EPA: New Source Review is hurting power projects that would improve reliability

June 14, 2002 — Acting on the broad-based, bipartisan call for improving the New Source Review (NSR) program, the U.S. Environmental Protection Agency (EPA) recently announced steps to increase energy efficiency and encourage emissions reductions.

The EPA recently submitted a report on NSR and recommendations for reform to President Bush to encourage pollution prevention projects, energy efficiency improvements, and investments in new technologies and modernization of facilities.

EPA’s review found that the NSR program has impeded or resulted in the cancellation of projects that would maintain or improve reliability, efficiency or safety of existing power plants and refineries. There is overwhelming support for reform from a diverse group of people and organizations.

The improvements that EPA is recommending recently are the culmination of a 10-year process. During this period, EPA implemented pilot studies and received thousands of comments from state and local governments, environmental groups, private sector representatives and concerned citizens.

Over the past year, EPA met with more than100 environmental and consumer groups and public officials from across the political spectrum, held public meetings around the country, and evaluated more than 130,000 written comments to assess the effect of NSR on the energy sector. Last summer, the nation’s governors and the state environmental commissioners – on a bipartisan basis – called for reform of the NSR program. Recently’s report and recommendations support this call for NSR reform.

“EPA is taking actions now to improve NSR and thereby encourage emissions reductions,” said EPA Administrator Christie Whitman. “NSR is a valuable program in many respects but the need for reform is clear and has broad-based support. Our review clearly established that some aspects of the NSR program have deterred companies from implementing projects that would increase energy efficiency and decrease air pollution.”

The following reforms that EPA is moving to finalize were originally proposed during the previous Administration in 1996 and has been subject to extensive technical review and public comment:

* Pollution Control and Prevention Projects: To encourage pollution prevention, EPA will create a simplified process for companies that undertake environmentally beneficial projects. NSR currently discourages investments in pollution control and prevention projects, even if they reduce overall emissions.
* Plantwide Applicability Limits (PALs): To provide facilities with greater flexibility to modernize their operations without increasing air pollution, a facility would agree to operate within strict sitewide emissions caps called PALs. PALs provide clarity, certainty and superior environmental protection.
* Clean Unit Provision: To encourage the installation of stateoftheart air pollution controls, EPA will give plants that install “clean units” operational flexibility if they continue to operate within permitted limits. Clean units must have an NSR permit or other regulatory limit that requires the use of the best air pollution control technologies.
* Calculating Emissions Increases and Establishing Actual Emissions Baseline: Currently, the NSR program estimates emissions increases based upon what a plant would emit if operated 24 hours a day, year-round. This makes it impossible to make certain modest changes in a facility without triggering NSR, even if those changes will not actually increase emissions. This common-sense reform will require EPA to evaluate how much a facility will actually emit after the proposed change. Also, to more accurately measure actual emissions, account for variations in business cycles, and clarify what may be a “more representative”period, facilities will be allowed to use any consecutive 24-month period in the previous decade as a baseline, as long as all current control requirements are taken into account.

EPA is also proposing three new reforms that will go through new rulemaking and public comment processes before they are finalized. These include:

* Routine Maintenance, Repair and Replacement: To increase environmental protection and promote the implementation of necessary repair and replacement projects, EPA will clarify the definition of “routine” repairs. NSR excludes repairs and maintenance activities that are “routine,” but a complex analysis must currently be used to determine what repairs meet that standard. This has deterred companies from conducting needed repairs, resulting in unnecessary emissions of pollution and hazardous conditions at these plants. EPA is proposing guidelines for particular industries to clearly establish what activities meet this standard.
“The NSR program needs to be clarified to adequately define the concept of “routine maintenance” to avoid the regulatory uncertainty facing industry. Such clarification would allow companies to repair their facilities and maintain reliable and safe electric service for consumers and workers without being subject to the threat of federal government lawsuits for allegedly violating vague NSR requirements.” – Letter to Administrator Whitman, May 13, 2002, from a bipartisan group of 26 Senators.
* Debottlenecking: EPA is proposing a rule to clarify how NSR applies when a company modifies one part of a facility in such a way that throughput in other parts of the facility increases (i.e., implements a “debottlenecking” project). Under the current rules, determining whether NSR applies to such complex projects is difficult and can be time consuming.
* Aggregation: Currently, when multiple projects are implemented in a short period of time, a difficult and complex analysis must be performed to determine if the projects should be treated separately or together (i.e., “aggregated”) under NSR. EPA’s proposal will establish two criteria that will guide this determination.

“Reforming NSR will promote energy efficiency, plant safety and modernization at refineries, power plants, and other industrial facilities across the country,” said Administrator Whitman. “Our common commitment to environmental protection need not be an obstacle to having the most modern and efficient energy infrastructure in the world. Unfortunately, some elements of NSR have discouraged modernization and the development of new technologies. These reforms will bring clarity and greater opportunities for pollution prevention and energy efficiency.”

Examples of New Source Review are available. To see a copy of the report and recommendations as well as other information on the New Source Review program, visit EPA’s web site at: https://epa.gov.

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