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# OAR Box 

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### Document

Number: 

# 181 ) ll-F- 8

Docket Number: 

# A-90-0 6

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II-F- 8 

# 1

MEMORANDU

M TO :

PROM : SUBJECT : 

## departmen to f Energ y Washhgton , D C 205B 5

Bil l Rotjenhnr

g Assistan tAdministrato rfo rAi ran d Radiatio n Environmenta l Protectio n Agftnc y Lind a G. Stunt z 

### {£> Objectio n t o iBBUin

g Draf tWEPC o Interpretativ e Rule ; DO E Proposa

l forResolvin g WEPC o Problem *

The purpos e of

thi s memorandum i s t o provid e DOE' s comment a explainin g wh y w e strenuousl y objec

tt o th e issuanc e of

a n inadequat e WEPCo interpretativ e rul e lik e th e Apri l 1 6 draft . DO E acknowledge s EPA' s recen tconcern abou tth e nee d to respond quickl y to industry' s concem s abou tWEPCo . However , thi s concer n wa s no t eviden tto u s durin g th e 6-mont h perio d betwee n Bil l Reilly' s lette rt o MikeBoski n las tyea ran d th e firstdraf tinterpretativ e rul e mad e availabl e to u s tha tha d bee n reviewe d b y EP

A management . W e are als o providin g comments o n EPA' s excerp tfrom a legislativ e rul e Uiat addresse s pollutio n controls . Finally , we ar e offerin g a proposal tha tshoul d lea d to a quic k an d satisfactory resolutio n of WEPCo throug h th e forthcoming legislativ e rule . Draf tlnteiforetativ e Rule DO E continue s to believ e tha ti ti s critical forth e Administratio n t o issu e OJQI

I a good an d comprehensiv e WEPC o fix by Jun e 1 . Therefore , w e strenuousl y objec tto releasin g th e April 1 8 draf tinterpretativ e rul e becaus e of it s failure , once again , t o resolv e certai n ke y issues . (Se e enclose d memorandum. ) On e exampl e i s EPA' s insistenc e o n tyin g pollutio n contro l relie f t o th e rebuttabl e presumption . Note tha t las tSeptember , th e Administratio n tol d Senato rFor d th e rebuttabl e presumptio n woul d b e easil y rebutted , thu s triggerin g WEPCo . (Se e enclosure , " A Brie f History of th e Rebuttabl e Presumption." ) Contrar y to EPA' s April 2 6 memorandum , w e do xuj i believ e Ui e draf tinterpretativ e rul e i s responsiv e t o th e need s o f th e electri c utilit y industry . Th e recen tlette rfro m th e trad e association s representin g th e electri c utilit y industr y make s clea rtha ta "partia l fix" would no tb e responsiv e t o thei rWEPCo problems . W e believ e a comprehensiv e legislativ e rul e which include s a good preambl e i s th e ojily wa y t o b e fully responsiv e t

o th e utilities ' WEPCo concerns . Pfl1h.tj.i n (])ontro l Exccro t DO E staf f me twit h EP A stafFlas twee k to see k clarificatio n of parts of th e draf t excerpt . Bot

h partie s agree d t o conside rquestion s raise d by th e other . Ourdetaile d comment s reflec tthos e questions . (See enclose d memorandum. )P. 3

I n som e respects , th e difference s betwee n EP A an d DO E ove rpollutio n contro l project s hav e narrowed . However , ou i majo rconcern s includ e limitin g th e pollutio n contro l PS P exclusio n t

o electri c utilitie s only , tyin g th e rebuttabl e presumptio n t o poUution control s i n nonattainmen tareas , an d th e nee d to exclud e deman d growth from future*actua

l emission s fo

rpollutio n control projects i n nonattainmen tareas .

Becaus e th e draf

trul e continue s t

o reflec tan approach tha tha tyielde d very littl e progress , IJO

E i s proposin g a somewha tdifferen tapproach t o th e legislativ e rule . Thi s approach shoul d hel p t o resolv e ou rdifference s i n a more expeditiou s an d mutuall y satisfactory manner . Specifically , w e propos e tha tth e legislativ e rule , t o b e issue d by Jun e 1 , contai n a preambl e tha tpresent s a reasonabl e interpretatio n o f EPA' s curren trule s and , of course , propos e ne w regulatory languag e a s needed . Suc h a preambl e woul d obviat e th e nee d foran interpretativ e rule . Th e proposed rul e woul d hav e th e followin g elements : 1 . Fo rpollutio n control projects , a n exclusio n from ne w sourc e review . Utilit y project s woul d b e presume d to b e environmentall y beneficial , wit h tha tter m broadl y construed . 2 . Fornon-pollutio n contro l projects , change s t o EP A rule s to implemen tth e 198 4 settlemen tagreemen tbetwee n th e Chemical Manufacture s Associatio n and EPA . (Th e term s of

th e agreemen tallo w a sourc e t o us e eithe ra potential-to*potentia l oran actual-to-actua l emission s tes tt o determin e whethe ra modificatio n ha s occurred. ) A t th e Marc h 2 6 meetin g o

f th e WEPC

o Group , EP

A indicate d it s long-standin g commitmen tto implemen tth e CM A settlemen tagreement . Implementin g tha t agreemen tno w a s parto f th e WEPC

o legislativ e rul e woul d resolv e th e difference s betwee n u

a concernin g non-pollutio n control activitie s an d allo w EP A t o mee tit s obligation s t

o th e D.C . Cour

tof Appeals . W e look forwar

d t o discussin g thi s proposa l a tou rTuesda y meeting . It s adoptio n b y EP A woul d ensur e tha ta goo d WEPC o fix i s proposed by th e Jun e deadline .

cc : Richard Schmalensee , CE A Do n Elliot , EP

A Barry Hartman , Justic e Ar tFrnafi, OM

B Teres a Gorman , Whit

e Hous e Jef f Holmstead , Whit

e Hous e Lydi a Wegman , EPA-OAQP SP. 4

I

MEMORANDU

M SUBJECT : DO

E Revie w o f th e Interpretiv

e Rul e an

d DO E Recommendation s o

n Ho w t o Proceed
DATE : Apri l 29 , 199 1

I . Backgroun

d

Th e Administratio

n ha s insiste

d Lhat EP

A abando n ita curren t WEPCo policies , i

n order C

O ensur e orderl y

implementatio

n o f the Clea n Ai r Ac t Amendment s of 1990 , t o encourag e pollutio n contro l projects , an

d t o promot e repair s an d replacement s needed fo r efficient reliabl e operatio n of electri c generatin g units . I

n Octobe r 1990 , Administrato r Reill y agree d t o revers e cours e o n WEPCo an

d retur n t o policie s tha t woul d allo w pollution contro l project s an

d neede d repair s ©n

d replacement s t o mov e forwar

d withou t th

e uncertainty

an d dela y associated wit hne w sourc e review . Prior t o th

e Administrator' s commitment t o fi xWEPCo. B? A submitte

d t o OM B a draf t interpretativ e rule , tha t addressed the "lik e kin d replacement " concept an d "pollutio

n control " projects . Amon y othe r things , thi s draf t interpretiv e rul e provided tha t pollutio

n contro l project s woul d not ; be exemp t fro m ne w sourc e review , i f annua l utilizatio n of th

e associated facilit y wer e t o ir.cieas e atte r th

o projec t wa s installed . Whil e th e draf t rul e woul d hav

e created a "rebuttabl e presumption " tha t pollution contro l project s woul d not b e followe

d b y a n increas e i

n annua l utilization , thi s presumptio n coul d easil y

hav e bee n rebutted , leadin g t o uncertainty

regardin

g whethe r suc

hproject s coul d b e undertaken a

t all . Fo

xthi s an

d othe r reasons , th e draf t rul e wa s rejected a s not providin g a n adequat e pollution contro l exemptio

n fro m ne w sourc e review . I n Marc h1991 , EP

A submitte

d a ne w versio n o f th e draf t interpretiv

e rul e - - a versio

n tha t had grow

n t o 7 4 pages . Thi s versio n provided eve

n les s relie f tha

n th e firs t version . I t Impose d ne w WEPg y xestxlotion s o

n pollutio

n contro l projects , an d stil l contained th

e "rebuttabl e presumption " a a the centerpiec e o f th e pollution contro l fix . Bil l Rosenber g an d Do n Elliot t state d tha t the

y ha d not reviewe

d thi s draf t befor e it s circulation , an

d agree d to revis e th

e draf t t o mak e it confor m wit hthe Adnsiiti,st,.x«aiLion' s positio n o n pollutio

n contro l projects .P. 5

O n Apri l 18 , 1991 , EP A circulated th

e lates t draf t interpretiv e rule . Th

e principl e differenc e betwee n thi s draf t an d earlie r draft s is.tha t thi s draf t ia only 1 8 page s long , i t reflect s n o change i

n overal l results .

21 , "Discussio

n o f th e Probl-Mi

m wit hth

« EPA' s Apri l Draf t Utilitie s shoul d b e allowe

d t o undertak e project s t o reduc e emissions , utilizin g certai n kind s o f technologie s tha t EP A i s quit e tamilia r with, 1 ' without triggerin g the ne

w aourc e revie

w process . Moreover , an y syste m ought t o b e susceptibl e o f a promp t an d certai n application , s o tha t a n averag e utility

woul d kno w in advanc e whethe r it s planned pollution contro l activitie s ar e goin g t o b e exemp t fro m ne w sourc e review . Unfortunately , i n ou r view , judge

d b y thes e standards , fc-FA's interpretiv e rul e remain s completel y

unacceptable . Specifically , lik

e th e firs t an

d secon d drafts , th

e Apri l draf t stil l adhere s to th e "actua l annua l increase " standard fo r pollutio

n contro l projects , albei t wit ha "rebuttabl e presumption. " I

n otiie r wuxds , EP

A propose d agai n th e approach tha t had bee

n rejecte

d earlie

r an d refused agai n t o retur n t o the 198 3 Pedersen PS D intexpretatio n regardin

g pollution contro l project s —

a n interpretatio

n that woul d provid e clear-cu t relie f fo r suchprojects . I n sum , EP

A ha s simpl y

submitted a shorte r versio n o f it s previousl y unacceptabl e interpretiv e rule . I n addition , th

e lates t draft , rul e contain s element s o f prio r draft s tha t ar

e unacceptabl e —

e.g. , th

e qualifie r o

n "lik e kin d replacements " Lha

t th e xeplac&ment canno t "fundamentall y alte r th e metho d o f operatio n o f a source, " an d th e failur e o f th

e rul e t o reooyniit

e that certai n other repair s /e.g. . additio n o f soo t blowers) , d

o not transfor

m a uni t tha t ha s "begu n norma l operations " into on e that ha s noL . Th e "fundamenta l change " criteri a creat e th e prospec t o f endles s an d tim e consumin

g EPA xeviews wheneve r a n older piec e o f equipmen t i s replaced wit hone o f a newe r design , o r withon

e tha t allows a sourc e t o retur n t o prio r operatin

g levels . Considerin g onl y replacement s an

d ignorin g al l repair s create s a n arbitrar

y lin e tha t canno t b e square d wit hth

e regulator

y language , whichfocuse s o n whethe r a uni t ha s o

r ha s not "begu

n norma l operations. " Lik e previou s version s o f it s interpretativ e rule , EP

A ha s added ne w requirements * t

o th e "actua l emissions " calculatio n formul a that , like earlier versions , "tak e awa y wit hon

e han d wha t i t ha s

l 'Thes e include scrubbers , low-NO X burners , precipitators , fabx-i c filters , sorben

t injectio

n systems , ttC -P. 6

TEL : Ap r 29,9 1 2 3 = 2 2 No.01 3 P.0 6

j give n wit hth

e other. " Th

e newes t interpretiv e rul e i s particularl y

ingeniou s i

n thi s regard . On e sectio

n o f th e draf t grudgingl y

implement s the "causa l link " requirement i

n th e Administration' s legislativ e proposal.* ' Bu t thf t sectio

n immediatel y

precedin

g th e "casua l link " sectio n make s clear tha t projected emission s (a s adjusted i

n accordanc e wit h th e "cauaa l link " section ) wil l not be use d b y EP A t o represen t future actua l annua l emission s whe n the y ar e "lea s than the source'shiohes t pas t utilisatio n rat e . . . . " (Pg . 10 , emphasi s added. ) Th e effec t o f thi s requiremen t i s t o eliminat e virtuall y

al l relie f tha t woul d b e provided b

y the "causa l link " aspec t o f th

e ruling , an

d t o rea

d the "causa l link " requiremen t ou t of th e rule s fo

r mos t cases . Unde r the Apri l draft , th e onl y tim e whe n PS D revie

w woul d clearl y not b e triggered i s whe

n pas t representativ e emission s equa l th

e source' s highes t pas t utilizatio n rate . I

n ever y cas e wher e pas t representativ e utilizatio

n i a les s tha

n th e pas t maximu m levels , PS D wil l b e triggered (eve

n i n casea wher e futur e utilizatio

n i s projected t

o dacr^fl^ e belo

w pas t representativ e levels) . Amon

g othe r things , thi s ne w requiremen t wil l arbitraril y

targe t fo

r ne w sourc e revie

w smaller , highe r emittin g facilitie s tha t hav e bee n reducin

g utilizatio

n an d pla n t o reduc e Utilizatio

n further t o mee t aci d rai n requirements . Finally , th

e drat t interpretativ e rul e i s expressed i n term a tha t make it particularl y vulnerabl e t o litigatio n b y opponent s t o th

e rule . Amon

g othe r things , ther e i s n o logica l or lega l basi s fo r distinguishin

g utilitie s fro

m non-utilitie s withrespec t t o pollutio

n contro l project s an d "lik e kind " replacements . Whil e distinction s ma

y be made a s t o wha t constitute s a pollutio n contro l project , i

t seem s to us tha t a

a a matte r o f soun

d administrativ

e law , EP

A canno t declar e pollutio n control s undertaken b

y utilitie s a s bein

g exemp t unde r th

e PS D rule s an

d control s undertaken b y other industrie s as triggerin g PS D review . I n thi s regard , releas e of th e interpretativ

e rul e i

n it s presen t for m woul d signa l t o al l other industrie s tha t EP A woul d vie

w contro l project s a s triggerin g a n "actua l t o potential " comparison . Thi s woul d mea n tha t ne

w sourc e revie

w woul d hav

e t o precede commencement o f constructio n o f an y pollutio

n contro l projec t b

y an y othe r industry . Thi s woul d substantiall y inhibi t th e voluntar

y contro l progra

m unde r Titl e II I o f th e 199 0

v Th e draf t fail s t o stat e explicitl y tha t change s i

n loadin

g order o f unit s du

e t o economi c o

r environmenta l reason s mus t b e discounted . Also , b y imposin

g a burde n o f proo f o n utilitie s undertakin

g etticienc

y improvements , EP

A wil l discourag e project * that ar e critica l t o achievin g th e Administration' s energ y an d environmenta l policies , includin g "globa l warming " concerns .P- 7 TEL : . . V .. .

Amendment s an

d coul d wreak havo c o n Titl e I nonattainmen t contro l programs , .A

n interpretation o f current rule s tha t returne d t o th e 198 3 Pedersen interpretatio n woul d avoi d thes e problems . I n conclusion , th

e draf t interpretativ e rul e doe s no t solv e "9 0 percent " o f th

e problem , a

o suggested b

y EP A a t ou r las t meeting . I t merel y

reiterate s th

e Agency' s prio r positio n an d impose s ne

w restriction s tha t creat e additiona l problems / makin g thi s draf t eve n les s acceptabl e than the prio r attempts .

Ill , DO E Recommendatio n Th e draf t interpretativ e rul e shoul d no t b e release d becaus e i t doe s not fultil l Administrato r Reilly' a commitment . Simpl e editin g wil l no

t transfor

m it int o a

n acceptabl e response . Wha t i s neede

d i s a legislativ

e rul e wit ha

n explanation o f curren t la w that remove s th

e WEPC O clou

d over pollution contro l project s an d ove r legitimat e repai r an d replacemen t activitie s a t utilit y units . W

e believ

e tha t th

e industr

y woul d be perfectl y conten t t o wai t a littl e bi t longer , s o a s t o ge t neede d WgPC o relief . Th e legislativ

e rul e shoul d als o include , a s Do n Elliot t ha s promised , proposed change s t o implement the CW A settlement . W e believ

e th e preambl e t o suc

ha legislativ

e rul e (which , t o the exten t it describe

d curren t law , woul d als o b e a n "interpretativ

e rule " tha t sourc e owner s coul d rel y upon ) shoul d accomplis hthe following : 1 . Make clear tha t curren t rule s contai n a n implici t pollution contro l exclusion (i.e. , a retur n t o the Pederse n interpretation) , whic hEP A i s proposin

g t o make explicit ; 2 . Describe th

e "causa l link " requiremen t an d mak e clea r tha t increase

d utilization du

e t o change s in loadin g order o r deman d growthmus t b

e discounted ; 3 . Implement th

e CM A settlemen t b

y proposing a chang e i n th e ne w sourc e applicabilit y rule s t o allo

w a n electio

n betwee n "potential-to-potential M an d "actual-to-actual" ; 4 . Unti l th

e CM A rul e i s finalized , mak e clea r tha t unit o tha t hav e begu n norma l operation s (includin g al l unit s undertakin

g like-kin

d replacements ) ar e subjec t t o a n actual-ta-.-ictual comparison ; 5 . implement tn

e NSP S fi

xi n th e Administration proposal , makin g clea r that , i

n th e interim , the emissio n rat e immediatel y

befor e a chang e wil l no t b e uae d wher e tha t rat e reflect s temporar

y condition s tha t ar e unrepresentativ e o f pas t operations .P. 8

** •iir TEL : Rp r 29,9 1 23=2 2 No.01 3 P.1 0

meanin g of th e term , it shoul d b e defined i

n th e iegialativ

e rule . I

n addition , utilit

y PCP s shoul d b

e presumed t o be environmentall y

beneficial . Th e excerp t languag e doe s no t mention deman d growth . Increase

d utilizatio

n i n respons e to deman d growt hshoul d be exclude d fro m th e projectio

n o f future-actua l emission s fo r PCPS . Thi s i s appropriat e becaus e th e installatio

n o f pollutio

n control s or fue l switchin g ar e no t causall y linke d t o satisfyin

g futur e deman

d growth . Onc e again , w

e objec t t o a rebuttabl e presumptio n bein g tied t o pollutio

n contro l projects . A s w e al l know , th

e allowanc e tradin

g syste m encourage s a hig

hleve l o f utilizatio

n o f th

e best-controlled powerplants . Therefore / increase

d utilizatio

n du e t o environmental/economi c dispatc h shoul d b e excluded . Otherwise , th e rebuttabl e presumptio n wil l b e rebutte

d an d WEPCo wil l b

e triggered .