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OAR Box 1778 

Prepped by Ollie Stewart 

Document Number: 

179) ll-F-6 

Docket Number: 

A-90-06 

Printed 10/28/2008 9:51:00 AM Sheet 179 of 276 
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Department of Energy 

Washington, DC 20585 

II-F-6 

MEMORANDUM TO: Don Elliott 

General Counsel 

FROM: 

SUBJECT: 

DATE: 

EPA 

Linda G. Stuntz 

Deputy Under Secretary for 

Policy, Planning, and Analysis 

Comments on Draft WEPCo Interpretive Rule 

March 15, 1991 

The draft WEPCo interpretive ruling (IR) is intended to clarify 

the applicability of new source review (NSR) and new source 

performance standards (NSPS) requirements to both electric 

utility pollution control projects and like-kind replacements of 

powerplant equipment. For reasons explained below, the draft 

would result in virtually all pollution control projects and 

like- kind replacements being subject to NSR. Such a result is 

clearly contrary to the goal of the Administration's legislative. 

proposal, which was intended to narrow the applicability of NSR 

by applying sound and reasonable criteria to determine whether a 

physical or operational change in issue constituted a 

"modification." Unfortunately, the draft rule does not even come 

close to meeting Administrator Reilly's commitment to Chairman 

Boskin. Indeed, the current draft is much worse than the earlier 

(and unacceptable) EPA draft interpretive rule. It is critical 

to note that the latest draft makes it practically inevitable 

that pollution control projects and like-kind replacements will 

trigger WEPCo. In addition, this draft expands EPA's WEPCo 

interpretation in a way that would give EPA unprecedented power 

to review a utility's pollution control project. 

It is also important to keep in mind that any IR must be 

considered along with whatever legislative rule on WEPCo is also 

proposed; that is, both rules must be read together as a package. 

While we have attempted to provide comments on major problems, we 

believe the document is so unreasonable that it should be 

scrapped and an entirely new rule should be drafted. Otherwise, 

it will take substantial time even to attempt to resolve these 

and other problems. We stand prepared to assist EPA in the 

preparation of a new draft interpretive rule. 

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Actual-to-Actual Emissions Baseline for PSD 

The draft ruling "clarifies" that the emissions baseline is the 

average emissions rate (tons per year) from any consecutive 2-

year period, which is representative of normal operations, within 

the 5 years preceding the proposed physical or operational 

change. This pre'-change calculation would be used for all nonroutine changes, presumably including pollution control projects. 

While this approach is consistent with the general thrust of the 

Administration's legislative proposal for non-pollution control 

projects, it is entirely inconsistent with the legislative 

proposal's potential-to-potential test for pollution control 

projects and--with DOE's position thrat such projects should be 

exempted from NSR, just as they are currently exempted from NSPS. 

We recommend that on this issue, as well as on other WEPCorelated legal matters, EPA adopt the positions laid out by our 

General Counsel in his February 26 memorandum. On this specific 

issue of pollution control exemption, our view is that, based on 

EPA's own regulations, relevant decisions and legal memoranda, 

pollution control projects are already exempt from NSR. 

That fact notwithstanding, as for the baseline for non-pollution 

control projects, DOE recommends that an explicit provision be 

included in any rule which would allow an electric generating 

unit that had been out of service for all or part of the 5 years 

immediately preceding-the change to use a longer period of time 

preceding the change (i.e., more than 5 years) from which to 

calculate its representative pre-change annual emissions. This 

is only fair since a unit that had been out of service for all 5 

years would have baseline emissions of zero. Furthermore, even 

had the unit been operating for, say, 2 of the 5 years before a 

physical or operational change, those 2 years could be very 

unrepresentative of normal operations. 

For post-change emissions, the draft rule would limit the use of 

actual emissions to only like-kind changes.1 EPA compounds the 

problem by calculating "future-actual" emissions in such a way 

that virtually assures sources will flunk an actual-to-actual 

test. This will occur because future-actual emissions are 

calculated by (1) applying a rebuttable presumption that the unit 

will not increase its utilization, (2) not excluding system 

demand growth, and (3) using the highest projected capacity 

utilization ("maximum future-actual emissions," Draft IR, p. 57). 

Presumably, this same future-actual emissions calculation would 

In accordance with EPA's flawed interpretation of the Seventh Circuit's 

WEPCo decision, non-like kind changes remain subject to an actual-to-potential 

test. Here again, our General Counsel strongly disagrees with your reading of 

the Seventh Circuit decision. 
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be applied t o pollutio n contro l projects, virtuall y assurin g tha t 

they too wil l encounter WEPCo problems. 

EPA says i t wil l conside r applying this same actual-to-actua l 

test t o non-utilities. While this issu e is of a lesse r concern 

t o DOE, we conside r i t t o be an important indicatio n of how 

unwillin g EPA is t o abandon its flawed approach t o thes e issues. 

PSD Applicabilit y t o Pollutio n Control Projects 

At th e outset , i t is critica l t o note tha t th e draft does not 

adopt a simple PSD exemption for pollutio n contro l projects, as 

DOE has urged. Were a simple exclusion adopted by EPA, such 

issue s as how t o determine whether emissions have increase d would 

be moot. However, EPA has proposed tha t th e projec t must be 

determined t o be "environmentally beneficial." 2 While on it s 

face i t would seem tha t a pollutio n contro l project , by it s very 

nature , benefits th e environment, EPA has devised a regulator y 

approach designed t o prove otherwise , thereby subjectin g 

virtuall y al l pollutio n contro l projects t o NSR. 

EPA cite s as th e basis for th e "environmentally beneficial " 

standard it s NSPS regulations, which contain an exclusio n for: 

The additio n or use of any system or devic e whose primary 

function is th e reduction of ai r pollutants, except when an 

emissions contro l system is removed or is replace d by a 

system which th e Administrator determine s t o be less 

environmentally beneficial . [40 CFR 60.14(e) (5)] 

Unfortunately, EPA has misunderstood th e plai n language of it s 

own regulations, which apply th e "environmentally beneficial " 

standard t o th e removal or replacement of an emissions contro l 

system, not t o th e additio n of pollutio n controls. Clearly , 

switching t o low-sulfur coal or installin g a scrubbe r is th e 

additio n — rathe r than th e removal or replacement — of a 

pollutio n contro l project . Other instance s where pollutio n 

controls ar e added should als o be granted a simple exclusio n from 

NSR. 

2

In our view, the practica l impact of this "environmentally beneficial " 

requirement, as construed by EPA, would be that no utilit y could instal l 

pollution controls without EPA review and approval. This review requires a 

source to undertake extensive air quality analyses, certain of which go far 

beyond the analyses tha t would be required if the source simply underwent new 

source review (e.g., modeling "unregulated air toxics"). The interpretive 

rule is so broad tha t i t contemplates case-by-case EPA review of each 

pollution control project. For the utilit y industry, the draft rule means 

micromanagement by EPA staff of utilit y acid rain control programs. It would 

have potentially devastating effects on Phase I acid rain compliance, since 

control commitments have to be made immediately to meet the January 1, 1995 

compliance deadline. 
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Ignoring for the moment the fact that the draft IR misunderstands 

EPA's own regulations, EPA's criteria to determine whether a 

project is environmentally beneficial are certain to prove that 

pollution control projects are, ironically, not environmentally 

beneficial. The criterion most likely to "disprove" the 

environmental benefit of the project is that annual emissions 

cannot increase. Many pollution control projects will fail to 

satisfy this criterion because post-change emissions will be 

calculated based on the rebuttable presumption that utilization 

will not increase and that demand growth will not be excluded. 

As for demand growth, the demand for electricity nationwide is 

increasing by 3% annually (based on the NES forecast for 1990 

through 2000). Meeting this increased demand will result in 

greater utilization of electric utility generating units. The 

definition of "major modification" (40 C.F.R. 52.21(b)(2)) 

requires that a casual link exist between the change and the 

increase in emissions, as indicated by the "would result in" 

language in the definition. Therefore, emission increases 

unrelated to the change should be excluded. The intent to allow 

increased use of a changed unit as a result of increased system 

demand is further clarified in the PSD regulations which 

specifically exclude an increase in the "hours of operation or in 

the production rate" (C.F.R. 52.21(2) (iii) (f) ) . Therefore, we 

believe that a properly drafted rule that excludes demand growth 

would survive judicial review. Indeed, our General Counsel 

believes that EPA's own regulations require that, for a change to 

constitute modification, there be a causal nexus between the 

change and the increase in emissions. 

Temporary Clean Coal Technology Demonstration Projects 

Section 415(b)(2) of the amended Clean Air Act exempts a 

temporary CCT project from WEPCo, provided it complies with 

certain reasonable conditions: 

Installation, operation, cessation, or removal of a 

temporary clean coal technology demonstration project that 

is operated for a period of five years or less, and which 

complies with the State implementation plan for the State in 

which the project is located and other requirements 

necessary to attain and maintain the national ambient air 

quality standards during and after the project is 

terminated, shall not subject such facility to the 

requirements of section 111 or part C or D of title I. 

Rather than merely implementing the clear language of section 

415(b) (2), the draft IR imposes additional requirements on these 

temporary projects. These requirements, which are carrying out 

the IR's mandate that the project be environmentally beneficial, 

include demonstrating that there will be no increase in hourly or 

annual emissions (these two criteria "may be waived") and 
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conducting air quality modeling to demonstrate that "there will 

be no adverse health or welfare impacts as a result of increased 

emissions of any as yet unregulated toxic or hazardous air 

pollutant." First, it is crystal clear that these new 

requirements are not imposed by section 415(b) (2) . Second, we 

have absolutely no doubt that if these requirements were imposed 

on temporary projects, they will pose an even greater impediment 

to the CCT Program than EPA's existing WEPCo policy. In short, 

these requirements should not be imposed on temporary CCT 

demonstration projects. 

We should point out that if a temporary demonstration project 

elects to become a permanent projects it would run into the same 

WEPCO problems that the draft IR has created for any pollution 

control project (e.g., rebuttable presumption and no exclusion 

for demand growth). 

Conclusion 

The draft IR reflects a number of fundamental legal and policy 

disagreements between DOE and EPA. DOE believes that, for a 

number of reasons, it makes no sense as a policy matter to 

subject pollution control projects to NSR. The draft IR reflects 

the view that as many such projects as possible should be subject 

to NSR. DOE believes that it is sound energy policy to allow 

powerplants to conduct maintenance, repair, and replacement 

activities that are necessary to maintaining reliable and 

efficient operation, without triggering NSPS and NSR. The draft 

IR reflects a contrary view.