p. 1



# OAR Box 1778 Prepped by Ollie Stewart



### Document

Number: 

# 70 ) ll-C-1 2

Docket Number: 

# A-90-0 6

Printed 10/28/20089:50:54 AM

Sheet 70of 276P. 2



### ('It ^ l^SS ^ * UNITE D STATE S ENVIRONMENTA L PR O i cv

_i IUI N A-otNC Y WASHINGTO N D C 2045 0


### FE B I 5 198 9

Mr
. Joh n W
. Bosto n Vic e Presiden t Wisconsi n Electri c Powe r Compan y Pos t Offi. e Bo x 204 6 Milwaukee , Wisconsi n 5230 1 Dea r Mr
. Boston : Thi s i s a revise d fina l determination , on reconsideration , regardin g th e applicabilit yo f th e Clea n Ai r Act' s Ne wSourc e Performanc e Standard s (NSPS ) an d Preventio n o f Significan t Deterioratio n (PSD ) provision s t o th e propose d lif e extensio n projec t a t th e Por t Washingto n stea melectri c generatin g station , whic h i s owne d an

d operate d b

yWisconsi n Electri c Powe r Compan y (WEPCO)

. Thi s determinatio n supplement s th e determinatio n se t fort h i n a n Octobe r 14 , 198 8 lette r t o yo u fromLe e M
. Thomas , whic h i n tur n incorporate d m ySeptembe r 9 , 198 8 memorandum

. I fin d i t necessar yt o reconside r EPA' s origina l determinatio n an d issu e thi s revise d determinatio n i n par t t o addres s matter s raise d by , an

d ne winformatio n submitte d by , WEPC O representative s sinc e th e Octobe r 1 4 letter

. WEPC O believe s tha t thes e ne waspect s cal l int o questio n th e accurac yo f EPA' s prio r determination

. Fo r th e followin g reasons , EPAtodayreaffirms , wit h limite d exception s detaile d below , it s earlie r finding s regardin g th e Por t Washingto n lif e extensio n project

. I hereb yincorporat e b

y referenc e th e Octobe r 1 4 lette r an d th e Septembe r 9 memorandum , an d reaffir mth e finding s an d conclusion s i n thos e tw o document s excep t wher e theyar e specificall ysupersede d below

. Thi s actio n constitute s fina l agenc yactio n fo r purpose s o f judicia l revie

w unde r sectio n 307(b ) o f th e Clea n Ai r Act , 4 2 U.S.C
. § 7607(b)

. I
. CAPITA

L EXPENDITUR E
EP A explaine d i nit s earlie r determinationtha t unde r th e Genera l Provision s o f th e NSP S regulations , a physica l or operationa l chang e whic hincrease s emission s a t anaffected facilit y

i s a modificatio nsubjec t t o NSPS . Se e 4 0 CF R60.14(a) . However , 4 0 CF

R60.14(e ) provide s certai nexception s t o tha t genera l rule . I nparticular , section60.14(e)(2 ) provide s tha t a nincreas e i nproductio nrat e a t anaffecte dfacilit y woul d not , b y itself , be considere d a modificatio ni f tha t increas e i s accomplishe d withou t a capita l expenditure . A s ha s bee ndiscusse d i n recen t meeting s betwee nWEPC O an d EPA , th

e Octobe r 14 , 198 8 lette r fro m Le e M . Thoma s wa s base d i nP. 3



### * • • ly

- 2 -

par t o n informatio n supplie d byWEPC O i n a lette r date d -Octobe r 11 , 198 8 whic h indicate d tha t th e increas e i n productio n rat e a t eac h o f th e fiv e unit s woul d b e accomplishe d wit h a capita l expenditure

. O n Octobe r 13 , 1988 , an d Novembe r 22 , 198 8 WEPC O submitte d revise d capita l expenditur e calculations

. EP Aha s carefull yreconsidere d it s earlie r determinatio n base d o n thos e tw o additiona l submissions. 1 However , a s explaine d below , the y provid e n o ground s o n whic h t o alte r EPA' s earlie r findin g o n capita l expenditure

.



## I Th e modificatio n provision s ar e designe d i n par t t o subjec t t o NSP S thos e emission s increase s cause d bya n increas e i n productio n rat e tha t i s i n turn-attributabl e t o a significan t investmen t i n improvement s t o th e capita l stock

. Consisten t wit h thi s intent , capita l expenditur e calculation s emplo yth e total , a s oppose d t o annual , cos t o f a give n projec t a t eac h affecte d facility

. Thus , th e Decembe r 16 , 19 7 5 preambl e t o th e promulgate d definitio n o f capita l expenditur e state s tha t "...th e tota l cos t o f increasin g th e productio n o r operatin g rat e mus t b e determined

. Al l expenditure s necessar yt o increasin g th e facility' s operatin g rat e mus t b e include d i n thi s total " (4 0 F R 58416 ) (emphasi s added)

. Th e tota l cos t o f th e planne d wor k a t eac h facilit yi s the n compare d t o th e produc t o f th e existin g facility' s basi s an d th e annua l asse t guidelin e repai r allowanc e percentag e use d b yth e Interna l Revenu e Servic e fo r taxatio n purposes . I f th e tota l projec t cos t fo r eac h facilit yexceed s :h e produc t o f th e basi s an d repai r percentag e fo r eac h facility , ther e i s a capita l expenditur e a t tha t facility

. Se e 4 0 CF R 60.2

. I t i s appropriat e t o accumulate , fo r capita l expenditur e purposes , th e cos t o f th e renovation s necessar yt o increas e th e facility' s productio n rate , becaus e th e overal l wor k necessar yt o increas e a facility' s productio n rat e pursuan t t o a particula r renovatio n projec t i s th e sam e whethe r th e wor k i s performe d i n on e calenda r yea r o r durin g tw o (o r more ) years . Th e us e o f annua l cost s coul d encourag e source s t o distor t norma l busines s planning . 1S T artificiall y stretchin g ou t cost s ove r tim e a s a mean s o f evadin g a findin g o f capita l expenditur e an d consequen t NSP S coverage. *

1 Th e Octobe r 13 , 198 8 submissio nwa s no t receive di n tim e t o b e considere d i nissuin g EPA' s lette r o f Octobe r 14 , 1988 . 'Indeed , i t appear s tha t WEPC O ma y hav e extende d th e planne d lengt ho f th e Por t Washingto nlif e extensio nprojec t fo r precisel y

thi s purpos e afte r bein g informe d b y EP A i nth e Octobe rP. 4

3 -

•Rather , the purpos e o f the exemptio n i n 4 0 CF R 60.14(e)(2 ) i s t o .exclud e fro

mNSP S coverag e increase s i n productio n rat e tha t ar e accomplishe d withou t "a n expenditur e fo r long-term addition s o r improvements. " Se e 3 9 F R 3694 8 (preambl e t o propose d NSP S regulations)

. Wher e the economi c realitie s o f th e cas e ar e tha t increase d productio n and , hence , emissions , ar e du e t o norma l fluctuation s i n the busines s cycl e rathe r tha n a considere d decisio n t o inves t i n substantia l capita l improvements , th e NSP S d o no t apply

. Th e lette r submitte d o n Octobe r 1 3 fro m Nei l Childres s o f you r staf f t o Gar yMcCutche n of

- EPApresente d updatedbasi s figure s (determine d b ymultiplyin g the origina l capita l investmen t i n th e facilit yb ya coefficien t representin g th e inflatio n i n constructio n cost s betwee n th e year o f the investmen t an

d th e yea r i n whic h th e capita l expenditur e calculatio n i s made ) fo r eac h o f th e emission s unit s a t Por t Washington . Thes e figure s include d cost s o f repai r o r replacemen t of equipment , suc has stea

m turbines , tha t i s no t par t of th

e existin

g affectedfacility for NSP S purposes . Sinc e applicabilit y

determination s unde r th e NSP S modification provision s ar e based o nth e existin

g affected facility , capita l expenditur e determination s likewis e ar e limitedt o cost s associated wit hth e affected facility . For NSP S Subpar t Da , th e affected facilit y

i s th e stea m generating uni t a s defined a t 4 0 CF R60.40a . Therefore , EP A staf f requestedWEPCO to limi t th e basi s figure s t o th e stea m generating unit . The Novembe r 22 , 198 8 lette r fro m Nei l Childres s t o Wal t Stevensonof EP

A presented revisedcos t figure s o nth e renovation work o nstea m generating unit s 1- 4 related t o th e capita l expenditur e calculations . Thes e Novembe r 2 2 basi s figure s ar e understood t o be limited t o cost s associatedwit hth e affected facility . The Novembe r 2 2 lette r als o presente da revised an d extended schedul e for th e renovationwork , unde r whic hth e cost s of repair s i nan

y one yea r woul dno t exceedth e produc t o f th

e annua l asse t guidelin e repai r allowanc e percentage , whic hi s 5 % for electri c utilit y stea m generating units , an d th e basi s o f eachunit . Mr Childress ' lette r conclude dtha t sinc e 5 % o f eac h

14 , 198 8 lette r tha t ther e woul dbe a capita l expenditur e using th e origina l schedule . The uni t 1 renovation s have bee nextende d fro m four year s t o five ; uni t 2 ha s bee nextendedfro m four year s t o six ; uni t 3 ha s bee nextended fro m thre e year s t o six ; uni t 4 ha s bee nextende d fro m tw o year s t o four . (Compar e Telecopie r Transmission , Nei l Childress , WEPCO , t o Gary McCutchen , EPA , Octobe r 11 , 198 8 (tabl e attached t o Respons e t o Questio nNo . 4 ) wit hLetter , Nei l Childress , WEPCO , t o Wal t Stevenson , EPA , Novembe r 22 , 1988 , at pag e 2. )P. 5

Vv*

.

- 4 -
unit' s update d basi s i s no t succeede d b ythe cos t o f renovatio n wor k i n an

yon e year , ther e woul d no t be a capita l expenditur e a t an yo f the units

. Th e revise d figure s als o showtha t th e tota l cost s fo r eac h uni t ove r the entir e renovatio n perio d woul d excee d the 5 % basi s figur e b y50 % t o 325%

. A s explaine d above , i t i s the tota l cost, ' no t the annua l cos t o f a renovatio n projec t tha t determine s whethe r a capita l expenditur e ha s occurred

. Accordingly , base d on the calculation s an d tota l projec t cost s i n WEPCO' s Novembe r 22 , 198 8 letter , the propose d projec t woul d resul t i n a capita l expenditur e a t eac h o f the fiv e Por t Washingto n units , an d thos e unit s woul d no t qualif y fo r the exemptio n i n the NSP S modificatio n provision s a t 4 0 CF R 60.14(e)(2). 3 A s t o uni t 5 , WEPC O di d no t submi t cos t dat a limite d t o th e affecte d facility

. Thus , I hav e n o reaso n t o alte r EPA' s origina l determinatio n tha t WEPC O ha s no t demonstrate d tha t th e increas e i n productio n rat e a t uni t 5 ca n b e accomplishe d withou t a capita l expenditure

. I n addition , I hav e determine d tha t i t i s mor e appropriat e t o utiliz e th e origina l basi s o f eac h affecte d facilit y(a s adjuste d t o reflec t pas t capita l improvements) , expresse d i n nomina l dollars , rathe r tha n th e update d basis , expresse d i n curren t dollars , i n determinin g NSP S applicability

. Thus , eve n i f WEPC O wer e correc t tha t annua l renovatio n costs , rathe r tha n tota l costs , shoul d b e use d i n capita l expenditur e calculations , i n thi s cas e a compariso n o f annua l renovatio n cost s an d th e

3 WEPCO ha s argue d tha t sinc e th e definitio n o f capita l expenditur e at 4 0 CF R60. 2 refer s t o th e IR S "annua l asse t guidelin e repai r allowanc e percentage " (emphasi s added) , EP Ai s boun d b y th e litera l languag e o f it s ow nregulations , t o us e annua l rathe r thantota l projec t cost s i nmaking capita l expenditur e calculations . However , th e regulation s d o no t dictat e suc ha result . Instead , o n thei r fac e the ycal l fo r a comparisonbetwee ntota l renovationcost s an dth e annua l asse t guideline . Had EP A intended th

e resul t suggeste db y WEPCO , i t woul d have explicitl y calledfor comparisono f annua l cost s o f th e chang e for project s exceeding one yea r wit hth e annua l asse t guideline . Thi s i t di dno t do . I naddition , a s indicate d above , th e purpos e o f the capita l expenditur e provisio nwoul dno t be serve d b

y annualizing projec t cost s fo r capita l expenditur e purposes .P. 6

5 - (adjusted ) origina l basi s o f eac h affecte d facilit yshow s tha t a capita l expenditur e woul d stil l occur.' '
I n makin g a mor e detaile d inquiryint o th e capita l expenditur e matte r i n respons e t o WEPCO' s request , I hav e foun d tha t neithe r the NSP S Genera l Provision s no r the preambl e theret o contai n an

ydiscussio n o f the matte r o f origina l versu s update d basis , an

d tha t EPAha s rarel ybee n calle d upo n t o addres s thi s issue

. However , upo n revie wo f EPA' s pas t practic e i n thi s area , I hav e foun

d tha t i n developin g performanc e standard s fo r particula r industries , EPAha s provide d th e regulate d communit y a mechanis mt o calculat e the origina l basi s i n makin g capita l expenditur e calculations

. See , e.g. , "Equipmen t Leak s o f VO C i n Petroleu

mRefinin g Industry—Background Informatio n fo r Promulgate d Standards, " EPA-450/3-81-015b , Decembe r 7 , 1983. 3 Thi s suggest s tha t EPAintende d th e origina l basi s t o b e utilize d t o determin e whethe r a capita l expenditur e i s goin g t o b e made . Moreover , I believe tha t th e us e o f origina l basi s i s consisten t wit hth e overal l purpos e of th e NSP S modification regulation s i n general , an d th e capita l expenditur e provision s i n particular

. Th

e effec t o f usin g origina l basi s i s tha t th e greate r th

e age o f a

naffected facility , th e mor e likel yi t i s tha t a.giveninvestmen t resultin g i nincreasedproductionwil l b e deemed a capita l expenditur e an d trigge r NSPS . Thi s i s consisten t wit hCongress ' inten t i nadoptin g ne w sourc e performanc e standards . Olde r facilitie s ar e mor e likel y to us e outdated equipmen t whic hdoe s no t reduc e pollutionto th e exten t mor e curren t technolog y does . Congres s includedmodified source s withi nth

e ne w sourc e performanc e standard s of section11 1 t o ensur e th

e us e o f ne

w technolog

y o nsuchsources . See CA A § § 111(a)(2) , 111(a)(4) ;

II . AI RHEATE

RRENOVATION S AT UNI T 1
I nJanuary

1989 , WEPCO asked EP A t o determin e whethe r replacemen t o f th

e hea t transfe r surfac e element s o nth e uni t 1 ai r heate r woul d trigge r PS D or NSP S applicability . However , i n a lette r date d February 3 , 1989 , WEPC O withdre w thi s request .

4 I t i s wort hnoting i nthi s regard tha t i f EP A wer e t o adher e t o a litera l reading o f IR S guideline s a s urged b y WEPCO , i t woul d have n o choic e bu t t o us e origina l basi s a s wel l a s annualize d cost s i nmaking capita l expenditur e calculation s for Por t Washington . Using thi s formula , WEPC O woul d exceed the repai r allowanc e percentag e at unit s 1- 5 for mos t years , an d NSP S woul d stil l apply .

9 Thi s Backgroun d InformationDocumen t provide s an alternative t o th

e methodprescribe di nthe Genera l Provision whe ni t i s difficul t t o determin e origina l costs . The formul a use s replacemen t cost s an d aninflationinde xt o "approximat e the origina l cos t basi s o f th e affecte d facility. "P. 7

- 6 -
asserting tha t i t coul d no t receiv e approva l i n the tim e necessary , whil e reservin g the righ t t o rene wi t a t a late r time a s t o uni t 1 o r an yothe r uni t a t Por t Washington

. Becaus e thi s issu e mayaris e again , an d becaus e I believ e i t bear s upo n the projec t a s a whole , I fin d i t appropriat e t o addres s th e matte r o f ai r heate r elemen t replacement

. Base d o n the informatio n submitte d regardin g thi s newplan , a s wel l a s the earlie r informatio n submitte d regardin g ai r heate r replacemen t work , I conclud e tha t i f WEPC O wer e t o procee d unde r it s revise d an d no w withdrawn plan , i t woul d no t alte r EPA' s earlie r finding tha t PS D an d NSP S woul d apply

. I n orde r t o explai n thi s finding , i t i s usefu l t o firs t summariz e the relevan t facts

. Originally , WEPC O advise d EP Atha t i t planne d t o replac e th e ai r heater s a t unit s 1 - 4 i n thei r entirety

. A s WEPC O explained : Ai r heater s ar e subjec t t o th e erosiv e an d corrosiv e effect s o f th e flu e ga s passin g throug h them an d requir e regula r maintenanc e o f th e hea t transfe r surfaces

. Th e plate-typ e ai r heater s o n Unit s 1 - 4 d o no t len d themselve s t o replacemen t o f th e individua l elements

. Wor n section s hav e bee n patche d and blocked , wher e accessible , ove r th e years . Now , however , overal l corrosio n an d perforatio n h^ s passe d beyond th e practica l poin t o f repair , an d replacemen t o f th e ai r heater s i s th e economica l wayt o maintai n th e ai r preheate r system
. Th e ai r heater s o n Por t Washingto n Uni t 5 an d th e othe r unit s o n th e Wisconsi n Electri c syste m[othe r tha n Por t Washingto n unit s 1-4 ] ar e o f th e Ljungstro m baske t design , whic h allow s th e hea t transfe r surface s (

_.ikets ) t o b e replace d easily

. ** *
See , e.g. . Lis t o f Por t Washingto n Projects , p . 6 (Attachmen t t o Apri l 22 , 198 8 lette r from Joh n W . Boston , WEPCO , t o Gar y McCutchen , EPA) . O nJanuary

11 , 1989 , WEPCO informe d th e Stat e o f Wisconsi n tha t i t wa s considering replacing al l the plat e element s a t uni t 1 . I na lette r t o th e Stat e o f Wisconsin , WEPC O describe d thi s projec t a s routin e repai r work , "necessar y t o hal t th

e continuing decreas e i nthe capabilit y o f Uni t 1, " an

d submitte da lis t o f 4 0 generating unit s wher e significan t portion s o f th e ai r heate r have bee nreplaced . Se e Letter , wit hattachment , fro m Mar k P . Steinberg , WEPCO , t o Dal e Ziege , Wisconsi nDepartmen t o f Natura l Resources , January 11 , 1989 .P. 8 

# a

- 7 -

I n a telephon e conversatio n wit h EP Astaf f the nex t day , WEPC O indicate d tha t i t desire d t o performthe uni t 1 plat e replacemen t wor k durin g a curren t uni t outage ; tha t i t intende d t o replac e onl yhalf , no t all , o f th e elements , a t a cos t o f approximatel y$500,000 ; tha t i t intende d t o late r scra p thi s wor k an d replac e the entir e ai r heate r a s describe d i n the origina l scop e o f work , a t a cos t o f $2,600,000 ; an d tha t i t wa s considerin g performin g th e same wor k a t uni t 4 also

. Se e Recor d o f Telephon e Conversatio n betwee n Davi d Schulz , EPA , an d Mar k Steinberg , Nei l Childress , an d Walte r Woelfle , WEPCO , January12 , 1989

. I n a meetin g o n January17 , 1989 , WEPC O relate d tha t i f i t replace d hal f o f th e plat e element s now , i t probabl ywoul d replac e the remainde r a s par t o f th e tota l renovatio n projec t a t a late r dat e an

d no t replac e th e ai r heate r i n whole

. WEPC O als o relate d tha t complet e replacemen t o f th e plat e element s shoul d increas e uni t l' s capabilit yt o th e origina l desig n capacity

. Finally , WEPC O state d i n respons e t o question s fromEPAstaf f tha t non e o f th e ai r heater s o r plat e element s a t unit s 1- 4 ha d eve r bee n replace d i n th e past
. Se e Memorandum , Meetin g wit h WEPC O regardin g th e Por t Washingto n Generatin g Station , from Davi d Schulz , EPA , t o Files , Januar y27 , 1989

. I n additio n t o th e abov e information , I not e tha t WEPCO' s lis t o f 4 0 unit s a t whic h ai r heate r elemen t replacement s hav e occurre d includ e n o unit s containin g plat e element s suc h a s thos e o n unit s 1 - 4 a t Por t Washington

. Instead , al l o f th e example s submitte d ar e o f th e Ljungstro mbaske t typ e o r th e tubula r type
. I conclud e tha t thos e example s ar e to o dissimila r t o th e plate

typ e element s i n us e a t unit s 1 - 4 t o suppor t WEPCO' s contentio n tha t th e wor k i n questio n i s routine. 6
Based o n al l o f th e foregoing , I find n o reasont o depar t fromEPA' s earlie r conclusio n tha t PS D an dNSP S woul dappl y t o th e ai r heate r wor k o nuni t 1

. I t appear s tha t despit e WEPCO' s recen t recharacterizationo f thi s wor k a s a separat e project , i t i s properl y

viewe d a s a

nintegra l par t o f th e overal l Por t Washington , lif e extensionproject . WEPC O canno t evade PS D an d NSP S applicabilit y b y carving out , an

dseeking separat e treatmen t of , significan t portion s o f a notherwis e integrate d renovation program . Suchpiecemea l actions , i f allowe dt o g o unchallenged , coul d readil y

eviscerat e th

e clea r inten t o f th e CleanAi r Act' s

'Further , eve nth

e lis t o f ai r heate r replacemen t wor k submitte d b

y WEPC O di d no t establis hthi s a s routin e repai r work . Thos e 4 0 unit s compris e onl y a smal l fractiono f tota l operating utilit y units , an

d eve nat the 4 0 units , ai r heate r repai r or replacemen t appear s t o have bee na one-tim e occurrence , no t routin e repair .P. 9

/*• •

ne wsourc e provisions

. Accordingly , i f see n a s par t o f WEPCO' s previousl ypropose d renovatio n project , the recen t recharacterizatio n o f the uni t 1 ai r heate r wor k doe s nothing t o alte r the factor s determinativ e o f PS D an d NSP S coverage . III
. CAPACIT Y TESTIN G FO R UNIT S 1- 4
A
. Impac t o f Tes t Result s o n NSP S Applicability

. I n Le e Thomas ' Octobe r 14 , 198 8 letter , EP Astate d tha t baselin e emission s fo r NSP S purpose s ar e determine d b yhourl y maximu mcapacit yjus t prio r t o the renovations

. EPArelie d o n actua l operatin g dat a t o determin e tha t curren t maximu mcapacit y a t unit s 1- 4 ha s significantl ydeteriorated , suc h tha t th e restoratio n o f origina l desig n capacit ythroug h th e lif e extensio n projec t woul d resul t i n correspondin g emission s increases

. A s t o uni t 5 , EP A state d tha t curren t capacity at uni t 5 i s zero becaus e i t i s physicall yinoperable

. EP A rejected WEPCO' s unsupporte d assertion s that al l fiv e unit s coul d b

e operated at hig

hcapacities , but hel dopenth e possibilit y

o f furthe r discussion s o nthat point . Subsequently , inNovembe r an d Decembe r o

f 1988 , followin

g discussion s wit hEPA , WEPCO conducted capacity

test s to determin e curren t actua l capacity . Base d o nit s revie

w an d analysi s o f th

e tes t data , EP

A find s tha t th e test s adequatel y demonstrat e tha t unit s 2 an d3 ca nb e operated a

t thei r origina l desig ncapacit y

o na sustained basis . Accordingly , I hereb y supersede EPA' s earlie r determinationan d fin d tha t NSP S woul d no t appl y t o unit s 2 an

d3 b y virtue o f th

e proposed renovation s s o lon g a s th

e capacit y

of thes e unit s afte r completiono f th

e wor k i s n

o highe r thandemonstrate d i nth e recen t test s (694,00 0 an d 690,00 0 pound s o f stea m pe r hour , respectively) . As discusse di nmor e detai l below , thi s revised NSP S determinationdoe s no t affec t ou r determinatio ntha t th e PS D provision s woul d b e applicabl e to th e propose d wor k o

nthes e tw

o units . During the test s o nunit s 1 an

d 4 , WEPC O wa s abl e t o operat e thes e unit s a t 497,00 0 an d586,00 0 pound s o f stea m pe r hour , respectively , representing 72 % an d 89 % o f thes e units ' respective origina l designcapacities . Thes e test s ar e adequat e to confir m EPA' s origina l determinatio ntha t unit s 1 an d4 ar e no t capabl e o f operating a t thei r origina l designcapacities , an dtha t restorationo f the los t capacit y throug

hthe lif e extensio nwil l trigge r NSP S coverage . EP A toda y als o determine s tha t thes e test s ar e no t adequat e t o sho w tha t curren t actua l capacit y for purpose s o f establishing th e NSP S baselin e i s a s higha s the level s achieve d during th e recen t tests . Rather , I reaffir m tha t baselin e for thos e unit s i s determine db y th e lowe r capacitie s reflecte d i nrecen t actua l operating dat a a s se t fort hi nLe e Thomas ' Octobe r 1 4 letter . EP A mus t rejec t the test s forP.1 0 m 

### A E

- 9 -

purpose s o f establishin g actua l NSP S baseline s becaus e durin g the testing discusse d above , ther e wer e significant , measure d exceedance s o f the applicabl e particulat e mas s emissio n limit , an d severa l measure d exceedance s o f the applicabl e opacit ylimi t containe d i n the Wisconsi n Stat e Implementatio n Plan

. On e o f the purpose s o f thes e test s wa s t o determin e the maximu mactua l capacit yo f the Por t Washingto n unit s tha t can b e achieve d i n a lawfu l manner . A s a consequenc e o f the measure d exceedances , WEPCO' s test s canno t b e relie d o n t o demonstrat e tha t th e compan y coul d lawfull ysustai n the level s achieve d durin g th e testing

. Regardin g uni t 5 , I fin d tha t b

ydeclinin g t o conduc t o r schedul e capacit ytests , WEPC O ha s effectivel yconcede d tha t uni t 5 i s a t presen t inoperable

. Therefore , I reaffirmtha t it s baselin e fo r NSP S purpose s i s zero . B
. Impac t o f Tes t Result s o n PS D Applicability

. I n it s Februar

y 3 , 198 9 letter , WEPC O assertedtha t EPA' s Octobe r 14 , 198 8 determinationassumedtha t th e emissionrat e of eac huni t woul d increas e followin g th e renovations . Thus , WEPCO claims , EP

A di d no t addres s th e questionwhethe r unit s tha t ar e no t increasing thei r emissio nrate s followin

g renovationcanbe deemed to trigge r PSD . WEPCO i s incorrec t o nbot hcounts . EPA' s prio r determinationexplained tha t unde r th e PS D program , unlik e NSPS , baselin e emission s ar e determined b y representative actua l emissions , prio r t o th e physica l or operationa l change . Accordingly , th e result s of testin g conducted b

y WEPCO , intendedto determine curren t maximu m hourl y capacity , have n

o impac t o

nth e existenc e o f a significan t ne t emission s increas e fo r PS D purposes . Hence , thos e tes t result s provid e n

o reasonto alte r EPA' s prio r determinationregarding PS D applicability . Actua l emission s ar e th e produc t of th

e emissionrat e (amount o f pollutio npe r uni t of productiono r throughput , e.g. , pound s o f sulfu r dioxid e pe r to no f coa l combusted) , th e productio nrat e o r capacit y utilization(amount o f productio nor throughpu t pe r hour , e.g. , ton s o f coa l combustedpe r hour) , an d th e hour»-« f operation(e.g. , hour s pe r year) . I nit s prio r determination , BPA explaine dtha t anincreas e i nan y on e o f thes e thre e factors , i f attributabl e t o a physica l or operationa l change , cantrigge r anemission s increas e for PS D purposes , an d rejecte d WEPCO' s contentiontha t onl y increase s i nth

e emissio n rat e wer e determinative . I ns o doing , EP A explicitl y

assume d tha t emission s increase s at Por t Washingto nwoul dcom e no t fro

m a nincreas e i nemissionrate , bu t rathe r fro m increase s i n productio nrat e o r hour s o f operation . Se e Memorandu m fro m Don R . Clay , Septembe r 9 , 198 8 at 8 .P.1 1
\

WEPC O furthe r irr.piie s ;:
. it s Jebruary3 , 193 9 lette r tha t th e de.Tionstratio

n tha t unit s 2 an

d 2 can operat e nowa t -.aximu

desig n capacit ymean s tha t ther e wil l be n o increas e i n productio n rat e fo r PS D purpose s following the renovations

. Thi s i s no t the cas e becaus e PS D baselin e emission s ar e determine d b y r JP?^. e .ndativ e .attu a 1 emissio n rate , productio n rate , an d hour s o f operatio n prio r t o the physica l change

. Representativ e actua l emission s ar e determine d b yexaminin g the actua l emission s durin g a representativ e two yea r period , (Se e 4 0 CFR 52.21(b ) (21 ) (ii) ) whic h i n thi s cas e th e Administrato r determine d t o b e 193 3 an

d 198 4 (Se e Le e Thomas ' Oct
. 1 4 letter , a t 5)

. Th e hourl ycapacit ydemonstratio n fo r NSP S purpose s i s no t relevan t t o th e PS D analysis

. IV
. NSP S OPERATIONA L LIMITATION S
I n m ySeptembe r 9 , 198 8 memorandum , I pointe d ou t tha t a n affecte d facilit ycanno t avoi d NSP S applicabilit yb yoffsetting , through th

e us e o f fue l wit h a lowe r sulfu r content , an increas e i n th e emissio

nrat e tha t woul d otherwis e occur due t o a physica l or operationa l change . A s I explaineda

t tha t time , 4 0 CF R 60.14(e ) provide s tha t us e of a nalternativ

e fue l or ra

w materia l

— sucha s higher-sulfur coa l — whic ha

nexistin

g facility

wa s designed t

o accommodat e befor e a physica l or operationa l chang e doe s no t constitut e a modificationfor NSP S purposes . I t follows tha t th e facilit y

canno t avoi dNSP S b y switchin

g t o lower-sulfur fue l t o counterac t a prospective increas e i nemissionrat e because , unde r th

e regulations , th

e facility

woul dalway s hav

e to optiont

o switchbac k to a higher-sulfur fue l at a late r dat e withou t triggerin

g NSPS . Subsequen t t'

o th e issuanc e o f EPA' s Octobe r 14 , 198 8 letter , WEPCO inquired whethe r i t migh t b e abl e t

o utiliz e lower-sulfur coa l t o avoi d NSP S at Por t Washington , notwithstanding th e regulator

y provisionexplaine dabove , b y agreein

g t o federall y enforceabl e permi t condition s tha t woul d ba r th e compan

y fro m switchin

g bac k t o highe r sulfur coa l i nth e future . Restriction s o f thi s natur e ar e acceptabl e for netting transaction s unde r th e Act' s PS O provisions . However , th e statut e reflect s a basi c politica l decisio ntha t fossi l fuel-firedsource s no t rel y onl y o nnatura l occurring less-polluting fuel s t o compl y wit hth

e NSPS . Instead , Congres s declare d tha t complianc e mus t depen d i n par t upo nthe applicationof flue ga s treatmen t or othe r pollutioncontro l technologies . Thus , section111(a)(1)(A)(ii ) define s "standard o f performance " fo r fossi l fuel-fire d source s a s requiring th

e achievemen t o f a percentag e reductio ni n the emission s fro

m suc hcategory

o f source s fro

m the emission s whic hwoul dhave resulte dfro m the us e o fP.1 2

l»

-

- 1 1 "

fuel s whichar e no t subjec t t o treatmen t prio r t o combustio n .. . .
Congres s furthe r clarifie d thi s poin t i n a late r paragrap h o f sectio n 111(a ) b

yadding :
Fo r th e purpos e o f subparagrap h (l)(A)(ii) , an y cleanin g o f the fue l o r reductio n i n th e pollutio n characteristic s o f the fue l afte r extractio n an d prio r t o combustio n mayb e credite d

.. . t o a sourc e whic h burn s suc h fuel

. Thi s cor e polic yjudgmen t i s reflecte d a s wel l i n th e legislativ e histor

y o f th e 197 7 Clea n Ai r Ac t amendments

. For example , th e Conferenc e Repor t states :

Th e Senat e concur s i n th e Hous e provisionwit h mino r amendments . Th e agreemen t require s (1 ) that th e standard s of performanc e fo r fossi l fuel-fired boiler s b e substantiall y

upgradedt

o requir e th

e us e of th

e bes t technologica l syste m of continuou s emissio n reductionan

d t o preclude us e o f untreate d lo w sulfur coa l alone a s a mean s o f compliance ; .. . (3 ) tha t fo r fossi l fuel-firedsources , th e ne w sourc e performanc e standard s mus t b

e comprisedo f bot ha standard of performanc e fo

r emission s an

d a nenforceabl e requiremen t for a percentag e reductioni npollution fro m untreate d fuel . H.R . Rep . No . 95-564 , 95thCong. , 1s t Sess . 130 . Becaus e th

e wil l of Congres s i s s o clea r tha t lower-sulfur fuel s alone wil l no t suffic e to compl y wit hNSPS , i t woul d b e inconsisten t wit hth e legislativ

e inten t for EP

A to allo

w source s to us e lower-sulfu r fue l t o avoi dcoverag e o f NSP S i nth e firs t instanc e i nth

e manne r suggestedb y WEPCO . I f EP

A wer e t o follo

w sucha course , numerou s modification s t o existing facilitie s coul d escap e coverag e i na manne r contrary t o th e statutor

y purpose .

V . TH E TIMIN

GO F TH E LIF E EXTENSIO N PROJEC T
I ndiscussion s wit hEPA , WEPC O ha s challenged , o nground s of timing , EPA' s positio no nbaselin e emission s for NSP S purposes . I nit s prio r determination , EP A explaine dtha t unde r the NSP S regulations , baselin e emission s ar e determine db y hourl y maximu

m capacit y

jus t prio r t o th

e renovations . Thus , th e baselin e for uni t 5 a t Por t Washingto ni s zer o becaus e the uni t ha s bee nshu t dow nfor severa l year s due t o safet y concerns . I nresponse .P.1 3
L.-Ji-

- 1 2 -

WEPC O ha s presente d th e hypothetica l questio n whethe r EP Awoul d stil l hav e foun

d a zer o baselin e i f uni t 5 had bee n shu t dow n o n a Fridaydu e t o som e unexpecte d o r catastrophi c failur e o f a majo r componen t previousl yi n goo d workin g order , an d WEPC O ha d sough t t o replac e tha t componen t o n the followin g Monday

. WEPC O assert s tha t i n suc h circumstances , EPAshoul d hav e establishe d baselin e emission s usin g the emission s rat e jus t prio r t o th e breakdown

. I find i t unnecessar yt o engag e i n speculatio n b yaddressin g th e hypothetica l situatio n presente d b yWEPCO , becaus e i t i s fa r remove d fromth e tru e circumstance s surroundin g th e propose d Por t Washingto n lif e extensio n project

. I n fact , uni t 5 ha s bee n shu t dow n fo r ove r fou r years , no t a -.eekend , an d tha t i s th e foundatio n c f EPA' s analysi s an d determination

. I n conclusion , wit h limite d exceptions , EPAtodayreaffirm s the decision s reache d i n th e Octobe r 1 4 determination

. I n addition

. EPAha s conclude d tha t th e wor k o n eac h uni t constitute s a capita l expenditur e an d tha t th e propose d ai r heate r plat e replacemen t wor k o n uni t 1 woul d trigge r PS D and NSPS
. A s a resul t o f th e capacit ytes t demonstration , however , I fin d tha t unit s 2 an

d 3 a t Por t Washingto n ca n b e operate d a t thei r desig n capacit yo n a sustaine d basis

. Therefor e EPA' s earlie r determinatio n wit h respec t t o NSP S applicabilit yi s supersede d an

d NSP S woul d no t appl yt o unit s 2 an d 3 b yvirtu e o f th e propose d renovation s s o long a s th e capacit yo f thes e unit s afte r th e completio n o f thi s wor k i s n o highe r tha n demonstrate d i n th e recen t tests
. Thi s determinatio n doe s no t affec t PS D applicabilit yfo r thes e two units

. I f yo u shoul d hav e an y question s abou t th e foregoing , pleas e fee l fre e t o contac t me . Than k yo u fo r you r cooperatio n i n thi s matter
. Sincerely ,

DonR . Cla j Actin g Assistan t Administrato r for Ai r & Radiation