Report to Congressional Requesters

United States General Accounting Office 

GAO 

February 2004 CLEAN AIR ACT 

Key Stakeholders’ 

Views on Revisions to 

the New Source 

Review Program 

GAO-04-274 
www.gao.gov/cgi-bin/getrpt?GAO-04-274.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact John 

Stephenson at (202) 512-3841 or 

stephensonj@gao.gov. 

Highlights of GAO-04-274, a report to 

congressional requesters 

February 2004

CLEAN AIR ACT

Key Stakeholders’ Views on Revisions to 

the New Source Review Program 

A majority (29 of 44) of the state officials responding to GAO’s survey 

expected the rule EPA finalized in December 2002 to provide industry with 

greater flexibility to make some facility changes without having to obtain 

NSR permits or, in some cases, install pollution controls. However, in their 

opinion, 27 officials expected the rule to increase emissions of harmful air 

pollutants, thereby hindering areas’ efforts to meet air quality standards and 

potentially creating or exacerbating public health risks. This concern 

contrasts with EPA’s assessment that the rule will decrease emissions and 

maintain the current level of environmental protection. Furthermore, 30 of 

the officials expected their agency’s workload would increase as they adopt 

and implement the rule into their own programs. Almost all of the 44 

officials would like EPA assistance with implementation. 

Similarly, 28 of the 42 officials responding expected the two NSR revisions 

as proposed in December 2002—intended to provide more certainty about 

when facility changes are considered routine maintenance, repair, and 

replacement activities and can be excluded from NSR requirements—to 

decrease the number of permits companies would have to obtain, thereby 

giving them the flexibility to make some changes without installing controls. 

However, 21 and 26 officials, respectively, thought that the two exclusions 

would increase emissions; only relatively few thought the exclusions would 

decrease emissions as EPA’s analysis had predicted. About a third of the 

officials thought the exclusions would exacerbate air quality problems in 

areas that do not meet standards, but fewer officials thought the exclusions 

would cause problems in areas that currently meet standards. Finally, 27 

thought that implementing the two exclusions would increase states’ 

administrative burden. 

The other stakeholder groups GAO contacted agreed that the final rule and 

two exclusions would decrease the regulatory burden on companies that 

modify their facilities, but disagreed about the impact on emissions and air 

quality agencies’ workload. The six environmental and public health 

officials expected that because companies would not have to obtain as many 

NSR permits or install as many controls when modifying facilities, emissions 

would rise and state and local agencies’ workloads increase as agencies 

sought alternative ways to meet standards. In contrast, the eight industry 

officials expected the revisions to encourage companies to invest in energyefficient projects they had avoided under the prior program, which the 

officials believed would lower fuel use and emissions. The officials also 

expected that fewer permits would lead to decreases in agencies’ workloads. 

Determining the revisions’ likely impacts is difficult because, as discussed in 

GAO’s August 2003 report on EPA’s analytical basis for the final rule (GAO03-947), little data exist to confirm stakeholders’ opinions. In that report, 

GAO recommended that EPA work with state and local agencies to obtain 

data to assess the rule’s emissions impact and correct any adverse effects. 

Environmental Protection Agency 

(EPA) revisions to the New Source 

Review (NSR) program to control 

industrial emissions have drawn 

attention from state and local 

agencies that implement the 

program, as well as industry and 

environmental and health groups. 

Under the revisions, companies 

may not have to install pollution 

controls when making some facility 

changes. GAO was asked to obtain 

the opinions of state air quality 

officials and other stakeholders on 

the impact of both the final and 

proposed revisions EPA issued in 

December 2002. GAO obtained 

survey responses from NSR 

program managers in 44 states and 

certain localities and contacted six 

environmental and health groups, 

and eight industry groups active in 

the NSR debate. 

GAO recommends that EPA (1) 

help state air quality agencies 

implement the revisions, (2) 

monitor the effects of the rule that 

excludes routine equipment 

replacements from NSR, and (3) 

consider stakeholders’ concerns 

before excluding other activities 

from NSR. In commenting on the 

report, EPA’s Assistant 

Administrator for Air and Radiation 

said that the agency has concerns 

about our methodology and certain 

of our findings. GAO believes its 

approach and presentation are 

appropriate. Moreover, EPA said 

that our recommendations make 

sense, and that the agency already 

plans to take these actions. 
Page i GAO-04-274 Clean Air Act 

Letter 1

Results in Brief 6

Background 9

A Majority of the State Officials Expect the December 2002 Rule 

Will Provide Industry with Greater Operating Flexibility but Also 

Increase Emissions and Agencies’ Workload 13

At Least Half of the State Officials Expected the Proposed 

Revisions Defining NSR Exclusions to Provide Industry Greater 

Flexibility but Also Increase Emissions and the Administrative 

Workload for State Agencies 19

Other Stakeholders Expected the Proposed and Final NSR 

Revisions to Benefit Industry but Disagreed on Their Effect on 

Emissions and Air Quality Agencies’ Workload 23

Conclusions 27

Recommendations for Executive Action 28

Agency Comments and Our Evaluation 29

Appendix I Summary of Local Agency Officials’ Responses 32 

Impacts on Industry 32

Emissions Impacts 32

Impacts on Local Agencies 33

Impacts on Industry 33

Emissions Impacts 33

Impacts on Agencies 34

Appendix II Objectives, Scope, and Methodology 35 

Appendix III Comments from the Environmental Protection 

Agency 41 

GAO Comments 46

Appendix IV GAO Contacts and Staff Acknowledgments 51 

GAO Contacts 51

Staff Acknowledgments 51

Contents 
Page ii GAO-04-274 Clean Air Act 

Tables 

Table 1: NSR Revisions Included in the December 2002 Final Rule 11

Table 2: Anticipated Emissions Effects of the December 2002 Final 

Rule Provisions (number of state officials’ responses) 15

Table 3: Ways in Which Officials Expect Their States to Adopt the 

Final Rule 18

Table 4: States with Local Air Agencies 35

Table 5: Survey Respondents Listed by EPA Region 37

Abbreviations 

ALAPCO Association of Local Air Pollution Control Officials 

DOE Department of Energy 

EPA Environmental Protection Agency 

NSR New Source Review 

PSD Prevention of Significant Deterioration 

STAPPA State and Territorial Air Pollution Program Administrators 

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. It may be reproduced and distributed in its entirety without further 

permission from GAO. However, because this work may contain copyrighted images or 

other material, permission from the copyright holder may be necessary if you wish to 

reproduce this material separately. 
Page 1 GAO-04-274 Clean Air Act 

February 2, 2004 

The Honorable James M. Jeffords 

Ranking Minority Member 

Committee on Environment and Public Works 

United States Senate 

The Honorable Joseph I. Lieberman 

United States Senate 

The Environmental Protection Agency’s (EPA) revisions to the Clean Air 

Act’s New Source Review (NSR) Program—one of the act’s mechanisms 

for maintaining air quality to protect public health—have provoked 

controversy. These revisions are contained in rules that the agency issued 

in December 2002 and October 2003, respectively. In general, these rules 

provide companies with regulatory flexibilities to modify their industrial 

facilities without triggering NSR requirements to install potentially costly 

pollution controls, if certain conditions are met. According to EPA, the 

December 2002 rule will provide incentives for facilities to reduce 

emissions, remove barriers to energy efficiency and pollution control 

projects, and offer facilities greater regulatory flexibility, while the 

October 2003 rule will allow companies to modernize facility operations in 

ways that will maintain and improve safety, reliability, and efficiency. EPA 

also anticipates that the rules will enhance the NSR program’s 

environmental benefits. 

Reactions to the rules have differed considerably. A number of industry 

groups agree with EPA’s position, and some states have filed legal 

documents in court expressing support for the rules. Other states and 

some localities, including a coalition of states and various localities 

primarily located in the mid-Atlantic and northeast regions of the country,1

as well as certain environmental groups, have filed lawsuits challenging 

the legality of the two rules in court. 

 1

The District of Columbia is included in this coalition. 

United States General Accounting Office

Washington, DC 20548 
Page 2 GAO-04-274 Clean Air Act 

The NSR program—established in 1977—seeks to protect public health, 

maintain compliance with air quality standards, and enhance air quality in 

national parks and scenic areas. The NSR program applies to nearly 17,000 

industrial facilities, including fossil-fueled power plants, petroleum 

refineries, and facilities that manufacture automobiles, chemicals, 

pharmaceuticals, and paper. The program requires companies, when they 

are constructing facilities, to obtain NSR permits that limit the amount of 

pollution that facilities may emit and to install pollution controls when 

necessary. The program imposes similar requirements when a company 

makes a physical or operational change to an existing facility—such as 

adding new production equipment—if the change would result in a 

significant net increase in emissions.2

 The Congress allowed existing 

facilities to defer installation of pollution controls until a major 

modification was made with the expectation that, over time, all facilities 

would install such equipment, and this would lead to lower overall 

emissions. 

Responsibility for implementing NSR, as well as other air quality 

regulations, generally rests with state and local air quality agencies. 

However, the stringency of the air quality regulations they set varies. The 

Clean Air Act generally requires more stringent control measures for 

industries located in areas that fail to meet at least one of the air quality 

standards than for those located in areas that meet the standards. 

Because of the NSR program’s complexity and the administrative burden it 

imposes, EPA has long recognized a need to revise it. In 1992, EPA began a 

reform process that resulted in proposed changes to the program in 1996 

and 1998. But the agency did not finalize the proposals as rules during the 

previous administration. The current administration acted on certain of 

the prior reform proposals by issuing a final rule in December 2002.3

 This 

rule contained five provisions—including a new method for determining 

whether a facility change will significantly increase net emissions—that 

reduced the likelihood that certain of these changes would require an NSR 

permit or, in some cases, the installation of pollution controls. In assessing 

 2

Such changes are called “major modifications” and the level of emissions that will trigger 

the NSR requirements, known as the threshold, varies by pollutant and the air quality status 

of the area in which a facility is located. 

3

Prevention of Significant Deterioration (PSD) and Nonattainment New Source Review 

(NSR): Baseline Emissions Determination, Actual-to-Future Actual Methodology, Plantwide 

Applicability Limitations, Clean Units, Pollution Control Projects, 67 Fed. Reg. 80186 (2002) 

(to be codified at 40 C.F.R. pts, 51 and 52). 
Page 3 GAO-04-274 Clean Air Act 

the potential costs and benefits of the rule to determine whether to pursue 

it, EPA anticipated that this rule will provide incentives for facilities to 

reduce emissions, remove barriers to investments in energy efficiency and 

pollution control projects, and offer facilities greater regulatory flexibility. 

In addition, at the time the agency issued the rule, it released an analysis of 

the rule’s anticipated environmental effects that concluded the rule would 

lead to an overall environmental benefit.4

 EPA estimated it will cost state 

and local agencies about $6.5 million annually to incorporate the rule into 

their air pollution control plans. However, the agency expects that the rule 

will ultimately decrease agencies’ NSR costs after the first 3 years of 

implementation. 

Also in December 2002, EPA issued a proposed rule, with two provisions, 

that would define certain activities as routine maintenance, repair, or 

replacement and, therefore, exempt from NSR requirements.5

 In its 

assessment of the rule, the agency asserted that the two provisions would 

provide greater certainty to industry about when facility changes can be 

exempt from NSR and encourage facilities to perform energy-efficiency 

projects that were being hindered by the existing program’s requirements 

for permits and costly controls. The cost of installing controls varies but, 

in extreme cases, costs can reach hundreds of millions of dollars, 

according to EPA. 

One of the provisions that EPA proposed would exclude activities from 

NSR requirements considered “routine equipment replacements”—

replacements of worn-out or broken machinery with identical parts or 

those that perform the same function as the existing part. EPA proposed 

several thresholds below which expenditures for such equipment 

replacement could be considered routine and exempt from NSR 

requirements and solicited public comment on them.6

 After reviewing the 

comments it received, EPA issued this exclusion as a final rule in October 

2003. EPA established 20 percent of the cost to replace the entire process 

 4

See U.S. Environmental Protection Agency, Supplemental Analysis of the Environmental 

Impact of the 2002 Final NSR Improvement Rules (Washington, D.C.: Nov. 21, 2002). 

5

Prevention of Significant Deterioration (PSD) and Nonattainment New Source Review: 

Routine Maintenance, Repair and Replacement, 67 Fed. Reg. 80290 (2002). 

6

The cost of the replacement equipment had to be below a certain percentage of the cost to 

replace the “process unit.” A process unit for power plants is defined as the portion of a 

plant that directly contributes to electricity production (power plants can have more than 

one such unit). The replacement equipment also had to meet certain criteria, such as 

maintaining the basic design of the original unit. 
Page 4 GAO-04-274 Clean Air Act 

unit—for example, a steam-generating unit in a power plant—as the cost 

threshold companies could use to replace parts within that unit without 

being subject to NSR, and concluded that the rule would have insignificant 

environmental effects.7 EPA also estimated that the rule would impose 

one-time costs of $8.7 million on industry and $1.7 million on state and 

local agencies that adopt the rule, while saving the electric utility industry 

hundreds of millions of dollars.8

The other provision that EPA proposed would create an “annual 

maintenance allowance” exclusion that would enable companies to avoid 

NSR if the cost of all routine maintenance and repair activities did not 

exceed a certain percentage of the cost to replace the entire facility. The 

agency has not determined whether it will finalize this portion of the 

proposal or pursue other options to address routine maintenance and 

repair activities. 

You asked us to address a number of questions about the basis of the 

revisions and their potential impacts. In two previous reports on the 

revisions, we reviewed (1) EPA’s assessment of the economic and 

environmental impact resulting from the December 2002 final rule, and (2) 

the potential impact of the NSR revisions on the enforcement actions that 

EPA had filed against coal-fired power plants for allegedly violating NSR 

requirements and on public access to information on emissions. We 

presented our findings on these reviews in reports issued on August 22, 

2003, and October 21, 2003, respectively.9

 In the August report, we 

determined that data limitations precluded EPA from performing a 

quantitative analysis of the effects of the December 2002 final rule. In the 

 7

Prevention of Significant Deterioration (PSD) and Nonattainment New Source Review 

(NSR): Equipment Replacement Provision of the Routine Maintenance, Repair and 

Replacement Exclusion, 68 Fed. Reg. 61248 (Oct. 27, 2003) (to be codified at 40 C.F.R. pts, 

51 and 52). 

8

EPA based this statement on an analysis which concluded that revising the routine 

maintenance, repair, and replacement exemption would lead to the increased availability of 

existing power plants, thereby reducing the need for new plants. See U.S. Environmental 

Protection Agency, Regulatory Impact Analysis for the Specification of Categories of 

Activities as Routine Maintenance, Repair, and Replacement for the New Source Review 

Program (Washington, D.C.: August 2003). 

9

See U.S. General Accounting Office, Clean Air Act: EPA Should Use Available Data to 

Monitor the Effects of Its Revisions to the New Source Review Program, GAO-03-947

(Washington, D.C.: Aug. 22, 2003) and U.S. General Accounting Office, Clean Air Act: New 

Source Review Revisions Could Affect Utility Enforcement Cases and Public Access to 

Emissions Data, GAO-04-58 (Washington, D.C.: Oct. 21, 2003). 
Page 5 GAO-04-274 Clean Air Act 

October report, we determined that the revisions could affect the ongoing 

cases and the public’s access to emissions information, although EPA 

program managers did not agree that the rule would affect access to 

emissions information. 

You also asked us to obtain the views of a number of key stakeholders 

about a broader range of the revisions’ potential impacts. More 

specifically, you asked us to obtain (1) state air quality agency officials’ 

views about the impacts of the December 2002 final NSR rule on industry, 

emissions, and agencies’ workloads; (2) state air quality agency officials’ 

views about the impacts of the two December 2002 proposed NSR 

exclusions on industry, emissions, and agencies workloads; and (3) 

environmental, health, and industry organizations’ views on the impacts of 

all the NSR revisions. In addition, we determined selected local air quality 

agencies’ views on the revisions’ potential effects. 

To address the first two objectives, we administered a detailed survey to 

the NSR program managers in 50 states and the District of Columbia using 

the Internet. We surveyed program managers to ensure that we obtained 

information from those most involved in the day-to-day administration of 

the NSR program. In addition, we sent this survey to 71 local agencies, 

primarily those with their own authority to issue NSR permits. To identify 

the NSR program manager for each state or local agency, we worked with 

the 10 EPA regional offices and obtained some information from the State 

and Territorial Air Pollution Program Administrators (STAPPA) and the 

Association of Local Air Pollution Control Officials (ALAPCO) Internet 

site. We pretested the survey with selected state and local program 

managers to ensure the questions were clear, understandable, accurate, 

and comprehensive. In addition, to ensure that the questions were neutral 

and objective, we pretested the survey with states that were supportive of 

the revisions, as well as states that were not. We received complete 

responses from 44 state program managers and 60 local agency officials 

(each state or local agency could only provide one response). The 

managers in four states said they declined to respond so as not to disclose 

information related to their state’s ongoing NSR-related litigation. We have 

provided a copy of our survey and detailed tables showing the state and 

local officials’ responses to the questions in a separate report, Survey of 

State and Local Air Quality Officials Opinions on the Impacts of the 

Environmental Protection Agency’s Revisions to the Clean Air Act’s New 

Source Review Program (GAO-04-337SP), available on the Internet at 

http://www.gao.gov/special.pubs/gao-04-337sp. We have also summarized 

the main results of our survey of select local air quality agencies in 

appendix I. 
Page 6 GAO-04-274 Clean Air Act 

It is important to note that we asked the program mangers for their 

opinions about the potential impacts, both positive and negative, of the 

NSR revisions. Based on our prior work, we had established, and EPA 

program managers told us, that very little data existed—either on the 

impact of the NSR program before the revisions, or on the number of 

facilities that might use any or all of the revisions—to try to assess the 

revisions’ impacts. In addition, at the time we asked the state and local 

officials for their opinions about the exclusion of certain activities as 

routine equipment replacement, EPA had not defined a specific cost 

threshold for this exclusion as it did in the October 2003 rule. As a result, 

we wanted to confirm that the opinions the officials stated about the 

exclusion in response to our survey were still accurate. Therefore, we 

provided a summary of our survey results regarding this provision to 

STAPPA/ALAPCO. Working with its members, the association confirmed 

that states and localities continue to have the same views about this 

exclusion as they did at the time of our survey. Furthermore, we 

confirmed with the EPA NSR program manager that he did not think the 

opinions of the state and local officials had changed as a result of EPA 

finalizing the exclusion in its October 2003 rule. 

To address the third objective, we identified key stakeholders involved in 

NSR policy decisions at the national level—including representatives of 

industry, environmental, and public health interests—and sent them a 

more general list of questions via electronic mail that solicited their 

responses about the revisions’ potential effects. For a more detailed 

discussion of our scope and methodology, see appendix II. 

A majority of the 44 state air quality officials responding to our survey 

believes that the December 2002 final rule will provide industry greater 

flexibility to modify facilities without having to install pollution controls in 

some cases; a majority of the officials also think, however, this flexibility 

will come at the cost of increases in emissions and agencies’ workloads. 

Regarding the impact of the rule on industry, 29 of the 44 officials said 

that, in their professional opinion, the rule allows companies to make 

more modifications without having to obtain permits, which can trigger 

requirements for controls. The permitting process and its requirements to 

install controls, however, was one of the best features of the NSR program 

prior to the revisions, according to 40 of the officials. Regarding the rule’s 

impact on emissions, 27 of the 44 officials believe the rule will increase 

emissions; only 5 believe it will decrease them (the remaining officials 

thought they would remain the same or were unsure). Many officials 

expect that these potential emissions increases will affect their state’s 

Results in Brief 
Page 7 GAO-04-274 Clean Air Act 

ability to meet the national health-based air quality standards: 13 officials 

said their state would have difficulty meeting standards, and 14 said they 

would look to other pollution control programs to try to offset the 

anticipated increases. Only 7 said their state would not have difficulty 

meeting standards. (Nine said they could not judge the rule’s effects). 

Finally, 30 of the officials predicted that implementing the rule, such as 

educating industry and their own staff on its provisions, would increase 

their agency’s workload at a time when many state agencies’ resources are 

constrained. To implement the rule, almost all of the officials said they 

would like EPA’s assistance and we are recommending that EPA provide 

states with this help. 

Overall, the state officials had similar opinions about the impact of the two 

provisions excluding some facility activities from NSR requirements if they 

are considered routine maintenance, repair, or replacement. Regarding the 

exclusions’ impact on industry, 28 of the 42 officials responding to this 

question said that both provisions would allow companies to make more 

facility changes without having to obtain permits. On the other hand, 21 of 

the 42 officials thought the exclusion for routine equipment replacement 

would increase emissions, and 26 thought the proposed annual 

maintenance allowance exclusion would have this impact. Relatively few 

officials thought the exclusions would decrease emissions. In general, the 

officials were less concerned about the impact of the exclusions on states’ 

ability to address air quality problems or meet standards than they were 

about the final rule’s impact. More specifically, about a third of the 

officials thought the increased emissions under the exclusions would 

worsen air quality problems in areas that already did not meet standards. 

Moreover, only 5 officials thought the exclusion for routine equipment 

replacement would cause problems in areas that currently meet standards, 

and only 7 thought the proposed annual maintenance allowance exclusion 

would do so. Regarding the impact on agency workloads, 27 of the 44 

officials responding thought that implementing the exclusions would 

increase their administrative burden. Overall, 21 officials opposed the 

exclusion for routine replacement of equipment; 32 opposed the proposed 

annual maintenance allowance exclusion; and, relatively few supported 

either provision (the remaining officials said they neither supported nor 

opposed it, or they had no opinion). 

The other stakeholders we contacted—representatives of key industry, 

environmental, and public health interests who have been most active in 

the NSR debate at the national level—also believed the revisions in the 

final rule and the two proposed exclusions would decrease the regulatory 

burden on industry. But the stakeholders differed in their opinions about 
Page 8 GAO-04-274 Clean Air Act 

these revisions’ impacts on emissions and agencies’ workloads. 

Representatives from the six environmental and public health groups we 

contacted believed the revisions allow companies to make more 

modifications without having to obtain an NSR permit or install controls, 

and that emissions and public health risks would increase as a result. 

These representatives also believed the changes would create more work 

for state and local air quality agencies, such as their having to find other 

ways to reduce emissions to meet air quality standards. On the other hand, 

the eight industry representatives we contacted expected the revisions to 

decrease emissions and health risks because they believe, consistent with 

EPA’s analysis, that companies will be more likely to pursue energy 

efficiency projects they had postponed because of the prior NSR 

requirements. With these projects, facilities could operate more efficiently, 

burning less fuel and creating fewer emissions, according to the 

representatives. As we noted in our August 2003 report, however, other 

industry and environmental officials believed that if facilities can operate 

more efficiently, they will increase their production and, therefore, 

emissions overall. Finally, the industry representatives we contacted 

believed that the revisions would lighten air quality agencies’ workloads. 

The NSR program will be clearer and simpler to implement and enforce, 

and agencies will have fewer permits to issue, according to some of these 

representatives. 

Determining the likely impact of the revisions, given the conflicting 

opinions of state officials and stakeholders, is difficult primarily because 

little data exist to substantiate opinions. For example, one of the 

stakeholders we contacted cited an EPA analysis of the equipment 

replacement rule as support for his position, and another cited a 

Department of Energy (DOE) analysis. However, neither analysis was a 

comprehensive assessment of the revisions’ effects. Furthermore, as we 

noted in our August 2003 report, the overall economic and environmental 

effects of the December 2002 rule are uncertain because of data 

limitations and difficulty determining how companies will respond to the 

rule. Therefore, we recommended in that report that EPA work with state 

and local air quality agencies to obtain the data needed to monitor the 

rule’s emissions impacts and address any adverse effects. In this light, we 

are making additional recommendations in this report: that EPA (1) 

identify available data, or ways to obtain it, to monitor the emissions 

impact of the NSR exclusion for routine equipment replacement (which 

EPA issued as a final rule in October 2003) and (2) consider the state 

officials’ and stakeholders’ concerns about emissions and workload 

impacts that we identified before issuing a final rule on the proposed 

annual maintenance allowance. 
Page 9 GAO-04-274 Clean Air Act 

In commenting on the report, EPA’s Assistant Administrator for Air and 

Radiation said that the agency has concerns about our methodology and 

certain of our findings. Nevertheless, EPA said that our recommendations, 

on their face, make sense and that the agency already has plans to take 

these actions. Specifically, EPA asserted that GAO (1) used the opinions 

expressed in the survey responses as fact, and to draw conclusions and 

make recommendations about the NSR program, (2) did not assure 

balance and objectivity, (3) used a skewed survey sample, and (4) should 

have evaluated whether the survey results were consistent with the facts 

cited in EPA’s analyses of the revisions’ effects. GAO disagrees with each 

of these assertions. First, GAO solicited opinions and carefully presented 

them as such because we found, and EPA acknowledged, the emissions 

data available to analyze the NSR revisions’ impacts are so limited. We 

also found that the state program managers’ informed opinions raised 

substantial concerns about the revisions’ impacts. Our recommendations 

are intended to address these legitimate concerns. Second, in designing 

our survey, we took numerous steps to minimize bias, including asking 

respondents’ about both the positive and negative effects of the revisions, 

conducting several pretests of the survey, and having a survey specialist 

independent of its design review the survey to ensure that the questions 

were not biased. Third, GAO surveyed the universe of state program 

managers. These officials are on the front lines of program implementation 

and are in the most informed position to weigh in on the implementation 

impact questions we asked. Because of the large number of other affected 

stakeholders, it was not feasible to survey the universe. Instead, we 

surveyed 30 representative organizations, chosen because they are 

involved in national NSR policy decisions and represent diverse 

environmental, health, and industry perspectives. Finally, we did not use 

the results of EPA’s analyses as a benchmark to evaluate the survey 

responses because our previous and current work has identified numerous 

limitations with those analyses. EPA’s written comments and our detailed 

response are included as appendix III. 

Under the Clean Air Act, EPA establishes health-based air quality 

standards that the states must meet and regulates air pollutant emissions 

from various sources. These include industrial facilities and mobile 

sources, such as automobiles and other transportation. EPA has issued air 

quality standards for six primary pollutants—carbon monoxide, lead, 

Background 
Page 10 GAO-04-274 Clean Air Act 

nitrogen oxides, ozone,10 particulate matter, and sulfur dioxide—that have 

been linked to a variety of health problems. For example, ozone can 

inflame lung tissue and increase susceptibility to bronchitis and 

pneumonia. In addition, nitrogen oxides and sulfur dioxide contribute to 

the formation of fine particles that have been linked to aggravated asthma, 

chronic bronchitis, and premature death. In 2002, the most recent year for 

which data were available, 146 million Americans lived in areas that failed 

to meet at least one air quality standard, according to EPA.11

Subject to EPA’s oversight, state and local air quality agencies generally 

administer the NSR program and operate under one of two arrangements. 

First, some agencies located in areas that meet air quality standards have 

“delegation” agreements with EPA under which they implement the NSR 

program contained in EPA’s regulations. Under the second arrangement, 

agencies design their own programs by incorporating all of their air quality 

regulations, including federal requirements, into overall air quality plans, 

known as state implementation plans. They update these plans 

periodically and submit them to EPA for approval. 

In addition, the Clean Air Act requires those agencies that implement their 

own air quality programs to ensure their requirements are at least as 

stringent as EPA’s regulations. State and local agencies may also 

supplement the federal NSR program with additional requirements. 

However, some jurisdictions have laws or policies that prevent agencies 

from implementing more stringent regulations. 

Throughout its history, the NSR program has been characterized by 

complexity and controversy, involving disputes between EPA and industry 

about, among other things, whether certain facility changes qualified for 

the routine maintenance, repair, and replacement exclusion. In recent 

years, EPA has taken enforcement action against companies in several 

industries, including some electricity producers, forest product 

manufacturers, and petroleum refineries, alleging noncompliance with the 

program. 

 10Ozone forms when nitrogen oxides react with volatile organic compounds in the presence 

of heat and sunlight. 

11This information, provided by EPA, is used for background purposes only. We did not, 

therefore, assess its reliability. 
Page 11 GAO-04-274 Clean Air Act 

In addition to concerns about enforcement related issues, some industry 

representatives have also raised concerns that the time required to obtain 

a NSR permit and the cost of installing controls have prevented facilities 

from making changes that enhance energy efficiency and reduce air 

emissions, such as modifying a boiler so that it produces the same amount 

of energy with less fuel. In May 2001, the Vice President’s National Energy 

Policy Development Group recommended, among other things, that the 

Administrator of the EPA, in consultation with the Secretary of Energy 

and other federal agencies, examine the impact of the NSR program on 

investments in new utility and refinery generation capacity, on energy 

efficiency, and on environmental protection. In its June 2002 NSR Report 

to the President, EPA concluded, among other things, that the program 

had not affected investments in new power plants and refineries but had 

discouraged some energy efficiency projects at existing facilities, 

including some that would have reduced air emissions. This report also 

contained recommendations for revising the program. 

Subsequently, EPA issued a final rule on December 31, 2002, which 

contained five provisions, identified in table 1, which exempt certain 

facility changes from requirements to obtain NSR permits.12

Table 1: NSR Revisions Included in the December 2002 Final Rule 

Provision Final rule requirements 

Revised method for calculating “baseline” 

emissions 

Changes the method for computing a piece of equipment’s baseline emissions from the 

most recent 24-month period—or any other period more representative of normal 

operations—to any 24-month period in the past 10 years adjusted for any new 

emissions limits added since the baseline period. No changes were made to the 

baseline period for electric utilities. 

Revised test for calculating emissions 

changes 

Allows a facility to calculate expected emissions after a facility change based on its 

projection of future operation, rather than at full capacity. This provision extended to all 

other industries the same type of methodology for calculating expected emissions that 

EPA had granted to the utility sector in the early 1990s. 

Clean unit Excludes production equipment with state-of-the-art pollution controls from NSR 

requirements for up to 10 years after installation provided the unit will still meet the 

physical or operational characteristics that formed the basis for the clean unit 

designation. 

 12The final rule’s provisions were based on proposals considered by the previous 

administration but never finalized. EPA solicited public comment on those proposals in 

1996 and again in 1998. 
Page 12 GAO-04-274 Clean Air Act 

Provision Final rule requirements 

Pollution control projects Exempts pollution prevention and control projects from NSR if they are on EPA’s list of 

“environmentally beneficial” projects or on a case-specific basis if a nonlisted project is 

determined to be environmentally beneficial. It also must be shown that the project will 

not cause or contribute to a violation of federal air quality standards or adversely 

impact air quality-related values (such as visibility) for a national park. 

Plantwide emissions limits Allows facilities to set a single emissions limit (per pollutant) for an entire plant and 

then make changes within the facility without triggering NSR, provided they do not 

exceed the limit. 

Source: EPA. 

These revisions have been the subject of congressional debate. For 

example, in 2002, the Congress held hearings during which members of the 

Congress, EPA officials, and a number of stakeholders—including 

industry, states, and environmental groups—presented their positions on 

the revisions. Also, legislation has been introduced in the Congress that 

seeks to further regulate emissions from industrial facilities.13

In addition, a number of environmental and public health groups, as well 

as a group of states primarily from the Mid-Atlantic and Northeast, claimed 

that the December 2002 final rule violated the Clean Air Act and asked 

EPA to reconsider several aspects of the rule. In July 2003, EPA agreed to 

do so and then solicited public comment on the areas under 

reconsideration. Based on this input, EPA announced at the end of 

October 2003 that it would make several technical changes to the rule. 

State and local agencies that operate under delegation agreements were 

required to have implemented the December 2002 rule by March 2003 or 

return responsibility for implementing the rule to EPA, while those 

operating under state implementation plans have until January 2006 to 

revise their regulations accordingly.14

As for the December 2002 proposed provisions—that would further 

specify what facility changes are exempt from NSR requirements under 

the routine maintenance, repair, or replacement exclusions—a coalition of 

primarily Mid-Atlantic and Northeastern states and environmental and 

public health groups challenged the legality of the equipment replacement 

rule in court after it was finalized in October 2003. State and local agencies 

 13Clear Skies Act of 2003 (S. 485 and H.R. 999); Clean Power Act of 2003 (S. 366); Clean Air 

Planning Act of 2003 (S. 843); Omnibus Mercury Emission Reduction Act of 2003 (S. 484). 

14Instead of meeting the March 2003 deadline, state and local agencies could elect to have 

EPA take over the administration of portions of their NSR programs affected by the 

revisions. Several agencies have chosen this option. 
Page 13 GAO-04-274 Clean Air Act 

that operate under delegation agreements were required to implement this 

rule by December 26, 2003 or have EPA implement it for them, while those 

operating under state implementation plans have until October 2006 to 

revise their regulations accordingly. However, on December 24, 2003, the 

U.S. Court of Appeals for the District of Columbia Circuit stayed the 

equipment replacement rule pending further review, preventing the rule 

from going into effect while the court considers the legal challenges. EPA 

has not determined what additional action, if any, it will take regarding 

establishing an annual maintenance allowance below which facility 

changes would be considered exempt from NSR requirements. 

A majority of the state officials expect that the December 2002 final rule 

will provide industry with greater flexibility to make facility changes 

without triggering NSR requirements for permits. However, a majority of 

the officials also expect that the rule will lead to an overall increase in 

emissions of harmful air pollutants and hinder efforts to meet air quality 

standards, potentially creating or exacerbating risk to public health. Most 

of the officials also expect that the rule will increase their agencies’ 

workload. 

In pursuing the December 2002 final rule, EPA, among other things, sought 

to offer facilities greater flexibility to improve and modernize their 

operations. Similarly, the state air quality agency officials (29 of 44) said 

that in their professional opinion, obtaining fewer permits and more 

flexibility to modify facilities are the rule’s two primary positive effects for 

industry. For example, more than half of the state officials believe that 

four of the five provisions of the rule15—including the revised test for 

determining whether a facility modification significantly increases net 

emissions and is, therefore, subject to NSR—will decrease the number of 

permits state air quality agencies issue. 

 15Less than half of the officials expect the provision exempting pollution control projects to 

lead to fewer permits. 

A Majority of the 

State Officials Expect 

the December 2002 

Rule Will Provide 

Industry with Greater 

Operating Flexibility 

but Also Increase 

Emissions and 

Agencies’ Workload 

More than Half of the State 

Officials Expect Most of 

the Rule’s Provisions to 

Decrease the Number of 

NSR Permits Issued and 

Provide Flexibility for 

Companies to Modify Their 

Facilities 
Page 14 GAO-04-274 Clean Air Act 

For perspective, the state officials reported that their agencies had issued 

a total of 600 NSR permits during the 3 years prior to the final rule to 

companies that were modifying existing facilities.16 The officials expect the 

number of such permits issued to decrease under the final rule because it 

expands the range of activities that companies may pursue without a 

permit and, in some cases, controls. Forty of the state officials identified 

the requirements to install pollution controls as one of the best features of 

the NSR program prior to the final rule. According to EPA, however, 

several provisions of the rule require companies to make certain 

commitments, such as accepting an overall limit on their emissions, in 

exchange for avoiding permitting. Therefore, EPA believes the rule will 

encourage investments that decrease emissions. 

As we reported in our August 2003 report, EPA found that the December 

2002 final rule would lead to overall benefits by encouraging energy 

efficiency projects, reducing emissions and related health risks, and 

providing economic benefits to companies affected by the program. For 

example, EPA’s analysis found that the rule would encourage companies 

to implement energy efficiency projects that would reduce emissions, such 

as upgrades to boilers used to generate power.17 However, only 9 of the 44 

officials we surveyed anticipated that the rule would provide the impetus 

for companies to increase these projects. 

 16According to EPA, this number may include some permits for new units at existing 

facilities. The officials reported issuing 528 permits to companies that were constructing 

new facilities. EPA program managers said the December 2002 rule did not affect new 

facilities and new units at existing facilities. 

17As we concluded in our August 2003 report, EPA relied primarily on anecdotal 

information from industry in concluding that the NSR program, prior to the final rule, 

discouraged some energy efficiency projects, including some projects that would have 

reduced air emissions. Twenty-three of the 44 state officials we surveyed said that the prior 

NSR program discouraged companies’ willingness to pursue energy efficiency projects. 
Page 15 GAO-04-274 Clean Air Act 

A majority of the state officials expect emissions to increase as a result of 

the final rule—in contrast to EPA’s conclusion, in the agency’s analysis of 

the rule’s environmental effects, that it will reduce emissions from 

industrial facilities.18 More specifically, 27 of the 44 officials we surveyed 

expect that overall, the December 2002 rule will increase emissions; 8 

officials believe emissions will decrease or remain the same (the 

remaining 9 officials could not judge the emissions impact). At least half of 

the officials thought the rule would increase emissions of carbon 

monoxide, nitrogen dioxide, ozone, particulate matter, or sulfur dioxide—

all of which have been linked to health problems and are controlled by a 

variety of Clean Air Act programs. 

When asked about the emissions impact of each specific provision in the 

final rule, a majority of the state officials identified two of the rule’s 

provisions as most likely to cause emissions increases, as table 2 

illustrates. These include the revised methods for determining (1) a 

facility’s historical or “baseline” emissions and (2) whether a change will 

result in a significant net emissions increase. 

Table 2: Anticipated Emissions Effects of the December 2002 Final Rule Provisions (number of state officials’ responses) 

Final rule provision 

Increase 

emissions 

Decrease 

emissions 

No change 

in emissions 

Unable to 

judge Total

Clean unit 20 6 12 6 44

Plantwide emissions limit 24 10 4 6 44

Pollution control project 14 10 12 8 44

Revised method for calculating “baseline” emissions 29 2 5 8 44

Revised test for calculating emissions changes 29 1 5 9 44

Overall effects of rule 27 5 3 9 44

Source: GAO analysis of survey responses. 

For example, a majority of the officials believe the “baseline” provision 

will increase emissions. This provision allows industrial facilities to use 

any consecutive 24-month period in the previous decade as a baseline.19

EPA changed this emissions calculation method to, among other things, 

account for variations in business cycles. The agency concluded that this 

 18See U.S. Environmental Protection Agency, Supplemental Analysis of the Environmental 

Impact of the 2002 Final NSR Improvement Rules (Washington, D.C.: Nov. 21, 2002). 

19EPA historically used the 2 years immediately preceding the proposed change to establish 

a facility’s actual emissions. However, in some cases, the agency allowed use of an earlier 

period. 

A Majority of the State 

Officials Expect the Rule 

to Increase Emissions and 

Hinder Efforts to Meet 

Health-based Air Quality 

Standards 
Page 16 GAO-04-274 Clean Air Act 

provision would have negligible emissions consequences because it would 

not alter the baseline for most facilities, including coal-fired power plants 

(the largest emitting group of facilities). In addition, companies must 

adjust their baselines downward to reflect any other emissions limitations 

that have become effective since the period of time they selected for 

establishing their baseline, according to EPA.20 EPA program managers, 

therefore, maintain that emissions baselines will not significantly increase 

as a result of this provision. 

Nevertheless, some officials provided written responses to our survey 

describing their concerns over this provision. Several such officials 

asserted that it allows companies to select the 24-month period within the 

previous 10 years in which their emissions were highest. 

In addition, 24 officials thought that the provision for plantwide emissions 

limits, whereby facilities accept a cap on their overall emissions to avoid 

undergoing NSR, would nevertheless increase emissions. For example, 

several officials said that the rule enables facilities to establish their 

emissions cap based on their highest 2 years of emissions in the previous 

10 years, thereby enabling them to create a cap that exceeds their current 

emissions. On the other hand, 10 officials said this provision would 

decrease emissions, and several asserted that it creates incentives for 

facilities to reduce or limit their emissions. EPA program managers 

maintain that this provision will decrease emissions. 

In addition to these overall effects, 24 of the state officials anticipate that 

the rule will particularly allow facilities built prior to the establishment of 

the NSR program in 1977 to increase their emissions. At the time, the 

Congress decided to allow existing facilities to defer installation of 

pollution controls until a major modification was made with the 

expectation that, over time, all facilities would install such equipment, and 

this would lead to lower overall emissions. However, as we concluded in 

our June 2002 report on emissions from older power plants,21 taken as a 

whole, such plants still emit more air pollution for each unit of electricity 

generated than newer plants. For example, we found that for each 

 20According to EPA, such requirements include those limiting emissions of toxic air 

pollutants, nitrogen oxides, as well as requirements in state implementation plans for 

attainment of the air quality standard for ozone. 

21See U.S. General Accounting Office, Air Pollution: Emissions from Older Electricity 

Generating Units, GAO-02-709 (Washington, D.C.: June 2002). 
Page 17 GAO-04-274 Clean Air Act 

megawatt of electricity produced, the older facilities emitted about 100 

percent more sulfur dioxide and 25 percent more nitrogen oxides than 

newer facilities. 

State officials that believe emissions increases will occur under the rule 

gave various opinions as to how they would manage such increases. For 

example, 7 officials said that the rule would not impede their ability to 

meet or maintain air quality standards. Another 14 expect they will offset 

the anticipated increases using other air quality regulations, such as those 

used to control emissions from mobile sources (automobiles and other 

transportation). However, 13 others expect the rule to impede their ability 

to meet or maintain standards—despite these other regulations. (Nine said 

they could not judge the rule’s effects.) This could create challenges for 

agencies that expect the rule to interfere with efforts to meet air quality 

standards, but that said they were prohibited from adopting more stringent 

regulations, such as the District of Columbia, Kentucky, New Jersey, New 

Mexico, Oklahoma, Pennsylvania, and Wisconsin.22 On the other hand, 28 

state officials said that state law or policy does not prohibit them from 

adopting more stringent rules than federal requirements. 

A majority of the state officials’ responses contrasted with EPA’s 

statement that the final rule would provide greater certainty than in the 

past for companies and regulators when determining when NSR 

requirements apply. Officials identified this uncertainty as one of the 

program’s main problems before the rule, and 30 officials identified 

continued uncertainty as the rule’s greatest negative impact on state 

agencies and industry. 

More specifically, one official explained that the rule is too vague to be 

implemented with certainty or enforced. Another state official said that 

the rule’s new method for determining whether a facility modification 

would significantly increase its emissions is by far the most complicated 

process yet devised for making such determinations. Furthermore, the 

official stated that a company trying to do the right thing could easily be 

confused when attempting to determine its future levels of emissions. This 

confusion could increase both the burden that the rule imposes on state 

 22The following jurisdictions said that they are restricted from adopting more stringent 

regulations than federal requirements: the District of Columbia, Iowa, Mississippi, Missouri, 

Montana, New Jersey, New Mexico, Kentucky, Ohio, North Dakota, Oklahoma, 

Pennsylvania, South Dakota, Utah, Virginia, and Wisconsin. 

Most State Officials 

Believe the Rule Will Not 

Resolve Uncertainty About 

When NSR Applies to a 

Modification 
Page 18 GAO-04-274 Clean Air Act 

agencies to implement and enforce it and the costs for companies that 

want to use its provisions. 

In addition, 30 of the state officials said that the final rule did not resolve 

any of the other significant problems with the program, including difficulty 

in determining the stringency of pollution controls that facilities should 

install when required to do so. 

The state officials’ survey responses showed that many expect the final 

rule to impose demands on their agencies, including increased workloads. 

This comes at a time when many states face budget deficits. Nevertheless, 

many of the state officials said their agencies plan to adopt all or most of 

the rule’s provisions as written (see table 3). 

Table 3: Ways in Which Officials Expect Their States to Adopt the Final Rule 

For areas that meet 

standards 

For areas that do not 

meet standards 

Adopt all or most provisions as 

written 20 17 

Seek review of rule in court 8 9 

Adopt or maintain more stringent 

regulations 3 2 

Other/do not know 13 8 

Total 44 36 

Source: GAO analysis of state survey responses. 

Note: Some states have both areas that meet standards and areas that do not meet them. 

In revising state programs to incorporate the rule, 31 of the officials said 

that it would take between one and four staff to adopt the rule’s provisions 

and obtain EPA’s approval of their proposed implementation plans. 

Seventeen of the 36 officials that were able to anticipate the staff needed 

said that their agency had a plan for obtaining the necessary staff time, but 

15 others did not (4 said they did not know if their agency had a plan). 

In addition, 30 state officials expect that having to administer the rule after 

it is adopted will increase their workload at least to some extent—despite 

the fact that most expect a decrease in the number of permits issued in the 

future. Another 6 expect a decrease in their workload, and 1 expected no 

change. As noted above, most officials expected continued uncertainty for 

state agencies as a negative impact of the rule. One official explained that 

A Majority of State 

Officials Expect the Rule 

Will Increase Agencies’ 

Workloads and Would Like 

EPA’s Assistance in 

Understanding and 

Implementing the Rule 
Page 19 GAO-04-274 Clean Air Act 

the state agency was spending considerable time learning the regulations 

and training agency staff and companies, while also developing record 

keeping, tracking, and other administrative processes. Another official 

expected a dramatic increase in the agency’s administrative workload, 

including time spent reviewing information associated with the rule’s 

provisions for plantwide limits, among other things. Similarly, another 

official expected a high demand among companies for plantwide limits 

and that developing them would be very resource intensive. However, 

another official said that the workload would increase initially because of 

the learning curve with the new program but then decrease over time. The 

remaining 7 officials did not know or had not assessed the rule’s workload 

impact. EPA program managers maintain that, over time, the rule will 

decrease the workload for agencies. 

To better understand and implement the rule, all but one of the agency 

officials said that they would benefit from some type of assistance from 

EPA, including updated guidance or workshops. 

Similar to their opinions on the final rule, a majority (28 of 42) of the state 

officials expected EPA’s two NSR revisions—as proposed in December 

2002—to provide companies the flexibility to perform maintenance and 

replacement activities without obtaining permits and installing pollution 

controls. However, at least half of the officials also expected that, as a 

result, emissions would increase, and a third expected the exclusions 

would exacerbate existing air quality problems and health risks in areas 

that already do not meet standards. A majority also expected a greater 

administrative burden and uncertainty for agencies in determining when a 

facility’s activities can be excluded. 

At Least Half of the 

State Officials 

Expected the 

Proposed Revisions 

Defining NSR 

Exclusions to Provide 

Industry Greater 

Flexibility but Also 

Increase Emissions 

and the 

Administrative 

Workload for State 

Agencies 
Page 20 GAO-04-274 Clean Air Act 

Twenty-eight state officials expected the two exclusions would exempt 

facility changes from requirements for permits and controls, decreasing 

the number of permits they issue over the next 5 years. This would provide 

industry with greater flexibility to perform routine maintenance, repair, 

and replacement activities without incurring the costs and delays of the 

NSR program. EPA previously determined which activities were 

considered routine maintenance, repair, and replacement, and thus 

excluded from NSR, on a case-by-case basis. In December 2002, EPA 

proposed that, in addition to the case-by-case determination, exclusions 

could also be determined according to a cost threshold mechanism, below 

which activities could be exempted from NSR, rather than an emissions 

threshold. Although, at the time of our survey, the 20 percent cost 

threshold for replacing equipment had not been established, one official 

said that this exclusion would exempt most facility modifications from 

NSR. 

The state officials identified fewer permits and increased flexibility as the 

exclusions’ most positive benefits for companies. In addition, 19 of the 

officials expected that the exclusions would have a positive effect on 

companies’ efforts to pursue energy efficiency projects. These officials’ 

opinions are, therefore, consistent with EPA’s finding that the exclusions 

would remove barriers to energy efficiency investments. 

Overall, 21 of the 44 officials said they opposed the equipment 

replacement exclusion. Another 12 said they supported this provision, and 

the others said they neither supported nor opposed it, or had no opinion. 

One of the officials who expressed concerns about the proposal said that 

implementing the equipment replacement exclusion would reduce or 

eliminate incentives for companies to install well-controlled equipment. 

Another official expressed the concern that the exclusion did not include 

the necessary provisions to ensure that a company does not replace an 

entire emissions unit over a period of just a few years without installing 

controls. 

In addition, 32 of the 44 officials said they opposed the annual 

maintenance allowance exclusion. Another 3 officials said they supported 

this provision, and the others said they neither supported nor opposed it, 

or had no opinion. Specifically, some states were concerned that the 

financial analysis to evaluate the cost data to determine exclusions is too 

complex. One official asserted that the annual maintenance allowance 

would enable companies to conduct projects that are not routine, thereby 

extending the life of equipment that should have been upgraded with more 

A Majority of State 

Officials Expected the Two 

Exclusions to Provide 

Industry the Flexibility to 

Undertake More Facility 

Modifications without a 

NSR Permit and Pollution 

Controls 

About Half of the State 

Officials Opposed the 

Equipment Replacement 

Exclusion and a Majority 

Opposed the Annual 

Maintenance Allowance 
Page 21 GAO-04-274 Clean Air Act 

efficient equipment. According to EPA, the agency received a mixture of 

positive and negative comments on the annual maintenance allowance 

approach from key stakeholders, including industry, state and local 

agencies, and environmental groups. The agency has not determined 

whether it will finalize this portion of the proposal or pursue other options 

to address routine maintenance activities. 

At least half of the state officials believed that the exclusions would result 

in increased emissions of harmful air pollutants. For example, half 

expected that the equipment replacement exclusion would increase 

emissions, and several believe the cost threshold mechanism will allow 

older facilities to avoid installing pollution controls. Only 2 officials 

thought that this exclusion would decrease emissions, while the others 

expected no change (7) or could not judge (12). 

Similarly, 26 of 42 officials who responded said they expected the 

proposed annual maintenance allowance exclusion would increase 

emissions. For example, one official explained that because the exclusion 

is based solely on the amount of money spent without regard to emissions 

increases, facilities could make changes that increase emissions and be 

exempt from NSR. Only 1 official expected this exclusion would decrease 

emissions, while the others expected no change (1) or could not judge 

(14). 

Overall, 21 of the 44 state officials believed the two exclusions would 

enable older facilities, built prior to 1977, to increase emissions. Another 8 

expected emissions to decrease or remain the same, and 15 were unable to 

judge. As discussed earlier, older power plants emit more pounds of 

pollutants per unit of energy generated than newer plants. One official said 

that older facilities would continue to be modified without going through 

NSR and upgrading their pollution controls. Another official said that 

enabling older power plants to avoid installing pollution controls violated 

the intent of the Clean Air Act. 

While at least half of the officials expected the exclusions to increase 

emissions, fewer expected them to exacerbate existing air quality 

problems or create new ones. For example, of the 30 officials located in 

states with areas that currently do not meet air quality standards, about a 

third expect the equipment replacement exclusion to interfere with areas’ 

efforts to meet standards, while another third did not expect it to interfere, 

and the final third could not judge. In addition, 13 of these officials 

expected the annual maintenance allowance exclusion to interfere, while 5 

At Least Half of the State 

Officials Expected the 

Proposals Would Increase 

Emissions, Potentially 

Worsening Air Quality 
Page 22 GAO-04-274 Clean Air Act 

did not, and 12 could not judge. In terms of creating new air quality 

problems in areas that currently meet standards, only 5 of 44 officials 

expected the equipment replacement exclusion to have this impact, while 

20 did not, and 19 could not judge. Furthermore, only 7 of these officials 

expected the annual maintenance allowance exclusion to have this impact, 

while 16 did not, and 21 could not judge. 

The opinions of officials that expect emissions increases and adverse air 

quality effects contrast with EPA’s conclusion that the exclusions would 

enhance the environmental protection and benefit derived from the 

program. In addition, EPA’s economic analysis of the exclusions found 

that they would lead to health benefits and did not account for any 

potential health-related costs.23 However, to the extent that either 

exclusion would cause or exacerbate violations of health-based air quality 

standards, EPA’s analysis would have underestimated the health effects 

and costs of the exclusions. 

A majority of the officials said that implementing the exclusions would 

increase their administrative burden (27 of 44) and create uncertainty for 

agencies in determining when a facility’s activities can be excluded (28 of 

44). These opinions contrast with EPA’s conclusion in the analysis noted 

above that they would provide greater regulatory certainty. Several 

officials expressed concerns about the complex accounting procedures 

they would need to use to determine compliance with the cost threshold 

mechanisms and whether modifications could be excluded from NSR 

permitting. For example, one official said that the accounting procedures 

were well beyond the expertise of the state agency, and another official 

described how the agency would need to hire certified public accountants 

to determine compliance with the exclusions. 

 23See U.S. Environmental Protection Agency, Regulatory Impact Analysis for the 

Specification of Categories of Activities as Routine Maintenance, Repair and 

Replacement for the New Source Review Program (Washington, D.C.: August 2003). 

A Majority of the State 

Officials Expected the 

Exclusions Would Create a 

Greater Administrative 

Workload 
Page 23 GAO-04-274 Clean Air Act 

According to key stakeholders we contacted, the proposed and final 

revisions to the NSR program would benefit industry by decreasing the 

regulatory burden on companies that modify their industrial facilities, but 

these stakeholders disagreed on the revisions’ impact on emissions and 

other factors. Stakeholders representing environmental and public health 

groups anticipated that the revisions would mean fewer modifications will 

be subject to NSR’s permit and control requirements, but more work for 

regulators as they look for alternative ways to control emissions. In 

contrast, stakeholders representing the industry groups asserted that the 

proposed and final changes clarified the NSR program, thereby making 

permitting easier, and encouraging investment in energy efficient projects 

that lower fuel consumption and emissions. As we concluded in our 

August 2003 report, the overall economic and environmental effects of the 

December 2002 rule are uncertain because of data limitations and 

difficulty determining how individual companies will respond to the rule. 

According to the opinions of the six environmental and public health 

group stakeholders we contacted, as well as an association representing 

all of the state and local air quality agencies, the proposed and final 

revisions would lessen the regulatory burden on companies because, as 

discussed earlier, fewer modifications would trigger NSR. Under the prior 

rules, to obtain a permit, a company would have to submit an application 

and go through a public notice and comment period—a process that could 

take 3 months to more than 1 year. The company would also have to 

periodically report on their compliance with the permit. Furthermore, in 

cases where the modification would significantly increase emissions, the 

company would have to go through the time and expense of installing 

emission controls. As a result of the NSR revisions, however, 

environmental and public health stakeholders anticipate that companies 

would forgo the emissions reductions that would have been achieved by 

installing controls, thereby increasing emissions and public health risks. 

As with a majority of the state air quality officials responding to our 

survey, nearly all of the environmental and public health group 

stakeholders asserted that the proposed and final revisions would create 

more work for state and local air quality agencies. Several of them believe 

that, because the revisions would result in fewer permits, they would also 

result in fewer recordkeeping and reporting requirements for industry. 

This, in turn, would make it harder for the agencies to track and monitor 

changes at facilities that could influence emissions. For example, 

according to the association representing these agencies, the revisions 

would make it difficult for them because they would now have to identify 

Other Stakeholders 

Expected the 

Proposed and Final 

NSR Revisions to 

Benefit Industry but 

Disagreed on Their 

Effect on Emissions 

and Air Quality 

Agencies’ Workload 

Environmental and Public 

Health Group Stakeholders 

Expected the Proposed 

and Final Revisions to 

Decrease Industry’s 

Regulatory Burden but 

Increase Emissions and Air 

Quality Agencies’ 

Workload 
Page 24 GAO-04-274 Clean Air Act 

other sources of emissions information instead of relying on companies to 

report this information, as companies were previously required to do 

under the NSR program. We concluded in our October 2003 report that, 

overall, as a result of the final rule, the public may have less assurance that 

they will have notice of, and information about, company plans to modify 

facilities in ways that affect emissions, as well as less opportunity to 

provide input on these changes and verify they will not increase emissions. 

Some of the environmental and public health stakeholders also pointed 

out that the agencies will be forced to find programs other than the federal 

NSR program to control emissions so that local air quality meets the 

national standards. For example, areas not meeting at least one of the 

standards must develop a state plan showing how they will reduce 

emissions to comply with the standard.24 But with fewer modifications and 

facilities subject to emission controls through NSR, air quality agencies 

will have to look for other ways to reduce or control emissions. However, 

according to some environmental and public health groups, these 

alternative regulations and programs can be more difficult to implement 

because, for example, they focus on smaller sources of emissions 

compared with the sources subject to the federal NSR program. Therefore, 

to achieve the same emissions savings as they would have under NSR, the 

agencies will have to track emissions and pursue reductions from a greater 

number of sources, requiring more staff time and resources for permitting 

and enforcement. 

 24Otherwise, the areas may be subject to sanctions, such as the loss of access to federal 

transportation funding. 
Page 25 GAO-04-274 Clean Air Act 

Most industry stakeholders we contacted felt the proposed and final 

revisions would lessen, or at least not increase, their regulatory burden, 

similar to the opinions of the environmental and public health 

stakeholders. Fewer modifications would be subject to the requirements 

to obtain a permit and install controls. Furthermore, several industry 

stakeholders said their regulatory burden would decrease because the 

revisions clarified when NSR actually applied. Several industry 

stakeholders explained that before the revisions, companies were 

uncertain as to whether some of their modifications triggered NSR. For 

example, one stakeholder said that the existing routine maintenance 

exclusion was arbitrary and unclear. As a result, to avoid enforcement 

actions and penalties, companies would opt not to make the 

modifications. 

On the other hand, the industry stakeholders disagreed with the 

environmental and public health stakeholders on a number of other 

potential impacts. First, all of the industry stakeholders believed the 

changes will encourage companies to invest in energy efficiency projects 

they avoided in the past because of NSR requirements. For example, as we 

discussed in our October 2003 report, under the prior program, to 

determine if a modification would increase emissions enough to trigger 

NSR, companies generally had to assume that facilities would run at the 

maximum capacity or the highest capacity allowed by the existing NSR 

permit after making the modification. A company had to make this 

assumption even if the facility had not run at this level in the past or was 

not expected to in the future. Industry stakeholders argued that having to 

assume this potential increase in emissions biased the test and overstated 

the true emissions impact of a project. One industry representative gave 

the example of a proposed modification that had the potential to save the 

company an estimated $300,000 per year and reduce emissions, but that 

the company did not pursue because the emissions test predicted it would 

have triggered costly NSR controls. 

In the December 2002 final rule, EPA revised the method of calculating the 

expected emissions so a company can project the actual activity level—as 

opposed to the maximum potential activity level—after the facility change 

and estimate the resulting emissions accordingly. Therefore, according to 

some of these stakeholders, such energy efficiency projects most likely 

will not trigger NSR requirements under the revised rule and will be less 

costly for companies to pursue. The industry stakeholders believed that, 

with the increased energy efficiency investments, facilities would use less 

fuel for the same levels of production. 

Industry Stakeholders 

Asserted That the 

Proposed and Final 

Revisions Clarify When 

NSR Applies to a 

Modification, Thereby 

Encouraging Energy 

Efficiency Projects and 

Reducing Emissions and 

Air Quality Agencies’ 

Workload 
Page 26 GAO-04-274 Clean Air Act 

However, as we discussed in our August 2003 report, industrial facilities’ 

future production levels and air pollutant emissions may fluctuate in 

response to changing economic conditions and other factors. In that 

report, we also noted that the executive director of one industry trade 

association stated that it would make economic sense to increase 

production at more efficient facilities. The representative “could not 

imagine a utility spending money on extra capacity and then not utilizing 

it.” As a result, some environmental groups that disagreed with industry 

were concerned that, if facilities become more efficient, they will actually 

cause a net increase in overall emissions and health risks. On the other 

hand, according to an EPA program manager, the agency expected that, if 

a company increased production at its more efficient facilities, it could 

decrease production at its less efficient facilities, more than offsetting any 

emissions impact. However, the manager said that the agency had not 

analyzed the air pollution impacts of shifts in production that facilities 

make after implementing energy efficiency projects to support the 

agency’s viewpoint. 

The industry stakeholders we contacted believed the increased projects 

and lower emissions they anticipate will result more from the revisions 

included in the December 2002 final rule rather than the October 2003 rule. 

This is because, according to some stakeholders, the latter rule simply 

reinforces how companies had already been interpreting NSR in the past 

to determine if a modification was a routine replacement of equipment 

and, therefore, exempt from NSR requirements. However, the October 

2003 rule specifies a 20 percent cost threshold, below which a company 

could make certain changes as routine replacement and exempt from NSR. 

Also, in contrast with the environmental and public health groups, some of 

the industry stakeholders argued that even with the NSR exemptions, 

companies will still have to monitor facility emissions and install emission 

control technologies because of other clean air regulations. For example, 

under the acid rain program, some utilities have had to control their 

facilities’ sulfur dioxide and nitrogen oxide emissions. Under the air toxics 

program, some companies have had to install controls to reduce facility 

emissions of hazardous air pollutants. In addition, the stakeholders 

maintained that state and local air quality agencies will still have to 

monitor any project that could increase emissions to ensure compliance 

with these programs, and the agencies may have their own requirements 

governing facility modifications. While this is true, we noted in our 

October 2003 report that the scope of the state and local program 

requirements varies widely. 
Page 27 GAO-04-274 Clean Air Act 

Finally, most of the industry stakeholders, unlike the environmental and 

health stakeholders, expected a decrease in the state and local air quality 

agencies’ workload as a result of the proposed and final revisions. The 

stakeholders claim the revisions will streamline agencies’ monitoring, 

minimize the time they spend determining if companies have properly 

complied with NSR, and ease the permitting process. 

While the stakeholders based their views primarily on professional 

opinion, one cited a DOE analysis and another cited an EPA analysis as 

support for their views. The DOE analysis included an estimate of 

emissions if all coal-fired power plants installed pollution controls while 

the EPA analysis focused on the possible emissions consequences of the 

equipment replacement exclusion. Neither analysis comprehensively 

assessed the impacts of the NSR revisions. 

One environmental representative compared the emissions levels in the 

DOE analysis with those in the EPA analysis to support the assertion that 

the exclusions would represent a rollback from the current program 

because the levels in the DOE analysis were lower than EPA’s. However, 

the DOE analysis is not useful as a benchmark for assessing the effects of 

EPA’s revisions because, under the NSR program, facilities only have to 

install the best available controls when making major modifications. In 

addition, this analysis was not specifically related to EPA’s NSR revisions. 

An industry stakeholder cited the above-mentioned EPA analysis of the 

equipment replacement rule to support the assertion that the exclusions 

would decrease emissions. However, the EPA analysis was limited in 

scope—it considered only power plants (the largest emitting category of 

facilities) and only two pollutants, nitrogen oxides and sulfur dioxide. 

Another related analysis performed by an EPA contractor included six 

additional industries and was based on case studies. 

Finally, as we concluded in our August 2003 report, the overall economic 

and environmental effects of the December 2002 rule are uncertain 

because of data limitations and difficulty determining how industrial 

companies will respond to the rule. 

EPA’s assessments of the December 2002 and October 2003 NSR revisions 

concluded that the rules would provide industry with greater flexibility to 

modify their facilities without having to obtain NSR permits or, in some 

cases, install pollution controls, while enhancing the program’s 

environmental benefits. The survey responses indicate that most state 

Conclusions 
Page 28 GAO-04-274 Clean Air Act 

program managers agreed with EPA’s conclusion that the revisions would 

enhance flexibility for industry. However, a majority of state program 

managers did not agree with EPA’s conclusion that the increased 

flexibility would lead to less pollution, raising questions about the final 

and proposed revisions’ environmental effects. Specifically, most of the 

state officials believed that the December 2002 rule and the not-yet 

finalized annual maintenance allowance exclusion would increase 

emissions, and half believed the equipment replacement provision would 

have this effect. Furthermore, of those that believe emissions increases 

will occur, a number of the officials thought that these anticipated 

increases would cause violations of health-based air quality standards or 

delay the attainment of the standards in areas that already have poor air 

quality, potentially creating or exacerbating health risks. Environmental 

groups agreed with the state program managers who expressed concerns, 

but other state officials and industry stakeholders maintained the revisions 

would have positive environmental effects. Little data currently exist to 

resolve these competing viewpoints. We therefore recommended in our 

August 2003 report that EPA determine what data are available to monitor 

the December 2002 rule’s effects and use the monitoring results to 

determine what effects the rule has created. For the same reason, if the 

equipment replacement rule eventually takes effect—pending the 

resolution of legal challenges—it will be necessary to monitor its 

implementation to determine its environmental and other effects. In 

addition, more EPA assistance for states would help them implement the 

new rules and lessen their administrative burden. 

To ensure that state and local air quality agencies are adequately equipped 

to implement the new NSR rules, as required by EPA, and that the rules do 

not have unintended effects on emissions and public health, we 

recommend that the EPA Administrator (1) provide state and local air 

quality agencies with assistance in implementing the December 2002 rule, 

(2) pending the court’s decision on the equipment replacement rule, work 

with state and local air quality agencies to identify the data that the agency 

would need to monitor the effects of this rule and use the monitoring 

results to identify necessary changes,25 and (3) consider the state and 

stakeholder concerns about emissions and workload impacts that we 

 25EPA should coordinate this effort with its response to a similar recommendation in our 

August 2003 report (GAO-03-947). 

Recommendations for 

Executive Action 
Page 29 GAO-04-274 Clean Air Act 

identified before deciding whether to issue a final rule on the second 

proposed exclusion, the annual maintenance allowance exclusion. 

We provided EPA with a draft of this report for review. The Assistant 

Administrator for Air and Radiation said that the agency has concerns 

about our methodology and certain of our findings. Nevertheless, EPA said 

that our recommendations, on their face, make sense, and that the agency 

already has plans to take these actions. 

Specifically, EPA asserted that GAO (1) in some instances, used the 

opinions expressed in the survey responses—which EPA believes may not 

have been grounded in a correct understanding of the revisions—as fact, 

and to draw conclusions and make recommendations about the NSR 

program, (2) did not carry out its work in a way that assured balance and 

objectivity, (3) used a skewed survey sample, and (4) should have 

evaluated whether the survey results were consistent with the facts cited 

in EPA’s analyses of the revisions’ effects. 

GAO disagrees with each of EPA’s assertions. First, as we previously 

reported and EPA acknowledged, there are limited data available to assess 

the effects of the NSR revisions. Therefore, consistent with the review’s 

objectives, we solicited the opinions of key stakeholders on the revisions’ 

effects and clearly presented them as opinions in both the title and body of 

the report. When, in this context of scarce data, many state program 

managers responsible for program implementation express concerns 

about the revisions’ adverse effects, we believe it would be prudent to take 

these concerns seriously. As such, GAO makes a number of 

recommendations to (1) collect data on and monitor the revisions’ actual 

impacts, (2) consider stakeholders’ opinions before further revising the 

NSR program, and (3) provide state and local agencies assistance in 

implementing the revisions. Taking this latter action will help to address 

EPA’s concerns that the respondents’ may not have fully understood the 

revisions. 

Second, we developed the survey using standard survey research 

principles and took steps to minimize question bias, including conducting 

several pretests, asking respondents about both the positive and negative 

effects of the revisions, and subjecting the survey to a thorough review by 

a GAO survey specialist not involved in its development. To ensure the 

independence of our efforts, we do not routinely seek the subject agency’s 

review of our survey instruments. Nonetheless, we worked with NSR 

program managers within EPA to understand how the revisions would 

Agency Comments 

and Our Evaluation 
Page 30 GAO-04-274 Clean Air Act 

work in practice as well as their potential effects and used this information 

to design the survey questions. 

Third, GAO surveyed the universe of state program managers because we 

believe they are in the most informed position to determine the revisions’ 

impacts on their programs and workloads. Furthermore, in the survey’s 

instructions we asked the managers, when answering the questions, to 

coordinate with the officials within their agencies as they deemed 

necessary and appropriate. As such, we relied on each state agency’s own 

procedures for completing and reviewing the survey responses. In 

addition, we surveyed select stakeholders representing environmental, 

health, and industry interests. Because of the large number of other 

affected stakeholders, it was not feasible to survey the universe. Instead, 

we surveyed 30 organizations representing diverse perspectives and chose 

them because they were involved in national NSR policy decisions. A 

number of these groups represent the views of large numbers of industrial 

companies or have a national membership base. 

Finally, GAO believes EPA’s assertion that we should have evaluated 

whether the opinions of state officials responsible for program 

implementation were consistent with “facts” cited in EPA’s analyses is 

disingenuous. As we point out in our previous and current work, these 

“facts” are largely assertions based on EPA’s limited analysis of the 

revisions’ effects. We therefore did not use the agency’s analysis as a 

benchmark to evaluate the survey responses. We further believe that the 

state program managers provided plausible explanations for why their 

views disagreed with those asserted by EPA. 

Appendix III contains the text of EPA’s letter along with our detailed 

responses to the issues raised. EPA also provided a number of technical 

comments, which we have incorporated as appropriate. 

As agreed with your offices, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 10 days from the 

report date. At that time, we will send copies of the report to the EPA 

Administrator and other interested parties. We also will make copies 

available to others upon request. In addition, the report will be available at 

no charge on the GAO Web site at http://www.gao.gov. 
Page 31 GAO-04-274 Clean Air Act 

If you have any questions about this report, please contact me at 

(202) 512-3841 or stephensonJ@gao.gov. Key contributors to this report 

are listed in appendix IV. 

John B. Stephenson 

Director, Natural Resources and Environment 
Appendix I: Summary of Local Agency 

Officials’ Responses 

Page 32 GAO-04-274 Clean Air Act 

This summary provides an overview of survey responses completed by 45 

local air quality agencies—those with independent authority to adopt rules 

and write, review, or issue New Source Review (NSR) permits. Seventeen 

of the 45 local air quality agencies are in California. The remainder are 

scattered across the remaining 14 states that have local air quality 

agencies. (See appendix II, table 3.) Detailed local survey results are 

available at: http://www.gao.gov/special.pub/gao-04-337sp. 

Similar to the state officials, more than half of the local officials expect 

that the December 2002 rule will provide industry with greater flexibility 

to make facility changes, but also believe that the rule will result in 

increased emissions. However, in contrast to the state officials, fewer than 

half of the local officials anticipate their workload to increase as a result 

of the rule. 

For some questions, the number of officials that provided answers varied. 

In terms of positive effects, 28 of 45 local officials believe the rule will 

result in greater flexibility for industry to make facility changes, similar to 

state officials. Also, 24 of the local officials believe that the rule will 

benefit industry by enabling companies to avoid NSR permitting. In 

addition, 10 of the officials identified greater opportunities for industry to 

pursue energy efficiency projects as one of the positive effects of the rule. 

On the other hand, only 2 of the local officials believe the rule will 

positively affect industry by providing companies with greater certainty as 

to when NSR applies to a facility modification. Twenty of the officials 

believe that regulatory uncertainty is one of the rule’s primary negative 

effects. 

As with the state officials, a majority (24 of 44) of local officials expect the 

rule to increase emissions, while 10 expect no change and 9 were unable 

to judge. More than half of the officials believe the revised methods for 

calculating a facility’s historical “baseline” emissions (25 of 44) and 

estimating emission changes from a modification (23 of 44) will lead to 

increased emissions. Fewer than half expect the remaining provisions to 

increase emissions. Twenty-two of the officials anticipate that the rule will 

allow facilities built prior to 1977—which did not have to install controls 

until they made a modification that significantly increased emissions—to 

increase total emissions because they can continue to postpone installing 

controls, while 11 anticipate no change in emissions from such facilities. 

Only 6 officials do not believe the rule will affect their ability to meet or 

Appendix I: Summary of Local Agency 

Officials’ Responses 

Impacts on Industry 

Emissions Impacts 
Appendix I: Summary of Local Agency 

Officials’ Responses 

Page 33 GAO-04-274 Clean Air Act 

continue to meet air quality standards. On the other hand, 16 expect that 

they can use other clean air regulations to meet standards, and 11 believe 

that taking into consideration the impacts of the final rule, these other 

regulations will not help them meet or continue to meet the standards. 

Although a greater percentage of local officials (21-24 percent) than state 

officials (6-7 percent) anticipate adopting or maintaining more stringent 

regulations than EPA, fewer local officials (22 of 45) than state officials 

(30 of 44) expect the rule to increase their workload. In addition, 5 of 43 

officials do not anticipate the need for additional staff to adopt the final 

rule and obtain EPA approval in contrast to state officials. All of the local 

officials said they would like some type of assistance from EPA, such as 

implementation workbooks and training courses. 

Similar to state officials, at least half of the local officials expected the two 

exclusions for routine maintenance, repair, and replacement activities to 

provide industry greater flexibility to make changes, but unlike state 

officials, fewer than half expected the exclusions would increase 

emissions or their administrative burden. Overall, 22 of 45 officials said 

that they opposed the equipment replacement exclusion and 16 supported 

it, while 28 opposed the annual maintenance allowance exclusion and 5 

supported it. 

More than half (24 of 45) of the local officials believed the exclusions 

would provide industry with greater flexibility to make facility changes, as 

did half of the state officials. Twenty-seven believed that not having to 

obtain a NSR permit would be one of the exclusions’ most positive 

benefits for industry. Thirteen of 43 local officials expected the exclusions 

to positively affect a company’s ability to pursue energy efficiency 

projects, while 16 expected no change. 

Eighteen of 45 officials expected the equipment replacement exclusion to 

increase emissions, while 14 expect no change, and 10 were unable to 

judge. Twenty-one of 45 officials expected the annual maintenance 

allowance exclusion to increase emissions, while 8 expected no change, 

and 15 were unable to judge. In addition, 21 of the 45 officials anticipated 

that facilities built prior to 1977 would increase emissions as a result of the 

exclusions, while 11 expected no change and 10 were unable to judge. 

These figures are similar to the state responses, however, compared with 

state officials, fewer local officials expected the exclusions to result in 

Impacts on Local 

Agencies 

Impacts on Industry 

Emissions Impacts 
Appendix I: Summary of Local Agency 

Officials’ Responses 

Page 34 GAO-04-274 Clean Air Act 

significant enough emissions changes to exacerbate air quality problems in 

areas that do not meet standards or cause new problems in areas that 

currently meet the standards. 

Unlike state officials, fewer than half (22 of 45) of the local officials 

believed the exclusions would increase their administrative burden. Impacts on Agencies 
Appendix II: Objectives, Scope, and 

Methodology 

Page 35 GAO-04-274 Clean Air Act 

The Ranking Minority Member of the Senate Environment and Public 

Works Committee and Senator Lieberman asked us to obtain the views of 

a number of key stakeholders about the revisions’ potential impacts. More 

specifically, they asked us to obtain (1) state air quality agency officials’ 

views about the impacts of the December 2002 final NSR rule on industry, 

emissions, and agencies’ workloads; (2) state air quality agency officials’ 

views about the impacts of the two December 2002 proposed NSR 

exclusions on industry, emissions, and agencies’ workloads; and (3) 

environmental, health, and industry organizations’ views on the impacts of 

all the NSR revisions. In addition, we determined selected local air quality 

agencies’ views on the revisions’ potential effects. 

To address the first two objectives and gather information from local 

agencies, we conducted an Internet-based survey of 50 state air quality 

agencies, the District of Columbia, and the 71 local air quality agencies 

that have responsibility for implementing the New Source Review (NSR) 

regulations and could potentially issue NSR permits. To ensure that we 

obtained information from those that were most involved in the day-to-day 

administration of the NSR program and therefore in the best position to 

judge the revisions’ potential impacts, we worked with the 10 EPA 

regional offices and obtained information from the Internet Web site of the 

Association of State and Territorial Air Pollution Program Administrators 

(STAPPA) and the Association of Local Air Pollution Control Officials 

(ALAPCO) to identify the NSR program manager for each agency. The 15 

states with local air quality agencies that issue NSR permits are listed in 

table 4 below. 

Table 4: States with Local Air Agencies 

State Number of local agencies

California 35

Ohio 7

Missouri, Tennessee 4

Arizona, Indiana, North Carolina 3

Alabama, Nebraska, Nevada, Pennsylvania 2

Kansas, Kentucky, New Mexico, Oregon 1

Source: GAO. 

California is the only state with local agencies covering the entire state. 

For the other states, the local agencies are typically located in larger 

metropolitan areas with air quality problems. In order to present a national 

perspective of the issues faced by air quality officials, we focused on the 

Appendix II: Objectives, Scope, and 

Methodology 
Appendix II: Objectives, Scope, and 

Methodology 

Page 36 GAO-04-274 Clean Air Act 

responses from states and highlighted areas where local agencies had 

differing points of view. 

The state and local air quality officials survey was developed between 

December 2002 and April 2003. It includes questions to determine 

respondents’ views on the NSR program prior to the revisions, as well as 

the anticipated effects the proposed and final revisions would likely have 

on their programs. 

Because we administered the survey to all of the state air quality agencies 

and local agencies that have responsibility for implementing the NSR 

regulations and could potentially issue NSR permits, our results are not 

subject to sampling error. However, the practical difficulties of conducting 

any survey may introduce other types of errors, commonly referred to as 

nonsampling errors. For example, differences in how a particular question 

is interpreted, the sources of information available to respondents in 

answering a question, or the types of people who do not respond can 

introduce unwanted variability into the survey results. We included steps 

in the development of the survey, the collection of data, and the editing 

and analysis of data for the purpose of minimizing such nonsampling 

errors. 

To reduce nonsampling error, we had cognizant officials from STAPPA 

and ALAPCO review the survey to make sure that they could clearly 

comprehend the questions and estimate the burden it would place on 

them. We also pretested the survey with three states and one local agency 

to ensure that (1) the questions were clear and unambiguous, (2) 

terminology was used correctly, (3) the survey did not place an undue 

burden on agency officials, and (4) the survey was comprehensive and 

unbiased. In selecting the pretest sites, we sought to include agencies in 

states that supported the rules as well as those that did not. We also 

considered major subgroups such as states with and without local 

permitting authorities and locations across a wide geographical area. To 

determine what concerns, if any, those states involved in litigation against 

the Environmental Protection Agency (EPA) regarding the NSR reforms 

would have in completing the survey, we had an official from the New 

York State Attorney General’s Office (who is involved in the litigation) 

review the survey. We asked the official to identify those questions that 

states might refuse to answer because of litigation concerns. In the end, 

four states involved in the litigation did not respond to the survey. We 

made changes to the content and format of the final questionnaire based 

on the pretests. 
Appendix II: Objectives, Scope, and 

Methodology 

Page 37 GAO-04-274 Clean Air Act 

We conducted the survey using self-administered electronic questionnaires 

posted to GAO’s Web site on the Internet. We sent e-mail notifications to 

alert the appropriate officials of the forthcoming questionnaire. These 

were followed by another e-mail containing unique passwords and 

usernames that enabled the officials to access and complete the survey 

and notifying officials that the survey was activated. The questionnaire 

was available on the Web until July 7, 2003. We received responses from 44 

states and 60 local agencies (each agency could only provide one 

response). In summarizing the survey data, the District of Columbia was 

included in the state responses. However, 15 of the local agencies that 

responded told us that they do not have the authority to adopt their own 

NSR regulations, or they do not write or issue NSR permits. Therefore, 

they were not eligible respondents and did not provide responses to our 

more detailed questions. Thus, 45 local agencies provided complete 

responses. The overall response rate was 83 percent. We edited all 

completed surveys for consistency and, if necessary, contacted 

respondents to clarify responses. Table 5 below lists the states that 

responded, by EPA region, as well as those that did not respond (listed in 

parentheses). It is important to note that four states in EPA Region 1 

declined to respond so as not to disclose information about their ongoing 

NSR-related litigation. 

Table 5: Survey Respondents Listed by EPA Region 

EPA Region 1 Maine, Rhode Island (Connecticut, Massachusetts, New 

Hampshire, Vermont) 

EPA Region 2 New Jersey, New York 

EPA Region 3 Delaware, District of Columbia, Maryland, Pennsylvania, 

Virginia, West Virginia 

EPA Region 4 Alabama, Georgia, Kentucky, Mississippi, North Carolina, 

South Carolina, Tennessee (Florida) 

EPA Region 5 Illinois, Indiana, Michigan, Minnesota, Ohio, Wisconsin 

EPA Region 6 Arkansas, Louisiana, New Mexico, Oklahoma, Texas 

EPA Region 7 Iowa, Kansas, Missouri, Nebraska 

EPA Region 8 Colorado, Montana, North Dakota, South Dakota, Utah, 

Wyoming 

EPA Region 9 California, Hawaii, Nevada (Arizona) 

EPA Region 10 Alaska, Oregon, Washington (Idaho) 

Source: GAO analysis of survey responses. 

Note: States that did not respond are listed in parentheses. 
Appendix II: Objectives, Scope, and 

Methodology 

Page 38 GAO-04-274 Clean Air Act 

At the time we conducted our survey, we asked state and local officials 

about the impacts of a proposed exclusion from NSR for equipment 

replacement activities. Because EPA finalized this exclusion as a rule after 

we completed our survey, we took steps to determine whether the 

officials’ views on the proposal were also true for the final rule. For 

example, in December 2003, the national association representing state 

and local air pollution control officials told us that, based on their ongoing 

dialogue with state and local officials, the survey responses on the 

proposed exclusion were consistent with state and local officials’ views on 

the final rule. In addition, an EPA manager for the NSR program said that 

he does not anticipate that the officials who responded to our survey 

would have changed their opinions on this exclusion in the time since they 

responded to the survey, even though it was not yet in final form at the 

time they commented. 

To address the third objective, we identified key stakeholders involved in 

national level NSR policy decisions and sent them a survey via e-mail 

soliciting their responses to a number of questions about the proposed and 

final NSR revisions’ potential impacts on emissions, industry investments, 

and air quality agencies’ workloads. We distributed the survey to 30 

organizations representing diverse industry and environmental interests. 

We used several criteria to select stakeholders for comment. For example, 

because of the large number of stakeholders involved in NSR issues at the 

national, state, and local level, we focused exclusively on groups that have 

a national perspective, including some law firms that represent several 

large industries. The stakeholders we selected included the following: 

• groups identified by knowledgeable EPA officials as key stakeholders; 

• members of EPA’s Permits/NSR/Toxics Subcommittee within its Clean Air 

Act Advisory Council (CAAAC) that have a national scope (CAAAC is a 

senior level policy committee consisting of approximately 60 senior 

managers and experts representing state and local government, 

environmental and public interest groups, academic institutions, unions, 

trade associations, utilities, industry, and other experts); 

• national level groups that have testified in Congress on NSR and Clean Air 

Act issues over the last several years; 

• national level groups that commented on EPA’s NSR proposals; and 

• trade associations representing those industries identified by EPA as those 

most affected by NSR. 
Appendix II: Objectives, Scope, and 

Methodology 

Page 39 GAO-04-274 Clean Air Act 

We again took steps in the design, data collection, and analysis phases of 

the survey to minimize nonsampling and data processing errors, including 

pretesting of the survey questions, follow-up with those that did not 

respond promptly, and independent verification of all survey responses 

entered into an analysis database. We conducted two pretests of the 

survey and made changes to the content and format of the final 

questionnaire based on the pretests. 

The survey was sent to the key stakeholders on July 2, 2003, and was 

available until July 18, 2003. Of the 30 stakeholders contacted, the 

following 14 responded to this survey: 

• American Forest & Paper Association; 

• American Lung Association; 

• American Petroleum Institute; 

• Clean Air Task Force; 

• Clean Air Trust; 

• Council of Industrial Boiler Owners; 

• Edison Electric Institute; 

• Energy and Innovation Center, Environmental Law Institute; 

• Hogan & Hartson LLP; 

• Morgan, Lewis & Bockius LLP; 

• National Environmental Development Association’s Clean Air Regulatory 

Project; 

• National Petrochemical & Refiners Association; 

• National Resources Defense Council; and 

• STAPPA/ALAPCO. 
Appendix II: Objectives, Scope, and 

Methodology 

Page 40 GAO-04-274 Clean Air Act 

We edited all completed surveys for consistency and, if necessary, 

contacted respondents to clarify responses. 

For all of these objectives, we worked with cognizant EPA officials, 

including the agency’s NSR program manager. 

Detailed survey results are available at: 

http://www.gao.gov/special.pubs/gao-04-337sp. 

We conducted our review from September 2002 through January 2004 in 

accordance with generally accepted government auditing standards. 
Appendix III: Comments from the 

Environmental Protection Agency 

Page 41 GAO-04-274 Clean Air Act 

Appendix III: Comments from the 

Environmental Protection Agency 

Note: GAO comments 

supplementing those in 

the report text appear at 

the end of this appendix. 

See comment 1. 
Appendix III: Comments from the 

Environmental Protection Agency 

Page 42 GAO-04-274 Clean Air Act 

See comment 3. 

See comment 2. 
Appendix III: Comments from the 

Environmental Protection Agency 

Page 43 GAO-04-274 Clean Air Act 

See comment 4. 

See comment 1. 
Appendix III: Comments from the 

Environmental Protection Agency 

Page 44 GAO-04-274 Clean Air Act 

See comment 2. 

See comment 1. 

See comment 1. 

See comment 1. 

See comment 4. 
Appendix III: Comments from the 

Environmental Protection Agency 

Page 45 GAO-04-274 Clean Air Act 

See comment 3. 

See comment 3. 

See comment 3. 
Appendix III: Comments from the 

Environmental Protection Agency 

Page 46 GAO-04-274 Clean Air Act 

The following are GAO’s comments on the letter from the Environmental 

Protection Agency dated January 23, 2004. 

1. GAO does not agree with EPA’s assertions that we, in some instances, 

used the opinions expressed in the survey results as facts. Consistent 

with the review’s objectives, this report carefully characterizes the 

survey results as opinions. To this end, the report’s title clearly points 

out that we are presenting stakeholders’ views. In addition, based on 

our two earlier reports on the revisions, we determined that, at best, 

limited data exist on the effects of the prior NSR program or the 

potential effects of the revisions. In fact, as we found in our August 

2003 report on the analytical basis for EPA’s December 2002 rule,1

 EPA 

itself relied primarily on the professional judgment of agency staff and 

comments received on earlier NSR reform proposals, rather than a 

comprehensive quantitative analysis of the rule’s possible effects, in 

initially justifying the rule. That report also described limitations with 

the agency’s subsequent analysis of the rule’s environmental effects. 

Because of our earlier findings about data limitations, we believe it 

useful and entirely appropriate to supplement the available 

information with the informed opinions of those most involved in the 

day-to-day administration of NSR programs. 

GAO also disagrees with EPA’s characterization that we improperly 

used stakeholder opinions to draw conclusions and make 

recommendations about the NSR revisions. While recognizing that the 

results were based on opinion, it is important to point out that these 

were the opinions of those on the front lines of program 

implementation. In this case, these informed opinions raise important 

questions about the revisions’ effects. Because of these questions and, 

in light of the limited hard analytical data on the revisions’ effects, 

GAO recommends that EPA collect data on the revisions’ actual 

impacts. We made this recommendation in our August 2003 report 

regarding the December 2002 rule and again in this report regarding 

the equipment replacement exclusion. We further recommend that 

EPA consider these informed opinions before further revising the NSR 

program. EPA also questioned whether the respondents’ opinions were 

grounded in a correct understanding of the rules’ provisions. We 

believe that our recommendation that EPA provide state and local air 

 1

U.S. General Accounting Office, Clean Air Act: EPA Should Use Available Data to 

Monitor the Effects of Its Revisions to the New Source Review Program, GAO-03-947

(Washington, D.C.: Aug. 22, 2003). 

GAO Comments 
Appendix III: Comments from the 

Environmental Protection Agency 

Page 47 GAO-04-274 Clean Air Act 

quality agencies with assistance in implementing the revisions will help 

to address this concern. Despite its concerns, EPA said these three 

recommendations, on their face, makes sense and that the agency 

plans to take these actions. 

2. GAO disagrees with EPA’s assertion that the way we carried out our 

work did not assure balance and objectivity. We developed the survey 

using standard survey research principles. This included taking steps 

to minimize question bias, asking respondents about both the positive 

and negative effects of the revisions, providing respondents with a 

range of answers to each question (including “no change” or “no 

effect”), and assessing each question for bias and problematic wording 

during an extensive pretesting and review process. We also sought to 

eliminate bias and problematic wording by subjecting the survey to a 

thorough review by a GAO survey specialist who was not involved in 

its development. Regarding the external review of our survey, we point 

out in the objectives, scope, and methodology section that we asked 

the trade association that represents state and local air quality control 

agencies (i.e., the officials we surveyed) to help ensure that their 

members could clearly comprehend the questions and estimate the 

burden it would place on them. We also asked a representative of the 

New York Attorney General’s Office to review the survey specifically 

to gauge whether they thought those states involved in lawsuits with 

EPA over the reforms would be concerned about completing the 

survey. Finally, to ensure the independence of our efforts, we do not 

routinely seek the subject agency’s review of our survey instruments. 

Nonetheless, we held discussions with staff in EPA’s Office of Air 

Quality Planning and Standards, Office of Enforcement, and regional 

offices to make sure we understood the technical nature of the 

revisions when developing the survey. In preparing our two prior NSR 

reports, we also worked closely with EPA’s managers of the NSR 

program to understand the agency’s assessment of how the revisions 

would work in practice, as well as the potential effects. We used all of 

this information to design the survey questions. 

3. GAO disagrees with EPA’s assertion that our survey sample was 

skewed. GAO surveyed various stakeholders including state and local 

officials, as well as industry and environmental groups, and this report 

presents a range of views on the possible effects of the NSR revisions. 

We describe our methodology for selecting these stakeholders in the 

report’s objectives, scope, and methodology section. More specifically, 

with respect to our survey of state agency officials, we point out that 

we did not survey a sample, but the universe of state NSR program 

managers. We sent the survey to the manager of each state’s NSR 
Appendix III: Comments from the 

Environmental Protection Agency 

Page 48 GAO-04-274 Clean Air Act 

program within the state environmental agency (instead of the agency 

head) because these program managers are responsible for day-to-day 

program implementation and hence are in the most informed position 

to determine the revisions’ impacts on their programs and workloads. 

Furthermore, in the survey’s instructions we asked the managers, 

when answering the questions, to coordinate with the officials within 

their agencies as they deemed necessary and appropriate. As such, we 

relied on each state agency’s own procedures for completing and 

reviewing the survey responses. In several cases, in fact, the program 

managers told us the reason they needed additional time to submit 

their responses to us was because the responses were under review by 

others within their agencies. 

EPA also questioned why we surveyed every state and local agency but 

only a handful of environmental groups and industry trade 

associations, and no individual industry officials. GAO gathered more 

detailed information from state and local agencies than from other 

stakeholders because these agencies generally implement the 

regulations and we were asked to obtain information on how this 

implementation would affect agencies’ programs and workload. 

Because of the large number of other affected stakeholders, it was not 

feasible to survey the universe. Instead, we surveyed key stakeholders 

that had been involved in national NSR policy decisions, which 

included 30 organizations, in order to obtain diverse industry and 

environmental perspectives. Of the 30 organizations we surveyed, 14 

responded, and 8 of the respondents represented industry. A number 

of the organizations that responded represent large numbers of 

industrial companies, including the American Forest & Paper 

Association and the American Petroleum Institute. Likewise several of 

the environmental and health groups represent a national membership 

base, including the American Lung Association and the Natural 

Resources Defense Council. 

GAO also disagrees with EPA’s assertion that we focused 

disproportionately on the state officials’ unfavorable opinions of the 

rule. In presenting the state survey results, we generally listed the total 

number of officials responding to a question and information on the 

distribution of their responses. We then provided more detailed 

information about the majority’s opinion for each question, consistent 

with standard survey principles. In most cases, it turned out that the 

majority of respondents to our questions held the view that the 

revisions would have an adverse impact on emissions and their 

workload, contrary to EPA’s conclusions about the revisions’ impacts. 
Appendix III: Comments from the 

Environmental Protection Agency 

Page 49 GAO-04-274 Clean Air Act 

We were very careful, however, to also discuss the number of 

respondents who held the minority view on a particular topic. 

4. EPA’s letter suggests that GAO should have evaluated whether the 

survey results were consistent with the “facts,” asserts that many of 

the survey responses are not, and cites its own analysis of the 

revisions’ emissions impacts as factual support for its position. EPA 

also cites two examples of cases in which the agency believes 

respondents’ opinions conflict with fact. EPA’s comment related to the 

“facts” however, largely only represents references to its own 

assertions. 

First, as discussed previously we have identified limitations with EPA’s 

analysis of the revisions’ impacts. As we stated in our August 2003 

report, a senior EPA economist said that uncertainty about the extent 

to which companies might elect to use the NSR alternatives in the 

December 2002 rule limited the agency’s ability to estimate the rule’s 

impacts. For these reasons, we did not use EPA’s analysis as a 

benchmark to evaluate the survey responses. Again, in this context, the 

opinions of key stakeholders, especially those responsible for 

implementing the regulations, provide an important perspective 

appropriately considered by congressional decisionmakers. 

Second, as to EPA’s examples of opinions conflicting with facts, the 

agency suggests that the opinions of those who expect the December 

2002 rule to delay attainment of air quality standards are incorrect. In 

its first example, EPA states that (1) even if emissions increased, the 

increase would be small and dwarfed by decreases coming from other 

air quality regulations, and (2) facilities affected by the revisions either 

already have emissions controls or would have to have them to qualify 

for many of the rule’s exemptions, such as those for plantwide 

emissions limits, clean units, and pollution control projects. Regarding 

the first point, as we report, 7 officials agreed with EPA and said that 

the rule would not impede their ability to meet or maintain air quality 

standards. Another 14 expect they will offset the anticipated increases 

using other air quality regulations. A minority of the respondents (13) 

said that, despite these other regulations, they would still have 

difficulty meeting or maintaining air quality standards. Therefore, 

these 13 officials already took into account the other air quality 

regulations EPA cites. Regarding the second point, EPA did not 

mention the rule’s key exemption—the revised method for determining 

facilities past emissions—that does not require that facilities have 

emissions controls, and was the provision cited most often by the state 

officials as likely to lead to emissions increases. While EPA maintains 
Appendix III: Comments from the 

Environmental Protection Agency 

Page 50 GAO-04-274 Clean Air Act 

that this provision will not have a significant environmental impact, 

agency managers for the NSR program acknowledged that EPA’s 

analysis justifying its position was not based on a statistically valid 

sample of affected facilities. Ultimately, many stakeholders disagreed 

with EPA’s assertions. 

Regarding the second example, GAO agrees that these opinions 

conflict with EPA’s information but also believes the state officials 

provided plausible explanations for why they expect their burden to 

increase even though they expect to issue fewer permits. As we point 

out in the report, some of the officials said that they find the December 

2002 rule confusing, complicated, and leading to more uncertainty 

about the NSR program—all of which can contribute to agencies’ 

workloads. While EPA asserts that the rule will lead to an overall 

reduction in workload for agencies based on its experience with six 

states that have used flexible permitting systems, our survey results 

found that four of these same states said the opposite—they expect the 

rule to increase their workload (one had not assessed such impacts, 

and the other did not know what the effect would be). Officials from 

the four states said they would spend more time drafting laws, 

regulations, and guidance, as well as processing permits, explaining 

the rule to industry, and training staff. Furthermore, officials from the 

four states said that they expected more work associated with the 

rule’s revised method for determining facilities’ past emissions. 

Therefore, GAO disagrees with EPA’s assertion that the experience of 

these states shows that the rule will reduce agencies’ workloads or 

that the survey results are contradictory.
Appendix IV: GAO Contacts and Staff 

Acknowledgments 

Page 51 GAO-04-274 Clean Air Act 

John B. Stephenson (202) 512-3841 

Eileen R. Larence (202) 512-6510 

In addition to the individuals named above, Ulana Bihun, Michael Hix, 

Jeffrey Larson, Lisa Turner, and Laura Yannayon made key contributions 

to this report. Nancy Crothers, Bob DeRoy, Tim Guinane, Karen Keegan, 

Judy Pagano, Minette Richardson, and Monica Wolford also made 

important contributions. 

Appendix IV: GAO Contacts and Staff 

Acknowledgments 

GAO Contacts 

Staff 

Acknowledgments 

(360404) 
The General Accounting Office, the audit, evaluation and investigative arm of 

Congress, exists to support Congress in meeting its constitutional responsibilities 

and to help improve the performance and accountability of the federal 

government for the American people. GAO examines the use of public funds; 

evaluates federal programs and policies; and provides analyses, 

recommendations, and other assistance to help Congress make informed 

oversight, policy, and funding decisions. GAO’s commitment to good government 

is reflected in its core values of accountability, integrity, and reliability. 

The fastest and easiest way to obtain copies of GAO documents at no cost is 

through the Internet. GAO’s Web site (www.gao.gov) contains abstracts and fulltext files of current reports and testimony and an expanding archive of older 

products. The Web site features a search engine to help you locate documents 

using key words and phrases. You can print these documents in their entirety, 

including charts and other graphics. 

Each day, GAO issues a list of newly released reports, testimony, and 

correspondence. GAO posts this list, known as “Today’s Reports,” on its Web site 

daily. The list contains links to the full-text document files. To have GAO e-mail 

this list to you every afternoon, go to www.gao.gov and select “Subscribe to e-mail 

alerts” under the “Order GAO Products” heading. 

The first copy of each printed report is free. Additional copies are $2 each. A 

check or money order should be made out to the Superintendent of Documents. 

GAO also accepts VISA and Mastercard. Orders for 100 or more copies mailed to a 

single address are discounted 25 percent. Orders should be sent to: 

U.S. General Accounting Office 

441 G Street NW, Room LM 

Washington, D.C. 20548 

To order by Phone: Voice: (202) 512-6000 

TDD: (202) 512-2537 

Fax: (202) 512-6061 

Contact: 

Web site: www.gao.gov/fraudnet/fraudnet.htm 

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470 

Jeff Nelligan, Managing Director, NelliganJ@gao.gov (202) 512-4800 

U.S. General Accounting Office, 441 G Street NW, Room 7149 

Washington, D.C. 20548 

GAO’s Mission 

Obtaining Copies of 

GAO Reports and 

Testimony 

Order by Mail or Phone 

To Report Fraud, 

Waste, and Abuse in 

Federal Programs 

Public Affairs