South Coast Air Quality Management District

U.S. EPA’s Recommended Modifications to New Source Review Program

SYNOPSIS: 

On June 13, 2002, U.S. EPA submitted a letter to the President along with a report and a set of seven recommendations announcing steps to modify the New Source Review Program. U.S. EPA intends to move four of the seven recommendations into final rules, while the remaining three recommendations will undergo new rulemaking and public comment before being finalized. AQMD has prepared comments related to U.S. EPA’s recommended modifications to the New Source Review Program.

COMMITTEE: 

Stationary Source, June 28, 2002, Reviewed

RECOMMENDED ACTION:

Approve forwarding comments to U.S. EPA from AQMD consistent with comments provided in the attached letter highlighting agency concerns with U.S. EPA’s recommended modifications to the New Source Review Program.

Barry R. Wallerstein, D.Env.
Executive Officer

Background

The AQMD’s New Source Review (NSR) Rules and Regulations were originally adopted in 1976, and were designed to ensure that while maintaining economic growth, emissions from new and modified sources do not interfere with efforts to attain and maintain the federal and state air quality standards and goals in the South Coast region. Later on, the U.S. Congress established the federal NSR Program as part of the 1977 Clean Air Act Amendments and further modified the program in the 1990 Clean Air Act Amendments. The federal NSR Program was designed to help clean up the air in areas with poor air quality, and protect air quality from deterioration in areas where it is healthful. In 1992, U.S. EPA issued a regulation addressing issues regarding federal NSR at electric utility steam generating units while undergoing major modifications (known as the WEPCo Rule, from a landmark case involving the Wisconsin Electric Power Company). In 1996 U.S. EPA proposed to make some changes to the federal NSR which were intended to significantly reduce cost and regulatory burden to the regulated community (referred to as the NSR Reforms). In 1996, AQMD provided comments to U.S. EPA expressing concerns about the weakening of the NSR Program and potential increase in emissions and adverse public health impacts associated with the proposed changes.

In May 2001, the National Energy Policy Development Group issued its National Energy Policy Report. One of the recommendations in this report requested U.S. EPA to issue a report to the President on the impact of the NSR regulations on investment in new utility and refinery generation capacity, energy efficiency, and environmental protection. In June 2001, U.S. EPA issued a background paper giving an overview of the NSR Program. On June 13, 2002, U.S. EPA submitted a letter and a report to the President summarizing its findings and investigation of the NSR Program impacts. In addition to the Report to the President, U.S. EPA also issued a document summarizing the modifications the agency is intending to make to the federal NSR Program. These recommendations include moving forward to finalize some of the NSR rule changes that U.S. EPA recommended in 1996, as well as new changes being recommended.

U.S. EPA’s Proposal

As part of its review and investigation, U.S. EPA has concluded that the federal NSR Program has not significantly impeded investment in new power plants or refineries. However, with respect to existing power plants and refineries, U.S. EPA concluded that the federal NSR Program has impeded or resulted in cancellation of some modifications that may have resulted in maintaining or improving reliability, efficiency, or safety. In addition, U.S. EPA has also concluded that at existing industrial facilities outside the power plant and refinery sectors, the federal NSR Program does discourage modifications that may improve capacity or efficiency but do not result in actual emissions increases.

Therefore, U.S. EPA has forwarded seven recommendations to modify the federal NSR Program. Four of these modifications are being recommended for final rulemaking because they were included in the 1996 proposal which was already subject to public comment, whereas the remaining three are being recommended for new rulemaking that will include opportunities for public comments before they are finalized. These seven recommendations are summarized below:

Recommended for final rulemaking

1. Plantwide Applicability Limits (PALs) - A source could apply for a plant-wide emissions cap based on the baseline emissions calculations described in item #4 below. Thereafter the source could make any changes to the facility without obtaining a major NSR permit, provided their emissions do not exceed the plant-wide cap. Also a PAL may be increased without triggering NSR, provided certain criterion are met.
   
   
2. Clean Unit Exclusion - A source which has installed BACT/LAER would be exempt from NSR for ten to fifteen years. The exemption is also retroactive back to 1990 and could apply to sources which install controls to meet MACT or RACT or pollution prevention, as well.
   
   
3. Pollution Control and Prevention Projects - A project which results in a net overall emission reduction or one which switches to a cleaner burning fuel, regardless of the primary purpose of the project, would be exempt from NSR.
   
   
4. Actual to Projected Future Actual Methodology - Emissions increases for modifications would be calculated based on the highest emission levels in the last ten years prior to the modification compared to the future actual (not potential) emissions.

Recommended for new rulemaking including public comments

5. Routine Maintenance, Repair and Replacement - Projects are proposed to be exempt from NSR, if they are functional replacements or are modifications to increase utilization where the cost of maintenance, repair and replacement is 1.5 to 15% of the company’s annual assets.
   
   
6. Debottlenecking - Emission increases from upstream and downstream units to a unit being modified are proposed to be exempt from NSR.
   
   
7. Aggregation - Emission increases from projects that are not technically or economically dependent would not be aggregated to trigger NSR.

Analysis

Since the U.S. EPA’s recommended modifications to the NSR Program will exempt a significant number of modifications or new projects from the NSR Program, many new or modified industrial emission sources would not require that BACT/LAER be installed. NSR in general provides opportunities for emission reductions, and such exemptions will result in these opportunities to be forgone. As a result the changes may cause significant emission increases and the proposed methodologies will make compliance determination more complex, if not impossible. In addition, due to South Coast’s extreme ozone non-attainment status, the proposed modifications may place businesses operating in the South Coast area under more competitive disadvantage compared to businesses elsewhere under the Clean Air Act.

Recommendations

Approve forwarding comments to U.S. EPA from AQMD consistent with comments provided in the attached letter highlighting agency concerns with U.S. EPA’s recommended modifications to the New Source Review Program.

Attachments

Letter from AQMD Executive Officer to U.S. EPA
Specific Comments by SCAQMD Regarding U.S. EPA’s June 2002 NSR Recommendations

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