to Hell,’” The Energy Daily (January 14, 2000),

p. 1 [headline].

Congressional Research Service

Air Quality and Electricity: Enforcing New Source Review

NSPS, but utilities would have some flexibility in achieving such reductions. Admittedly, utilities

would get credit for shutdowns that they would not get under 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 authority.

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 “modified” or not. It would simplify the

NSR trigger, but would required legislative action.

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

Clean Air Act, section 112(m)(1).

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).

Congressional Research Service

Air Quality and Electricity: Enforcing New Source Review

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 wellcontrolled. 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 problematic.

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 protection with lower cost and

greater environmental benefit.”53

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 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

61 Federal Register 38255 (July 23, 1996).

Environmental Protection Agency, “An Emissions Cap Alternative to New Source Review” (September 27, 1999), p.

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

Congressional Research Service

Air Quality and Electricity: Enforcing New Source Review

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

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.

Congressional Research Service

Air Quality and Electricity: Enforcing New Source Review

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.

Author Contact Information

(name redacted)

Specialist in Energy and Environmental Policy

[redacted]@crs.loc.gov, 7-....

Congressional Research Service

(name redacted)

Specialist in Environmental Policy

[redacted]@crs.loc.gov, 7-....

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