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# OAR Box 1778 Prepped byOllie Stewart

Document

Number: 

# 179 ) ll-F- 6 Docket Number: 

# A-90-0 6

Printed 10/28/20089:51:00AM

Sheet 179of 276P. 2



### Departmen t o

fEnerg y Washington , D

C 2058 5 II-F- 6

MEMORANDU

M TO : Do n Elliot t Genera l Counse l FROM :

SUBJECT : DATE : EP A

Lind a G . Stunt z Deput yUnde r Secretaryfo r Policy , Planning , an d Analysi s Comment s on Draf t WEPC o Interpretiv e Rul e Marc h15 , 199 1 The draf t WEPC o interpretiv e ruling (IR ) i s intende d t o clarif y the applicabilit yo f ne wsourc e revie w(NSR ) and ne wsourc e performanc e standard s (NSPS ) requirement s t o bot helectri c utilit ypollutio n contro l project s an d like-kind replacement s o f powerplan t equipment . Fo r reason s explaine d below , th e draf t woul d resul t i n virtuall yal l pollutio n contro l project s an d like

- kin

d replacement s being subjec t t o NSR . Suc ha resul t i s clearl ycontraryt o th e goa l o f th e Administration' s legislative . proposal , whic hwa s intende d t o narro wth e applicabilit yo f NS R b yapplying soun

d an d reasonabl e criteri a t o determin e whethe r a physica l o r operationa l chang e i n issu e constitute d a "modification. " Unfortunately , th e draf t rul e doe s no t eve n come clos e t o meetin g Administrato r Reilly' s commitmen t t o Chairma n Boskin . Indeed , th e curren t draf t i s muc hwors e tha n th e earlie r (an d unacceptable ) EPAdraf t interpretiv e rule . I t i s critica l t o not e tha t th e lates t draf t make s i t practicall yinevitabl e tha t pollutio n contro l project s an d like-kind replacement s wil l trigge r WEPCo . I n addition , thi s draf t expand s EPA' s WEPC o interpretatio n i n a wa ytha t woul d giv e EP Aunprecedente d powe r t o revie wa utility' s pollutio n contro l project . I t i s als o importan t t o keep i n mind tha t an yI R mus t b e considere d along wit hwhateve r legislativ e rul e o n WEPC o i s als o proposed ; tha t is , bot hrule s mus t b e rea d togethe r a s a package . Whil e w e hav e attempte d t o provid e comment s o n majo r problems , w e believ e th e documen t i s s o unreasonabl e tha t i t shoul d b e scrappe d an

d an entirel yne wrul e shoul d b e drafted . Otherwise , i t wil l tak e substantia l time eve n t o attemp t t o resolv e thes e an d othe r problems . W e stan d prepare d t o assis t EPAi n th e preparatio n o f a ne wdraf t interpretiv e rule . 

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_ _ Actual-to-Actua l Emission s Baselin e fo r PS D Th e draf t ruling "clarifies " tha t th e emission s baselin e i s the averag e emission s rat e (ton s pe r year ) fro man yconsecutiv e 2

- yea r period , whic hi s representativ e o f norma l operations , withi n th e 5 year s precedin g th e propose d physica l o r operationa l change . Thi s pre'-change calculatio n woul d b e use d fo r al l non routin e changes , presumabl yincluding pollutio n contro l projects . Whil e thi s approac hi s consisten t wit hth e genera l thrus t o f th e Administration' s legislativ e proposa l fo r non-pollutio n contro l projects , i t i s entirel yinconsisten t wit hth e legislativ e proposal' s potential-to-potentia l tes t fo r pollutio n contro l project s and--wit

hDOE' s positio n th r at suc hproject s shoul d b e exempte d fro

m NSR , jus t a s theyar e currentl yexempte d fromNSPS . W e recommend tha t on thi s issue , a s wel l a s o n othe r WEPCo
relate d lega l matters , EP Aadop t th e position s lai d ou t b you r Genera l Counse l i n hi s February2 6 memorandum . On thi s specifi c issu e o f pollutio n contro l exemption , ou r vie wi s that , base d o n EPA' s ow

n regulations , relevan t decision s an d lega l memoranda , pollutio n contro l project s ar e alread yexemp t from

NSR . Tha t fac t notwithstanding , a s fo r th e baselin e fo r non-pollutio n contro l projects , DO E recommend s tha t a n explici t provisio n b e include d i n an

yrul e whic hwoul d allo wan electri c generatin g uni t tha t ha d bee n ou t o f servic e fo r al l o r par t o f th e 5 year s immediatel ypreceding-th e chang e t o us e a longe r perio d o f time precedin g th e chang e (i.e. , mor e tha n 5 years ) from whic ht o calculat e it s representativ e pre-chang e annua l emissions . Thi s i s onl yfai r sinc e a uni t tha t ha d bee n ou t o f servic e fo r al l 5 year s woul d hav e baselin e emission s o f zero . Furthermore , eve n ha d th e uni t bee n operating for , say , 2 o f th e 5 year s befor e a physica l o r operationa l change , thos e 2 year s coul d b e ver y unrepresentativ e o f norma l operations . Fo r post-chang e emissions , th e draf t rul e woul d limi t th e us e o f actua l emission s t o onl ylike-kind changes. 1 EP Acompound s th e proble mb

ycalculating "future-actual " emission s i n suc ha wa y tha t virtuall yassure s source s wil l flun k an actual-to-actua l test . Thi s wil l occu r becaus e future-actua l emission s ar e calculate d b

y(1 ) applying a rebuttabl e presumptio n tha t th e uni t wil l no t increas e it s utilization , (2 ) no t excludin g system demand growth , an

d (3 ) usin g th e highes t projecte d capacit y utilizatio n ("maximu mfuture-actua l emissions, " Draf t IR , p . 57) . Presumably , thi s same future-actua l emission s calculatio n woul d

I n accordanc e wit hEPA' s flawe d interpretatio n o f th e Sevent hCircuit' s WEPC o decision , non-lik e kin d change s remai n subjec t t o an actual-to-potentia l test . Her e again , ou r Genera l Counse l strongl ydisagree s wit hyou r reading o f the Sevent hCircui t decision .It

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9 b d* P2-L\ 16 , G Iyb W

b eapplie dt o pollutio ncontro l projects , virtuall y assurin g tha t the y to o wil l encounte r WEPC o problems
. EP Asay s i t

wil l conside r

applyin g thi s sam e actual-to-actua l tes t t o non-utilities
. Whil e thi s issu e i s o f alesse r

concer n t o DOE, w

econside r

i t t o b e a nimportan t indicatio no f

ho w unwillin g EP

Ai s t o abando nit s flawe dapproac ht o thes e issues
. PS D Applicabilit y t o Pollutio nContro l Project s A t th eoutset , i t

i s critica l t o not e tha t th e draf t

doe s no t adop t asimpl ePS D exemptio nfo r pollutio ncontro l projects , a s DO Eha s urged
. Wer easimpl eexclusio nadopte db y EPA , suc h issue s a s ho w t o determin e whethe r emission s hav e increase dwoul d b emoot . However , EP Aha s propose dtha t th e projec t

mus t b e determine dt o b e"environmentall y beneficial." 2Whil e o nit s fac ei t woul dsee mtha t

apollutio ncontro l project , b y it s ver y nature , benefit s th eenvironment , EP Aha s devise daregulator y approac hdesigne dt o prov e otherwise , thereb y subjectin g virtuall y al l pollutio ncontro l project s t o NSR
. EP Acite s a s th ebasi s fo r th e"environmentall y beneficial " standar dit s NSPS regulations , whic hcontai na nexclusio nfor : Th eadditio no r

us eo f an y syste mo r

devic e whos e primar y functio ni s th ereductio no f ai r pollutants , excep t whe na n emission s contro l syste mi s remove do r i s replace db y a syste mwhic hth eAdministrato r determine s t o b e les s environmentall y beneficial
. [4 0 CF R60.14(e ) (5) ] Unfortunately , EP

Aha s misunderstoo dth e plai nlanguag e o f it s ow nregulations , whic happl y th e"environmentall y beneficial " standar dt o th e remova l o r replacemen t

o f a nemission s contro l system , no t

t o th e additio no f pollutio ncontrols
. Clearly , switchin g t o low-sulfu r coa l o r

installin g ascrubbe r i s th e additio n—rathe r

tha nth eremova l o r replacemen t

— o f a pollutio ncontro l project
. Othe r instance s wher e pollutio n control s ar eadde dshoul dals o b egrante dasimpl e exclusio nfro m NSR
.

2 I nou r

view , th epractica l impac t o f thi s "environmentall y beneficial " requirement , a s construe db y EPA , woul db e tha t

n o utilit y coul dinstal l pollutio ncontrol s withou t EP Arevie w an dapproval
. Thi s revie w require s a sourc et o undertak eextensiv e ai r qualit y analyses , certai no f whic hg o fa r beyon dth eanalyse s tha t woul db e require di f th e sourc e simpl y underwen t ne w sourc e revie w (e.g. , modelin g "unregulate dai r toxics")
. The interpretiv e rul e i s s o broa dtha t i t contemplate s case-by-cas e EP Arevie w o f

eac h pollutio ncontro l project
. Fo r th e utilit y industry , th e draf t rul e mean s micromanagemen t

b y EP Astaf f o f utilit y aci drai ncontro l programs . I t woul d hav epotentiall y devastatin g effect s onPhas e Iaci drai ncompliance , sinc e contro l commitment s hav et o b e mad e immediatel y t o mee t th e Januar y 1 , 199 5 complianc edeadline
.

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# W " P. 5

Ignorin g fo r th e momen t th e fac t tha t th e draf t I R misunderstand s EPA' s ow

n regulations , EPA' s criteri a t o determin e whethe r a projec t i s environmentall ybeneficia l ar e certai n t o prov e tha t pollutio n contro l project s are , ironically , no t environmentall y beneficial . Th e criterio n mos t likel yt o "disprove " th e environmenta l benefi t o f th e projec t i s tha t annua l emission s canno t increase . Man ypollutio n contro l project s wil l fai l t o satisf ythi s criterio n becaus e post-chang e emission s wil l b e calculate d base d o n th e rebuttabl e presumptio n tha t utilizatio n wil l no t increas e an d tha t demand growt hwil l no t b e excluded . A s fo r demand growth , th e demand fo r electricit ynationwid e i s increasin g b

y3 % annuall y(based o n th e NE S forecas t fo r 199 0 throug h2000) . Meetin g thi s increase d demand wil l resul t i n greate r utilizatio n o f electri c utilit ygeneratin g units . Th e definitio n o f "majo r modification " (4 0 C.F.R . 52.21(b)(2) ) require s tha t a casua l lin k exis t betwee n th e chang e and th e increas e i n emissions , a s indicate d b yth e "woul d resul t in " languag e i n th e definition . Therefore , emissio n increase s unrelate d t o th e chang e shoul d b e excluded . Th e inten t t o allo w increase d us e o f a change d uni t a s a resul t o f increase d system demand i s furthe r clarifie d i n th e PS D regulation s whic h specificall yexclud e an increas e i n th e "hour s o f operatio n o r i n th e productio n rate " (C.F.R . 52.21(2 ) (iii ) (f ) ) . Therefore , w e believ e tha t a properl ydrafte d rul e tha t exclude s demand growt h woul d surviv e judicia l review . Indeed , ou r Genera l Counse l believe s tha t EPA' s ow n regulation s requir e that , fo r a chang e t o constitut e modification , ther e b e a causa l nexu s betwee n th e chang e an

d th e increas e i n emissions . TemporaryClea n Coa l Technolog yDemonstratio n Project s Sectio n 415(b)(2 ) o f th e amende d Clea n Ai r Ac t exempt s a temporaryCC T projec t fro mWEPCo , provide d i t complie s wit h certai n reasonabl e conditions : Installation , operation , cessation , o r remova l o f a temporaryclea n coa l technologydemonstratio n projec t tha t i s operate d fo r a perio d o f five year s o r less , and whic h complie s wit hth e Stat e implementatio n pla n fo r th e Stat e i n whic hth e projec t i s locate d an d othe r requirement s necessaryt o attai n an d maintai n th e nationa l ambien t ai r qualit ystandard s durin g an d afte r th e projec t i s terminated , shal l no t subjec t suc hfacilit yt o th e requirement s o f sectio n 11 1 o r par t C o r D o f titl e I . Rathe r tha n merel yimplementing th e clea r languag e o f sectio n 415(b ) (2) , th e draf t I R impose s additiona l requirement s o n thes e temporar yprojects . Thes e requirements , whic har e carryin g ou t th e IR' s mandat e tha t th e projec t b e environmentall ybeneficial , includ e demonstratin g tha t ther e wil l b e n o increas e i n hourl yo r annua l emission s (thes e tw o criteri a "ma yb e waived" ) an

dP. 6 82-i I IB , 6 i yy

w

conducting ai r qualit ymodelin g t o demonstrat e tha t "ther e wil l b e no advers e healt ho r welfar e impact s a s a resul t o f increase d emission s o f an

ya s ye t unregulate d toxi c o r hazardou s ai r pollutant. " First , i t i s crysta l clea r tha t thes e ne w requirement s ar e no t impose d b ysectio n 415(b ) (2 ) . Second , w e hav e absolutel yn o doub t tha t i f thes e requirement s wer e impose d o n temporaryprojects , theywil l pos e an eve n greate r impedimen t t o th e CC T Progra

mtha n EPA' s existing WEPC o policy . I n short , thes e requirement s shoul d no t b e impose d on temporaryCC T demonstratio n projects . W e shoul d poin t ou t tha t i f a temporarydemonstratio n projec t elect s t o becom e a permanen t project s i t woul d run int o th e same WEPC O problem s tha t th e draf t I R ha s create d fo r an ypollutio n contro l projec t (e.g. , rebuttabl e presumptio n and n o exclusio n fo r demand growth) . Conclusio n Th e draf t I R reflect s a numbe r o f fundamenta l lega l an d polic y disagreement s betwee n DO E an d EPA . DO E believe s that , fo r a numbe r o f reasons , i t make s n o sens e a s a polic ymatte r t o subjec t pollutio n contro l project s t o NSR . Th e draf t I R reflect s th e vie wtha t a s man ysuc hproject s a s possibl e shoul d b e subjec t t o NSR . DO E believe s tha t i t i s soun d energ ypolic yt o allo w powerplant s t o conduc t maintenance , repair , an d replacemen t activitie s tha t ar e necessaryt o maintainin g reliabl e an d efficien t operation , withou t triggerin g NSP S an d NSR . Th e draf t I R reflect s a contraryview .