p.1 

OAR Box 1796 

Prepped by Keeia Richards 

Document Number: 

31) IV-H-56 

Docket Number: 

A-90-37 

Printed 10/31/2008 4:20:37 PM Sheet 31 of 107 
P.2 

A-90-37 

IV 11-50 

Lynn Hutchinson 

11/21/02 12:54 PM 

To: Amy_L._Farrell@omb.eop.gov 

cc: Arthur_G._Fraas@omb.eop.gov, Lorraine_D._Hunt@omb.eop.gov, Lynn 

Hutchinson/RTP/USEPA/US@EPA, Bill Wehrum/DC/USEPA/US@EPA, 

Bill Harnett, Dave Svendsgaard/RTP/USEPA/US@EPA, Michael 

Ling/RTP/USEPA/US@EPA 

Subject: revised RIA 

CRNWVR C 
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United States Environmental Protection Agency 

EPA Office of Air and Radiation 

Office of Air Quality Planning and Standards 

Innovative Strategies and Economics Group 

November, 2002 

REGULATORY IMPACT ANALYSIS FOR 

THE SPECIFICATION OF CATEGORIES 

OF ACTIVITIES AS ROUTINE 

MAINTENANCE, REPAIR AND 

REPLACEMENT FOR THE NEW SOURCE 

REVIEW PROGRAM 

prepared by 

Daniel Mussatti, Senior Economist 

Innovative Strategies and Economics Group 

Air Quality Strategies and Standards Division 

^Ztt&> 
P.4 

Executive Summary Under the changes promulgated to 40 CFR parts 51 and 52, "major 

modification" is defined as any physical change in or change in the method 

of operation ofa major stationary source that would result in: (1) a 

significant emissions increase ofa regulated new source review (NSR) 

pollutant; and (2) a significant net emissions increase of that pollutant 

from the major stationary source. Owners or operators of major stationary 

sources (sources) are required to obtain a major NSR permit prior to 

beginning actual construction of a modification that meets this definition. 

The regulations exclude certain activities from the definition of "major 

modification." One such exclusion is for routine maintenance, repair and 

replacement (RMRR) activities. The regulations do not define this term. 

Under our current approach, the RMRR exclusion is applied on a 

case-by-case basis using a multi-factor test. In interpreting this exclusion, 

we have followed certain criteria. The preamble to the 1992 "WEPCO 

Rule" (57 FR 32314) and applicability determinations made to date 

describe our current approach to assessing what activities constitute 

RMRR. This approach is known as the multi-factor test. This proposed 

rulemaking changes the major NSR program by providing specific 

categories of activities that EPA will consider RMRR in the future. 

The proposal provides two approaches that reviewing authorities will 

consider for identifying RMRR activities in the future: an annual 

maintenance, repair and replacement allowance, and an allowance for 

certain equipment replacement. When an activity falls within either of 

these categories, then EPA would consider it to be RMRR and a source 

would know that it was excluded from major NSR without regard to other 

considerations. When an activity does not fall within one of these 

categories, then it still could qualify as routine maintenance, repair, and 

replacement under the multi-factor test. 

The approaches would exclude from major NSR applicability: 1) activities 

at a stationary source whose total costs fall below specified thresholds set 

so as to cover RMRR capital and non-capital costs incurred to maintain, 

facilitate, restore, or improve the safety, efficiency, availability or 

reliability of the operation of the stationary source; and, 2) the 

replacement of existing equipment with equipment that serves the same 

function and that does not alter the basic design parameters ofa unit, 

provided the cost of the replacement equipment does not exceed a certain 

percentage of the cost of the process unit to which the equipment belongs. 

Such categories would remove disincentives to undertaking RMRR 

activities and provide more certainty both to the industry, who could better 

plan activities at their facilities, and to reviewing authorities, who could 

better focus resources on activities outside these RMRR categories. The 

Agency may decide to promulgate both approaches or just one of the two 

approaches. 

We have attempted to quantitatively analyze the possible emissions 

consequences of the approaches to the RMRR exclusion described above. 
P.5 

The analysis was conducted using the Integrated Planning Model (IPM) 

which is a powerful model that covers the entire power industry. We do 

not have such a model for other industries but believe that the results for 

the electric utilities accurately reflect the trends we would see in other 

industries. 

The analysis looks at the potential impacts of a "narrow" RMRR exclusion 

(e.g., less activities identified as RMRR) and "broader" RMRR exclusions 

(e.g, more activities identified as RMRR). The analysis is meant to bound 

the potential effects of the range of approaches proposed. It is difficult to 

be certain that such an analysis can truly bound the potential 

improvements in energy efficiency and emissions reductions which may be 

realized by a "broader" RMRR exclusion. 

We also considered similar analyses for the power sector conducted by the 

Department of Energy (DOE). The DOE used a complex model called the 

National Energy Modeling System (NEMS). Although NEMS and IPM 

do not employ exactly the same analytical methods, we consider the results 

from both models to be comparable and useful in examining our proposed 

rule. 

The analyses generally concluded that the breadth of the RMRR exclusion 

would have little impact on the emissions reductions that will be achieved 

in the future under the major NSR program. The analyses showed that 

emissions of sulfur dioxide (S02) are essentially the same under all 

scenarios. This stands to reason because nationwide emissions of S02 

from the power sector are capped by the title W Acid Rain Program. For 

nitrogen oxide (NOx), the analyses showed modest relative decreases in 

some cases and modest relative increases in other cases. These predicted 

changes represent only a modest fraction of nationwide NOx emissions 

from the power sector, which hover around 4.3 million tons per year. 

The analyses do not consider changes in maintenance costs, they only 

assumes changes in fuel costs and changes in capital costs associated with 

new generating units and new emission control equipment. Therefore, the 

analyses probably understates the cost of the increased maintenance 

scenarios and understates the cost of the major NSR base case. In 

addition, there would be significant reduction in the costs to industry and 

reviewing agencies, due to decreases in making applicability 

determinations, associated with identifying categories of activities that are 

RMRR. 
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1 Introduction 

1.1 Purpose The purpose of this document is to provide information on the potential 

costs and benefits of the proposed modifications to the major NSR routine 

maintenance, repair and replacement program. 

New Source Review is one of many programs created by the Clean Air Act 

to control or reduce emissions of criteria air pollutants emitted from a 

wide variety of sources and have an adverse impact on human health and 

the environment. Other key programs include: the title IV Acid Rain 

Program, Maximum Achievable Control Technology (MACT) and other 

air toxics standards for control of Hazardous Air Pollutants (HAPs), New 

Source Performance Standards, the 22-state NOx "SIP call",, the Regional 

Haze program, numerous mobile source programs, and the basic state and 

local air control programs to attain and maintain the National Ambient Air 

Quality Standards (NAAQS). Together, these programs have achieved, 

and will continue to achieve, tens of millions of tons per year of reductions 

that are independent of the major NSR Improvements rule. 

While the programs discussed above play the dominant role in reducing 

emissions of air pollution, the major NSR program assures that when the 

construction of new sources of pollution or modifications at existing 

sources occur, the emissions that result from that construction or 

modification are well-controlled and are permitted consistent with these 

programs. 

This document supports the Agency's requirements under the various Acts 

and Executive Orders governing the analysis of regulations, including (but 

not limited to) the requirements discussed below in section 2 of this 

analysis with regards to determining the regulatory burden associated with 

the proposed change to the preconstruction permitting program to provide 

a clear category of activities that will be considered routine maintenance, 

repair, and replacement under the major NSR program. 

1.2 Introduction Currently, the Agency interprets and applies its major New Source Review 

(major NSR) exclusion for sources performing routine maintenance, repair 

and replacement (RMRR) on a case-by-case basis. The rulemaking 

provides two approaches that reviewing authorities will consider for 

identifying RMRR activities in the future: an annual maintenance, repair 

and replacement allowance, and an allowance for certain equipment 

replacement. When an activity falls within either of these categories, then 

EPA would consider it to be RMRR and a source would know that it was 

excluded from major NSR without regard to other considerations. When 

an activity did not fall within one of these categories, then it still could 

REGULATORY IMPACT ANALYSIS FOR THE SPECIFICATION OF CATEGORIES OF ACTIVITIES AS 

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qualify as routine maintenance, repair, and replacement under the multifactor test. 

This paper presents an overview of the impacts of the proposed 

identification of categories of activities as routine maintenance, repair, and 

replacement (RMRR) within the framework of the major NSR 

preconstruction permit program. To perform this analysis, the Agency 

relied heavily upon existing reports on file for various aspects of the major 

NSR program, including the June 2002 Report to the President,' the major 

NSR Review Background Paper,2 the current major NSR Information 

Collection Request (ICR),3 the ICRs submitted in May and June for 

revisions to the major NSR applicability requirements and the proposed 

RMRR program,4'

5

 and their associated Federal Register notices and other 

public announcements. 

1.3 The Current The major NSR program is a combination of air quality planning and air 

NSR Proaram pollution control technology program requirements for new and modified 

major stationary sources of air pollution. Section 109 of the Clean Air Act 

Amendments of 1990 (CAAA) requires EPA to promulgate primary 

National Ambient Air Quality Standards (NAAQS) to protect public 

health and secondary NAAQS to protect public welfare. Once EPA has set 

these standards, states must develop State Implementation Plans (SIPs) 

that contain emission limitations and other control measures to attain and 

maintain the NAAQS and to meet the other requirements of section 110(a) 

of the Act. The major NSR program is a part of that SIP requirement. 

The program commonly called "major NSR" derives its authority from 

parts C and D of Title I of the Act and is a preconstruction review and 

U.S. EPA, 2002, "New Source Review: Report To the President," 

http://www.epa.gov/air/nsr-review/background.html 

U.S. EPA, 2001, "NSR 90-Day Review Background Paper," Docket A-2001-19, 

Document Number II-A-01, http://www.epa.gov/air/nsr-review/background.html 

U.S. EPA, 2001, "Information Collection Request for 40 CFR Part 51 and 52 

Prevention of Significant Deterioration and Nonattainment New Source Review," OMB Control Number 2060-0003; EPA Form Number 1230.09. 

U.S. EPA, 2002, "Information Collection Request for Changes to the 40 CFR 

Parts 51 and 52 PSD and NSR Applicability Requirements for Modifications to 

Existing Sources," EPA Form Number 2074.01. 

U.S. EPA, 2002, "Information Collection Request for the Establishment ofa 

Definition of Routine Maintenance, Repair and Replacement for the New Source 

Review Program," EPA Form Number 1713.04. 

REGULATORY IMPACT ANALYSIS FOR THE SPECIFICATION OF CATEGORIES OF ACTIVITIES AS 

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permitting program applicable to new or modified major stationary sources 

of air pollutants. In areas not meeting the NAAQS and in the ozone 

transport regions (OTR), the program is the "nonattainment" major NSR 

program, implemented under the requirements of part D of title I of the 

Act. In attainment areas (areas meeting NAAQS) or in areas where there is 

insufficient information to determine whether they meet the NAAQS 

("unclassifiable" areas), the Agency implements major NSR as the 

Prevention of Significant Deterioration (PSD) program under the 

requirements of part C of Title I of the Act. Applicability of the major 

NSR program must be determined in advance of construction and is 

pollutant-specific. When a source triggers major NSR in attainment areas, 

it must install best available control technology (BACT) and conduct 

modeling and monitoring as necessary. If the source is located in a 

nonattainment area, it must install technology that meets the lowest 

achievable emission rate (LAER), secure emission reductions to offset any 

increases above baseline emission levels, and perform other analysis. 

1.4 RMRR -

Background 

The modification provisions of the major NSR program in parts C and D 

are based on the definition in section 111(a)(4) of the Act: 

". .. ['modification' means] .. . any physical change in, or change 

in the method of operation of, a stationary source which increases 

the amount of any air pollutant emitted by such source or which 

results in the emission of any air pollutant not previously emitted." 

That definition involves a two-step test for determining whether source 

activities constitute a modification subject to major NSR requirements: the 

source determines whether a physical or operational change will occur and 

then determines whether the change will result in (1) a significant 

emissions increase of a regulated pollutant from a combination of one or 

more emissions units following the physical or operational change; and (2) 

a significant net emissions increase of that pollutant from the major 

stationary source over the contemporaneous period. 

Under the changes promulgated to 40 CFR parts 51 and 52, "major 

modification" is defined as any physical change in or change in the method 

of operation ofa major stationary source that would result in: (1) a 

significant emissions increase of a regulated new source review (NSR) 

pollutant; and (2) a significant net emissions increase of that pollutant 

from the major stationary source. Owners or operators of major stationary 

sources are required to obtain a major NSR permit prior to beginning 

actual construction of a modification that meets this definition. The 

regulations exclude certain activities from the definition of "major 

modification," including activities that constitute RMRR. 

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Currently, the RMRR exclusion is interpreted and applied on a case-bycase basis. The current process still "imposes significant burdens on the 

utility practices necessary to maintain the safety, availability, efficiency 

and reliability of the electricity supply at existing sources.. .[and] the 

current NSR program has actively discouraged efficiency improvement 

projects .. ,"67 For example, the 2001 NSR 90-Day Report cites the 

following anecdotal evidence: 

".. .past blade maintenance and replacement of only the 

deteriorated blades at Detroit Edison has never increased efficiency 

over the original design. Yet because [blade upgrade] would result 

in substantially improved efficiency compared to the original 

design, EPA considered it a physical change under its NSR 

regulations, and [therefore] subject to NSR.. ."8 

Another major problem inherent in the current major NSR system is 

regulatory delay. Since 1997, the average time needed to obtain a major 

NSR or PSD permit, across all industries, is about seven months.9 The 

average time needed to make a maintenance-related NSR determination is 

between thirty and sixty days. The National Petroleum Council (NPC) 

reported in June 2000 that the lengthy process for obtaining permits can 

limit a refinery's ability to respond quickly to changing market conditions. 

They offered the following list of average regulatory delays, based upon 

surveys of its members: 

• 3-6 months to prepare a permit application 

• 1-3 months for the permitting authority to deem the application 

complete 

• 3-6 months for the development and negotiation of a draft permit 

• An unstated period for public notice and the opportunity to receive 

public comments on the draft permit 

• An unstated period of time for the permitting authority to respond to 

public comments and take final action on the permit10 

6 U.S. EPA 2002, "New Source Review: Report To the President," p : 

7 The discussion applies equally to industrial sources. 

8 U.S. EPA, 2001, "NSR 90-Day Review Background Paper," p 28. 

9 Ibid, p 7. 

10 Ibid, p 44. 

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Note that these examples do not address only routine maintenance. 

Relying on the results of the NPC survey, the entire process of merely 

getting approval to make a routine modification would require a minimum 

of year. Then, if the determination indicated the activity required major 

NSR permitting, the source would have to wait once more for its permit to 

be approved before beginning the repair. In other words, a source may 

have to wait for up to eighteen months to be able to make a repair because 

it triggers major NSR permitting. Obviously, if such a routine change is 

warranted in response to changing market conditions, then such delay 

would threaten a company's ability to operate effectively in the market. 

One of the goals of the rulemaking on the routine maintenance, repair and 

replacement exclusion is to allow for the exclusion to be implemented 

without such delays. 

EPA proposes modifying the RMRR exclusion to explicitly include 

activities with total costs below an annual maintenance, repair, and 

replacement allowance for a unit. The annual maintenance, repair, and 

replacement allowance and the rules for calculating and summing projects 

under the allowance would be defined in new provisions at 40 CFR 51.165 

(a) (1) (xxvi), 40 CFR 51.166 (b) (38), 40 CFR 52.21 (b) (39), and 40 CFR 

52.24 (f) (25). Under EPA's first approach a maintenance, repair, and 

replacement allowance would be established for each facility for each predefined year (typically a calendar year or fiscal year). The costs of projects 

incurred during the calendar year would be summed across all units 

regardless of the pollutant it emits from least expensive to most expensive 

to get a total yearly cost for a unit. Facilities with total RMRR-related 

costs below the annual maintenance, repair, and replacement allowance 

would be considered to have undertake only routine maintenance, repair 

and replacement activities for those projects in its annual report. When a 

facility's total yearly reported cost exceeds the annual maintenance, repair, 

and replacement allowance, the activities would be reviewed as follows: 

• The owner/operator would subtract projects from the total yearly cost, 

starting with the most expensive project, until the remainder is less 

than or equal to the annual maintenance, repair, and replacement 

allowance. 

• Projects that were removed from the total yearly cost would be 

evaluated according to the multi-factor test in accordance with current 

EPA policy. 

• Any removed project found to require major NSR permitting through 

the ex post case-by-case review would be subject to major NSR. 

The Agency would establish the annual maintenance, repair, and 

replacement allowance equal to the product of the replacement cost of the 

unit and a specified maintenance percentage established in the proposed 

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rule, where replacement cost is defined as the total capital investment 

necessary for the complete replacement of the unit, calculated according to 

the EPA's cost methodology, set out in the EPA Air Pollution Control 

Cost Manual, (excluding the costs for installing and maintaining pollution 

control equipment)." When a stationary source uses the annual 

maintenance, repair, and replacement allowance to determine RMRR 

activities, all projects must be included in the annual cost calculations. 

Under the first approach, facilities must submit an annual report, 

aggregated across all units at the facility, to the appropriate reviewing 

authority (RA) within 60 days of the end of the year over which project 

costs have been summed. Each report must provide a summary of the 

estimated replacement value of each unit, the aggregated annual 

maintenance, repair, and replacement allowance for the facility, a 

description of all changes made to each unit, and the costs associated with 

those projects. If the sum of the cost of the projects at a facility exceed the 

annual maintenance, repair, and replacement allowance for the unit, the 

outcome of the multi-factor test for all projects selected in accordance with 

the steps outlined above must also be included in the unit's report. 

EPA's recommended approach will also contain safeguards to help ensure 

that projects that should be considered a major modification under the 

regulations are ineligible for exclusion from major NSR under the annual 

maintenance, repair, and replacement allowance. EPA proposes excluding 

from use of the annual maintenance, repair, and replacement allowance: 

1. The installation ofa new process unit. The types of activities 

eligible for an automatic RMRR exclusion should be limited to 

maintenance of existing process units at a stationary source in 

order to ensure continued safe and reliable operation. The addition 

of new process units that did not previously exist should receive 

greater scrutiny before a determination of routineness is made. 

2. The replacement of an entire process unit. The replacement of 

an entire process unit should not be automatically considered 

routine since a variety of operating parameters could change. 

Therefore, a wholesale exchange of a process unit should be 

subject to greater scrutiny under the major NSR program. 

3. Any change that would result in an increase in short term 

emission rates of any regulated pollutant, or in the emission of 

any regulated pollutant not previously emitted. Any activity 

that will result in a higher emission rate or the emission of a new 

11 The EPA Air Pollution Control Cost Manual, 6,h Edition, Daniel Mussatti, ed., 

January 2002, EPA #452-B-02-001, Section 1, Chapter 2. 

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pollutant should not be automatically excluded from the major 

NSR program as these increases may result in a significant net 

emissions increase or may have a significant impact on the 

environment. 

Concomitant with the proposed annual maintenance, repair, and 

replacement allowance approach, the Agency developed a second 

approach to the management of RMRR activities that focuses on clarifying 

when the replacement of existing equipment with equipment that serves 

the same function and that does not alter the basic design parameters of a 

unit would be considered RMRR. Under this approach, EPA would 

establish a percentage (yet to be determined) of the replacement value of 

an unit as a per-project threshold for applying the RMRR exclusion in a 

fashion similar to that employed for New Source Performance Standards 

(NSPS) purposes. This approach would let sources determine more readily 

what large-scale replacement activities would or would not trigger major 

NSR permitting. The equipment replacement approach would apply to the 

replacement of existing equipment with either identical new equipment or 

with functionally equivalent equipment. 

While the annual maintenance provisions described above will improve 

implementation of the RMRR exclusion, the allowance applies primarily 

to lower cost, short turn-around activities. For large scale projects that 

should qualify for an RMRR exclusion, the current multi-factor test and 

the proposed annual maintenance, repair, and replacement allowance 

approach may not provide sufficient relief. The current approach requires 

complex analysis to decide whether or not proposed projects (the same 

projects that would not meet the annual maintenance, repair, and 

replacement allowance criteria) constitute RMRR. Sources must choose 

between proceeding without a permit (with all of the potential liabilities of 

noncompliance) or seeking an applicability determination, which delays 

major source NSR project implementation by a minimum of six months. 

Given such a choice, it is not surprising that the Agency has amassed 

anecdotal evidence there have been cases in which the uncertainty about 

the exemption for routine activities has resulted in expensive delays or 

even the cancellation of beneficial projects. Such regulatory 

discouragement results in lost productive capacity, as well as lost 

opportunities to improve energy efficiency and reduce air pollution. 

Sources are not the only entities that incur costs from such determinations. 

State and local permitting authorities must devote scarce resources to 

make complex determinations, consult with other agencies to ensure their 

determinations are consistent with decisions made for similar 

circumstances in other jurisdictions (and the EPA), and confer with other 

regulators to ensure consistency among the RA's conclusions. 

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1.6 Analytical 

Considerations 

While the Agency proposes a single RMRR approach that combines 

elements of both alternatives, the exact nature of that combined approach 

cannot be determined at this time. Consequently, the Agency had to make 

an important limiting assumption with regard to this analysis by assuming 

the two approaches are mutually exclusive and that one or the other of the 

approaches - but not both - will be present in the final rule. Furthermore, in 

considering each alternative separately, the conclusions of the analysis 

cannot be considered to be upper or lower bounds on the benefits or costs 

that may accrue to affected entities because the Agency will select the best 

of both alternatives when designing its hybrid program and, therefore, 

believes the sum will be greater than its parts, expanding benefits beyond 

either program individually and reducing costs below those reported for 

either alternative. 

The results of the EPA's analysis are found below. 

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Needs and Consequences 

This part of the qualitative analysis summarizes the statutory requirements 

affecting the development of a Federal major NSR program and describes 

the nature of the problem. The need for regulatory action and the 

consequences of the regulation in terms of improving the functioning of 

the market are also discussed. 

2.1 Nature of the 

Problem 

In the absence of government regulation, market-oriented economic 

systems typically fail to prevent elevated levels of pollution in the 

environment because the environment is a public good. More specifically, 

individual sources treat the assimilative capacity of the environment as a 

"free good" resource to dispose of unused byproduct emissions. Under 

these conditions, emitters of pollutants and pollutant precursors do not 

internalize the cost of damages created by their own emissions. These 

damages occur to society as a whole, rather than to specific members of 

society. This is because pollution emissions are non-market goods — 

goods not bought or sold in the marketplace — and the atmosphere carries 

with it no property rights. The damages of pollution include increased 

morbidity and mortality; property damage from soiling, staining, and 

corrosion; and productive loss due to decreased worker efficiency, crop 

and livestock damage, and increased wear and tear on capital stocks. All 

of these damages are measurable. In addition, there are damages caused 

by pollution that are much harder, if not impossible, to quantify. These 

damages include habitat loss, diminished biodiversity, reductions in 

aesthetic quality, option values, and existence values. 

The divergence between the private cost of production and the social 

cost of production occur because the source does not bear the full cost of 

its activities (market costs plus damages). The outcome of the cost 

divergence is market failure, where as described in this case, the level of 

output is such that marginal social benefits are not equal to marginal social 

cost. The result is economic inefficiency, or a mis-allocation of society's 

resources; the polluting activity (e.g., the release of ozone precursors) 

occurs at too high a level in comparison to the optimally efficient 

situation, thus reducing the potential total benefits to society. Regulatory 

strategies attempt to correct for the divergence between social and private 

costs. Using regulatory strategies to internalize the negative externality 

may not, however, result in zero air pollution. Economic efficiency calls 

for abatement up to the point where additional abatement would cost more 

than the additional benefits would be worth to society. 

In addition to government regulation, other potential mechanisms may 

be used to correct for the negative externality brought about by air 

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pollution. Negotiations or litigation under tort and common law, in 

theory, could result in compensation to persons for the damages that they 

incur. However, two major obstacles block the correction by the private 

market for pollution-based inefficiencies and inequities. The first obstacle 

is high transaction costs when millions of persons are affected by millions 

of pollution sources. Transaction costs of compensating those adversely 

affected arise and accumulate because the current and future injury to each 

individual must be appraised, the injury must be apportioned to each 

precursor source, and damage suits or negotiations must be conducted. In 

an unregulated market, each source of precursor emissions and each 

affected person would have to litigate or negotiate. The transaction costs 

would be so high as to probably exceed the benefits of reduced air 

emissions. These obstacles strongly suggest that another mechanism is 

desirable for solving air pollution problems. 

The second obstacle discouraging resolution by the private sector is 

due to the public good nature of air resource. That is, after emission 

reductions have been achieved, the benefits of cleaner air can be enjoyed 

by additional persons at no additional cost. This results in the classic "free 

rider" problem. Everyone would have an incentive to be the last to 

contribute resources for litigation or negotiation, thinking that he or she 

would freely benefit from the efforts of others. While regulatory 

intervention can mitigate the impacts of the types of market failures 

discussed above, they generally do not occur without imposing their own 

costs. Typically, these costs include administration, enforcement, and the 

redistribution of resources at all levels. However, secondary impacts on 

social and economic sub-groups of the economy can also be affected in a 

disproportionate manner. The purpose of this report is to analyze, identify, 

and mitigate these regulatory costs. 

2.2 Legislative 

Requirements 

This section describes various legislative and executive requirements that 

govern the analytical requirements for Federal rulemakings, and describes 

how each analytical requirement is addressed in this RIA. 

2.2.1 Executive Order 

12866 

Executive Order 12866, "Regulatory Planning and Review" (FR, 1993), 

supercedes Executive Order 12291 "Federal Regulation" of 1981. It 

requires EPA to provide the Office of Information and Regulatory Affairs 

of the Office of Management and Budget (OLRA, OMB) with an 

assessment of the costs and benefits of significant regulatory actions. A 

"significant regulatory action" is defined as "any regulatory action that is 

likely to result in a rule that may: 

Have an annual effect on the economy of $100 million or more or 

adversely affect in a material way the economy, a sector of the 

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economy, productivity, competition, jobs, the environment, public 

health or safety, or State, local, or tribal governments or communities; 

• Create a serious inconsistency or otherwise interfere with an action 

taken or planned by another agency; 

• Materially alter the budgetary impact of entitlements, grants, user fees, 

or loan programs or the rights and obligations of recipients thereof; or 

• Raise novel legal or policy issues arising out of legal mandates, the 

President's priorities, or the principles set forth in the Executive 

Order" (FR, 1993). 

For any such regulatory action, the Agency must provide a statement of the 

need for the proposed action, must examine alternative approaches, and 

estimate social benefits and costs. 

EPA has determined that the proposed change to the RMRR exclusion 

does not constitute a significant regulatory action because only minor new 

regulatory requirements will be imposed. However, the Agency 

recognizes the importance of the major NSR program and its effort to 

streamline and simplify its processes. Consequently, this RIA has been 

prepared to provide updated economic cost and benefits information 

required by E.O. 12866 for a significant regulatory action. 

2.2.2 Executive Order 

12898 

Executive Order 12898, "Federal Actions to Address Environmental 

Justice in Minority Populations and Low-Income Populations," requires 

federal agencies to consider the impact of programs, policies, and 

activities on minority populations and low-income populations. 

Disproportionate adverse impacts on these populations should be avoided. 

According to EPA guidance, agencies are to assess whether minority or 

low-income populations face risk or a rate of exposure to hazards that is 

significant (as defined by the National Environmental Policy Act) and that 

"appreciably exceeds or is likely to appreciably exceed the risk or rate to 

the general population or other appropriate comparison group." (EPA, 

1996b) This guidance outlines EPA's Environmental Justice Strategy and 

discusses environmental justice issues, concerns, and goals identified by 

EPA and environmental justice advocates in relation to regulatory actions. 

In general, the potential for disproportionate effects on minority and lowincome populations in the major NSR program come from siting issues. 

However, by definition, the RMRR component of the major NSR program 

deals exclusively with existing facilities. Therefore, while the Agency has 

conducted only a general analysis of the potential changes in exposure to 

harmful air pollutants because of the RMRR program. These findings are 

presented in this RIA. 

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2.2.3 Executive Order 

13045 

Executive Order 13045, "Protection of Children from Environmental 

Health Risks and Safety Risks," directs Federal agencies developing health 

and safety standards to include an evaluation of the health and safety 

effects of the regulations on children. Regulatory actions covered under 

the Executive Order include rulemakings that are economically significant 

under Executive Order 12866, and that concern an environmental health 

risk or safety risk that the Agency has reason to believe may 

disproportionately affect children. EPA has developed internal guidelines 

for implementing the E.O. 13045. (EPA, 1998b) This rule is not subject to 

Executive Order 13045, because it is not economically significant under 

E.O. 12866 and the Agency does not have reason to believe the 

environmental health risks or safety risks addressed by this action present 

a disproportionate risk to children. 

2.2.4 Executive Order 

13132 

Executive Order 13132, entitled Federalism (64 FR 43255, August 10, 

1999), requires EPA to develop an accountable process to ensure 

meaningful and timely input by State and local officials in the 

development of regulatory policies that have federalism implications. 

"Policies that have federalism implications" is defined in the Executive 

Order to include regulations that have "substantial direct effects on the 

States, on the relationship between the national government and the States, 

or on the distribution of power and responsibilities among the various 

levels of government." Under Executive Order 13132, EPA may not issue 

a regulation that has federalism implications, imposes substantial direct 

compliance costs, or that is not required by statute, unless the Federal 

government provides the funds necessary to pay the direct compliance 

costs incurred by State and local governments, or EPA consults with State 

and local officials early in the process of developing the proposed 

regulation. EPA also may not issue a regulation preempts State law unless 

the Agency consults with State and local officials early in the process of 

developing the proposed regulation. 

If EPA complies by consulting States and local governments, Executive 

Order 13132 requires EPA to provide to OMB, in a separately identified 

section of the preamble to the rule, a federalism summary impact 

statement (FSIS). The FSIS must include a description of the extent of 

EPA's prior consultation with State and local officials, a summary of the 

nature of their concerns and the agency's position supporting the need to 

issue the regulation, and a statement of the extent to which the concerns of 

State and local officials have been met. Also, when EPA transmits a draft 

final rule with federalism implications to OMB for review pursuant to 

Executive Order 12866, EPA must include a certification from the 

Agency's Federalism Official stating that EPA has met the requirements of 

Executive Order 13132 in a meaningful and timely manner. 

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The proposed change to the RMRR exclusion under the major NSR 

program will not have substantial direct effects on the States, on the 

relationship between the national government and the States, or on the 

distribution of power and responsibilities among the various levels of 

government, as specified in Executive Order 13132. As discussed above, 

this rule imposes only minimal compliance burdens beyond those already 

included in the major NSR program. Thus, the requirements of section 6 

of the Executive Order do not apply to this rule. 

2.2.5 Executive Order 

13084 

Under Executive Order 13084, "Consultation with Tribal Governments," 

EPA may not issue a regulation not required by statute that significantly or 

uniquely affects the communities of Indian tribal governments, or that 

imposes substantial direct compliance costs on those communities, unless 

the Federal government provides the funds necessary to pay the direct 

compliance costs incurred by the tribal governments, or EPA consults with 

those governments. If EPA complies by consulting these governments, 

Executive Order 13084 requires EPA to provide to OMB in a separately 

identified section of the preamble to the rule, a description of the extent of 

EPA's prior consultation with representatives of affected tribal 

governments, a summary of the nature of their concerns, and a statement 

supporting the need to issue the regulation. In addition, Executive Order 

13084 requires EPA to develop an effective process permitting elected and 

other representatives of Indian tribal governments "to provide meaningful 

and timely input in the development of regulatory policies on matters that 

significantly or uniquely affect their communities." 

This proposed change in the major NSR program does not significantly or 

uniquely affect the communities of Indian tribal governments. As 

discussed above, this rule imposes only minimal new compliance burdens 

beyond those already required by the major NSR program. Moreover, the 

final Section 126 rule will not impose substantial direct compliance costs 

on such communities. Consequently, the requirements of section 3(b) of 

Executive Order 13084 do not apply. 

2.2.6 Regulatory 

Flexibility Act 

and the Small 

Business 

Regulatory 

Fairness Act of 

1996 

The Regulatory Flexibility Act (RFA) of 1980 (PL 96-354) requires 

agencies to conduct a screening analysis to determine whether a regulation 

will have a significant impact on a substantial number of small entities, 

including small businesses, governments and organizations. If a regulation 

will have such an impact, agencies must prepare a Regulatory Flexibility 

Analysis, and comply with a number of procedural requirements to solicit 

and consider flexible regulatory options that minimize adverse economic 

impacts on small entities. The RFA's analytical and procedural 

requirements were strengthened by the Small Business Regulatory 

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Enforcement Fairness Act (SBREFA) of 1996. The RFA and SBREFA 

require use of definitions of "small entities", including small businesses, 

governments and non-profits, published by the Small Business 

Administration (SBA).12 It is EPA's position that because the proposed 

change for the RMRR exclusion is a subset of the major NSR program, 

and since the major NSR program has already asserted it has no significant 

impact on a substantial number of small entities, the RFA as amended by 

SBREFA does apply to this proposal. 

2.2.7 Unfunded 

Mandates 

Reform Act 

The Unfunded Mandates Reform Act (UMRA) of 1995 (PL 104-4) was 

enacted to focus attention on federal mandates that require other 

governments and private parties to expend resources without federal 

funding, to ensure that Congress considers those costs before imposing 

mandates, and to encourage federal financial assistance for 

intergovernmental mandates. The Act establishes a number of procedural 

requirements. The Congressional Budget Office is required to inform 

Congressional committees about the presence of federal mandates in 

legislation, and must estimate the total direct costs of mandates in a bill in 

any of the first five years of a mandate, if the total exceeds $50 million for 

intergovernmental mandates and $100 million for private-sector mandates. 

Section 202 of UMRA directs agencies to provide a qualitative and 

quantitative assessment of the anticipated costs and benefits of a Federal 

mandate that results in annual expenditures of $100 million or more. The 

assessment should include costs and benefits to State, local, and tribal 

governments and the private sector, and identify any disproportionate 

budgetary impacts. Section 205 of the Act requires agencies to identify 

and consider alternatives, including the least costly, most cost-effective, or 

least burdensome alternative that achieves the objectives of the rule. 

Since the total expected new cost of this proposed change to the RMRR 

exclusion is less than $2 million per year, EPA has determined that 

UMRA does not affirmatively apply to this regulatory action. However, 

this RIA includes a cost analysis of administrative requirements for State 

and local governments associated with revising SIPs and collecting and 

reporting data to EPA. It also includes the compliance and administrative 

costs to emissions sources owned by government entities. 

12 Where appropriate, agencies can propose and justify alternative definitions of 

"small entity." This RIA relies on the SBA definitions. 

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2.2.8 Paperwork 

Reduction Act 

The Paperwork Reduction Act of 1995 (PRA) requires Federal agencies to 

be responsible and publicly accountable for reducing the burden of Federal 

paperwork on the public. EPA has submitted an Information Collection 

Request (ICR) to the Office of Management and Budget (OMB) for these 

proposed change to the RMRR exclusion in compliance with the PRA. 

The ICR explains the need for additional information collection 

requirements and provides respondent burden estimates for additional 

paperwork requirements to State and local governments. 

For the proposed rulemaking, EPA estimated the burden and cost of all 

new recordkeeping, monitoring, and reporting activities and reported them 

in the May 2002 ICR. These estimates of administrative burden costs are 

contained in the docket for this action. 

Burden means the total time, effort, and financial resources expended by 

persons to generate, maintain, retain, and disclose or provide information 

to or for a federal agency. This includes the time needed to review 

instructions; develop, acquire, install, and utilize technology and systems 

for the purposes of collecting, validating, processing, maintaining and 

disclosing information; adjust the existing ways to comply with any 

previously applicable instructions and requirements; train personnel to be 

able to respond to a collection of information; search data sources; 

complete and review the collection of information; and transmit or 

otherwise disclose the information. 

An agency may not conduct or sponsor, and nor is a person required, to 

respond to a collection of information unless it displays a currently valid 

OMB control number. The OMB control numbers for EPA's regulations 

are listed in 40 CFR part 9 and 48 CFR Chapter 15. 

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Consideration of Alternative Approaches 

Because the proposed change to the RMRR exclusion under the major 

NSR program has been subject to an extensive stakeholder outreach 

program, it has been subjected to discussions of numerous alternative 

approaches. These discussions included participants from the regulated 

community, State and local air pollution control agencies, environmental 

organizations, and other Federal agencies. Consequently, the proposed 

change to the RMRR exclusion constitutes a well reasoned compromise to 

the specific interests of each of those groups. 

3.1 No Regulation The consideration of alternative approaches must include a determination 

of the feasibility of the Federal government taking no action. Title I of the 

Act mandates the NSR process. Consequently, "No Regulation" is not a 

viable option for this analysis. 

3.2 Alternative 

Effective Dates 

The purpose of the proposed rulemaking is to increase the clarity 

regarding the RMRR exclusion. Consequently, the Agency gave this 

package the earliest possible effective date. Consideration of alternative 

effective dates would, in effect, result in additional costs and burden to 

sources. 

3.3 Economic 

Incentive 

Alternatives 

While economic incentives can be considered a part of the major NSR 

process, the nature of the activities included within the definition of 

RMRR does not contain elements that are a part of the economic incentive 

process. 

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Description of Affected Entities 

There are two types of sources potentially affected by the proposed 

approaches to routine maintenance, repair, and replacement within the 

framework of the Agency's major NSR preconstruction permit program: 

electricity utility steam generating units and non-utility sources. The 

following discussion includes brief descriptions of each type of affected 

entity. The Agency made this differentiation based upon existing air 

quality reports and regulatory analyses: the Ozone Transport Assessment 

Group's (OTAG's) 1990 data base; the Operating Permits data base of 

respondents; and the data base developed by the RACT/BACT/LAER 

Clearinghouse (RBLC). 

4.1 Electricity Generating Units 

In 1990, approximately 2.8 trillion kilowatt hours (kWh) of electricity 

were generated in the United States. By 2005, EPA projects this total to 

increase to about 3.6 trillion kWh.13 More than 95 percent of the nation's 

generating capacity is owned by electric utilities and a significant portion 

of the nation's electricity generating industry is in the region affected by 

the final Section 126 rule.14 EPA estimates 842 electrical generating units 

of less than 25 MW will be operating in this region in the year 2000. In 

addition to electric utility power units that produce only electricity, this 

number includes units owned by independent power producers (LPPs) and 

units that co-generate electricity and steam (co-generators), whether owned 

by utilities or IPPs. 

4.2 Non-Utility 

Potentially 

Affected 

Sources 

There are about 14,500 sources subject to Title I operating permits 

requirements in the EPA's Operating Permits Database, encompassing all 

industry classifications in 34 states and the District of Columbia. EPA 

believes this database represents the majority of the universe of potentially 

affected sources for the major NSR program. Table 1 below is in the 

13 EPA's generation requirement projections are based on an extension of the 

electric demand forecast of the North American Electric Reliability Council, 

adjusted for the impact of the Climate Change Action Plan. 

14 The final Section 126 region consists of whole or parts of Delaware, District of 

Columbia, Indiana, Kentucky, Maryland, Michigan, North Carolina, New Jersey, 

New York, Ohio, Pennsylvania, Virginia, and West Virginia. The petitions filed 

with EPA only name parts of Indiana, Michigan, Kentucky, and New York while 

naming the whole of the other jurisdictions. 

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current NSR ICR. Table 1 displays the industry classifications most 

commonly affected by major NSR permitting requirements.I5 

Table 1 Most Commonly Affected Entities 

Industry Group 

Pulp and Paper Mills 

Paper Mills 

Chemical Processes 

Pharmaceuticals 

Petroleum Refining 

Automobile Manufacturing 

Electric Services 

Natural Gas Transport 

SIC 

261 

262 

281 

283 

291 

371 

491 

492 

NAICS 

32211,322121,322122,32213 

322121,322122 

325181,32512,325131,325182,211112,325998,331311,325188 

325411,325412, 325413, 325414 

32411 

336111,336112,336712, 336211,336992, 336322,336312,33633, 

33634,33635,336399, 336212, 336213 

221111,221112,221113,221119,221121,221122 

48621,22121 

15 Information Collection Request for 40 CFR Part 51 and 52 Prevention of 

Significant Deterioration and Nonattainment New Source Review, Office of 

Management and Budget (OMB) Control Number 2060-0003; EPA Form 

Number 1230.09. 

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5 Assessing Benefits and Costs 

The Agency believes all sources potentially subject to major NSR 

permitting will use the RMRR approach promulgated by EPA. To analyze 

the benefits and costs associated with the change, EPA looked at both the 

beneficial effects on industry maintenance practices by having identified 

categories of activities as RMRR and on the potential reduction in work 

for industry and reviewing authorities through having to perform less 

applicability determinations. 

We have attempted to analyze quantitatively the possible emissions and 

cost consequences of the range of different approaches to the RMRR 

exclusion described above. The analysis was conducted using the 

Integrated Planning Model (IPM). This analysis was done for electric 

utilities because we have a powerful model to perform such an analysis 

that we do not have for other industries. We think the results for the 

electric utilities accurately reflect the trends we would see in other 

industries. 

We have also attempted to estimate the significant reduction in the costs to 

industry and reviewing agencies, due to decreases in making applicability 

determinations, associated with identifying categories of activities that are 

RMRR. 

5.1 Analysis In order to evaluate the impact of the routine maintenance provisions, EPA 

considered a scenario under which major NSR regulations remained in 

place and a range of scenarios that could occur if major NSR did not exist. 

The first scenario is intended to represent the existing program, which the 

EPA has found impedes or results in cancellation of projects that maintain 

and improve reliability, availability, and efficiency at existing power 

plants.I6 The second range of scenarios is based on companies receiving 

flexibility under the major NSR program that removes many of these 

impediments . As part of this analysis, EPA reviewed three key variables: 

change in S02 emissions, change in NOx emissions and change in cost. 

When we issue a final rule to establish categories of activities that qualify 

as RMRR under major NSR, we expect that final rules governing the use 

of plantwide applicability limits (PALs), and Clean Units will already be 

in place. Some sources with in the electric utility generation industry may 

take advantage of these changes. However, any such decision will be 

16 This finding is described in detail in EPA's June 13, 2002 New Source Review 

Report to the President. 

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based on case specific information related to their past operating levels, 

current levels of control and company's specific strategies for complying 

with major. Therefore, we can not make estimates on how many sources 

may take advantage of PALs and Clean Units. To the extent they are used 

within the industry, they will dampen the effects shown in this analysis 

(i.e., estimated decreases and increases will not be as large). 

One part of our analysis was performed using IPM. IPM is a linear 

programming model that EPA uses to analyze the effect of various 

environmental policies on the power sector. It provides forecasts of leastcost capacity expansion, electricity dispatch and emission control 

strategies for meeting energy demand and environmental, transmission, 

dispatch and reliability constraints. EPA has used it to analyze many 

environmental policies including the Phase II Acid Rain Nitrogen Oxide 

regulations and the Nitrogen Oxide SIP Call. Analysis can be performed 

varying multiple constraints such as availability of various types of power 

plants (e.g. coal-fired, nuclear, gas-fired combined cycle units), heat rates 

of various types of power plants, environmental constraints (e.g. caps on 

emissions, emission rate limitations). More detail regarding IPM can be 

found in the document titled "Documentation of EPA Modeling 

Application (V.2.1) Using the Integrated Planning Model, which can be 

found at: http://www.epa.gov/airmarkets/epa-ipm/index.html. 

The first scenario, referred to as the major NSR base cases approximates 

utility behavior under the current program, where the EPA has found that 

companies perform limited maintenance on coal plants because of 

concerns about major NSR. In this scenario, it was assumed that the 

performance of coal units would deteriorate, resulting in higher heat rates 

and lower capacities. EPA did not assume that reduced maintenance 

resulted in a change in maximum potential unit availability. This is 

because over the last 20 years, availability of coal-fired plants has 

increased even as the plants have aged. This is due in large part to 

improved maintenance practices. For instance tests to inspect boiler tubes 

have been continually improving (see "Preventing Boiler Tube Failures 

with EMAT's", S.P. Clark et al, "EPRI International Conference on Boiler 

Tube Failures and HRSG Tube Failures and Inspects", November 6-8, 

2001). These improved preventive maintenance practices allow 

companies to replace components during regularly scheduled outages 

before they fail rather than causing unscheduled outages after they fail. 

The second range of scenarios, referred to as increased maintenance cases 

#1 - #5 , looks at a range of scenario for what might happen in the utility 

sector if companies were provided with increased flexibility under major 

NSR to perform maintenance. This would result in lower heat rates, 

higher capacities and/or higher unit availabilities for these units. Finally 

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EPA looked at one case (standard base case) in which heat rate, capacity 

and unit availability did not change. 

It is important to note several limitations to this analysis. First this 

analysis only considered emission regulations that are currently in effect 

(e.g. the NOx SIP Call and the Title IV Acid Rain Provisions). Future 

environmental regulations such as emission reduction requirements 

necessary to meet the fine particulate matter standards or emission 

reductions under multi-pollutant regulations could significantly change 

this analysis. Second, the analysis assumed the operating and maintenance 

costs of coal-fired units was the same for units performing limited 

maintenance and for units performing increased maintenance. Since the 

most significant cost associated with running an existing power plant is the 

cost of fuel, this impact is probably fairly small. 

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Table 1: Key modeling assumptions in routine maintenance analysis 

Major NSR Base-case 

Increased Maintenance Case #1 

Increased Maintenance Case #2 

Increased Maintenance Case #3 

Increased Maintenance Case #4 

Increased Maintenance #5 

Standard Base Case 

Winter 

Availability 

81.6% 

85.0% 

81.6% 

85.0% 

85.0% 

81.6% 

81.6% 

Summer 

Availabilit 

y 

89.8% 

92.0% 

89.8% 

92.0% 

92.0% 

89.8% 

89.8% 

Heat Rate Change 

+0.1%) per year 

-0.1% per year 

-0.1% per year 

-1.6% in year 

2005 and beyond 

-3.2% in year 

2005 and beyond 

-1.6% in year 

2005 and beyond 

No change 

Capacity Change 

-0.1% per year 

+0.1 % per year 

+0.1% per year 

+1.6% in year 

2005 and beyond 

+3.2% in year 

2005 and beyond 

+1.6% in year 

2005 and beyond 

No change 

Results: 

Changes in S02 Emissions, NOx emissions and cost are summarized in 

tables 2, 3 and 4 below. 

Table 2: Changes in S02 emissions in scenarios considered in routine maintenance 

analysis. 

Major NSR Base-case 

Increased Maintenance Case #1 

Increased Maintenance Case #2 

Increased Maintenance Case #3 

Increased Maintenance Case #4 

Increased Maintenance #5 

Standard Base Case 

2005 S02 

Emissions 

(tons) 

10,168,230 

10,135,120 

10,186,660 

10,075,060 

10,009,250 

10,079,510 

10,168,520 

2010 S02 

Emissions 

(tons) 

9,713,684 

9,739,029 

9,701,112 

9,773,242 

9,813,664 

9,764,971 

9,712,499 

2015 S02 

Emissions 

(tons) 

9,101,622 

9,104,121 

9,099,363 

9,104,836 

9,105,429 

9,099,923 

9,100,264 

2020 S02 

Emissions 

(tons) 

9,103,275 

9,102,688 

9,099,271 

9,103,779 

9,104,396 

9,100,361 

9,100,680 

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As shown in table 2, there is very little change in S02 emissions over the 

entire time period studied under the two scenarios. This is because S02 

emissions are already capped nationally under the Title IV Acid Rain 

Provisions. Therefore if a unit decreases its emissions to make room 

under its PAL, it could instead sell excess allowances to another unit. 

However because emissions can also be shifted temporally by banking 

emission allowances to be used in a future year there can be significant 

changes in emissions for a specific year. While temporal distribution of 

emissions did not change much over time in the major NSR cases 

considered, there was more temporal distribution of emissions in the 

increased maintenance scenarios considered. 

Increasing capacity (under the increased maintenance cases) leads to 

increases in NOx emissions. When comparing increased maintenance 

cases #1 and #2 (which had the same increases in efficiency, but different 

changes in maximum availability, NOx emissions increase by an average 

of almost 92,000 tons per year over the time period analyzed. 

Table 3: Changes in NOx emissions in scenarios considered under routine maintenance 

scenarios. 

Major NSR Base-case 

Increased Maintenance Case #1 

Increased Maintenance Case #2 

Increased Maintenance Case #3 

Increased Maintenance Case #4 

Increased Maintenance #5 

Standard Base Case 

2005 NOx 

Emissions 

(tons) 

4,279,362 

4,340,166 

4,276,550 

4,307,796 

4,276,172 

4,259,170 

4,277,407 

2010 NOx 

Emissions 

(tons) 

4,285,400 

4,362,948 

4,283,081 

4,350,737 

4,334,671 

4,271,294 

4,285,423 

2015 NOx 

Emissions 

(tons) 

4,338,461 

4,442,881 

4,327,979 

4,423,141 

4,412,340 

4,324,992 

4,332,209 

2020 NOx 

Emissions 

(tons) 

4,375,486 

4,471,499 

4,362,859 

4,472,706 

4,460,041 

4,363,930 

4,360,044 

It appears that changing heat rates and capacities has the opposite affect on 

emissions. NOx emissions actually decrease when flexibility under major 

NSR program allows power generation companies to improve efficiency 

by performing increased maintenance if maximum availability of these 

units does not change at the same time. For instance if one compares two 

scenarios with the same maximum capacities: Major NSR Base-case , 

increased maintenance case #2 and the standard base case, average 

emissions are about 7000 tons per year higher over the time period 

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analyzed in the Major NSR Base-case where heat rates are higher and 

capacities are lower. Looking at increased maintenance cases #3 and #4 

shows the same trend. In these two cases maximum availability remains 

constant, but heat rates are lower and capacities are higher in increased 

maintenance case #4. These lower heat rates and higher capacities lead to 

emissions that are on average nearly 18000 tons per year less in increased 

maintenance case #4 than in increased maintenance case #5. 

Another point to note is that EPA also looked at the speed in which the 

improvements to the units were made. For example by 2020, the heat rate 

decrease and the capacity increase was the same in both increased 

maintenance case #2 and increased maintenance case #5 were the same. 

However in case #5, those changes happened in one step in 2005, in case 

#2, the changes happened gradually. When the changes occurred all at 

emissions were lower in the early years. In the later years, when the total 

magnitude of the changes was more similar in both cases, the NOx 

emissions were also more similar. 

This analysis suggests that the affect that changing the requirements of 

major NSR with regards to routine maintenance will have on emissions is 

dependent upon the affect that it will have on maximum unit availabilities. 

If the routine maintenance changes increase efficiency and plant capacity 

without increasing maximum unit availability, this analysis suggests that 

the changes could decrease emissions. The amount of that emission 

decrease would depend both on how much heat rate decreased and 

capacity increased and how quickly these changes occurred. The greater 

the heat rate decrease and capacity increase and the more quickly the 

changes occurred, the greater the emission reductions. If on the other 

hand, the new provisions increase maximum unit availabilities this 

analysis suggests that the changes could increase emissions. 

Changes in cost are summarized in table 4 below. Note that this analysis 

does not consider changes in maintenance costs, it only assumes changes 

in fuel costs and changes in capital costs associated with new generating 

units and new emission control equipment. Therefore it probably 

understates the cost of the increased maintenance scenarios and 

understates the cost of the Major NSR Base-case. 

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Table 4: Total cost of scenarios considered (in 1999 dollars) 

Major NSR Base-case 

Increased Maintenance Case #1 

Increased Maintenance Case #2 

Increased Maintenance Case #3 

Increased Maintenance Case #4 

Increased Maintenance #5 

Standard Base Case 

2005 Total 

Cost 

(million 

1999 

dollars) 

76,187 

75,432 

76,088 

74,422 

73,740 

75,164 

76,149 

2010 Total 

Cost 

(million 

1999 

dollars) 

80,934 

79,819 

80,290 

79,309 

78,250 

79,782 

80,572 

2015 Total 

Cost 

(million 

1999 

dollars) 

88,921 

87,306 

87,861 

86,715 

85,898 

87,600 

88,404 

2020 Cost 

(million 

1999 

dollars) 

95,819 

92,817 

93,781 

92,788 

91,932 

93,784 

94,588 

The Department of Energy also attempted to analyze quantitatively the 

possible emissions consequences of the range of different approaches to 

the RMRR exclusion described above. Using the National Energy 

Modeling System (NEMS), DOE evaluated a variety of changes in energy 

efficiency and availability, as well as the effect on emissions resulting 

from these changes. This analysis concluded that efficiency improvements 

resulting from increased maintenance are expected to decrease emissions, 

whereas availability improvements are expected to increase emissions. In 

the cases represented in this analysis, the impacts of the assumed 

reductions in heat rates tend to dominate the corresponding effects of the 

assumed availability increases. A copy of that analysis is included in 

Appendix A of this report. A more complete description of the analysis 

and its results can be found in EPA Air docket A-2002-04. 

5.2 Benefits "Benefits" refers to any and all outcomes of a regulation that contribute to 

an enhanced level of social welfare. The two primary types of benefits that 

can be attributed to the proposed change to the RMRR exclusion are 

temporal health-related benefits and benefits from avoided costs. 

The Agency believes most of the benefits from the proposed change to the 

RMRR exclusion will be derived from cost savings, of which this report 

identifies four types: 1) increased efficiency for industrial production, 2) 

improved flexibility and reaction time, 3) reductions in the number of 

applicability determinations performed by industry and reviewing 

authorities and their associated delays and 4) reductions in the need for 

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new sources. The delays associated with applicability determinations can 

limit industry's ability to react quickly in a changing economic 

environment For many source categories, this is not a big problem because 

they undertake major NSR-related activities on an infrequent basis. 

However, for a number of industries, the Agency has identified as many as 

three or four changes take place each year that could prompt an Operating 

Permit revision and, potentially, a major NSR permit, as well.I7 When 

such changes occur, permitting lags can significantly impact the 

profitability of the source by preventing timely changes in processes that 

improve competitiveness and protect market share. For EGUs and other 

boiler applications, the failure to perform timely repairs and maintenance 

can reduce boiler efficiency and thereby reduce electricity generating 

capacity. Even a one percent change in the heat rate of a boiler {ceteris 

paribus) can impose a half a million dollar change in net revenues for a 

500 MWe coal-fired boiler.18 Allowing sources to respond to 

maintenance-related problems in a revenue maximizing fashion will 

unambiguously increase revenues (and profits) and reduce operating costs 

for industry. 

The net effect of these cost savings could be substantial. In tangible cost 

savings, the ability to address larger routine maintenance and repair 

problems quickly can conceivably result in tens of millions of dollars in 

savings through more efficient electricity generation alone. The LPM 

analysis showed that increased levels of maintenance can lead to increased 

availability of units which will decrease the need for new generating units 

saving millions of dollars. That, combined with the potential for improved 

national and international competitiveness and market share due to RMRR 

flexibility improvements could potentially result in job savings, job 

creation, and other macro-economic improvements. Unfortunately, there is 

no way to determine a realistic value for these improvements. The LPM 

analysis also shows that there may be reduced NOx emissions under some 

of the increased maintenance scenarios due to improved efficiency of the 

units. 

This report invites the public and other stakeholders to offer their input 

into this assessment toward future refinement of this analysis. 

17 U.S. EPA, 1994, "Economic Analysis, Regulatory Flexibility Act Screening 

Analysis, and Paperwork Reduction Act Information Collection Request Analysis for Proposed Revisions to Part 70 Operating Permits Regulations," by Daniel 

Charles Mussatti, pp 33-48. 

18 http://ildpower.com/fossil02.html 

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5.3 Costs The IPM analysis showed significant decreased costs associated with the 

increased maintenance scenarios. These decreases result from the 

increased availability of existing units and, therefore, the decrease in 

construction of new generating units. The analysis did not consider 

changes in maintenance costs. 

5.3.1 Source Costs EPA believes costs will be insignificant for most of the sources 

participating in the RMRR program under either approach. For instance, 

the first annual task at each participating facility will be to estimate the 

replacement costs of all of its process units. Since these data are readily 

available to the applicant through financial records (such as insurance 

forms) it should take no more than 4 hours per process unit (source) for 

each facility to inventory all of its units. Following the estimation of 

replacement cost for each process unit, the facility must create an annual 

report for each source, detailing all of the RMRR-related costs and 

activities at that unit. For most units, this will be a relatively short report, 

again probably no more than 4 hours per report to gather and record each 

unit's RMRR-related activities into the facility's annual report. 

As stated in the preamble to the proposed change to the RMRR exclusion, 

sources must report activities aggregated by costs across all appropriate 

process units, rather than aggregating the cost of activities across 

pollutants. While this limitation necessarily increases the burden and cost 

to industry, EPA believes the cost of that additional burden is minimal. 

Table 2 displays the expected long-term annual burden and cost of this 

rulemaking to sources for the maximum scope of this proposed 

rulemaking. 

Table 2 Expected Annual Marginal Burden and Cost to Process Units (Sources) for the Annual 

Maintenance, Repair, and Replacement Allowance Approach 

Entity / Activity 

Sources 

Rule Assimilation, Development of 

Strategy2 

Assessment of Replacement Value 

Preparation of Annual RMRR Report 

Total Source Burden and Cost 

Respondents 

1,450 

1,450 

1,450 

1,450 

Hours Per 

Respondent per 

Year 

4 

4 

4 

12 

Total Annual 

Hours (All 

Respondents) 

5,800 

5,800 

5,800 

17,400 

Annual Cost per 

Respondent' 

$300 

$300 

$300 

$900 

Total Annual 

Cost (All 

Respondent)' 

$435,000 

$435,000 

$435,000 

$1,305,000 

1 All costs are in 2002 dollars 

2 One-time items have been averaged over the three year life of this ICR. 

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There are approximately 14,500 sources of air pollution potentially subject 

to major NSR permitting.19 Each of these sources will have to undertake 

the tasks listed in Table 2, resulting in an increased burden to all 

potentially affected sources of about $900 per year ($1.3 million annually 

for all sources) under the annual maintenance, repair, and replacement 

allowance approach. Because there are so many sources that are potentially 

affected and will need to perform the minimal annual tasks of inventory 

and reporting, the increase in burden dominates the expected effects of the 

RMRR program. However, through the potential for reduced uncertainty 

and improved flexibility and competitiveness found in the RMRR 

program, the Agency believes that although not measurable, for those 

sources subject to major NSR, the overall benefit to sources able to avoid 

major NSR permitting through the RMRR program outweighs the de 

minimis increase in burden and costs imposed upon the entire universe of 

potentially affected sources. Consequently, the Administrator asserts that 

while not estimable in the traditional sense, the proposed RMRR 

approaches provide regulatory relief to those sources currently subject to 

major NSR under the current routine maintenance provisions. 

Table 3 Expected Annual Marginal Burden and Cost to Process Units (Sources) for the 

Equipment Replacement Approach 

Entity / Activity 

Sources 

Rule Assimilation, Development of 

Strategy2 

Assessment of Replacement Value 

Total Source Burden and Cost 

Respondents 

1,450 

1,450 

1,450 

Hours Per 

Respondent 

per Year 

4 

4 

8 

Total Annual 

Hours (All 

Respondents) 

5,800 

5,800 

11,600 

Annual Cost 

per 

Respondent' 

$300 

$300 

$600 

Total Annual 

Cost (All 

Respondent)1 

$435,000 

$435,000 

$870,000 

1 All costs are in 2002 dollars 

2 One-time items have been averaged over the three year life of this ICR. 

The 14,500 sources of air pollution potentially subject to major NSR 

permitting under the proposed equipment replacement approach will have 

to undertake the tasks listed in Table 3, above. There is no reason to 

believe the number of affected sources or the burden differs between the 

two proposed approaches. The primary difference between the two 

proposed approaches is that the equipment replacement approach does not 

have an associated annual reporting requirement. Consequently, the 

number of affected sources and the burden associated with each of the 

tasks in Table 3 has the same value as its analog in Table 2 for the annual 

19 Most sources contain more than one pollution creating unit, but this report does 

not need to differentiate by pollutant for the purposes of this analysis. 

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maintenance, repair, and replacement allowance approach. Each affected 

source will expend about 8 additional hours in regulatory-related activities, 

relative to the status quo, for a total additional cost of about $870 thousand 

per year. As with the annual maintenance, repair, and replacement 

allowance approach, the Administrator asserts that the reduction in 

uncertainty and improved flexibility and competitiveness available through 

the equipment replacement RMRR approach also provides regulatory 

relief to industry. 

5.3.2 Reviewing 

Authority Costs 

Permitting authorities seeking to implement the new RMRR provisions 

will incur the costs outline in this section. RAs, however, do not have to 

adopt any particular provision as long as they can show that their version 

of the program is at least as stringent as ours. RAs who do not want to 

implement the new provisions will incur costs associated with 

demonstrating the adequacy of their existing programs. Each participating 

RA will have to learn the rule and incorporate it into its SIP. The Agency 

identified five tasks that each RA must perform for the incorporation of 

the RMRR program into its SIP and two annual tasks it will have to 

perform to maintain the RMRR program. Table 4 displays the expected 

annual burden and cost of this rulemaking to RAs for the maximum scope 

of this analysis. Each RA can expect to incur an additional 1,400 hours of 

activity per year 

Table 4 Expected Marginal 

Entity / Activity 

Rule Familiarization2 

Applicability Determinations2 

SIP Revision2 

Public Hearing and SIP Modification2 

Legislative Coordination2 

Annual Report Review3 

Major NSR Determination

 3'4 

Total One-Time RA Burden and Cost' 

Total Annual Burden and Cost' 

Burden and Cost to 

Respondents 

112 

112 

112 

112 

112 

112 

112 

112 

112 

Hours Per 

Activity 

20 

10 

40 

30 

40 

8 

10 

Permitting Authorities 

Total Annual 

Hours (All 

Respondents) 

2,240 

1,120 

4,480 

3,360 

4,480 

116,480 

7,280 

15,680 

123,760 

Annual Cost per 

Respondent' 

$740 

$370 

$1,480 

$1,110 

$1,480 

$38,480 

$2,405 

$5,180 

Total Annual 

Cost (All 

Respondent)' 

$82,880 

$41,440 

$165,760 

$124,320 

$165,760 

$4,309,760 

$269,360 

$580,160 

$4,579,120 

1 All costs are in 2002 dollars 

2 One-time items have been averaged over the three year life of this ICR. 

3 Annual items have been estimated at 130 sources per RA per year. 

4 Assumes 1 determination for every 20 sources. 

5.3.3 Federal Costs 

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The Federal government incurs a moderate long-run burden from the 

promulgation of this rule, but the Agency believes the burden and cost of 

the RMRR program to be justified. Furthermore, the Agency believes the 

slight increase in burden will be somewhat offset by the reduction in 

oversight and enforcement activities that will result from fewer major 

source modifications occurring each year. For the RMRR program, EPA 

will be responsible for two one-time activities, SIP revision support (at 

least 10 hours of guidance per year, or 3,360 hours over the three years of 

expected SIP revision), and SIP review and approval (about one day per 

SIP, or a total of 299 hours per year). Annually, the EPA will have two 

tasks to perform: management of the RMRR program to those sources 

where it has authority (about 10 hours per year, or 1,450 hours per year per 

Federally managed source), and oversight of RA report review and major 

NSR determinations, which will take about half as long for the Federal 

government to review each form, relative to the RA's burden for each task. 

The Agency typically provides Permitting Authority oversight to one 

source determination in ten. Table 5, below, displays the average annual 

expected burden and cost to the Federal government for the RMRR 

program. 

5.3.4 Bottom Line Impacts 

The proposed annual maintenance, repair, and replacement allowance 

approach to RMRR activities will add about $13 million annually to the 

cost of the major NSR program. However, the effect of small costs 

accrued by large numbers of sources makes this total misleading. About 61 

percent of that cost applies to the annual cost of the RMRR program to 

sources - most of which is attributable to the de minimis cost of additional 

reporting that is spread across 14,500 sources (at an annual cost of less 

than a thousand dollars per source). If that de minimis cost is removed 

from total, the annual cost of the annual maintenance, repair, and 

replacement allowance RMRR program is less than $200,000. The 

equipment replacement approach costs somewhat less than the annual 

maintenance, repair, and replacement allowance approach, since it does 

not have an annual reporting requirement. Consequently, the equipment 

replacement approach will cost sources $870 thousand per year, or about 

$600 per source per year. 

Table 5 Expected Yearly Marginal Burden and Cost to The Federal Government 

Entity / Activity 

Coordination with RAs

 2 

Review of SIPS2 

Management of Federal Program

 3 

Annual Report Review3 

Number of 

Respondents 

Served 

112 

112 

145 

13,050 

Hours per 

Year Per 

Respondent 

10 

8 

10 

4 

Total Annual 

Hours 

1,120 

896 

1,450 

5,220 

Average 

Annual Cost 

per 

Respondent' 

$41,440 

$11,063 

$370 

$4 

Total Annual 

Cost (All 

Respondent)' 

$41,440 

$11,063 

$53,650 

$193,140 

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Major NSR Determination

 3'4 

TOTAL One-Time Federal Burden and Costs ' 

TOTAL Annual Federal Burden and Costs ' 

13,050 10 

13 

13,050 

1,456 

$6 

$52,503 

$482,850 

$52,503 

$502,190 

1 All costs are in 2002 dollars 

2 One-time items have been averaged over the three year life of this ICR. 

3 Annual items have been estimated at 130 sources per RA per year. 

4 Assumes 1 determination for every 20 sources. 

Under both approaches, the Agency has provided opportunities for 

industry to improve its responsiveness to changing economic conditions 

while performing critical repair, replacement and maintenance activities. 

These improvements derive from the RMRR program's primary goals -

the reduction of uncertainty and regulatory delay related to the 

performance of such activities. While valuable, the decrease in uncertainty 

and regulatory delay are not quantifiable in the traditional sense. Instead, 

the Agency's assertion that the two alternative approaches to RMRR 

provide regulatory relief depends on a simple concept, the Le Chetalier 

Principle in its economic application: reducing the restrictions on industry 

reduces costs. Consequently, while the measurable portion of the proposed 

approaches indicate increases in burden and cost, the program in toto 

should be beneficial. 

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Table 6 Bottom Line One-Time and Annual Burden and Costs1 

Entity / Activity 

Process Units (Sources) Annual Maintenance, Repair, and 

Replacement Allowance Approach 

Process Units (Sources) Equipment Replacement Approach 

Permitting Authorities (Both Approaches) 

US Environmental Protection Agency (Both Approaches) 

Number of 

Respondent 

s 

1,450 

1,450 

112 

1 

Hours per 

Year per 

Respondent 

12 

8 

140 

23 

Total Expected Cost (Annual Maintenance, Repair, and Replacement Allowance Approach) 

Total Expected Cost ( Equipment Replacement Approach) 

Total Annual 

Hours (All 

Respondents) 

17,400 

11,600 

15,680 

2,906 

Annual Cost 

per 

Respondent' 

$900 

$600 

$5,180 

$851 

Total Annual 

Cost (All 

Respondent)' 

$1,305,000 

$870,000 

$580,160 

$107,522 

$1,992,682 

$1,557,682 

1 All costs are in 2002 dollars 

5.3.5 Caveats The analysis is based upon the best data available to the Agency at this 

time. However, inconsistencies in RA reporting techniques, incomplete 

data sets, and sampling limitations imposed upon the Agency by the 

Paperwork Reduction Act necessitated a certain amount of extrapolation 

and "best-guess" estimations by RAs and Agency experts. Consequently, 

the reader should not consider the conclusions to be an exact 

representation of the level of burden or cost that will occur. Instead, this 

report should be considered a directionally correct assessment of the 

impact the programmatic changes included in this rulemaking. 

Furthermore, because the final version of this rulemaking has not been 

determined, the EPA cannot make a fair estimate ex ante of the impact on 

number of permits that will be affected by this rulemaking. However, in 

the context of what has been done for over ten years for major NSR, the 

Agency can be relatively confident that the DIRECTION and the 

MAGNITUDE of the expected changes due to the new RMRR program 

reported in this analysis are representative of what will be observe ex post. 

For most analyses, the Agency relies upon a Bayesian approach to 

predicting the future impacts of its regulations: it relies upon past 

information ofa similar nature as the best predictor of the future. 

However, for the determination of the number of potentially affected 

sources in this analysis involves the assessment of counterfactual data. In. 

other words, the Agency had to predict how many sources would not 

perform specific actions or, for whatever reason, were not reporting on 

specific actions undertaken. Clearly, no data source can supply such 

information. Therefore, the estimates in this analysis are based to a much 

greater extent upon the experiences and expertise of the Agency's staff and 

consultants, as well as industry representatives. 

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APPENDIX A 

EMISSIONS IMPACTS OF HIGHER EFFICIENCIES AND 

AVAILABILITIES FOR COAL-FIRED GENERATING UNITS 

(DEPARTMENT OF ENERGY) 

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EMISSIONS IMPACTS OF HIGHER EFFICIENCIES AND 

AVAILABILITIES FOR COAL-FIRED GENERATING UNITS 

Description: Utilizing assumptions provided by the Office of Fossil 

Energy of the Department of Energy, this analysis considers the effects of 

potential improvements in coal power plant heat rates and availabilities. 

The Office of Fossil Energy believes that these improvements might occur 

if they could be accomplished without triggering the major New Source 

Review (major NSR) requirements. Specifically, heat rates for coal-fired 

plants are assumed to decrease by 5, 10, and 15 percent by 2010. Each of 

these cases are also combined with assumed increases in availability for 

coal capacity of 2 and 5 percentage points by 2010. The resulting impacts 

on fuel use and emissions (sulfur dioxide, nitrogen oxide, mercury, and 

carbon dioxide) are examined. 

Methodology: Using the National Energy Modeling System (NEMS), the 

assumed changes in heat rates and availabilities are analyzed by modifying 

the AEO2002 Reference Case. The improvements are phased in through 

2010. Although the potential to improve heat rates and availabilities could 

vary among coal units, this analysis assumes that the same rate of change 

occurs to all of this capacity. Although these improvements could require 

increases in maintenance costs, no change in these costs is incorporated. 

Potential improvements to oil- and gas-fired capacity are also not included. 

Analvsis: Improvements in heat rates (i.e., increased operating efficiency) 

result in lower coal consumption and emissions, although sulfur dioxide 

emissions nationally are unaffected since there is a cap on total emissions. 

Compared to the AEO2002 Reference Case, a 5-percent decrease in heat 

rates reduces carbon and nitrogen oxide emissions by about 4 percent each 

and mercury emissions by 2 percent in 2010 (Table 1). In 2020, the 

respective emissions reductions are 3 percent, 4 percent, and 2 percent. 

Not surprisingly, higher assumed efficiency improvements result in greater 

emissions reductions. A 10-percent decrease in heat rates reduces carbon 

and nitrogen oxide emissions by about 8 percent each and mercury 

emissions by 5 percent in 2010 (Table 2). In 2020, the respective 

emissions reductions are 7 percent, 8 percent, and 4 percent. A 15-percent 

decrease in heat rates reduces carbon, nitrogen oxide, and mercury 

emissions in 2010 by about 12 percent, 13 percent, and 9 percent, 

respectively (Table 3). In 2020, the corresponding reductions are 10 

percent, 12 percent, and 8 percent. 

Increasing the availability of coal-fired capacity leads to increases in coal 

generation, consumption and emissions. However, these increases in 

emissions are not enough to offset the reductions that result from the 

efficiency improvements, except when the lowest assumed efficiency 

improvement (5 percent) is combined with the highest assumed 

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availability increase (5 percentage points). Compared to the Reference 

Case, mercury emissions in this case are about 1 percent higher in 2010 

and 2020 (Table 1). Carbon emissions are 2 percent lower in 2010 and 1 

percent lower in 2020. Nitrogen oxide emissions are slightly lower in 

2010 but slightly higher in 2020. If a 5-percent decrease in heat rates is 

combined with the lesser availability increase of 2-percentage points, 

carbon and nitrogen oxide emissions in 2010 are each 3 percent lower than 

in the Reference case and mercury emissions are 1 percent lower. In 2020, 

the reductions are about 2 percent each for carbon and nitrogen oxide and 

1 percent for mercury. 

Compared to the AEO2002 Reference Case, both the 10-percent and 15-

percent efficiency improvement cases are projected to lower emissions 

when combined with both of the assumed availability increases. 

Assuming a 10-percent decrease in heat rates and a 2-percentage point 

increase in availability lowers carbon and nitrogen oxide emissions in 

2010 by 7 percent each and mercury emissions by 5 percent (Table 2). A 

5-percentage point increase in availability results in further increases in 

coal use, so the emissions reductions resulting from the 10-percent heat 

rate improvements are further offset by the availability increases. In this 

case, carbon, nitrogen oxide, and mercury emissions in 2010 are 6 percent, 

5 percent, and 2 percent lower than in the AEO2002 Reference Case, 

respectively. A 15-percent decrease in heat rates combined with a 2-

percentage point increase in availability lowers carbon and nitrogen oxide 

emissions in 2010 by 11 percent each and mercury emissions by 8 percent 

(Table 3). A 15-percent decrease in heat rates combined with a 5-

percentage point increase in availability lowers carbon emissions by 10 

percent, nitrogen oxide emissions by 9 percent, and mercury emissions by 

6 percent in 2010. In 2020, the emissions reductions in the combined heat 

rate/availability improvement cases are typically about 1 to 2 percentage 

points lower than the corresponding results in 2010. 

In conclusion, efficiency improvements resulting from increased 

maintenance are expected to decrease emissions, whereas availability 

improvements are expected to increase emissions. In the cases represented 

in this study, the impacts of the assumed reductions in heat rates tend to 

dominate the corresponding effects of the assumed availability increases. 

However, the some of the assumed heat rate improvements could be 

difficult to achieve. In 2000, the average heat rate for coal capacity was 

about 10,250 btu per kilowatt-hour, so a 10-percent reduction by 2010 

would lower the average heat rate to about 9,200 btu per kilowatt-hour. 

This heat rate would be almost as good as the heat rate assumed for new 

coal units. A 15-percent decrease would reduce the heat rate to a level 

below the heat rate for new units. Even if the assumed heat rate 

improvements are feasible, they may not be economic. The required 

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increase in maintenance costs, which is not represented in these cases, may 

be higher than the resulting savings in fuel costs. 

Since the assumed efficiency improvements result in lower fuel 

consumption, it may also be possible to increase output at coal-fired units 

without resulting in a net increase in coal consumption and triggering 

major NSR. The assumed increases in availability represent one option for 

increasing generation. Another way to increase generation would be to 

increase capacity, but this option is not considered in this analysis. 

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