U.S. GOVERNMENT PUBLISHING OFFICE

30–134 WASHINGTON : 2019

NEW SOURCE REVIEW PERMITTING CHALLENGES 

FOR MANUFACTURING AND INFRASTRUCTURE 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ENVIRONMENT 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

SECOND SESSION 

FEBRUARY 14, 2018 

Serial No. 115–100 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

(II) 

COMMITTEE ON ENERGY AND COMMERCE 

GREG WALDEN, Oregon 

Chairman 

JOE BARTON, Texas 

Vice Chairman 

FRED UPTON, Michigan 

JOHN SHIMKUS, Illinois 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

LARRY BUCSHON, Indiana 

BILL FLORES, Texas 

SUSAN W. BROOKS, Indiana 

MARKWAYNE MULLIN, Oklahoma 

RICHARD HUDSON, North Carolina 

CHRIS COLLINS, New York 

KEVIN CRAMER, North Dakota 

TIM WALBERG, Michigan 

MIMI WALTERS, California 

RYAN A. COSTELLO, Pennsylvania 

EARL L. ‘‘BUDDY’’ CARTER, Georgia 

JEFF DUNCAN, South Carolina 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

G.K. BUTTERFIELD, North Carolina 

DORIS O. MATSUI, California 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

PETER WELCH, Vermont 

BEN RAY LUJA ́ N, New Mexico 

PAUL TONKO, New York 

YVETTE D. CLARKE, New York 

DAVID LOEBSACK, Iowa 

KURT SCHRADER, Oregon 

JOSEPH P. KENNEDY, III, Massachusetts 

TONY CA ́ RDENAS, CaliforniaL RUIZ, 

California 

SCOTT H. PETERS, California 

DEBBIE DINGELL, Michigan 

SUBCOMMITTEE ON ENVIRONMENT

JOHN SHIMKUS, Illinois 

Chairman 

DAVID B. MCKINLEY, West Virginia 

Vice Chairman 

JOE BARTON, Texas 

TIM MURPHY, Pennsylvania 

MARSHA BLACKBURN, Tennessee 

GREGG HARPER, Mississippi 

PETE OLSON, Texas 

BILL JOHNSON, Ohio 

BILL FLORES, Texas 

RICHARD HUDSON, North Carolina 

KEVIN CRAMER, North Dakota 

TIM WALBERG, Michigan 

EARL L. ‘‘BUDDY’’ CARTER, Georgia 

JEFF DUNCAN, South Carolina 

GREG WALDEN, Oregon (ex officio) 

PAUL TONKO, New York 

Ranking Member 

RAUL RUIZ, California 

SCOTT H. PETERS, California 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

JERRY MCNERNEY, California 

TONY CA ́ RDENAS, California 

DEBBIE DINGELL, Michigan 

DORIS O. MATSUI, California 

FRANK PALLONE, JR., New Jersey (ex 

officio) 

(III) 

C O N T E N T S 

Page 

Hon. John Shimkus, a Representative in Congress from the State of Illinois, 

opening statement ................................................................................................ 1 

Prepared statement .......................................................................................... 3 

Hon. Paul Tonko, a Representative in Congress from the State of New York, 

opening statement ................................................................................................ 3 

Hon. Greg Walden, a Representative in Congress from the State of Oregon, 

opening statement ................................................................................................ 5 

Prepared statement .......................................................................................... 6 

Hon. Frank Pallone, Jr., a Representative in Congress from the State of 

New Jersey, opening statement .......................................................................... 7 

WITNESSES

Stuart Spencer, Associate Director, Arkansas Department of Environmental 

Quality, Office of Air Quality, on Behalf of the Association of Air Pollution 

Control Agencies .................................................................................................. 9 

Prepared statement .......................................................................................... 12 

Answers to submitted questions ...................................................................... 163 

Kevin Sunday, Director of Government Affairs, Pennsylvania Chamber of 

Business and Industry ......................................................................................... 22 

Prepared statement .......................................................................................... 24 

Answers to submitted questions ...................................................................... 174 

Paul Noe, Vice President Public Policy, American Forest and Paper Association and American Wood Council ....................................................................... 38 

Prepared statement .......................................................................................... 40 

Answers to submitted questions ...................................................................... 177 

Emily Hammond, Glen Earl Weston Research Professor of Law, The George 

Washington University Law School .................................................................... 63 

Prepared statement .......................................................................................... 65 

Answers to submitted questions ...................................................................... 185 

John D. Walke, Clean Air Director, Natural Resources Defense Council ........... 72 

Prepared statement .......................................................................................... 74 

Answers to submitted questions ...................................................................... 188 

Jeffrey R. Holmstead, Partner, Bracewell LLP ..................................................... 104 

Prepared statement .......................................................................................... 106 

Answers to submitted questions ...................................................................... 208 

SUBMITTED MATERIAL

United States Environmental Protection Agency memorandum, 2005 1 ............. 133 

Article entitled, ‘‘EPA’s New Source Review Program: Time for Reform?’’ 

Environmental Law Institute, 2017 ................................................................... 148 

1 The attachment to this document can be found at: https://docs.house.gov/ 

meetings/IF/IF18/20180214/106852/HHRG-115-IF18-20180214- 

SD007.pdf. 

(1) 

NEW SOURCE REVIEW PERMITTING CHALLENGES FOR MANUFACTURING AND INFRASTRUCTURE 

WEDNESDAY, FEBRUARY 14, 2018 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON ENVIRONMENT, 

COMMITTEE ON ENERGY AND COMMERCE

Washington, DC. 

The subcommittee met, pursuant to call, at 2:00 p.m., in room 

2123 Rayburn House Office Building, Hon. John Shimkus (chairman of the subcommittee) presiding. 

Members present: Representatives Shimkus, McKinley, Olson, 

Johnson, Flores, Hudson, Cramer, Walberg, Carter, Walden (ex 

officio), Tonko, Ruiz, Peters, Green, McNerney, Dingell, Matsui, 

and Pallone (ex officio). 

Staff present: Mike Bloomquist, Deputy Staff Director; Allie 

Bury, Legislative Clerk, Energy/Environment; Kelly Collins, Staff 

Assistant; Wyatt Ellertson, Research Associate, Energy/Environment; Margaret Tucker Fogarty, Staff Assistant; Jordan Haverly, 

Policy Coordinator, Environment; A.T. Johnston, Senior Policy Advisor, Energy; Ben Lieberman, Senior Counsel, Energy; Mary Martin, Deputy Chief Counsel, Energy & Environment; Dan Schneider, 

Press Secretary; Austin Stonebraker, Press Assistant; Hamlin 

Wade, Special Advisor, External Affairs; Jean Fruci, Minority Energy and Environment Policy Advisor; Caitlin Haberman, Minority 

Professional Staff Member; Rick Kessler, Minority Senior Advisor 

and Staff Director, Energy and Environment; Alexander Ratner, 

Minority Policy Analyst; Andrew Souvall, Minority Director of 

Communications, Outreach and Member Services; C.J. Young, Minority Press Secretary; and Catherine Zander, Minority Environment Fellow. 

OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS 

Mr. SHIMKUS. The Subcommittee on the Environment will now 

come to order. The chair recognizes himself for 5 minutes for an 

opening statement. 

Today’s hearing examines the impact of the EPA’s new source review air permitting program, commonly referred to as NSR. 

Congress created this preconstruction permitting program with 

the goal of protecting air quality by ensuring that the use of appropriate pollution control devices on new and modified source of emissions such as power plants, factories, and industrial facilities. 

2 

As you can imagine, the NSR permitting program reaches across 

several industry sectors and has far-reaching impacts on America’s 

economy and global competitiveness. For these reasons, it is incredibly important for us to ensure that the preconstruction permitting 

program is working effectively and efficiently. 

Unfortunately, history shows that there are too many instances 

where New Source Review Program is anything but effective and 

efficient. 

As we will hear from many of our witnesses today, over time the 

NSR program has become more costly and time consuming which 

not only slows economic growth but also hinders the nation’s ability 

to modernize infrastructure. 

Under the existing NSR program, it can take multiple years and 

millions of dollars to obtain the preconstruction air permits required to begin construction on a new facility. This significant time 

delay and cost burden makes it more difficult and less likely for 

owners to invest in new projects and facilities. 

Not only is the NSR process costly and time consuming, it is also 

complex and uncertain. Right now, on the EPA’s Web site there are 

nearly 700 posted guidance documents that an applicant may need 

to be aware of when seeking a preconstruction permit. 

Companies must hire teams of lawyers just understand the requirements and processes established under the NSR program. The 

end result of this complexity is that companies are afraid of incorrectly interpreting NSR requirements and violating the rules that 

they are hesitant to pursue projects that require an NSR 

preconstruction permit. 

In other words, the NSR program is holding back needed investment in the nation’s infrastructure, industrial capacity, and manufacturing capabilities. 

One particularly frustrating effect of the NSR program is that it 

discourages owners from carrying out projects that would improve 

the environmental performance of their facilities. 

For example, if a company wants to perform efficiency upgrades 

to install new pollution control technology, they typically have to 

obtain a preconstruction permit through the NSR program. 

However, because the NSR program is so burdensome, many 

owners are choosing to avoid the NSR process and facility upgrades 

altogether and are instead continuing to operate older, less efficient, and dirtier facilities. 

Clearly, there are significant problems and shortcomings with 

how the NSR program is being carried out today. The goal of this 

hearing is to identify and understand the challenges connected to 

the NSR program so that we can begin considering potential reforms to improve the program. 

To assist our work, we will hear today from witnesses who can 

explain the challenges faced by manufacturers and industry seeking to expand operations. 

We will hear from a state regulator who can explain the role 

NSR program plays in protecting local air quality and we will also 

hear from NSR policy experts who can discuss options for how to 

reduce unnecessary NSR permitting burdens. 

I am confident that through targeted changes to the NSR program we can not only reduce the unnecessary burden imposed upon 

3 

industry but also maintain and enhance the NSR program’s important protections for the environment and public health. 

[The prepared statement of Mr. Shimkus follows:] 

PREPARED STATEMENT OF HON. JOHN SHIMKUS

Today’s hearing examines the impact of the EPA’s New Source Review air permitting program, commonly referred to as NSR. Congress created this preconstruction 

permitting program with the goal of protecting air quality by ensuring the use of 

appropriate pollution control devices on new and modified sources of emissions, such 

as power plants, factories, and industrial facilities. 

As you can imagine, the NSR permitting program reaches across several industry 

sectors and has far reaching impacts on America’s economy and global competitiveness. For these reasons, it is incredibly important for us to ensure that the 

preconstruction permitting program is working effectively and efficiently. Unfortunately, history shows that there are too many instances where the current NSR program is anything but effective and efficient. 

As we will hear from many of our witnesses today, over time the NSR program 

has become more costly and time-consuming, which not only slows economic growth 

but also hinders the nation’s ability to modernize infrastructure. Under the existing 

NSR program, it can take multiple years and millions of dollars to obtain the 

preconstruction air permits required to begin construction on a new facility. This 

significant time delay and cost burden makes it more difficult and less likely for 

owners to invest in new projects and facilities. 

Not only is the NSR process costly and time-consuming, it is also complex and 

uncertain. Right now on the EPA’s Web site, there are nearly 700 posted guidance 

documents that an applicant may need to be aware of when seeking a 

preconstruction permit. Companies must hire teams of lawyers just to understand 

the requirements and processes established under the NSR program. The end result 

of this complexity, is that companies are so afraid of incorrectly interpreting NSR 

requirements and violating the rules that they are hesitant to pursue projects that 

require an NSR preconstruction permit. In other words, the NSR program is holding 

back needed investment in the nation’s infrastructure, industrial capacity, and manufacturing capabilities. 

One particularly frustrating effect of the NSR program, is that it discourages owners from carrying out projects that would improve the environmental performance 

of their facilities. For example, if a company wants to perform efficiency upgrades 

or install new pollution control technology, they typically have to obtain a 

preconstruction permit through the NSR program. However, because the NSR program is so burdensome, many owners are choosing to avoid the NSR process and 

facility upgrades altogether, and are instead continuing to operate older, less efficient, dirtier facilities. 

Clearly there are significant problems and shortcomings with how the NSR program is being carried out today. The goal of this hearing is to identify and understand the challenges connected to the NSR program so that we can begin considering potential reforms to improve the program. 

To assist our work, we will hear today from witnesses who can explain the challenges faced by manufacturers and industry seeking to expand operations. We will 

hear from a state regulator who can explain the role the NSR program plays in protecting local air quality and we will also hear from NSR policy experts who can discuss options for how to reduce unnecessary NSR permitting burdens. 

I am confident that through targeted changes to the NSR program, we can not 

only reduce the unnecessary burden imposed upon industry, but also maintain and 

enhance the NSR program’s important protections for the environment and public 

health. 

And with that, I’d like to yield—so I will turn to the minority— 

are you ready to go? I would like to recognize the ranking member 

of the subcommittee, Mr. Tonko, for 5 minutes. 

OPENING STATEMENT OF HON. PAUL TONKO, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW YORK 

Mr. TONKO. Thank you, Mr. Chair, and thank you to our witnesses for being here today. 

4 

Today’s hearing will examine EPA’s new source review permitting program. As we have discussed on many occasions in this subcommittee, under the Clean Air Act, EPA is required to set healthbased national ambient air quality standards, or NAAQS, for six 

criteria pollutants. 

As more medical and scientific evidence has come to light, 

NAAQS have been adjusted accordingly to ensure they continue to 

be protective of our health. 

Since the passage of the Clean Air Act, our nation has experienced the drastic reduction in these air pollutants, all while our 

economy has grown tremendously. 

It is beyond dispute that air pollution has serious health and economic consequences. When people are sick, hospitalized, and miss 

school are work we are a less productive society. 

The new source review program plays an important role to ensure that new and modified major sources use the appropriate pollution controls to limit emissions of criteria pollutants. 

This includes the best available controlled technology and locations with relatively clean air known as prevention of significant 

deterioration to ensure these areas continue to maintain healthy 

levels of air quality. 

For areas in nonattainment of a NAAQS this includes the lowest 

achievement emissions rate along with appropriate offsets from 

other existing sources. This is known as nonattainment new source 

review. 

The Clean Air Act has been successful because it is premised on 

making progress over time. We have made major strides in reducing pollution as our understanding of the health risks posed by 

dirty air has become more sophisticated. 

That is why I was pleased to see EPA’s Web site recognized February as American Heart Month. EPA has some useful heart 

health statistics such as heart disease and stroke are the first and 

fourth leading causes of death in the United States. 

Air pollution can affect heart health and can trigger heart attacks and strokes that cause disability and death. One in three 

American adults has heart or blood vessel disease and is at higher 

risk from air pollution. 

It is critical that we acknowledge and educate people on the role 

air pollution plays in exacerbating heart disease, asthma, and 

other respiratory illnesses. 

So while EPA’s Web site has taken steps to connect the dots between air pollution and threats to Americans’ health, the actions 

by Administrator Pruitt and Assistant Administrator Wehrum have 

been troubling. 

On December 7th, Administrator Pruitt issued a memorandum 

with a new approach to implementation and enforcement of the 

new source review program. 

EPA will no longer review the permanent applicant’s emissions 

projections nor will the agency enforce against an applicant that 

provides invalid estimates. 

In some cases, this lax attitude on enforcement will have consequences in downwind states, far away from the original permitting authority. 

5 

And while not the subject of today’s hearing, another data point 

from January 25th, Assistant Administrator Wehrum reversed 

EPA’s longstanding once in always in policy for major source 

MACT requirements. 

Both decisions will review—will result, rather, in greater air pollution, and the new source review task force seems to be little more 

than a brainstorming session on how to evade air pollution controls 

rather than actually building a public record on how the program 

might be improved. 

Progress over time means ensuring we don’t backslide and, sadly, 

I believe the direction of this EPA will cause us to do just that. 

My district and many great towns and cities across this country 

were built by manufacturers. But when many of those facilities 

were built, we didn’t fully understand the consequences of dirty air. 

We didn’t know that one in three American adults has heart or 

blood vessel disease and is at higher risk from air pollution. 

We know better today. Our health and environmental safeguards 

should reflect that. We shouldn’t have to ask our constituents to 

bear all the costs of air pollution, especially not when they are— 

when there are effective and well understood pollution controls. 

I would urge EPA’s leadership to stop going down this path and 

consider how the—how to best improve and preserve air quality. 

So again, I thank you. I thank the witnesses for being here and 

helping us better understand some of the potential changes to the 

new source review program. 

And with that, Mr. Chair, I yield back. 

Mr. SHIMKUS. Gentleman yields back his time. 

The chair now recognizes the chairman of the full committee, Mr. 

Walden for Oregon, for 5 minutes. 

OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OREGON 

Mr. WALDEN. I thank the gentleman and appreciate the witnesses being here today. We look forward to your testimony. 

As we all know, the purpose of the Clean Air Act is, and I quote, 

to protect and enhance the quality of the nation’s air resources, to 

promote the public health and welfare and the productive capacity 

of its population, closed quote. 

So in today’s hearing, we will highlight the necessity to ensure 

the rules to protect and improve air quality, promote both of these 

core objectives. 

Effective clean air regulations should allow the nation to continue to expand its manufacturing and industrial capacity. But 

these goals are undermined when regulatory requirements no 

longer reflect practical reality. 

As a result, American communities are deprived of both continued environmental improvements and economic prosperity. The 

new source review permitting process serves as a case in point. 

Permitting requirements under EPA’s NSR program have 

evolved in complexity and confusions as the program began in the 

1970s and as a result complex preconstruction planning requirements present unnecessary delays and impediments to the expansion of manufacturing and industrial facilities. 

6 

As we will hear in the testimony today, the complexity of the 

NSR process permitting time delays and regulatory uncertainty 

create powerful incentives to forego needed project upgrades even 

in areas that meet current air quality standards. 

And for other communities NSR complexity raises costs and otherwise harms the prospects for economic expansion and increased 

environmental benefits. 

In fact, the burdens associated with NSR can lead to communities losing the emissions benefits offered by more efficient modern technologies. 

Prineville, Oregon—that’s in my district. Home to data centers 

for Facebook and Apple. Recently, a proposed data center expansion ran headlong into a permitting issue because of potential 

backup generator emissions. 

A single air sampling location, just one, and restrictive air quality rules made it unclear whether or not the expansion could go forward. It was only after the city persuaded the EPA to add an additional sampling location that they were then able to resolve the 

issue. 

That instance involved hundreds of millions of dollars in investments and hundreds of construction jobs. Multiply that by the 

thousands of projects waiting to take off around the nation— 

around the nation in response to our reformed tax structure and 

the urgency of addressing NSR problems becomes apparent. 

I would also say that when you’re dealing with companies the 

capital and intellectual capacity of Facebook and Apple they are 

probably better positioned to challenge some of these issues. 

The witnesses today, you all bring a range of perspectives on the 

NSR permitting process. We appreciate your willingness to help us 

understand the challenges of the current process and what we can 

do to improve upon it. 

Our goal is to develop responsible targeted reforms that will provide for economic growth while maintaining the environmental protections we all agree are important. Doing this will ultimately benefit all American workers and consumers. 

[The prepared statement of Mr. Walden follows:] 

PREPARED STATEMENT OF HON. GREG WALDEN

The purpose of the Clean Air Act is ‘‘to protect and enhance the quality of the 

Nation’s air resources to promote the public health and welfare and the productive 

capacity of its population.’’ 

With today’s hearing, we will highlight the necessity to ensure the rules to protect 

and improve air quality promote both core objectives. 

Effective clean air regulations should allow the nation to continue to expand its 

manufacturing and industrial capacity. But these goals are undermined when regulatory requirements no longer reflect practical reality. As a result, American communities are deprived of both continued environmental improvements and economic 

prosperity. 

The New Source Review permitting process serves as a case in point. Permitting 

requirements under EPA’s NSR program have evolved in complexity and confusion 

since the program began in the 1970s. As a result, complex pre-construction planning requirements present unnecessary delays and impediments to the expansion of 

manufacturing and industrial facilities. 

As we will hear in testimony this morning, the complexity of the NSR process, 

permitting time delays, and regulatory uncertainty, create powerful incentives to 

forego needed project upgrades, even in areas that meet current air quality standards. 

7 

And for other communities, NSR complexity raises costs and otherwise harms the 

prospects for economic expansion and increased environmental benefits. In fact, the 

burdens associated with NSR can lead to communities losing the emissions benefits 

offered by more efficient modern technologies. 

Prineville, Oregon in my district is home to data centers for Facebook and Apple. 

Recently, a proposed data center expansion ran headlong into permitting issues because of potential backup generator emissions. A single air sampling location and 

restrictive air quality rules made it unclear whether the expansion could go forward. 

It was only after the city persuaded EPA to add an additional sampling location 

that they were able to resolve the issue. 

That instance involved hundreds of millions of dollars in investments and hundreds of construction jobs. Multiply that by the thousands of projects waiting to take 

off around the nation in response to our reformed tax structure and the urgency of 

addressing NSR problems becomes apparent. 

The witnesses today will bring a range of perspectives on NSR permitting to help 

us examine the challenges with the current process. I’m hopeful we can begin to 

identify practical reforms to ensure that the NSR program serves its environmental 

planning purpose while still allowing for economic expansion and infrastructure 

modernization. 

Our goal, is to develop responsible, targeted reforms that will provide for economic 

growth, while maintaining environmental protections. Doing this will ultimately 

benefit all American workers and consumers. 

I know Mrs. Blackburn is hoping to have a little time but she 

is not here. So with that, I will yield back. 

Mr. SHIMKUS. The gentleman yields back his time. 

The chair now recognizes the ranking member of the full committee, the gentleman from New Jersey for 5 minutes. 

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY 

Mr. PALLONE. Thank you, Mr. Chairman. 

We are here today to discuss one of the Clean Air Act’s oldest 

and most debated programs, the New Source Review program. It’s 

based on a simple principle—any new facility that emits pollutants 

should not increase local air pollution above levels that are safe to 

breathe. 

The NSR program ensures that we have growth in the economy 

and not in pollution. In December, Administrator Pruitt issued a 

memorandum altering longstanding NSR policy using an active 

case as justification for the change. 

The case was U.S. vs. DTF Energy Company, or DTE Energy 

Company, and the December memo actually reads as if it were prepared by DTE’s legal team. I can’t say that comes as a complete 

shock to me since Bill Wehrum, the man Administrator Pruitt put 

in charge of the office that drafted the memo, was previously part 

of DTE’s legal team. 

The new policy is as suspect as the process used to initiate it. 

It will gut enforcement of the NSR program to the benefit of certain companies at the expense of the public health and companies 

that have cleaned up their act. The eight-page memo lays out a policy that invites polluters to skirt the law and dump tons of harmful 

pollution on our communities. 

Essentially, it’s a recipe instructing polluters how to cook the 

books and get out from under the need for a permit under the NSR 

program. 

And this is certainly not a perfect program, but it has helped reduce harmful air pollution and improve public health, especially for 

8 

people living in the communities close to these facilities. All of 

these gains will erode rapidly if we stay on the course this administration is following. 

Too many old facilities have already used loopholes to game the 

system and avoid cleaning up the pollution. Certainly there are 

challenges to those existing facilities. But the Clean Air Act never 

intended for them to be exempt from the NSR program forever. 

Also, it’s important to remember that pollution control is zero 

sum game. Therefore, under Administrator Pruitt’s NSR scheme, 

states and localities will have to make those that have played by 

the rules achieve greater pollution reduction in order to offset the 

excess pollution created by businesses that EPA is essentially allowing to go unregulated. 

And that’s particularly outrageous to those of us who represent 

downwind states. We are tired of having to compensate for the lack 

of pollution control in neighboring states. 

The EPA should not be making life easier for polluters. The 

agency should do its job and ensure that lax implementation and 

enforcement in one state doesn’t burden others. 

Now, Republicans argue that we need to ease the NSR program 

to expand manufacturing and infrastructure. But new manufacturing facilities aren’t being held back by clean air requirements. 

Weakening the Clean Air Act is not going to create jobs. The fact 

is that the so-called NSR program improvements being suggested 

today by my Republican friends are not new ideas. They are just 

a bunch of toxic old policies bundled up in a heart-shaped box as 

a Valentine’s Day present to polluters. 

Industry has been trying to get out from under this program for 

a long time and it looks like Scott Pruitt and the Republicans are 

working hard to try to grant their wish. 

But make no mistake, the Valentine’s Day gift from Pruitt and 

Republicans gives polluters all the roses and sticks the public with 

the thorns. We would reject these policies that will harm the public 

health. 

Unless someone else wants my time on my side, I’ll yield back, 

Mr. Chairman. 

Mr. SHIMKUS. The gentleman yields back the balance of his time. 

Do you have a new writer? 

Mr. PALLONE. I don’t know. I—— 

Mr. SHIMKUS. That was pretty good. 

[Laughter.] 

Mr. PALLONE. —I thought it was pretty good, myself. 

We now conclude with members’ opening statements. The chair 

would like to remind members that pursuant to committee rules, 

all members’ opening statements will be made part of the record. 

We want to thank all our witnesses for being here today and taking the time to testify before the subcommittee. Today’s witnesses 

will have the opportunity to give opening statements followed by a 

round of questions from the members. 

Our witnesses—panelists for today’s hearing will include, from 

my left to right, Mr. Stuart Spencer, who is associate director, Office of Air Quality, Arkansas Department of Environmental Quality, testifying on behalf of the Association of Air Pollution Control 

Agencies; Mr. Kevin Sunday, director of government affairs, PennVerDate Nov 24 2008 13:55 Jan 16, 2019 Jkt 037690 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 115\HEARINGS\115-100 CHRIS
9 

sylvania Chamber of Commerce Business and Industry; Mr. Paul 

Noe, vice president, public policy, American Forest and Paper Association and American Wood Council; Emily Hammond, Glen Earl 

Weston research professor of law, the George Washington University Law School; John Walke, clean air director, Natural Resources 

Defense Council; and a friend of ours from years past, Jeffrey 

Holmstead, who is a partner at Bracewell. 

So with that, we’d like to begin our testimony and we will begin 

with Mr. Spencer. Your entire record is in the file. You have 5 minutes and you can begin. 

STATEMENTS OF STUART SPENCER, ASSOCIATE DIRECTOR, 

ARKANSAS DEPARTMENT OF ENVIRONMENTAL QUALITY, 

OFFICE OF AIR QUALITY, ON BEHALF OF THE ASSOCIATION 

OF AIR POLLUTION CONTROL AGENCIES; KEVIN SUNDAY, 

DIRECTOR OF GOVERNMENT AFFAIRS, PENNSYLVANIA 

CHAMBER OF BUSINESS AND INDUSTRY; PAUL NOE, VICE 

PRESIDENT PUBLIC POLICY, AMERICAN FOREST AND PAPER 

ASSOCIATION AND AMERICAN WOOD COUNCIL; EMILY HAMMOND, GLEN EARL WESTON RESEARCH PROFESSOR OF 

LAW, THE GEORGE WASHINGTON UNIVERSITY LAW SCHOOL; 

JOHN D. WALKE, CLEAN AIR DIRECTOR, NATURAL RESOURCES DEFENSE COUNCIL; JEFFREY R. HOLMSTEAD, 

PARTNER, BRACEWELL LLP 

STATEMENT OF STUART SPENCER 

Mr. SPENCER. Thank you. 

Good afternoon, Chairman Shimkus, Ranking Member Tonko, 

and distinguished members of the subcommittee. I appreciate the 

invitation to join you today to discuss the important issue of New 

Source Review reform. 

I am here in two capacities. First, I am here as an associate director of the Arkansas Department of Environmental Quality. Our 

Office of Air Quality staff includes epidemiologists, engineers, 

ecologists, chemists, biologists, a meteorologist, and a lawyer in the 

primary branches of compliance, permits, policy, and planning in 

asbestos and enforcement. 

Our primary mission is to protect and improve air quality in Arkansas while fostering responsible economic expansion opportunities. 

Second, I am here as the president of the Association of Air Pollution Control Agencies, or AAPCA. AAPCA is a consensus-driven 

organization comprised of 45 state and local air agencies. 

The AAPCA board of directors is made up of the air directors 

from our 20 geographically diverse member states including states 

with representation on this subcommittee. 

As AAPCA’s president, I serve on the board of the directors along 

with air directors from states as diverse as Wyoming, Maine, South 

Carolina, and Arizona, and despite the miles between our state borders, we have common goals and missions. 

Today, I will be addressing a few common themes in regard to 

NSR reform. The first thing is practical application. 

Environmental regulations should encourage necessary repair in 

replacement projects and should incentivize projects that improve 

10 

the safety of operations increase energy efficiency or reduce the 

emissions of regulated air pollutants. 

The second theme is clarity. This includes removing undefined 

terms and exemptions such as routine maintenance and nonroutine 

modification from the NSR rules and guidance and replacing them 

with clear definitions. 

A prime example would also be refining the term modification to 

truly mean a substantial change. An ambiguous or muddy rule inhibits planning due to its lack of certainty and therefore stifles 

growth and innovation. 

This leads me to my final theme, modernization. NSR is outdated 

and cumbersome. The documents that comprise the NSR rules in 

the guidance take up at least two file boxes if printed out in hard 

copy form. 

The time to reform was yesterday so I am glad we are having 

this conversation today. 

With those themes in mind, I will speak first as the associate director of ADEQ. The Office of Air Quality implements all programs 

delegated by EPA Region 6 to the state of Arkansas. 

Under the leadership of one of your former colleagues and now 

governor of Arkansas, Asa Hutchinson, and ADEQ Director Becky 

Keogh, Arkansas has committed to protective permitting. 

This practice is essential to achieving our goals of maintaining 

our status as the natural state, protecting public health and the 

environment in our communities and promoting and sustaining 

economic growth. 

The Arkansas NSR program follows the federal program. ADEQ 

believes that the NSR rules should be clear and concise to allow 

companies to achieve compliance and ensure that both ADEQ and 

our regulated community have a well-defined understanding of 

what is required by the program. 

Arkansas believes that changes to the NSR program would support its efforts to ensure that our regulated community and the 

companies in our communities are in compliance with the rules and 

do not become subject to enforcement actions based on rule interpretations that are either not well defined or continue to evolve. 

For these reasons, we appreciate that EPA intends to tackle NSR 

reform again. The 2002 NSR reform rule was helpful but it did not 

go far enough to clarify the program and provide certainty to regulators and the regulated community. 

So based on these points that I’ve made, any efforts to modernize 

and reform NSR reform—NSR, particularly the upcoming EPA-directed NSR task forum discussions should address the following 

issues. 

Number one; revise the emission increase test under NSR to 

match the hourly test under New Source Performance Standards— 

our NSPS program. 

This would eliminate and streamline many of the issues with the 

current program. Many of the other changes could be avoided or 

simplified if NSR applicability was based on an increase in maximum achievable emission rates rather than annual tons. 

Next, clarify the factors to be considered in determining whether 

a project is a routine maintenance repair or replacement activity. 

11 

Next, create an exemption from NSR for efficiency projects. The 

current program is a disincentive to companies undertaking 

projects to make their operations more efficient. 

Next, codify the information in EPA Administrator Scott Pruitt’s 

December 7th, 2018 memo that EPA will not second guess a facility’s emissions projections and clearly identify the circumstances 

when an emissions projection will be subject to review. 

Next, clarify the definition of a source in order to ensure that 

geographically separate sources are not artificially combined or aggregated to create a single major source for NSR purposes. 

And finally, clearly identify what types of projects should be considered as changes in the method of operation. 

Thank you for your time again today and I am available to answer any questions upon request. 

Thank you. 

[The statement of Mr. Spencer follows:] 

12 


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TESTIMONY OF STUART SPENCER 

ASSOCIATE DIRECTOR. ARKANSAS DEPARTMENT OF ENVIRONMENTAL QUALITY 

PRESIDENT. ASSOCIATION OF AIR POLLUTION CONTROL AGENCIES 

BEFORE THE HOUSE COMMITTEE ON ENERGY AND COMMERCE 

SUBCOMMITTEE ON ENVIRONMENT 

FEBRUARY 14.2018 

Good afternoon Chairman Shimkus, Ranking Member Tonka, and members of the 

subcommittee. I appreciate the invitation to join you today to discuss the important issue of New 

Source Review (NSR) reform. I'll be presenting information to you in two capacities. 

First, I'm here as an Associate Director of the Arkansas Department of Environmental 

Quality, where I oversee seventy-five employees in the Office of Air Quality located primarily in 

our headquarters in North Little Rock and also throughout the state in nine regional field offices. 

The Office of Air Quality staff includes engineers, epidemiologists, ecologists, chemists, 

physicists, biologists, and attorneys in the primary branches of Compliance, Permits, and Policy 

and Planning, as well as the Asbestos and Enforcement sections. Our primary mission is to 

protect and improve air quality in Arkansas while fostering responsible economic expansion 

opportunities. 

Second, I'm here as the President of the Association of Air Pollution Control Agencies 

(AAPCA). AAPCA is a consensus-driven organization comprised of forty-five state and local 

air agencies that focuses on assisting its members and their personnel with implementation of 

technical issues associated with the federal Clean Air Act. The AAPCA board of directors is 

made up of the Air directors from our twenty geographically diverse member states, including 

states with representation on this subcommittee. As AAPCA' s President, I serve on the board of 

1 
13 


30134.002

directors along with Air Directors from Florida, Georgia, Kentucky, Louisiana, North Carolina, 

Ohio, South Carolina, Tennessee, Texas, Virginia, and West Virginia, as well as states as diverse 

as Wyoming and Maine. Despite the miles between our state borders, we have common goals 

and missions. 

Today, I'll be addressing a few common themes in regard to reforming NSR. The first 

theme is practical application. Environmental regulations should encourage necessary repair and 

replacement projects and should incentivize projects that improve the safety of operations, 

increase energy efficiency, or reduce the emissions of regulated air pollutants. The second theme 

is clarity. This includes removing undefined terms and exemptions, such as "routine 

maintenance", from the NSR rules and guidance, and replacing them with clear definitions. A 

prime example would be refining the term "modification" to truly mean a substantial 

modification, as proposed in legislation introduced by your own Rep. Griffith. As an 

environmental regulator, I can tell you that an ambiguous or muddy rule is often times worse 

than a bad rule, because it inhibits planning due to its lack of certainty, and therefore stifles 

growth and innovation. This leads me into my final theme: modernization. NSR is outdated and 

cumbersome. It's my understanding that the documents that comprise the NSR rules and 

guidance take up at least two file boxes if printed out in hard copy form. The time to reform was 

yesterday, so I'm glad we're having this conversation today. 

With those themes in mind, I'll speak first as an Associate Director of ADEQ. The 

Office of Air Quality implements all air programs delegated by EPA Region 6 to the State of 

Arkansas. These programs include the Title V program for major sources of pollutants, the New 

Source Performance Standards (NSPS), the National Emission Standards for Hazardous Air 

Pollutants (NESI-IAP), Prevention of Significant Deterioration, and the State Implementation 

2 
14 


30134.003

Plan (SIP). Arkansas operates a one permit or "unified" system with construction, operating, 

state, and federal requirements all included in the Title V permit. 

Under the leadership of one of your former colleagues and now Governor of Arkansas, 

Asa Hutchinson, Arkansas has committed to "protective permitting", a practice we implement at 

ADEQ. This practice is essential to achieving our goals of maintaining our status as "The 

Natural State", protecting public health and the environment in our communities, and promoting 

and sustaining economic growth. 

Our permits are protective in a number of ways. First, they protect the environment by 

establishing emissions limits, operating requirements for pollution control devices or pollution 

prevention activities, and monitoring and record keeping requirements. These limits and 

requirements arc established through a combination of assessing monitoring data, modeling 

analyses, and other empirical evaluations. According to our most recent ADEQ State of the Air 

report, the ambient concentrations of most pollutants decreased during the analyzed time period. 

Currently, all monitoring locations in Arkansas are exhibiting design values well below national 

ambient air quality health-based standards for all national ambient air quality standard criteria 

pollutants. These achievements in air quality were realized while simultaneously significantly 

reducing our permit backlog: Arkansas is currently ranked in the top five nationally for timely 

Title V significant modifications and Title V permit renewals. 

Second, our permits protect the regulated community because they drive compliance 

through the certainty of their permit conditions. ADEQ air permits contain clearly defined 

specific, plant-wide, and general requirements for all emitting sources at the facility. These 

requirements are clear both to the permitted facility and to ADEQ's inspectors. It's this clarity 

that facilitates compliance and triggers enforcement when appropriate. 

3 
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30134.004

Finally, our permits protect the investments made in infrastructure and "job-creating" 

businesses which rely on the permits written by permit writers at ADEQ to be defensible. The 

permits are taken through a deliberate and public process, and include legally binding provisions 

that include enforceable conditions with which the source owner/operator must comply. 

I am joined today in the gallery by the ADEQ Senior Associate Director and General 

Counsel, Julie Linck. Under the leadership of ADEQ Director Becky Keogh and Senior 

Associate Director Linck, ADEQ has taken steps to reaffirm the state's role in the collaborative 

process of cooperative federalism. Before the U.S Senate Environment and Public Works 

Committee, Director Keogh testified about the need for US EPA to move from "coercive" federal 

role to one which supports states proper role. Jn asserting our position at the table, Director 

Keogh has suggested that many state programs have matured and as she has repeatedly stated "at 

40 years of ages, states have grown up and are ready to leave home and be given the freedom 

and flexibility to make a better future." She had publicly praised the recent efforts of the United 

States Environmental Protection Agency's (EPA) Administrator Scott Pruitt as he has worked to 

shift the relationship from parent to partnership. 

We are working cooperatively with our counterparts at EPA to submit state plans and 

issue permits that are approvable and defensible respectively. We have asserted our place in 

policy setting and decision making. No longer a pawn in a coercive system of onerous federal 

plans, we are beginning to see movement on a number of our submissions. To borrow a phrase 

from Director Keogh's colleague in Arizona, Misael Cabrera, we are working our way out of the 

"regional haze maze", having recently received approval from EPA on a portion of our first 

planning period SIP. But navigating the "haze maze" is a topic for another day. Today, we're 

here to talk about what I term "bizarre NSR". 

4 
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30134.005

I use the term bizarre because the NSR rules and regulations often times demonstrably 

discourage rather than encourage pollution control and efficiency projects because they create a 

fear and disincentive in the regulated community to maintain and update aging equipment. You 

may recall my first theme was practical application. The EPA NSR draft guidance document is 

the appropriately titled 1990 "puzzle book". This puzzle book is almost 30 years old and it has 

never been finalized. Most EPA guidance exists in a perpetual "draft" status, yet is relied upon 

and enforced by EPA staff as if it is final. It is a haphazardly-stitched quilt of rules, manuals, 

memos, guidance documents, and disparate applicability determinations. 

ADEQ believes the NSR rules should be clear and concise in order to allow facilities to 

achieve compliance and ensure that both ADEQ and the regulated community have a welldefined understanding of the requirements. Changes to the NSR program would support our 

efforts to ensure that regulated facilities are in compliance with the rules, but do not become 

subject to potential enforcement actions based on divergent rule interpretations that are either 

ambiguous or evolving. 

Both the EPA and the United States Department of Justice (DOJ) recently released 

guidance documents regarding NSR-related enforcement issues. ADEQ believes this new 

guidance is important to reorient policies toward pursuit of actual violations that create emissions 

increases. To date, NSR enforcement appears to be focused on what a company might have 

projected based on available information that, in many instances, is years or even decades old 

and that may not be based on actual emissions resulting from a project undertaken at a facility. 

Even where a facility has a clear NSR applicability process and has performed an emissions 

analysis in compliance with the NSR rules, there has historically been no guarantee that EPA and 

DOJ would not bring an enforcement action. In the same way that ADEQ ensures protective 

5 
17 


30134.006

permitting, EPA and DOJ need to move toward implementing protective policymaking that 

provides practicality and clarity to both the delegated regulators the states- and the regulated 

community. 

On that point, the guidance that EPA Administrator Pruitt issued on December 7, 2017 

clarifies that EPA will not second-guess a facility's preconstruction emissions analysis. This will 

help ensure that both regulators and the regulated community have certainty in the process. The 

guidance also explains that EPA will not bring an enforcement action unless there has been an 

actual increase in emissions from a project. ADEQ believes this will help focus priorities on 

activities that have caused actual pollution increases rather than on-paper increases. 

Likewise, the DOJ's January 25, 2018 memorandum prohibiting DOJ civil enforcement 

of noncompliance with other agencies' guidance documents has significant implications for NSR 

enforcement. As I've indicated, while the NSR rules are only a handful of pages, there are 

thousands of pages of guidance purporting to interpret the rules. Enforcement of the NSR 

program should not be based on guidance that can be revised over time as agency staff changes. 

ADEQ welcomed the news in the Fall of 2017 that EPA Administrator Pruitt would be 

convening a NSR Reform Task Force. I speak both as an ADEQ Air Director and the President 

of AAPCA when I say we look forward to the opportunity to engage with EPA and stakeholders 

of interest to tackle NSR reform. The 2002 NSR Reform Rule was well-intentioned, but it did 

not deliver defensible clarity or certainty to the regulated community. 

On the issue of reform efforts, AAPCA has submitted a number of comments in various 

federal dockets and has issued reports highlighting areas ripe for revisions and modifications. In 

June of last year, AAPCA provided to this Committee a letter containing consensus principles 

for Clean Air Act modernization, and a similar letter was also sent to the Senate Environment 

6 
18 


30134.007

and Public Works Subcommittee on Clean Air and Nuclear Safety. AAPCA's outlined 

principles included several related to permitting: 

"Maintain permitting requirements but allow facilities to be built or expanded in any 

area of the country as long as: (I) state or local environmental officials determine that 

the facility will not have a meaningful adverse impact on human health or the 

environment; and (2) they employ the best available technology to control their 

emissions." 

"Maintain state and local agency discretion in permitting decisions and clarify that 

permits may be challenged only for clear and significant deficiencies that would have 

a meaningful impact on air quality." 

"Provide for a limited exemption from Prevention of Significant Deterioration/New 

Source Review permitting for projects that arc determined to be environmentally 

beneficial based upon a cumulative impacts analysis." 

AAPCA also submitted comments to the docket on EPA's review of regulations that may 

be appropriate for repeal, replacement, or modification under Executive Order 13777 on 

Enforcing the Regulatory Reform Agenda. In the AAPCA's comments, specific suggestions to 

revisions to NSR permitting included: "removal of volatile organic compound (VOC) 

requirements in areas with oxides of nitrogen limits under NSR"; as well as "modifications to 

PSD and NSR that consider environmentally beneficial projects; and providing a clean unit 

exemption." AAPCA also tracked state and local agency comments on EPA's evaluation of 

existing regulations and produced a report in July 2017 entitled The State of Regulatory Reform: 

Navigating State Perspectives on Clean Air Act Regulations Under Executive Order 13777. 

7 
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30134.008

In conclusion, speaking again as an ADEQ Associate Director, any effotts to modernize 

and reform NSR, particularly the upcoming EPA-directed NSR Task Form discussions, should 

address the following issues: 

1. Revise the emissions increase test under NSR to match the hourly test under NSPS. 

This would eliminate many of the issues with the current program and would 

streamline the entire program. Many of the other changes to the program could be 

avoided or simplified if NSR applicability was based on an increase in maximum 

achievable emission rates rather than annual tons. 

2. Clarify the factors to be considered in determining whether a project is a routine 

maintenance, repair, or replacement activity. Many of those factors apply to almost 

any activity undertaken at a large industrial facility and have been raised in 

enforcement actions to claim that maintenance activities are not routine. 

3. Create an exemption from NSR for efficiency projects. The current program is a 

disincentive to companies undertaking projects to make their operations more 

efficient. An hourly emission rate test would resolve this issue. 

4. Codify the information in the EPA Administrator Pruitt's December 7, 2018 memo, 

that EPA will not second-guess a facility's emissions projection and clearly identify 

the circumstances when an emissions projection will be subject to review, such as if 

there were errors in the calculations or where the company used the wrong significant 

emissions threshold. 

5. Clarify the definition of a "source" in order to ensure that geographically separate 

facilities are not artificially combined to create a single major source for NSR 

purposes. 

8 
20 


30134.009

6. Define when projects need to be aggregated for NSR purposes. 

7. Clearly identify what types of projects should be considered as changes in the 

methods of operation. 

At the end of the day, I can assure you that to the best of my knowledge all state Air 

Directors are unified in their mission to preserve and improve air quality. This mission can and 

should be achieved with mindful and modem policies and, where appropriate, regulations. Thank 

you again for opportunity to provide testimony today. l welcome any questions you may have 

for me. 

9 
21 


30134.010

Summary of Stuart Spencer's Testimony 

The time for meaningful New Source Review (NSR) reform is now. Environmental regulations 

should encourage necessary repair and replacement projects and should incentivize projects that 

improve the safety of operations, increase energy efficiency, or reduce the emissions of regulated 

air pollutants. Permitting programs should allow facilities to be built or expanded in any area of 

the country as long as state or local environmental officials determine that the facility will not 

have a meaningful adverse impact on human health or the environment and that best available 

technology is employed to control emissions. State and local agencies should maintain discretion 

in permitting decisions and permits should only be challenged for clear and significant 

deficiencies that would have a meaningful impact on air quality. Any reform should provide for 

a limited exemption from Prevention of Significant Deterioration/NSR permitting for projects 

that are determined to be environmentally beneficial based upon a cumulative impacts analysis. 

The NSR rules and guidance should remove undefined terms and exemptions, such as "routine 

maintenance", and replace them with clear definitions. Consequently, the factors to be 

considered in determining whether a project is a routine maintenance, repair, or replacement 

activity should be clarified. The terms "modification" should be revised and the emissions 

increase test under NSR should be based on an increase in maximum achievable emission rates 

rather than annual tons. Circumstances under which an emissions projection will be subject to 

review should be limited to those instances where there were errors in the calculations or where 

the company used the wrong significant emissions threshold. Geographically separate facilities 

should not be artificially combined or aggregated to create a single major source. Finally, the 

NSR rules should clearly identify what types of projects should be considered as changes in the 

methods of operation. 
22 

Mr. SHIMKUS. Thank you. Excellent. 

I now turn to Mr. Kevin Sunday. You are recognized for 5 minutes. 

STATEMENT OF KEVIN SUNDAY 

Mr. SUNDAY. Good afternoon, Mr. Shimkus, Mr. Tonko, and 

members of the committee. 

My name is Kevin Sunday, director of government affairs with 

the Pennsylvania Chamber of Business and Industry. It’s an honor 

to appear before you today to discuss the challenges our members 

have had when it comes to complying with New Source Review requirements. 

Our nearly 10,000 member companies are of all sizes and across 

all industry sectors. We, as an organization, seek stewardship of 

our nation’s land, air, and water and we seek to provide thoughtful 

and balanced ways in which we can continue to reduce our environmental impacts and grow the economy. 

Thanks to tax reform and the prolific supply of our natural resources in nuclear, coal, gas, oil, and renewables we have before us 

a generational opportunity to invest in our workforces, our infrastructure, and our future. 

And we applaud the members of the House of Representatives 

and the United States Senate who took a bold stand for growth and 

sent the Tax Cut and Jobs Act to the president’s desk for his signature last year, and we thank our senator, Pat Toomey, for his leadership in getting that bill through the Senate. 

In the short time since that bill was enacted, employers across 

the country have announced plans to increase hiring and wages, 

and it is expected that in the near term consumer spending and 

economic growth will increase considerably, as much as 4 percent 

on an annualized basis according to the Atlanta Fed. 

As the economy grows, capital is going to be repatriated and 

rates on employers come down. Manufacturers and businesses have 

a generational opportunity to secure global competitive advantage 

by reinvesting into their facilities, enhancing their sustainability 

profiles, and expand to capture a share of the growing economy, 

provided, of course, that regulatory obligations do not present unnecessary hurdles. 

What energy means to Pennsylvania and the region is significant. We are part of an endeavor called Forge the Future, which 

forecasts $60 billion in state GDP and 100,000 new jobs because of 

energy assets. 

The Appalachian region at large including Pennsylvania, Ohio, 

West Virginia, and Kentucky could become a petrochemical and 

plastics manufacturing hub and, according to the American Chemistry Council, more than $28 billion in economic expansion and 

more than 100,000 new jobs could be created should the region capitalize on an ethane storage project and secure the construction 

and operation of several petrochemical plants. 

However, these projects too must wind through the permitting 

process to become reality. Our manufacturers in Pennsylvania have 

reported that the current NSR process is an impediment to investing in the efficiency of their operations and improve their ability 

to compete abroad. 

23 

Because of the costs associated with crossing NSR thresholds, 

companies have shelved projects that would have reduced their 

emissions and their operating costs. 

Disputes between state and federal regulators over the interpretation and application of regulatory criteria have resulted in sizeable legal and engineering costs and left projects in limbo for 

months if not years. 

Lenders will not sign off on financing until the revolving door of 

lawsuits from third party groups over the perpetually changing 

universe of BACT and LAER control stops spinning. 

Economic growth and environmental progress depend upon a 

well functioning and rational regulatory system and the NSR program as it is being administered show signs of being neither. 

From a land use perspective alone, it’s illogical that we would 

have a regulatory program that would encourage building entirely 

new facilities, oftentimes outside the U.S., when existing mothballs—when existing plants are being mothballed and retired that 

could have been upgraded. And how much has the closure of largescale manufacturers in this country led to the flat electricity demand that has so troubled the power generation and utilities sectors. 

So that’s why we applaud EPA Administrator Scott Pruitt and 

his team at EPA for the December 7th memo that clarifies how 

NSR requirements should be interpreted and applied. 

That’s a crucial first step to reform of the program and we look 

forward to additional progress on that front. 

The National Federation of Independent Businesses yesterday 

came out and said a record number of small businesses believe now 

is a good time to expand. 

We believe we can ill afford to waste this opportunity in front of 

us by leaving up barriers to growth. We have the opportunity to 

make our regulatory process more efficient, allow our companies to 

invest, and reduce their environmental footprint and waste less of 

our natural resources. 

And if we don’t capitalize on that opportunity, that’s a failure. 

It’s bad for business and it’s bad for the environment. 

Instead, let us pursue stewardship of our natural resources and 

secure economic growth in a thoughtful responsible manner and 

that starts with NSR reform. 

Thank you. 

[The statement of Mr. Sunday follows:] 

24 


30134.011

PAChamber® 

Bu ness a 

Testimony 

Submitted on behalf of the 

Pennsylvania Chamber of Business and lndmtry 

New Source Review Permitting Challenges for Manufacturing and 

Infrastructure 

Before the: 

United States House of Representatives 

Committee on Energy and Commerce 

Subcommittee on Environment 

Presented by: 

Kevin Sunday 

Director, Government 1\ffairs 

\'Vashington, DC 

February 1-1., 2018 

417 \Valnut Street 

Harrisburg, Pi\ 17101-1902 

717.720.5443 phone 

http:/ /www.pachamber.org 
25 


30134.012

Testimony of Kevin Sunday, Pennsylvania Chamber of Business and Industly 

Before the House Energy and Commerce Committee Subcommittee on Environment 

New Source Review Permitting Challenges for Manufacturing and Infrastructure 

Feb. 14, 2018 

Good afternoon Chairman Shimkus, Ranking ivfember Tonko, and metnbers of the committee, 

lvly natnc is Kevin Sunday, director of govermnent affairs for the Pennsylvania Chatnber of Business and 

Industry. The PA Chamber is the largest, broad-based business advocacy organization in the Commonwealth. 

Our nearly 10,000 members arc of all sizes, crossing all industry sectors throughout Pennsylvania. All of our 

members are conunitted to the stewardship of our state and nation's land) air and water, and we seek to 

provide a thoughtful and balanced approach on ways we can continue to reduce our environmental impacts 

and grow the economy. 

It is an honor to appear before you this afternoon to discuss the challenges our members, particularly those in 

the manufacturing and energy space, have faced in terms of securing permitting and authorizations under the 

New Source Review (NSR) program. NSR reform can and should be done in a manner that allows American 

businesses to re-establish their competitive advantage without regressing on the significant progress the 

country has made in reducing criteria pollutants in the past several decades. We applaud the Trump 

admioistration and EPA Administrator Pruitt for taking steps towards instituting thoughtful reform to this 

program- a program that to date has held back companies from growing their business, shoring up their 

competitiveness and even reducing their environmental footprint. 

PA Chamber members have reported that the current process is an itnpediment to investing in the efficiency 

of their operations and improving their ability to compete abroad. Because of the costs associated with 

crossing NSR thresholds, companies have shelved projects that "\Vould have reduced enlissions, lowered 

operating costs and provided an overall benefit to public health and the environment. Disputes bet\veen state 

and federal regulators over interpretation and application of regulatory criteria result in sizeable legal and 

eng1ncering costs and leave projects in lin1bo for months, or years. Lenders will not sign off on financing until 

the revolving door of lawsuits from third-party groups over the perpetually changing universe of Best 

Achievable Control Technology (BACI) and Lowest Achievable Emissions Rate (LAER) controls stops 

spinning. Economic growth and environmental progress depend upon a wcll-functionjng and rational 

regulatory system; the NSR program shows signs of being neither. 

w·e also applaud the members of the United States House of Representatives and Senate for taking a bold 

stand for economic growth by sending the Tax Cut and Jobs Act to the President's desk for his signature late 

last year. In particular we thank Senator Pat Toomey for his leadership in getting the bill through the Senate. 

In the short time since the enactn1cnt of this legislatio.n, employers across the country have announced plans 

Pagt' 2 
26 


30134.013

Testimony of Kevin Sunday, Pennsylvania Chamber of Business and Industry 

Before the House Energy and Commerce Committee Subcommittee on Environment 

New Source Review Permitting Challenges for Manufacturing and Infrastructure 

Feb. 14, 2018 

to increase investment, hiring and wages. It is expected that in the short term, consumer spending and 

economic gro-.vth will increase considerably so 4.0°/o in GDP growth on an annualized basis, according to 

the Federal Reserve Bank of Atlanta. As the economy grows, capital is repatriated, and rates on employers arc 

reduced, tnanufacturcrs and businesses have a generational opporh1nity to secure a competitive advantage by 

re-investing into their facilities, enhancing their sustainability profiles and expanding to capture a share of the 

growing economy- provided, of course, that regulatory obligations do not present unnecessary obstacles. 

Paired with tax reform, the unprecedented output of our nation's natural resources and the strength of its 

diverse power generation portfolio of nuclear, coal, gas, oil and renewables has positioned this country to 

return to levels of GDP growth unseen .in more than a decade. An energy-focused economic development 

strategy, as outlined in a recent report entitled Forge tl1e f<uture, for Pennsylvania has the potential for to 

bring an additional $60 billion in state GDP and more than 100,000 jobs to our state. The 1\ppalach.ian 

region, including Pennsylvania, Ohio, \Xlest Virginia and Kentucky, could become a petrochemicals and 

plastic manufacturing hub- according to the American Chemistry Council, more than $28 billion in 

economic expansion and more than 100,000 jobs could be created should the region capitalize on an ethane 

storage project and secure the construction and operation of several petrochemical plants. 

We can ill afford to waste this opportunity by leaving up barriers to growth, such as unnecessarily 

burdensome permitting requirements as existed under previous administrations' implementation of NSR 

regulations. Instead, let us pursue stewardship of our natural resources and secure economic growth in a 

thoughtful, responsible manner. 

Page 3 
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30134.014

Testimony of Kevin Sunday, Pennsylvania Chamber of Business and Industry 

Before the House Energy and Commerce Committee Subcommittee on Environment 

New Source Review Permitting Challenges for Manufacturing and Infrastructure 

Feb. 14, 2018 

Tax Reform, Energy Infrastructure and the Expanded Use and Production of Domestic Natural 

Resources are Creating Generational Opportunity for Pennsylvania, the Appalachian Region and the 

United States 

In an increasingly competitive global environment for capital investment, the United States' corporate tax rate 

increasingly became a drag on investment decisions, prior to the historic reforms made with the Tax Cut and 

Jobs Act of 2017. Since the previous comprehensive taJ< reform took place in the mid-1980's, the rest of the 

world spent much of the past thirty years lowering their corporate tax rates to an average considerably lower 

than ours, while ours stayed the same. As a result, the United States didn't just lose a competitive edge -it 

lost out on real growth. From 2006 to 2015, the United States achieved a dubious historic record- going ten 

straight years without a single year of 3% real GDP growth. The country is in need of strong economic 

growth in order to provide opportunity for all. 

Statutory u.s. Corporate Tax Rate 

Compared to OECD Averages 1981 102012 

U.S. GOES RECORD 10 STRAIGHT YEARS 

WITHOUT 3% GROWTH IN GOP 

u.s.-

-REAl ANNUAL GROWTH IN GOP ·-l·P'E:RCI':NT LEVEL 

Source: U.S. Chamber of Commerce 

Page 4 
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30134.015

Testimony of Kevin Sunday, Pennsylvania Chamber of Business and Industry 

Before the House Energy and Commerce Committee Subcommittee on Environment 

New Source Review Permitting Challenges for Manufacturing and Infrastructure 

Feb. 14, 2018 

Fortunately, the Tax Cuts and Job Act is e':pected to yield a boost to growth. \Xlh.ile there are a multitude of 

variables impacting the nation's economic output, lowered rates for businesses and individuals is expected to 

result in a 1no.re productive economy, The Tax F1oundation's preliminary analysis of the new tax law Ends that 

over the next decade, GDP will increase by an average of 029~/o each year, at a total average annual rate of 

2.13%, compared to an expected baseline of L84%1 While this additional 0.29% may not seem like a high 

number to a casual observer, even small improvements in GDP result in massive positive impacts for our 

nation's economy. The standard rule of thumb applied by the Congressional Budget Office is that a mere 

0.1% increase in GDP yields an aggregate $273 billion in increased economic activity over ten years.' 

Another credible analysis, which incorporates the impact of international trade and global flow, anticipates 

the tax reform framework will raise GDP by between 3 and 5 percent and real wages by between 4 and 7 

percent, which translates approximately to $3,500 annually for the average American working household.' 

Pinally, most recently, the Atlanta Federal Reserve announced, in its latest forecast for the fl.rst quarter of 

2018, the econmny is expected to grow by a very strong 4.01Yo on an annualized basis,-lTa..."C reform is not the only catalyst for economic growth in Pennsylvania or the nation, The increased 

development and use of oil and natural gas promises significant economic gains as well~ including in some 

sectors that are not traditionally associated with these fuel sources. Industries such as additive manufacturing, 

data centers, fabricated materials, glass, electronics, fiber optics, concrete, nanofibers, steel, cement, advanced 

tnanufacturing and robotics, in addition to traditional manufactured usc of petrochemicals, such as ethane, 

polyethylene, ammonia and inorganic chemicals, all face the opportunity to secure a global competitive 

advantage through the use of natural gas in their fuel source for heating, power and feedstock. To what extent 

was in part the subject of a recent econometric srudy, Forge the Fu1ure. Aggressive pursuit and use of 

domestic natural gas results could result i.n an additional SGO billion in state GDP for Pennsylvania, as it 

positions itself to be a national leader in manufacturing. More than 100,000 family sustaining jobs could be 

'Preliminary Details and Analysis of the Tax Cuts and Jobs Act. Tax Foundation, Dec. 18, 2017. 

https: //taxfoundation.org/final-tax -cuts-and-jobs-act-details-analysis/ 2 The Budget and Economic Outlook: 2017 to 2027. Congressional Budget Office, January 2017. 

https: //www .cbo.gov Is ites I default/files l115th-congress-20 17-2018 /reports/52370-outlook o .pdf 

3 Simulating the Republican "Unified Framework" Tax Plan. Seth G. Benzel!, Laurence J. Kotlikoff, and 

Guillermo Lagarda, Oct. 17, 2017. 

https: //kotlikoff. net/sites I default /files I Simulating%2othe% 20 Unified% 20 Framework% 20Tax%20 Ref or 

m%2oPian o.pdf 

4 GDPNow Forecast. Federal Reserve Bank of Atlanta, Feb. 6, 2018. 

https://www.frbatlanta.org/cqer /research/gdpnow.aspx 
29 


30134.016

Testimony of Kevin Sunday, Pennsylvania Chamber of Business and Industry 

Before the House Energy and Commerce Committee Subcommittee on Environment 

New Source Review Permitting Challenges for Manufacturing and Infrastructure 

Feb. 14, 2018 

created, as well as hundreds of thousands of Pennsylvania families saving considerable amounts of money in 

home heating and electric costs.s 

Another report, commissioned by the Pennsylvania Department of Comtnunity and Economic Development 

•nd the Team Pennsylvani• Foundation, forecasted the potential for nearly $.f billion in investment in 

additional opportunities for ethylene cracker plants and pl•stics manufacturers6 These are industries that are 

very sensitive to both comn10dity price and consumer demand. As consumer spending increases domestically 

and abroad, and as sustained development of natural resources provides a stable, low-cost feedstock~ these 

.industries have a generational opportunity to capitalize on recent trends and to establish a global competitive 

advantage. 

Pennsylvania is not the only state ·with the opportunity to see significant investment .into new and expanded 

petrochemical and plastics manufacturing. A study conducted by the American Chemistry Council examined 

a hypothetical scenario in which the Appalachian region- Kentucky, Pennsylvania, West Virginia and Ohioin total saw the build out of five ethane crackers and two propane dehydrogenation facilities, supported by a 

regional ethane storage hub in the next decade. The result: a total of $36 billion in investment, more than 

100,000 jobs and $28 billion in economic expansion7 

Tax refonn, the nation's vast energy resources, increased growth, and higher consumer spending arc laying 

the foundations for a successful resurgence of manufacturing and for capturing a global leadership position in 

a wide variety of industries. However, as new facilities seek to be built and as existing facilities seek to 

capitalize on domestic resources or invest capital into improving the efficiency of their plants, the complex 

array of environmental requirements, including permitting under the New Source Review regulations, could 

present a barrier. Thoughtful and creative reform to NSR is needed to realize the full economic potential 

available to our nation; indeed such reform can and should take place in a manner that doesn~t diminish the 

significant progress made with respect to improving air quality across the country in the past several decades. 

s Forge the Future: Pennsylvania's Path to an Advanced, Energy-Enabled Economy. ,July 2017. 

http://www.paforgethefuture.com/pdf/PA-Forge-the-Future.pdf 

6 Prospects to Enhance Pennsylvania's Opportunities in Petrochemical Manufacturing. IHS Markit, March 

2017. https: l/teampa.com/wpcontent/uploads/20t7/03/Prospects to Enhance PAs Opportunities in Petrochemical Mfng Report 

21March2017.pdf 

7 The Potential Economic Benefits of an Appalachian Petrochemical Industry. American Chemistry 

Council Economics & Statistics Department, May 2017. 

https://www.americanchemistr:y.com/Appalachian-Petrochem-Study/ 

Pagr 6 
30 


30134.017

Testimony of Kevin Sunday, Pennsylvania Chamber of Business and Industry 

Before the House Energy and Commerce Committee Subcommittee on Environment 

New Source Review Permitting Challenges for Manufacturing and Infrastructure 

Feb. 14, 2018 

The New Source Review Program Is In Need of Reform 

When a new industrial facility is seeking a permit to be built, or when an existing facility is seeking to expand, 

the project must go through the NSR and Prevention of Significant Deterioration (l'SD) permitting process. 

The backbone of these programs arc the National Ambient Air Quality Standards. NSR was established as 

part of the Clean .Air Act to ensure that counties and regions can progress towards attaining and maintaining 

air quality that is protective of public health while new facilities are built and existing facilities are modifted 

and expanded. 

In practice this regulatory construct discourages expansion of existing n1anufacturing (and the attraction of 

new facilities) in non-attainment areas, despite historic improvements in air quality. In many cases, the NSR 

rules as applied don't allow for significant itnprovemcnts to existing facilities, as they require application of 

the highest Clean .Air Act standard, rendering projects uneconomic due to compliance costs. Most large-scale 

manufachlring and industrial facilities will trigger NSR thresholds for one or more N,\AQS pollutant. W11en 

these facilities seck to expand their operations, they must calculate, per NSR regulations, if there will be a 

significant net emissions increase as a result of the modification, compared to recent operational profiles, and 

EPA has established that such a calculation must assume that a source will produce its n1aximum possible 

emissions every hour of every day for the duration of its existence (referred to as '(potential to emit" or PTE), 

even though such a calculation is not representative of any facility's actual operations. Companies must then 

account for these emissions that will never be emitted by accepting a more stringent limit and installing costly 

control technology than would be necessary had the calculation on future net emissions be representative of 

actual future operational practice. [n practice, this has discouraged companies frmn investing in installing 

cheaper and cleaner-burning burners in their boiler systems or other on-site heating and power units. In other 

words, modifications that increase a facility's output per unit of fuel can trigger NSR thresholds, even if the 

overall impact is a net environmental gain. 

The costs of cornpliance with NSR are significant- for nonattainmcnt areas, sources must deploy Lowest 

J\chievable Emissions Rate (LAER) technology, which are the most expensive type of control, and/ or obtain 

Emission Reductions Credits (ERCs)- credits which have become increasingly expensive and in short supply 

as NAAQS requirements have been ratcheted down in recent years. 1 n addition to these costs, the penalties 

for non-compliance are massive, and the costs to defend litigation -against citizen suits and environmental 

NGO's arc also punitive. Perversely, the NSR construct encourages the wasting of resources by not 

encouraging facilities to make changes to become efficient. 

Page 7 
31 


30134.018

Testimony of Kevin Sunday1 Pennsylvania Chamber of Business and Industry 

Before the House Energy and Commerce Committee Subcommittee on Environment 

New Source Review Permitting Challenges for Manufacturing and Infrastructure 

Feb. 14, 2018 

Regulators Are Not Applying NSR With the Flexibility that the Law Provides to Account for Changing 

Market Conditions 

In the NSR process, an existing facility's recent output is compared to the hypothetical, 24/7 output resulting 

from a modification (potential actual emissions). This comparison penalizes facilities that have not been 

running at full capacity in the years running up to submitting its plans for NSR review. Importantly, the text 

of the Clean Air Act and NSR regulations allows applicants a so-called "demand growth exclusion," which 

allows applicants to exclude a portion of the difference between actual baseline emissions and potential actual 

emissions by subtracting out etnission that would have been generated but for a lack of market demand. This 

is a useful, common sense and necessary· component of a well-functioning regulatory program to allow for 

operational flexibility ho\vever, during the Obatna administration, the EPA took a severely restrictive view 

of when the demand grO\vth exclusion can be utilized. 

As a real world example, one major manufacturer in southeastern Pennsylvania saw its operations reduced 

over a period of a few years due to economic challenges and fuel supply issues, even to the point of being idle 

for a year. This period of scaled-back operations resulted in an emissions profile that became the line that, if 

crossed due to almost any facuity modification, will trigger NSR. \\1hen new ownership took over the facility, 

and macroeconomic conditions changed to the benefit of the facility, management sought to make 

improvements to the facility to increase output and maintain viability of the facility. Such improvements 

would not only allow the company to increase its output and retain its workforce, but to do so in a more 

efficient manner with fewer emissions. The company was able to make the business case to invest in the 

facility and go through, at great expense, the NSR process; but for other companies in different 

cixcumstances, NSR encourages retirement and divestment from plants that could be made more efficient and 

productive - and keep their workforce employed. 

To cite another of many examples, one P1\ Chamber member has reported that they cancelled a planned fuel 

s\\oitch to a cleaner burning fuel at their tnanufacturing facility because low production rates during the 

recession resulted in low baseline emissions. This company operates in an industry heavily exposed to 

construction activity. The cleaner fuel would have resulted in lower real-world emissions compared to when 

the facility was running full tilt prior to the recession~ but because of ho'-v NSR emissions methodologies arc 

applied, it looked like, on paper, a significant emissions increase was going to be occurring, as compared to 

the temporarily low production rates that occurred during the recession. This would not have been a projectdriven emissions increase, and air quality and public health would have seen a net benefit from the fuel 

switch. 

Page 8 
32 


30134.019

Testimony of Kevin Sunday, Pennsylvania Chamber of Business and Industry 

Before the House Energy and Commerce Committee Subcommittee on Environment 

New Source Review Permitting Challenges for Manufacturing and Infrastructure 

Feb. 14, 2018 

Permit Review Times and lntragovcrnmental Disputes over· Regulatorv Interpretations Add Costs and 

I eopardize Projects 

The time to secure pennittlng through NSR is extremely lengthy. PA Chamber members report a fast-tracked 

process takes at minimum a year. Further, the pcnnitti:ng process does not allow for much operational 

flexibility. Too often, the business world and market conditions change faster than the NSR process is able to 

accommodate. If operational conditions at a facility changes, the permit may need to be modified, resulting in 

a long period where it is unclear if the facility is in non-compliance . .-\dtninistration of the NSR program has, 

over the past several decades, been in constant Oux as various EPA Administrators issue interpretative 

me1noranda and regional offices make different conclusions on projects with fairly similar characteristics, P 1\ 

Chamber members report this has resulted in a significant amount of regulatory gray area where it is unclear 

if the project will be vulnerable to enforcement by federal regulators. Companies are averse to deploying the 

significant amount of capital to upgrade and keep viable an existing facility if the regulatory risk is too 

uncertain. 

There is often disagreement on interpretation ofNSR requirements between state and federal regulators, 

putting project applicants in a bind when, fairly late in the game, EP :\ delivers a series of comments and 

questions to the state on a project. Compliance with NSR and other environmental requirements has a major 

impact on the business planning and operational design of facilities. Financial viability of a project depends 

on getting timely approvals. Pi\ Chamber members have reported that this tension between state and federal 

regulators, and the lack of communication to project applicants about that tension until several months into 

permitting discussions, is not only extremely frustrating, but costly. \Xlhat may seem like a minor dispute over 

the calculation of future versus actual emissions can result in tens of thousands of dollars in engineering and 

legal fees and a resubmitted application. 

Another P J\ Chamber mctnber has reported that a project to switch to a cleaner burning fuel at its 

manufacturing facility is in jeopardy because of how regulators are interpreting NSR requirements. The 

project will result in considerable reductions of one criteria pollutant (S02), but the fuel cbange is triggering 

NSR due to a relatively small amount of increase in another criteria pollutant (NOx). The overall public 

health and environtnental benefits from the fuel switch are clear: there will be an overall improven1cnt in air 

quality as a result. But the costs involved in complying with NSR as a result of the fuel switch may render the 

project uneconomical, and the company has been negotiating with regulators for more than a year. 

Page 9 
33 


30134.020

Testimony of Kevin Sunday, Pennsylvania Chamber of Business and Industry 

Before the House Energy and Commerce Committee Subcommittee on Environment 

New Source Review Permitting Cha11enges for Manufacturing and Infrastructure 

Feb. 14, 2018 

In most cases, lenders also will not sign off on financing a new or expanding facility until all permits are 

issued and all appeals are resolved. Not only can there be a protracted dispute between state and federal 

regulators regarding interpretation and application of regulatory criteria, but citizens' suits from third-party 

NGOs are common. Once this potentially multi-year process of intragovcrnmental disagreement and 

litigation with third"" parties concludes, the lUliverse of what constitutes BACT or LAER for such a project 

may have shifted- requiring the company to change its plans, affording NGOs the opportunity to ftle suit 

again and restricting the lenders to make a final decision on financing. This is an unfornmate and unwelcome 

result, given that the company proposing the new build or expansion has done everything in its power to 

comply with the regulations from the outset. There is room within the existing regulatory and statutoty 

framework to provide certainty to applicants by limiting the universe of relevant BACT and LAER as it 

existed when a final and complete application was submitted" 

Administrative Determinations Regarding Single Source Can Shunt Projects into NSR Jeopardizing 

.Otherwise Viable Projects 

Over many years, EPA has built up a substantial body of guidance and applicability determinations that 

address the circumstances under which two or more facilities must be considered a single source for purposes 

of air perm.its issued under the New Source Review and Title V progran1s. Far from providing clarity and 

consistency) these detenninat:ions have created substantial uncertainty for permitted entities and in many 

cases have discouraged advantageous cotnmercial relationships and new investment. 

EPA purports to base its guidance on the relevant regulatory definitions, which use a three-part test 

consisting of whether two facilities arc in the same industrial grouping, located on contiguous or adjacent 

properties, and are under common control However, because adjacency and common control are not 

defined in the regulations, EPA guidance has established a long list of factors that it considers relevant in 

determining whether tu.ro otherwise separate facilities or entities must be aggregated. One of the sectors 

particularly affected by these determinations is the landfill sector, which has been unduly burdened by EPA's 

focus in recent years on the aggregation of landfills and nearby landfill gas-to-energy facilities. By their very 

nature, gas-to-energy facilities are entirely separate opcrat.ions, with the landfill engaged 1n the managctnent of 

waste and the gas-to-energy facility engaged in the production of energy" However, in order to be 

economically and operationally viable, gas-to-energy facilities must be located at or near the landfill facility" 

In some cases, EPA has pointed to the use of a pipeline for the conveyance of gas from the landfill to the 

enerb'Y facility as an indicator of adjacency. Additionally, EPA has created a presumption of common control 

for co-located entities, even where the two entities are not commonly owned. In support of this presumption, 

EPA has often concluded that the existence and terms of gas purchase agreements between the landfill and 

Page 10 
34 


30134.021

Te..~timony of Kevin Sunday, Pennsylvania Chamber of Business and Industry 

Before the House Energy and Commerce Committee Subcommittee on Environment 

New Source Review Permitting ChaHenges for Manufacturing and Infrastructure 

Feb. 14, 2018 

gas-to-energy facility are indicators of corrunon control. Chamber members have also seen regulatory 

determinations to aggregate sources in the oil and gas sector in the context of permitting co1npressor stations, 

dehydration facilities, and other associated infrastructure that is not adjacent or under comtnon controL 

EPA's analysis ignores the fact that an arms-length, mutually beneficial commercial contract should not be a 

basis for detennining that two parties are under cotnmon controL 

Over the past several years, there have been efforts in EPA Regions 1, 2 and 3 (and perhaps others) to push 

delegated state permitting agencies to evaluate whether landfills and gas-to-energy facilities should be 

aggregated. In most cases, the facilities were initially permitted and have been operating for many years as 

separate facilities (many under Title V permits). Most often, the issue comes up at Title V renewal, rather 

than in response to any modification at either facility. These efforts upset the settled expectation of the 

parties long after initial investtnents have been made) with the specter of future New Source Review 

permitting burdens applying in the future, These re-evaluations cause administrative burden and cost for 

permittees and no immediate benefit to the environment in fact, single source determinations can senre to 

discourage future investment for fear of triggering New Source Review obligations. Further, these cases 

often highlight differences in approach between the EPA regions and delegated states within those regions, 

with EP _A pressuring state agencies to carry out these evaluations which can take years to play out and may 

involve litigation at the state and federal level. Finally, when a single source determination is made (most 

often over the objection of the permittees), state permitting agencies often struggle to structure operating 

permits in a manner that accomplish the goals of Title V by providing compliance certainty- instead, two 

otherwise unrelated entities arc forced into an unnatural joint pennitting arrangetncnt in which they share 

responsibility and risk for each other's operation. In the landfill sector, these determinations threaten to 

discourage the beneficial use of landfill gas as an energy resource. 

Federal Agencies !lave Also Pointed to NSR as a Significant Challenge to Manufacturers and the Energy 

Economv 

PA Chamber members and the manufacturing industry writ large are not the only ones calling for reform to 

NSR In a 2002 report to President George W. Bush, EPA noted that: 

Page ll 
35 


30134.022

Testimony of Kevin Sunday, Pennsylvania Chamber of Business and Industry 

Before the House Energy and Commerce Committee Subcommittee on Environment 

New Source Review Permitting Challenges for Manufacturing and Infrastructure 

Feb. 14, 2018 

As applied to existil\gprnver plants and rejinerie.r, EPA mndudes that !he NSR program im impeded or mulled in !he 

ean"llatiotl of pro;edJ whieh would maintain and impnm reliability, ejjiliency and safo[y ofextj·ting energy tapaeity . .f11eh 

discoura,gement results in lost capaci!J, a.r well a.r lost opportuniiies to impnme energy ifftden~.Y and redur.-e air pollution. R 

In the Department of Energy's "Staff Report to the Secretary on Electricity Markets and Reliability," staff 

noted that, among the tnany pressures to power generation, the NSR had a significant impact: 

The retrofit-or-retire dedsionforownm is also impaited by El'/l's New .fouree Review (NJR) regulations that ran affi,t 

owners' abili!J to enhance plant effidenq due to the de/qy, mst, and uncertainty associated with obtaining an NJRpermit. The 

NSR permittil!~ pro,gram requires .rtationary .rources of air pol/ution-includin,gfactories, industrial boilers, and power plant.l'-

to get permits beforr cvmtmctio11 starts, whether the unit is being newly built or tJtodifted. Tbi.r i.r an import4nt wntern for owners 

considering retrofitting an existing power plant with carbon capture equipment to reduce C02 emissions, or adding new 

components to improve operating effidency. These upgradu <VII!d trigger the NJR requirements of the Clean Air Act beta11.re th£Y 

would cowtitute a 'Jy~ysica! t'hange, ''or lead to a designation ~/the tbange aJ a ''mqjor mod~jication, "m!jet.:fiJZP, the unit to 

NJR permitting rrquiremen!J. 

The uncertain[y stemmingfi-oml\YSR treate.r an tmnecessat)l burden that di.rcomuges rather than rmtottrages installation of C02 

emission amtrol equipment and inrestments in eflidem;y becattJe ~f the additional e>..pmdituru and delq;'s associated with the 

permittingpro,us. Ironically, the tmartainiJ' sunvmtding N.fR rrquiremmts has led to a .rignijirantlack of investment in plant 

and efjident] up~gradu, whicb lWtdd otherwise lead to more ejfhient pouter generation, ben~jits to grid management, and reduced 

em,iranmenta/ impadJ. 9 

Our energy assets are providing the opportunity for many companies to improve their sustainability footprint 

and reduce costs via projects like distributed solar, combined heat and power (CHP), microgrids and fuel 

cells. Policy barriers should not impede the deployment of these technologies, nor for potential technologies 

such as small modular reactors (SMRs) making usc of nuclear energy on a smaller scale. However, while our 

energy picture continues to shift, as American ingenuity and resourcefulness is put to use, the backbone of 

our grid remains large-scale, centralized power plants. The P J\ Chamber is a supporter of markets and we 

believe competitive energy markets have been good for consumers. \\1c also recognize the need to ensure 

s New Source Review: Report to the President. U.S. Environmental Protection Agency, June 2002. 

https: //www.epa.gov /sites/production/files/2ms-o81 documents/nsr report to president.pdf 9 Staff Report to the Secretary on Electricity Markets and Reliability. U.S. Department of Energy, August 

2017. 

https://energy.gov/sites/prod/files/2017/o8/f36/Staff%2oReport%20on%2oElectricity%2oMarkets%20 

and%2oReliability o.pdf 

Page 12 
36 


30134.023

Testimony of Kevin Sunday, Pennsylvania Chamber of Business and Industry 

Before tbe House Energy and Commerce Committee Subcommittee on Environment 

New Source Review Permitting Challenges for Manufacturing and Infrastructure 

Feb. 14, 2018 

adequate capacity is available. \Vc appreciate the Trump administration has begun a conversation, and that the 

independent Federal Energy Regulatory Commissiorr and regional grid operator PJM Interconnection has 

continued that conversation as it relates to market design, to emmrc that there are not policy barriers at work 

in the energy markets contributing to the premature rctiren1ent ofbascload generation nuclear, coal and 

otherwise. 

The Recent Pruitt Memorandum is an Important First Step to Reforming NSR 

On Dec. 7, 2017 E!'J\ Administrator sent a memorandum to all regional administrators provided guidance on 

how sources may conduct emissions projects when going through the NSR program, and how El' A staff 

should evaluate those projections and handle enforcement.W The memo is significant in that it returns 

application of NSR requirements closer to the plain language of the Clean Air Act and NSR regulations. It 

allows applicants to account for how they will actively manage future e1nissions and provides for more use of 

the demand growth exclusion, provided the applicant has complied with regulatory criteria regardu1g 

evaluation, docmncntation and notice '':ithout a "clear error.'' The memo also includes an express prohibition 

on EPA staff second-guessing these analyses. El' A staff will, however, continue to evaluate if significant 

thresholds were crossed during five- and ten-year periods, post-project. States arc free to implement a more 

stringent NSR program, and the memo makes clear that El' A staff should defer to state regulators' 

judgments. 

It is important to note that none of the contents of the memo will inhibit states' ability to progress towards 

achieving and maintaining attainment of NAAQS, nor are individual companies relieved of their rcgulatoty 

obligations. \X·'hat the memo does do is provide more regulatory certainty to sources and to states. Less 

dispute between state and federal regulators means not just a streamlined permitting process for applicants, 

but that less public resources are being expended on intra-governmental in-fighting; more high··efficiency 

tnodifications at existing facilities also means less natural resources are being expended to produce greater 

econonllc output. 

It is the sincere hope of the PA Chamber that this memo is the start of further reforms to NSR in 

administrative, regulatory and statutory:' contexts. If we a have a regulatory process that could be made more 

efficient, so that our plants and facilities can become n1orc efficient, and we don't- that is a failure. Such a 

result is not only bad for business, it's bad for the cnvironn1Cnt. 

10 New Source Review Preconstruction Permitting Requirements: Enforceability and Use of Actual-toProjected-Actual Applicability in Determining Major Modification Applicability. Administrator Scott 

Pruitt, Dec. 7, 2017. https:/(www.epa.gov/sites(production/files/2017-

12/documents/nsr policy memo.12.7.17.pdf 

Page 13 
37 


30134.024

Testimony of Kevin Sunday, Pennsylvania Chamber of Business and Industry 

Before the House Energy and Commerce Committee Subcommittee on Environment 

New Source Review Permitting Challenges for Manufacturing and Infrastructure 

Feb. 14, 2018 

A year ago, the PA Chamber delivered testirnony to this same subcomtnittee, identifying a number of 

recommendations to the nation's air regul~tory fratnework that will boost the productivity and 

competitiveness of domestic tnanufacturers, and, more broadly, the econmny. \\1c are pleased thaL a nun1ber 

of these recommendations have been adopted, including the rescission of the long-standing and illogical 

"once in, always in" HAPS guidance and rescinding the CEQ guidance on NEP A and greenhouse gas 

emissions. We applaud these changes, and we look forward to working with this body and the administration 

on the adoption of additional pro-growth policies that do not sacrifice environmental quality. 

Page 14 
38 

Mr. SHIMKUS. The chair thanks you. 

The chair now recognizes Mr. Paul Noe. You’re recognized for 5 

minutes. 

STATEMENT OF PAUL NOE 

Mr. NOE. Chairman Shimkus, Ranking Member Tonko, and distinguished members of the committee, on behalf of the American 

Forest and Paper Association and the American Wood Council, I 

want to thank you for the opportunity to be here to discuss the 

challenges posed by EPA’s NSR program for the forest products industry and to provide our perspectives on how it can be improved. 

This is consistent with the twin purposes of the Clean Air Act, 

which is to promote public health and welfare as well as the productive capacity of our nation. 

Unfortunately, NSR is an outdated, inefficient, and slow regulatory approach that currently just doesn’t work very well for existing sources and it’s impeding modernization and growth in the U.S. 

manufacturing sector. 

It just doesn’t make sense to discourage upgrading plants already subject to a myriad of other regulatory requirements or to 

block beneficial projects using best controls simply due to unrealistic air quality modelling and assumptions. 

Our country has made great strides in improving air quality, 

largely under other programs. To borrow from my friend and 

former EPA general counsel Don Elliott when he testified before 

Congress 15 years ago on the need for NSR reform, quote, ‘‘NSR 

is slow, costly, and ineffective, and those are the kindest things 

that one can say about it. It is the least successful of all the programs under the Clean Air Act.’’ 

The reality is that energy efficiency and modernization projects 

for existing sources are delayed, modified, or thwarted by complex 

NSR interpretations that have accumulated and evolved over time. 

The program requires expensive but unrealistic air modelling that frequently delays projects and can cost $100,000 or more to 

complete. Unreasonable permitting delays tie up investment capital 

and undermine the economic benefits from expansion projects. 

There are many ways EPA could improve the permit process but 

let me focus on two key points. First, consistent with this statute, 

EPA should focus the NSR program on larger projects that really 

have a greater potential to impact air quality. 

Changing the NSR applicability criteria could reduce unnecessary workload on permitting agencies and create business certainty 

and positive incentives without jeopardizing air quality. 

For example, currently the NSR regulations use a two-step calculation process to determine of a project is subject to NSR. The 

emissions increases from a project are calculated first to see if they 

are significant before any decreases are subtracted. 

This step one then step two analysis is complicated, expensive, 

and time consuming. By simply allowing increases and decreases to 

be netted projects with emissions below significant levels could proceed. 

Second, once a project truly does trigger a higher level of scrutiny, EPA ought to use realistic assumptions and analytic tools, including probabilistic air quality modelling approaches. 

39 

This is needed now more than ever because there is little room 

for error. This is because in recent years EPA has lowered the national ambient air quality standards close to background levels. 

This has left little room for permits, even in attainment areas. 

In the past, when NAAQS for PM or SO2 or nitrogen dioxide were 

higher, if you looked at that versus the ambient level in emissions 

from the nearby sources and the facilities exposures, there was 

enough room or head room, as we call it, for a permit. 

The problem seriously exacerbated by many of EPA’s current policy approaches and modelling tools which significantly over predict 

impacts from facilities, especially when a series of unrealistic assumptions are compounded. 

So it’s critical that the modelling results reflect the reality of 

local air quality. 

For example, EPA’s current modelling guidelines have an expansive interpretation of where the general public must be protected 

from nearby plant emissions. 

Rather than focussing on where people actually are, it is assumed that ambient air is anywhere a person theoretically could be 

such as by illegally trespassing at the facility or where the general 

public in reality could not be, such as standing on a railroad or a 

road that runs through the facility. 

Overly conservative modelling analysis can lead to unverifiable 

and nonexistent concentration estimates that cause costly changes 

or cancellations of beneficial projects, even though real-world exposure to the general public around these locations is minimal, improbable, or even impossible. 

Therefore, EPA should issue new guidance to update its policies 

for placing receptors considering natural, manmade, or jurisdictional barriers. 

Although forest products mills typically are located in attainment 

areas with better quality, they face problems as soon as NAAQS 

are issued because they’re immediately effective and EPA has compounded the confusion and delay by not providing implementation 

and modelling guidance until after the NAAQS are issued. 

I don’t believe Congress intended this confusion and delay when 

it enacted the act and I believe the U.S. is the best place in the 

world for a robust manufacturing sector. We have the best workers 

in the world. 

We have created entrepreneurs and innovators. We have abundant resources. We have a strong free-market democracy and we 

have regulatory agencies that are capable of leading the world on 

sustainable regulation. 

Thank you, Mr. Chairman. 

[The statement of Mr. Noe follows:] 

40 


30134.025

American 

Forest & Paper 

• Association AMERICAN WOOD COUNCIL 

Testimony of Paul Noe for 

American Forest & Paper Association 

and American Wood Council before 

House Committee on Energy and Commerce 

Subcommittee on Environment 

Oversight Hearing on 

"New Source Review Permitting Challenges for 

Manufacturing and Infrastructure" 

February 14, 2018 

My name is Paul Noe, and I am the Vice President of Public for the 

American Forest & Paper Association and American Wood Council. I want to thank 

the Subcommittee for the opportunity to provide the forest product industry's 

perspectives on the challenges posed by EPA's New Source Review Program and 

how it can be improved -- consistent with the twin purposes of the Clean Air Act to 

promote public health and welfare, as well the productive capacity of the nation. 1 

The American Forest & Paper Association (AF&PA) serves to advance a 

sustainable U.S. pulp, paper, packaging, tissue and wood products manufacturing 

industry through fact-based public policy and marketplace advocacy. AF&PA 

member companies make products essential for everyday life from renewable and 

recyclable resources and are committed to continuous improvement through the 

industry's sustainability initiative The forest 

products industry accounts for approximately four percent of the total U.S. 

manufacturing GOP, manufactures over $200 billion in products annually, and 

employs approximately 900,000 men and women. The industry meets a payroll of 

approximately $50 billion annually and is among the top 10 manufacturing sector 

employers in 45 states. 

AF&PA's sustainability initiative- Better Practices, Better Planet 2020- comprises 

one of the most extensive quantifiable sets of sustainability goals for a U.S. 

manufacturing industry and is the latest example of our members' proactive 

1 Clean Air Act, Sec. 101(b), 42 USC 7401(b). 
41 


30134.026

commitment to the long-term success of our industry, our communities and our 

environment. We have long been responsible stewards of our planet's resources. 

We are proud to report that our members have already achieved the greenhouse 

gas reduction and workplace safety goals. Our member companies have also 

collectively made significant progress in each of the following goals: increasing 

paper recovery for recycling; improving energy efficiency; promoting sustainable 

forestry practices; and reducing water use. 

The American Wood Council (AWC) is the voice of North American wood 

products manufacturing, an industry that provides approximately 400,000 men and 

women in the United States with family-wage jobs. AWC represents 86 percent of 

the structural wood products industry, and members make products that are 

essential to everyday life from a renewable resource that absorbs and sequesters 

carbon. Staff experts develop state-of-the-art engineering data, technology, and 

standards for wood products to assure their safe and efficient design, as well as 

provide information on wood design, green building, and environmental 

regulations. AWC also advocates for balanced government policies that affect 

wood products. 

Overview 

EPA's complex New Source Review (NSR) air permit program affects practically 

every major manufacturing facility in the United States, and unfortunately, it has 

become a significant impediment to the modernization and growth of the U.S. 

manufacturing sector. 2 U.S. air permitting and regulatory requirements are out of 

date, overly conservative, rigid, and time-consuming. The air quality permitting 

process for new and modified facilities is slow and cumbersome and relies on 

unrealistic modeling and assumptions, resulting in unnecessary delays, costs and 

impediments for projects that would benefit both our economy and our environment. 

Recently, this problem has become more acute with substantial tightening of EPA's 

National Ambient Air Quality Standards (NAAQS) closer to ambient background 

levels. Simply put, when stringent NAAQS are combined with unrealistic air quality 

modeling and assumptions, there is little or no "headroom" for new or modified 

facilities in many areas to show that their residual emissions will not contribute to a 

violation of the NAAQS, even after the installation of the best available pollution 

control technology. 3 

2 See, e.g., Art Fraas, John D. Graham, and Jeff Holmstead, "EPA's New Source Review Program: 

Time for Reform?," 47 E.L.R. 10026 (Jan. 2017). 

3 ld. 

2 
42 


30134.027

Manufacturing is one of the most heavily regulated sectors in the U.S. economy. 

Since 1981, manufacturers have been subject to over 2,200 different regulations, 

and almost half were from EPA4 The manufacturing sector has made large 

investments in air quality improvements. Air quality in the U.S. has improved 

markedly over the past 30 years, even as the population has grown. In the pulp and 

paper industry, for example, SOz emissions have been reduced by over 50% since 

2000, and NOx emissions have been reduced by almost 30% in that same 

timeframe. 

Pu:lp and P~per MllfAir ~missions 

Reductions 

10 

so2 reduced 53%, NOx: reduced 29% smce 2000 

PULP AND PAPER MILt. SO., .AND NO, 

EMISSIONS 

2000 2002 2001i 2006 

Sulfur Dioxide 

:woa 2010 201Z 20H 

Nltmgen Oxides 

...... ~-- In another measure of environmental progress, AF&PA member companies have 

already met their voluntary Better Practices, Better Planet sustainability goal to 

reduce greenhouse gas emissions by 15% from a 2005 baseline-- six years ahead 

of schedule. 

4 See Paul Bernstein et aL, Macroeconomic Impacts of Federal Regulation of the Manufacturing Sector (NERA 

Economic Consulting & Manufacturing Alliance for Productivity and Innovation) 2012 

3 
43 


30134.028

Gre~nhouse GasRtduf!tion. Goal Progress 

Greenhouse gas emissions decreased by !6%, 

surpassing our goal of a ·15% reduction by2020 

GR!EeNHOtJS!E CAS !EMlSStONS COAl 

OJlS 

0.80 

0.15 

0.?0 

0.65 

0.60 

l(l·QS 200$ 

Cl.:15~iin>e 

Methanol emissions intensity, expressed in pounds per thousand cubic feet of wood 

products produced by AWC member companies, has declined 34% from 2008 to 

2014. Formaldehyde emissions have dropped almost 60% from 2006 to 2014. 

4 
44 


30134.029

Chart 2: Methanol Releases Intensity 

Pounds per 1,000 Cubic feet of production 

20{]3 2006 2008 2010 2012 2014 

Source: AWC 2016 Industry Progress Report 

These and other emission reductions come at a high cost The forest products 

industry has invested about $1 billion to comply with EPA's 2013 Boiler MACT 

regulation, and those emission reduction benefits will be reflected in future AF&PA 

and AWC reports. All told, several billion dollars have been spent on Clean Air Act 

obligations by the forest products industry in the last two decades, contributing to 

the impressive emissions reductions our nation has achieved. 

The NSR permit program was established under the Clean Air Act in 1977 to 

require new facilities as well as existing facilities that undertake significant 

modifications to update their pollution control systems to current standards. 

Unfortunately, some important parts of NSR that are aimed at existing sources, 

particularly its Prevention of Significant Deterioration (PSD) program, can 

undermine the laudable goals of the Clean Air Act. Energy efficiency and 

modernization projects are being delayed or thwarted by NSR interpretations that 

have evolved over time. The program requires expensive emissions assessments 

and air modeling that frequently delays projects and can cost $100,000 per project 

or more to complete. It also easily can take 12 to 18 months to obtain NSR 

permits, tying up investment capital and delaying the economic benefits from 

expansion projects. Finally, the permitting process itself can lead to lawsuits by 

environmental organizations-not just during NSR but again during renewal of the 

5 
45 


30134.030

facility's Title V operating permit, assuming the manufacturer actually gets the 

permit 

We believe there are many actions the EPA could take to improve the process 

that regulated entities must go through to secure air permits and comply with 

federal air quality regulations. This testimony focuses on several aspects of the 

NSR and PSD programs. Our suggested solutions to the problems identified 

would promote growth and jobs in domestic manufacturing industries and our 

economy while protecting against actual risks to the environment and public 

health. 

The permitting program under the Clean Air Act needs a substantial re-examination 

since it has evolved over time in a rather haphazard and incremental manner. First, 

consistent with the statute, EPA should focus the NSR program on larger projects 

that have a greater potential to impact air quality. Changing the NSR applicability 

criteria could reduce unnecessary workloads on permitting agencies and create 

business certainty and incentives without jeopardizing air quality. Second, once a 

project triggers a higher level of scrutiny, EPA should use real-world assumptions 

and modern, realistic air quality modeling tools, including probabilistic air quality 

models, instead of the deterministic, upper-bound modeling assumptions currently 

used. 

As a group, the complicated and burdensome set of air quality rules surrounding 

NSR and PSD permitting are a deterrent to manufacturing facility modifications and 

expansions. The current set of air quality permitting requirements even deters 

implementation of projects that would reduce emissions and/or enhance energy 

efficiency. Part of what makes implementing these regulations so difficult is the 

thousands of pages of complex, prescriptive guidance. EPA should establish a 

new permitting process and adjust its modeling criteria to be more reflective of 

actual impacts. Regulatory air quality models now have the capability to predict 

ambient air concentrations based on variable emissions, background, and 

meteorological conditions. Unfortunately, long-standing policies are obsolete and 

preclude the use of modern approaches that take variability into account Simply 

stated, implementation of stringent new air quality standards has outpaced 

reliable implementation tools and appropriate guidance, which remain years 

behind current knowledge. EPA should address the rapidly developing air 

permitting gridlock by adopting more flexible policies to allow use of more realistic 

emissions and modeling data.5 In addition, states should be given more discretion 

5 In the future, EPA also should not revise current NAAQS unless evidence shows a significant 

public health concern and previous NAAQS revisions have been fully implemented. Moving these 

multiple regulatory goal posts every five years creates significant business investment uncertainty 

6 
46 


30134.031

in running their permitting programs including advancing new tools, models and 

permitting approaches through guidance to the states and Regional 

Administrators. 

New Source Review Problems and Solutions 

EPA previously developed proposed rules6 - some were even finalized but 

indefinitely stayed and never implemented -that would add common sense tests 

for determining which projects would actually cause significant emissions 

increases. Such projects are subject to major source/modification permitting and 

their exclusion would eliminate resource-consuming reviews for routine projects 

and those that would not cause a significant emissions increase. 

We have several suggested revisions to the NSR permitting program to address 

real world problems. 

Actual Emissions Increase 

The NSR regulations use a two-step calculation process to determine if a project is 

subject to NSR. This test, also known as the applicability analysis, consists of 

determining (1) whether the project itself produces a "significant emission 

increase," and, if so, (2) whether the project's emission increase, netted with all 

other emissions increases and decreases occurring at the facility during the 

"contemporaneous" period, results in a "significant net emissions increase." Only if 

the project will result in a significant emission increase in Step 1 must the source 

proceed to Step 2, where the source evaluates its plant-wide emissions over a time 

period, usually five years preceding the proposed project. 

There is significant ambiguity and confusion regarding EPA's emissions accounting 

regulations that have forced companies to consider only the project's emission 

increases in "Step 1" and ignore emission decreases until Step 2 after significant 

resources have been expended and time lost. And in Step 2, decreases are 

evaluated only in the "plant-wide netting" process, which looks at the plant-wide 

emissions increases and decreases over time. Although some projects can easily 

use "plant-wide netting" to demonstrate that NSR is not triggered, at a large plant 

with complex operations, netting is an onerous, technically challenging calculation 

process that is taxing on state regulators and can create substantial confusion for 

those trying to analyze a proposed permit. 

when the air quality in the U.S. is some of the best in the world and will continue to get better under 

current programs and trends. A ten year NAAQS review cycle would be much more appropriate. 

6 https:l/www.epa.gov/nsr/nsr-regulatory-actions#general. 

7 
47 


30134.032

In recent years, EPA has issued guidance documents stating that emission 

decreases associated with a particular project cannot be counted in the Step 1 

portion of an applicability analysis. The complexity of the Step 2 analysis for many 

plants means that companies will simply forgo environmentally beneficial projects 

that involve counting decreases in order to demonstrate that NSR is not triggered. 

Furthermore, as pointed out in the 2006 proposed regulation preamble, the 

approach of only counting increases at Step 1 fails to accurately reflect the effects 

of a project and that NSR only be triggered for projects that actually cause a 

significant emissions increase. 

EPA should finalize the September 14, 2006 proposal to allow accounting for the 

complete effects (both increases and decreases in emissions) of a project for PSD 

applicability analyses. This proposal stated that all emissions changes, both 

increases and decreases that occur within the scope of the project would get 

counted under "step 1" of the applicability analysis. Project netting calculations are 

more straightforward than facility-wide netting and the resulting regulatory change 

to explicitly allow project netting would let facilities receive credit for emission 

reductions that are achieved as part of an overall project, without introducing 

complexity into the program. As a stopgap measure, EPA could issue guidance 

interpreting the current regulations "sum of the difference" language as considering 

both increases and decreases in Step 1. 

Contemporaneous Project Classification 

Current EPA policy calls for the emissions impact of contemporaneous projects in 

netting transactions to be quantified using the actual-to-potential (ATP) test. This is 

required even if those projects relied on the actual-to-projected actual (ATPA) 

emissions comparison for their initial PSD applicability determination. EPA 

explains7 that this restriction on the use of the ATPA comparison for netting 

purposes is mandated because the amended definition of "actual emissions" in the 

2002 NSR Reform rule does not apply when assessing whether a significant net 

emissions increase has occurred or will occur for PSD purposes. 

This policy is overly conservative and restrictive. The definition of a "net emissions 

increase" under PSD requires that an assessment be made of the increases and 

decreases of contemporaneous "actual emissions"; the plain language of "actual" 

emissions would suggest that the net emission changes (if any) that have actually 

7 Letter from Cheryl L. Newton, EPA Region V Air and Radiation Division Director, to Keith Baugues, 

Indiana Department of Environmental Management, April 4, 2011. 

8 
48 


30134.033

occurred are to be the basis of this determination. We recognize that there are 

some netting assessment instances where a contemporaneous project has not 

begun normal operations, and in those instances it seems clear that the actual 

increase in emissions cannot yet be defined. For these situations, the definition of 

"actual emissions" at 40 CFR 52.21 (b)(21 )(iv) (i.e., the presumption that a unit's 

post-change actual emissions are equal to its potential-to-emit) would appropriately 

apply. 

In most instances, however, the increases in emissions that actually occur as a 

result of projects are less than what is estimated during preconstruction review. It is 

overly restrictive and it does not serve any compelling purpose to require an ATP 

emissions comparison for projects where the actual-to-actual emissions history can 

be established. Accordingly, we encourage EPA to rescind the 2011 policy memo 

that requires the ATP emissions test for contemporaneous projects in netting 

transactions, and to promulgate changes to the appropriate definitions within the 

PSD regulations. 

Project Aggregation 

NSR pre-construction permitting applies to "major modifications" to existing "major 

sources" that result in "significant" emission increases. Most companies perform 

dozens of changes/projects at a plant over one to three years. While many of 

these are exempt from NSR because they are routine maintenance, repair and 

replacement projects, some do not trigger NSR because they do not individually 

result in a significant emissions increase. EPA, however, is concerned about 

companies circumventing NSR by "dividing," "phasing" or "tiering" projects that are 

technically or financially interdependent. 

For this concern, the agency applies its "project aggregation" policy to determine 

when emissions increases from multiple projects at the same major source should 

be aggregated or summed to determine if together they constitute a "significant" 

emission increase triggering "major modification" NSR. In 1993, EPA enforcement 

concluded that 3M had circumvented NSR permitting when it constructed four 

separate R&D pilot projects at its Maplewood, MN plant. "3M Maplewood" 

established a very restrictive four factor aggregation policy that considers time 

between projects, funding and consumer demand, EPA's assessment of the 

economic relationship between projects, and "the overall basic purpose of the 

plant." 

Thus, aggregation has become a presumption for groups of projects that occur 

close together in time, even though from a business perspective most decisions 

9 
49 


30134.034

and projects are independent of each other. This interpretation that unrelated 

projects get "aggregated" regardless of their true inter-relatedness places undue 

permitting burdens on facilities for smaller projects that should be allowed to begin 

construction without added red tape. 

EPA began moving down the right path when it proposed changes to the PSD 

regulations on September 14, 2006 involving aggregation that were finalized in 

January 2009. The rule described factors for distinguishing "separate" and 

"substantially related" projects such as "technical" and/or "economic dependence." 

However, that rule was stayed by the Obama Administration and then stayed again 

in 2010 along with a proposal to revoke the final rule. No final action was taken on 

the stay and revocation. We suggest that EPA withdraw the 2010 proposal and lift 

the stay on the 2009 rule to make it effective and replace the "3M Maplewood" 

framework for unrelated projects. 

Plant-wide Applicability Limits (PALs) 

PAL provisions were established in the 2002 NSR Reform Rules in order to provide 

facilities with a simplified process for approval of physical or operational changes 

under the NSR rules, as long as facility-wide actual emissions remain below the 

PAL after the change. 

The regulated community has not taken advantage of the flexibility afforded by 

these provisions because of unnecessary requirements that were included in the 

PAL regulations. Concern exists that PAL caps can be re-opened and reduced at 

any time. These concerns create huge uncertainty for sources. The PAL expiration 

and PAL renewal provisions have prevented facilities from utilizing PALs more. 

Some states issue separate PAL permits making the program more complicated 

instead of incorporating PAL provisions into the Title V permit and harmonizing 

monitoring requirements. 

EPA can unlock the potential of PALs to reduce permitting burdens and create 

incentives to keep emissions at a capped level. EPA should issue guidance to 

clarify with permitting authorities that they should incorporate the PAL requirements 

into a facility's Title V permit and that a PAL may be renewed at the same level, 

regardless of whether actual emissions are below the PAL level. In addition, EPA 

should make the PAL provisions more attractive to the regulated community by (1) 

clarifying there are only limited events that trigger review of the PAL cap during the 

PAL permit cycle, (2) encouraging states to incorporate PALs into Title V permits to 

establish a coordinated PAL/Title V permit, (3) harmonizing reporting and 

10 
50 


30134.035

recordkeeping to reduce administrative burden, and (4) removing penalties for 

terminating a PAL. 

Streamlining Permitting Programs 

EPA has lowered the PMzs, NOz, and SOz National Ambient Air Quality Standards 

(NAAQS) in the last eight years. States have responsibilities to evaluate air quality 

data, determine which areas of their states are in non-attainment and adopt State 

Implementation Plans (SIPs) requiring emission reductions needed to attain the 

relevant standards. In addition, SIPs establish and implement regulatory programs 

such as PSD permitting programs to ensure that areas currently meeting the 

NAAQS continue to do so. In addition to requiring best available control 

technologies to be applied at sources seeking approval to significantly increase 

emissions, the SIP permitting regulations require applicants to conduct Air Quality 

Analyses involving application of computer models to predict how the proposed 

emission increases could potentially affect ambient pollutant concentrations. 

Modeling results are relied on as the technical basis for judgments on whether a 

proposed project will protect or threaten the NAAQS. Separately, facilities must 

model attainment of the NAAQS through the PSD process or under state-specific 

programs when making a modification or building a new source that increases 

emissions in attainment areas. Forest Products Industry (FPI) facilities are located 

predominantly in attainment areas but are subject to thorough air quality reviews 

for projects and sometimes upon permit renewal. 

Air emissions from our industry have been regulated for many years and our 

sources are subject to multiple types of air quality standards that are the backbone 

of the Clean Air Act and will remain in place. As mentioned previously, industrial 

boilers are subject to EPA's stringent Boiler MACT requirements8 while smaller 

boilers must comply with the 2013 Boiler Generally Achievable Control Technology 

(GACT) rule. All parts of pulp and paper mills are subject to the so called "Cluster 

Rule" that paired dramatic air emission reductions with stringent water quality limits 

and transformed bleaching systems at mills. In 2012 and again in 2017, EPA 

confirmed that the Cluster Rule had mitigated health risks to acceptable levels and 

that the emission control technologies deployed remain the best available. At wood 

product mills, the 2003 Plywood and Composite Wood Product (PCWP) MACT 

required 90% reductions in emissions from most presses and dryers. EPA is in the 

process of updating these MACT regulations and completing a separate residual 

8 EPA is in the process of reviewing parts of the Boiler MACT regulation that could impose even more 

emission reductions on our facilities, and then it still has to conduct its risk and technology review. 

11 
51 


30134.036

risk and technology review (RTR) in the next couple of years that will cover 

additional mills. On top of these major rules, MACT regulations are in place for 

engines, turbines, and various coating operations at forest product mills. 

For criteria pollutants, New Source Performance Standards (NSPS) for Kraft Pulp 

Mills and Boilers are in place and reviewed periodically. Many facilities were also 

subject to the Best Available Retrofit Control Technology (BART) regional haze 

program that reduced emissions from S02, NOx, and PM that could impact visibility 

in nearby parks and wilderness areas. Finally, there are many SIPs that impose 

Best Available Control Technology (BACT) or Lowest Achievable Emission Rate 

(LAER) controls on sources as a result of local air quality concerns. Occasionally, 

EPA imposes region-wide requirements into SIPs such as the NOx SIP Call or 

interstate pollutant transport rules that can impact stationary sources in upwind 

states. 

In the past, when the NAAQS were higher, there was sufficient margin or 

"headroom" between the NAAQS level vs. the ambient background levels, and the 

facility's emissions plus those of surrounding sources. With that headroom, and for 

expediency, the Agency built multiple layers of conservatism into a NAAQS 

analysis. This approach was not problematic in most cases for decades. Now, 

however, the headroom has shrunk or disappeared as standards approach 

background levels (for some pollutants, the ambient background concentration is 

75% or more of the NAAQS), so it is critical to carefully consider the overlyconservative assumptions and procedures required in the permitting and modeling 

processes. And to make matters even worse, emission offsets are limited in the 

rural areas where forest product mills operate. 

Industry has found that many of the current policy approaches- which were initially 

formulated and implemented several decades ago- and deterministic, upperbound computer modeling tools significantly over-predict impacts from their 

facilities, especially when results of making conservative (and often unrealistic) 

assumptions are compounded. Thus, the computer modelling results are overly 

conservative and produce unrealistic predictions of actual local air quality impacts. 

Let me highlight two areas where modernization of the PSD program is sorely 

needed. 

Realistic Placement of Receptors: Ambient Air 

The current computer modeling guidelines rely on the definition of "ambient air" to 

determine where in the vicinity of a major source the emissions impact from a 

project must be evaluated. At these "ambient receptors", computer modeling is 

12 
52 


30134.037

conducted to determine if a project will cause or contribute to a predicted violation 

of a NAAQS or PSD Increment. Neither the NSR regulations nor the modeling 

guidelines define "ambient air," but instead use the definition in 40 CFR § 50.1 (e)-

"that portion of the atmosphere, external to buildings, to which the general public 

has access." Historically, EPA defined "access" as the right or ability to enter, and 

the "general public" to be the "community at large" in implementing its ambient air 

definition 9 In more than 40 years of implementation, EPA has issued guidance 

through numerous memoranda, permit determinations, and comments that 

expanded the original interpretation of general public and restricted its original 

interpretation of access. Moreover, the form of the NAAQS are now based on a 

probabilistic approach (e.g., 4th highest over 3 years), which is not considered 

within the existing ambient air definition or EPA's modeling guideline. These 

changes result in excessively conservative assumptions that unrealistically 

simulate the location, frequency, and duration of modeled exposures. 

EPA's modeling guidelines, based on its ambient air policy, are excessively 

conservative because they go beyond the regulatory definition of ambient air. They 

require industry to evaluate impacts anywhere that any person could theoretically 

access (even by illegally trespassing) rather than considering only locations to 

which the general public legitimately and realistically has access. The policy also 

requires assessments at locations where the general public would not reasonably 

be exposed (e.g., on facility property, on a waterway, roadway, railway, or steep 

terrain) for the duration or averaging time of the current NAAQS. An overly 

conservative modeling analysis can lead to unverifiable and non-existing 

concentration estimates that can necessitate costly project changes or cancellation 

of beneficial projects even though possible exposure of the general public at these 

locations is minimal, improbable, or impossible. In practice, the unrealistic 

technical modeling analysis can force changes to a project's design or emissions 

control when true air quality impacts are minimal. . 

Although prior EPA ambient air policy has disregarded the frequency and duration 

of exposure, the current NAAQS differ from historical NAAQS in that they are 

inherently linked to the probability of exposure and apply over a wide range of 

averaging periods (i.e., 1-hour to annual), making a "one-size fits all" approach for 

defining receptor location under the modeling policy unreasonable and obsolete. In 

addition, fear of being second guessed by EPA prevents states from making 

9 See memorandum from Walter C. Barber, Office of Air Quality Planning and Standards to Gordon M. 

Rapier, air and Hazardous Materials Division, Region II, "Applicability of PSD Increments over 

Company property," May 23, 1977. 

13 
53 


30134.038

common sense judgments about modeled receptor locations consistent with their 

broader overarching purpose of protecting public health. 

EPA should issue new guidance to update its policies for air quality modeling to 

embrace the concept that site-specific circumstances should be used in placing 

receptors considering natural, man-made, or jurisdictional barriers that preclude 

exposure to the general public for a duration that might cause harm. Such policies 

would emphasize that permit modeling is a technical analysis as part of a PSD 

permit application, which is intended to balance economic growth and 

environmental protection. It is therefore reasonable within the decision-making 

process to consider the frequency and duration of potential exposures (consistent 

with the probabilistic form of the current NAAQS) and effective mechanisms for 

access restriction. 

Modeling receptors should not be located where general public exposure at a site 

is objectively unrealistic, such as, within a plant's fence line or posted property 

boundary. "Access" should be interpreted such that receptors should not be 

placed at locations where the general public would become trespassers or would 

be otherwise unauthorized to be present, such as along right-of-ways. In more 

unique circumstances, deference should be given to state permitting agencies' 

authority to determine the areas necessary to include in the ambient air analysis to 

determine whether a particular project will cause or contribute to a modeled 

NAAQS or increment exceedance within their regulatory programs. 

Unrealistic Modeling Assumptions 

EPA's modeling guidelines have historically required excessively conservative 

assumptions about dispersion model inputs that frequently result in gross 

overestimates of a project's air quality impacts. Combined with increasingly more 

stringent NAAQS, this situation presents state regulatory agencies and the 

regulated community with complex challenges that are barriers to efficient air 

permitting and stifle economic growth. While EPA has acknowledged how some of 

its policies overstate true impacts as in the 2017 Appendix W changes, many more 

changes are needed. 

Long-standing EPA policies for NSR implementation restrict a state agency's ability 

to embrace the use of approaches that address the variability of source emission 

rates, or that allow for the exclusion of intermittently-operated sources in certain 

circumstances. In addition, EPA is slow to develop and adopt new dispersion 

modeling tools that are superior to existing approaches for low wind conditions, 

building downwash, complex terrain, intermittenUvariable sources, and other 

14 
54 


30134.039

challenges. Modeling techniques and implementation guidance have frequently 

not been available at the time new air quality standards and regulatory 

requirements become effective. 

Although the revised 2017 Appendix W requires facilities to address ambient 

impacts from projects with significant increases in emissions of ozone or PM2.s 

precursors, EPA has not fully developed adequate tools, screening techniques, 

and implementation guidance that are needed in order to develop a robust analysis 

that avoids the time and expense of single source photochemical modeling. 

Finally, data-driven probabilistic methods have been embraced in other EPA 

programs and are equally applicable to air quality compliance demonstrations 

when simulating variable emission rates and representative background 

concentrations. State agencies can be a laboratory for innovation but they are 

reluctant to adopt new approaches given EPA's history of second guessing 

decisions. 

There are several policy changes EPA could embrace to solve these modeling 

conundrums. First, EPA should more fully develop and finalize tools such as 

Significant Impact Levels (Sils) that facilities can use to perform screening level 

analyses and avoid the time and expense of single source photochemical modeling 

for projects with significant emissions increases of ozone and PM2.s precursors. 

The modeling thresholds should be set at a sufficiently high level to exclude 

projects with minimal impacts. 

Second, EPA should continue to incorporate data-driven, probabilistic methods into 

air quality analyses that simulate emission variability and representative source 

conditions. For example, EPA's recent revision to Appendix W for cumulative 

impact analyses emphasizes the use of representative actual emissions for nonmodified emission units rather than assuming that all sources continuously and 

simultaneously emit at the maximum allowable short-term emission rate. EPA 

should expand that approach to use probabilistic modeling techniques such as 

EMVAP or "randomly reassigned emissions" to formulate realistic emissions inputs 

that conservatively account for emissions variability of new or modified sources. 

Implementation of these concepts into air quality compliance demonstrations for 

permitting can be done through changes in guidance or a revision/clarification to 

AppendixW. 

Third, EPA should make improved dispersion modeling tools a higher priority for 

model development and evaluation/determination of acceptability of new models. 

New modeling techniques should be evaluated based on their overall performance 

15 
55 


30134.040

and the soundness of the science, not be automatically rejected based on limited 

cases of under-prediction. 

Fourth, EPA should revise its policy to implement new air quality standards for 

permitting immediately upon the effective date to avoid recurring situations when 

modeling tools, data, and implementation guidance are not yet available. 

Finally, permitting decisions made by state agencies that are based on reasonable 

data and sound analytical techniques should be respected without being second 

guessed by EPA. 

Real-World Examples of Problems with NSR and PSD Program 

Many industries and our own have been concerned about the NSR and PSD 

programs for many years. While some changes have occurred recently, the pace 

of change has been slow and limited. Full modernization of the air permitting 

program would create greater certainty to invest in American manufacturing 

facilities. Here are several examples of projects that would benefit from the reforms 

previously suggested. 

1. Thermal Oil Heater Energy Reduction Project 

In order to reduce energy consumption, particulate emissions, and volatile organic 

compounds (VOC) emissions and comply with the Boiler MACT requirements, a 

wood products mill proposed to route the exhaust from four thermal oil heaters into 

dryer burners as combustion air. The emissions from the existing thermal oil 

heaters were going to older style, electrified filter beds that achieved 70% 

particulate removal and spare parts were no longer available. 

Because the heater exhaust is hotter than the incoming air used for combustion in 

the dryer burners, the company would burn less wood to get the same amount of 

heat to dry the flakes. In addition, the heater exhaust would be combined with the 

OSB dryer exhaust and be cleaned by a modern wet electrostatic precipitator 

(WESP) for particulate control and then a go through a regenerative thermal 

oxidizer (RTO) for VOC/HAP control. The WESP is approximately 98% efficient in 

removing particulate and the RTO destroys approximately 95% of the VOCs/HAPs. 

Additional particulate removal was estimated to be at least 20 tons per year with no 

changes in the other criteria pollutants. 

The state claimed that since the facility had previously gone through the PSD 

permitting process for the heaters and the dryers separately and that BACT levels 

were established for each and that since a change was being made to where the 

16 
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30134.041

heater exhaust was routed, BACT had not been established for the heater exhaust 

going into the dryers. Consequently, EPA required the facility to go through PSD 

again and reestablish BACT-- regardless of whether there was a significant 

increase in emissions. 

In addition, the state agency required the facility to aggregate in the PSD 

evaluation two unrelated dryer RTO replacement projects even though they had 

previously exempted the projects as "like kind replacements." The RTOs were old 

and in jeopardy of catastrophic failure. The company provided the information 

required in the "3M Maplewood" guidance showing the RTO replacements were 

not related to the heater project, but the state disagreed. 

In the end, the company decided to go through the burdensome PSD analysis and 

aggregate the RTO projects with the heater energy efficiency project because of 

the looming Boiler MACT compliance deadlines and winter weather that would limit 

construction. The project was delayed approximately 5 months and the company 

spent an additional $1 OOK on assessment of alternative compliance options plus 

$59K for state permitting fees. The delay resulted in an increase of 1 0 tons of 

particulate emissions and no substantive changes to the project's scope as a result 

of the exhaustive (and unnecessary) review. If EPA adjusted both its aggregation 

policy and how to account for decreases in emissions, the state could have allowed 

the project to proceed quickly, and the company and environment would have been 

better off. 

2. Paper Mill -Paper Machine Restart 

In response to an emerging market demand for a specific type and quality paper, 

the mill proposed to restart a paper machine that had previously been taken out of 

service. An air permit was required since the project involved extensive repairs 

and various equipment modifications in order to return the machine to working 

order. Global market conditions combined to create a very narrow time window 

that had to be met to ensure acceptable financial return and justify the capital 

investment. To meet the window of opportunity, the mill needed to obtain a permit, 

complete repairs and modifications and be up and running within 7 months. Since 

a major NSR permit would require 12-16 months to obtain, emission increases 

from the project had to be kept below major significance levels and qualify for a 

minor NSR permit. To constrain emission increases, the scope of the physical and 

operational changes had to remain very narrow, and production increases had to 

come solely from recycled fiber in order to demonstrate that virgin pulping 

processes and chemical recovery operations would not be "debottlenecked" (with 

possible emissions increase implications) or otherwise affected by the project. 

17 
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While this project was successfully permitted and implemented, the company was 

only able to capture a portion of the financial benefits of the global market 

expansion. The time needed to obtain a major NSR permit prevented the company 

from pursuing more substantive modifications that would allow larger increases in 

production and possibly position the mill to capture a greater share of the 

expanding market. Expectations to account for emissions from unmodified, but 

otherwise affected process operations (i.e., "debottlenecking") caused the 

company to accept new operating constraints that prevents full utilization of 

existing assets and restricts flexibility to be able to respond to future market 

opportunities. Finally, this project sets the stage for "project aggregation" 

discussions that will need to be evaluated and addressed in the future when the 

mill attempts to get a permit involving virgin pulping or chemical recovery 

operations, including projects focused on cost, reliability or energy related 

improvements. 

If EPA can reduce the significant time needed to get a permit, then market 

opportunities like this can be realized --especially if better emissions accounting 

procedures are adopted. And if EPA's aggregation policy is fixed so only truly 

linked projects are added together, then long-term operating flexibility would not be 

sacrificed to obtain a near-term opportunity. 

3. Mill Infrastructure Project 

A paper mill wanted to improve mill operations by shutting down two older, 

inefficient smaller boilers and upgrading a newer, larger boiler to meet the same 

steam needs for operations. The changes would use less overall energy and not 

increase emissions. Rather than being able to undertake the project quickly, the 

company was forced by EPA through a lengthy review process, wasting several 

months and requiring additional consulting expenses. In the words of the company, 

this was "an absurd result." 

Specially, EPA-- over the objections of the state-- did not allow the mill to count 

reductions in emissions at the same time as the "increases" from the upgraded 

boiler-- which otherwise would have made the project not "significant" and would 

have avoided PSD review. In addition, the regulators wanted the company to look 

at two previous unrelated improvements to the older boilers using the "actual to 

projected to emit" emissions test, summed with the current change. That 

essentially would have suggested that emissions were increasing at the units as a 

result of their permanent shutdown; which is illogical. 

18 
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Compared to new pre-project baseline actual emissions (BAE), the analyses 

projected an increase above the significance level for the pollutant. However, if 

only contemporaneous changes were considered, even a conservative "actual to 

potential to emit" test would have shown no increase and thus a minor NSR 

project. 

Fortunately, the company and state pressed EPA to allow the netting of the actual 

decreases to offset the "increase" from the modified boiler under the current 

project, showing zero additional air emissions. The process took 18 months from 

beginning to end, with some time spent by the company changing the scope. EPA 

should change its policies and regulations to allow realistic emission accounting 

procedures for projects and limit considerations to contemporaneous changes to 

avoid these unnecessary delays, expenses, and uncertainties that hinder 

investments and competitiveness while not benefiting, or even harming, the 

environment. 

4. Paper Mill- Paper Machine Conversion 

The mill proposed to convert an existing paper machine from producing free sheet 

using bleached virgin pulp stock to producing new products that involve 

unbleached pulp stock. The conversion required physical modifications to the 

machine in addition to the installation of new ancillary equipment. The primary 

emissions source was the paper machine which involved negligible sources of 

emissions. Prior to commencing construction, the mill is required to receive 

authorization from the regulatory agency in the form of a construction permit. In 

this instance, the long lead time for constructing the new equipment necessitated 

the need to receive construction authorization within a few months which was not 

possible under the current permitting system. As a fallback, the company chose to 

minimize the emission impact of the affected units by committing that virgin pulp 

production would remain at historic levels. 

This example illustrates the need to streamline the current NAAQS modeling 

process, which involves submittal of a dispersion modeling protocol and approval 

of the protocol prior to the submittal of a construction permit application even for 

units that are not being modified and have been previously evaluated for 

environmental impacts. These extra steps in the process are one part of what 

makes triggering major NSR permitting more time consuming than certain projects 

can tolerate. 

In addition, the primary driver for the timing of this project is the construction lead 

time of emissions units with negligible emissions rates. Allowing for construction of 

19 
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30134.044

minor emissions sources that do not trigger NSR permitting obligations (prior to the 

PSD triggering modifications being approved (i.e., phased permitting)) would pave 

the way for a more flexible permit that still meets environmental requirements. 

Finally, ambiguity in EPA's aggregation policy creates business planning 

uncertainty. A minor project such as this conversion might be "aggregated" with a 

future unrelated project such as one to improve pulp yields driven by market 

conditions. This puts mills in the position of second guessing themselves about the 

future emissions implications of decisions made today even when projects are 

unrelated. Finalization of the aggregation rule making is critical to creating a 

rationale permitting process where only truly linked projects are considered 

together. 

5. Paper Mill - Paper Machine Project 

The company wants to replace three existing paper machines with one new, more 

efficient machine. The emissions inventory and PSD applicability analysis for the 

project has been unnecessarily complicated given current NSR regulations and 

guidance. The company has spent several months on the emission analysis, when 

it should have only taken weeks if emissions assessments were limited to 

equipment being modified rather than other processes. 

In addition, the company cannot account for the decrease in emissions from 

shutting down the existing paper machines or from limiting operation of one of the 

power boilers in "Step 1" of the emission analysis; only emission increases, not 

decreases, may be counted in Step 1. A proper accounting of the project's net 

emission impact should include the emission decreases associated with a project. 

"Step 2" of the emissions analysis requires that the emission increases associated 

with contemporaneous projects be calculated using the baseline actual to potential 

to emit (PTE) method, even when the contemporaneous projects were evaluated 

using the actual-to-projected actual method, and actual emissions have not 

exceeded the projections. Instead, the netting analysis should include the actual 

emission increases from the contemporaneous projects or the actual-to-actual 

emission projections from the emission analysis conducted for those projects. 

In the end, the project requires a federally enforceable emission limit to restrict 

operation of an existing power boiler. And as a result, the company cannot begin 

partial construction due to the need for this federally enforceable limit, delaying the 

start of the project. If the project had been appropriately classified as "minor" 

20 
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30134.045

construction would have commenced. 10 

In sum, waiting to begin construction of the project while a permit application is 

under review adds many months to the project's completion and delays the cost 

savings. 

Other Permitting Improvements 

While EPA has the clear authority under the Clean Air Act to make substantial 

improvements to the NSR and PSD programs, strategic changes to the statute are 

needed in areas where the courts have limited EPA's attempts to improve the 

permitting program. Here are two opportunities for Congress. 

Clean Unit Exemption 

As part of the New Source Reform provisions promulgated by EPA in December 

2002, EPA included a new permitting applicability test for Clean Units. This 

provision allowed any emission unit that had been through a permitting process 

that resulted in Best Available Control Technology (BACT) or Lowest Achievable 

Emission Rate (LAER) emission control levels (or the state equivalent) being 

imposed would trigger NSR only if the facility was seeking an increase in its 

permitted allowable emissions. At the time of its promulgation, EPA stated that this 

exclusion " ... protects air quality, creates incentives for sources to install state-ofthe-art controls, provides flexibility for sources, and promotes administrative 

efficiency" .

11 

However, the Clean Unit exemption was vacated by the DC Circuit Court of 

Appeals in June, 200512• The Court found that the exclusion was contrary to the 

Clean Air Act because it exempts certain emission units from NSR permitting on 

the basis of their status, rather than on the basis of changes in their actual 

emissions. 

Nonetheless, the Clean Unit concept represents an important development for the 

regulated community, because when an existing facility that operates such state1o In addition, the NSR regulations should allow a facility to start, completely at its own risk, 

construction of a source or project prior to obtaining an NSR permit. Companies would find the risk 

of constructing an entire source too great since the permit could be denied or costly retrofits 

required. However, most companies would undertake currently prohibited construction activities to 

start a project and accelerate project benefits that could be realized. 

11 67 Federal Register 80190 "Prevention of Significant Deterioration (PSD) and Nonattainment New 

Source Review (NSR); Final Rule and Proposed Rule. December 31, 2002. 

12 New York v. EPA, 413 F. 3d 3, DC Circuit, June 24, 2005. 

21 
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30134.046

of-the-art emission control systems triggers new source review, the permitting 

process invariably results in minimal (if any) improvements to either existing air 

quality or the efficiency of the emission control systems installed on the source. A 

legislative change to the Clean Air Act authorizing the 2002 Clean Unit exclusion 

would be helpful. 

Pollution Control Projects 

The 2002 New Source Reform provisions exempted specific Pollution Control 

Projects (PCPs) from having to undergo preconstruction NSR permitting in specific 

situations where installation of controls targeting reduction of a specific type or 

family of pollutants causes a collateral and significant emission increase of an NSR 

regulated pollutant. The rule defined a PCP as " ... any activity, set of work practices 

or project undertaken at an existing emissions unit that reduces emissions of air 

pollutants from the unit." EPA stated that one of the purposes of promulgating this 

PCP exemption was to remove any disincentive for industrial sources to undertake 

pollution control and prevention measures. 

The General Provisions to EPA's New Source Performance Standards (NSPS) 

program specifically allows pollution control projects to be exempted from the 

definition of a "modification" to an existing source that might otherwise trigger the 

need for the source to meet new source emission standards. As the NSR and 

NSPS programs both utilize a fundamentally similar definition for modification, it is 

inappropriate for EPA to allow pollution control projects to be considered exempt 

for NSPS purposes yet at the same time trigger preconstruction review under the 

NSR program. 

The PCP exemption included in the 2002 NSR Reform provisions was intended to 

codify in the NSR rules a very similar exclusion that EPA had made available by 

interpretive policy in 1994.13 The interpretive policy was in turn based on the 

explicit PCP exclusion afforded by EPA to electric utility units in 1992 (i.e., the 

"WEPCO rule"). The 2002 NSR Reform rule made the PCP exemption available to 

all source categories but at the same time contained safeguards that were 

intended to ensure that such projects would, on balance, be environmentally 

beneficial and would achieve the goals of minimizing regulatory burdens and 

reduce procedural delays for such projects. 

13 "Pollution Control Projects and New Source Review (NSR) Applicability", John. S. Seitz, Director, 

EPA OAQPS, July 1, 1994. 

22 
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30134.047

The PCP exclusion was vacated by the DC Circuit of Appeals in 2005, along with 

the Clean Unit Exclusion. At that time, the Court reasoned that EPA lacked the 

authority to create blanket PCP exemptions from NSR, essentially because EPA 

was unable to demonstrate to the Court's satisfaction that Congress originally 

intended pollution control projects to be exempted from preconstruction review 

when the Clean Air Act was implemented. 

The vacatur of the PCP exclusion discourages prompt implementation of projects 

whose primary purpose is either the reduction of air emissions or pollution 

prevention. It also creates an absurd situation for sources that are required to 

install emission controls in order to comply with other parts of the CAA, such as 

Maximum Achievable Control Technology (MACT) standards under Title Ill. 

Operation of the MACT control causes collateral increase in criteria pollutant 

emissions regulated under Title I and subject to preconstruction NSR permit 

requirements. As the regulations are currently configured, such collateral increases 

are required to be compared against PSD significant emission rates to determine 

whether the installation of the mandated emission controls constitutes a major 

modification subject to PSD review. This catch-22 is both counter-productive and 

burdensome to the regulated community. Given the court decision, a change to the 

Clean Air Act seems the best way to exclude pollution control projects from NSR. 

Conclusion 

In enacting the Clean Air Act, I do not believe that Congress intended to create 

such an arcane NSR permitting system using unrealistic assumptions and 

modeling to impede permits as manufacturers strive to grow and innovate. In fact, 

in response to the Department of Commerce and EPA outreach last year on 

impediments to U.S. manufacturing, many industries beyond forest products--

such as aerospace, mining, steel, and utilities-- highlighted NSR as ripe for reform. 

AF&PA and AWC urge this committee to work with EPA to improve the NSR and 

PSD programs so minor projects are excluded and those with significant emissions 

increases can use realistic assumptions and the best science in their air quality 

assessments. 

To further the twin purposes of the Clean Air Act, our goal should be sustainable 

regulation- regulation that addresses environmental and economic needs. I 

believe there is no better place for a robust manufacturing sector than the United 

States, which has highly productive workers, creative entrepreneurs and 

innovators, abundant resources, a strong free-market democracy, and regulatory 

agencies capable of leading the world on sustainable regulation. 

23 
63 

Mr. SHIMKUS. The gentleman’s time is expired. 

The chair now recognizes Emily Hammond. You’re recognized for 

5 minutes. 

STATEMENT OF EMILY HAMMOND 

Ms. HAMMOND. Thank you, Chairman Shimkus, Ranking Member Tonko, and distinguished members of the subcommittee. 

One year ago almost to the day, I testified before this subcommittee about the many health and environmental benefits of 

clean air protections and I cautioned against efforts to roll back 

progress achieved over decades of hard work. 

Today, I urge you to scrutinize recent actions by EPA that 

amount to nothing short of an abnegation of the agency’s statutory 

responsibilities and I emphasize once more that human lives and 

our economy are at stake. 

The Clean Air Act is a technical and complex statute but two of 

its basic policies are straightforward. First, it is meant to clean up 

dirty air. 

Second, it aims to keep clean air clean. By keeping in mind these 

first principles, it’s easy to see what’s wrong with EPA’s current 

approach. 

New Source Review makes sure that new or modified sources of 

air pollution use the right technology so that in areas where poor 

air quality harms human health, we can improve over time. 

And in areas where air quality meets human health standards, 

New Source Review guards against creating a new public health 

problem with new uncontrolled air pollution. 

But on December 7th of this past year, the same day that EPA 

Administrator Scott Pruitt testified to this subcommittee that EPA 

should not issue guidance documents, he issued a guidance document that promises to polluters that EPA won’t check the work of 

those major polluters when they decide whether New Source Review is necessary. 

This approach opens a gaping hole in the statutory design and 

it violates fundamental principles of good governance and legitimacy. 

The president, Administrator Pruitt, and members of Congress 

have all spoken against the perils of overreach when agencies make 

major policies through nondemocratic procedures. 

Yet, the December 7th guidance does just that. When an agency 

adopts a policy so blatantly contrary to its mandate and does so 

without any public input, that action lacks legitimacy. 

In the words of the Supreme Court in Heckler v. Chaney, the 

agency has consciously and expressly adopted a general policy that 

is so extreme as to amount to an abdication of its statutory responsibilities. 

This institution should hold EPA to task, not give it cover to 

make our air dirtier. And what is at stake? The lives of people 

across our country and the benefits of economic growth. 

You will hear a lot from industry about the costs of clean air protections and the supposed impediments clean air poses to economic 

growth. But they won’t tell you about the attendant benefits because the numbers are so compelling. 

64 

Between 1970 and 2011, aggregate emissions of air pollutants 

dropped 68 percent while the U.S. gross domestic product increased 

212 percent. 

During that same period, private sector jobs increased by 88 percent. Our population has increased. We have used more energy. We 

have built more infrastructure, all while improving our environment. 

Consider as well that major regulations issued by EPA undergo 

a rigorous cost-benefit analysis. EPA is required to follow Office of 

Management and Budget accounting principles and assess both the 

costs and the benefits of regulations. 

Many researchers have concluded that these constrained analyses vastly understate the benefits of environmental regulations. 

So the values I am about to describe should be understood as very 

conservative. 

Even with this caveat, the results are compelling. A 2011 peerreviewed study showed that the benefits of the 1990 Clean Air Act 

amendments and implementing regulations exceed the costs by a 

factor of more than 30 to 1. 

The 2011 study also revealed that EPA’s Clean Air Act rules 

saved over 164,000 lives in 2010 and are projected to save 237,000 

lives in 2020. 

These same rules saved millions of days of lost work and missed 

school and will continue to do so. Further, since EPA began regulating lead as a criteria pollutant under the NAAQS program, the 

median concentration of lead in the blood of children between one 

and 5 years old has decreased 93 percent. 

These numbers speak for themselves and they demonstrate that 

those who would roll back clean air protections have set up a false 

choice. Clean air and economic growth do indeed go hand in hand. 

Thank you. 

[The statement of Ms. Hammond follows:] 

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30134.048

TESTIMONY OF EMILY HAMMOND 

PROFESSOR OF LAW 

THE GEORGE WASHINGTOI'i UNIVERSITY LAW SCHOOL 

BEFORE THE HOUSE COMMITTEE ON ENERGY AND COMMERCE 

SUBCOMMITTEE ON ENVIRONMENT 

FEBRUARY 14,2018 

Thank you, Chairman Shimkus, Vice-Chairman McKinley, Ranking Member Tonko, and 

distinguished Members of the Subcommittee, for the opportunity to testify today at this hearing 

entitled "New Source Review Permitting Challenges for Manufacturing and Infrastructure." 

I am Glen Earl Weston Research Professor of Law at the George Washington University 

Law School, a member-scholar of the not-for-profit regulatory think-tank, the Center for 

Progressive Reform, and past-Chair of the Administrative Law Section of the Association of 

American Law Schools. I am testifying today, however, on the basis of my expertise and not as a 

partisan or representative of any organization. As a professor and scholar of environmental law, 

energy law, and administrative law, I specialize in the role of these laws in society. My work is 

published in the country's top scholarly journals as well as in many books and shorter works, and 

I am a co-author of textbooks on both environmental law and energy law. Early in my career, I 

practiced environmental engineering; that experience and training inform my assessment of the 

role of environmental law in bettering our society. 

One year ago almost to the day, I testified before this Subcommittee about the many 

health and environmental benefits of clean air protections, and I cautioned against efforts to roll 

back progress achieved over decades of hard work. Today, I urge you to scrutinize recent actions 

by the Environmental Protection Agency (EPA) that amount to nothing short of an abnegation of 
66 


30134.049

the agency's statutory responsibilities. And I remind you once more that human lives and our 

economy are at stake. 

I. EPA Should Not Be Permitted to Shirk Its Statutory Duties 

The Clean Air Act (CAA) is a technical and complex statute, but two of its basic policy 

aims are straightforward. First, it is meant to clean up dirty air. Second, it is meant to help keep 

clean air clean. By keeping in mind these first principles, it is easy to see what is wrong with 

EPA's current approach. 

A. New Source Review is a Critical Component of the Clean Air Act 

The CAA directs EPA to set national ambient air quality standards (NAAQS) for criteria 

pollutants-those that the agency finds are reasonably anticipated to endanger public health and 

welfare 1

-which include lead, ozone, particulate matter, carbon monoxide, nitrogen dioxide, and 

sulfur dioxide. Once the standards are set, states develop state implementation plans (SIPs), 

which specify how the NAAQS will be attained.2 The CAA requires EPA to periodically revise 

its NAAQS, which helps accommodate new scientific knowledge and ensure ongoing progress in 

making dirty air cleaner. 

A cornerstone component of the CAA permitting program is new source review (NSR). 

Key features of NSR help promote the twin aims of improving dirty air and maintaining 

relatively clean air. First, new sources of air pollution must get preconstruction permits and 

install either "best achievable control technology" (BACT) 3 in areas with relatively clean air; or 

"lowest achievable emission rate" (LAER)4 in areas that have not attained the ambient air quality 

standards. Second, existing sources of air pollution were originally grand fathered into the CAA's 

I 42 U.S.C. §§ 7408-09. 2 ld.§7410. 

J ld. § 7479(3). 4 !d.§ 7501(3). 

2 
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30134.050

design, but Congress ensured progress over time by requiring that they, too, obtain permits when 

they make modifications to their facilities. 5 As the relevant criteria imply, NSR permitting 

overlays technology-based standards with the quality of the air where a given source of pollution 

is located, enabling improvement over time and protecting against deterioration of air quality that 

might otherwise result from construction of new or modification of existing major sources. 

From the very beginning, industry has attempted to shirk its duties to comply with NSR, 

and at times, EPA has been complicit. The courts have largely resolved conflicts according to the 

CAA's aims-upholding EPA enforcement activities against shirkers, and reining in EPA when 

the agency itself shirks its statutory duties. 6 

B. EPA's Irresponsible December 7 Guidance Document Is Both Bad Policy and 

Faulty as a Matter of Administrative Law 

On the very same day that EPA Administrator Scott Pruitt testified before this 

Subcommittee that EPA should not use guidance instead of rules/ he issued a guidance 

document of breathtaking scope ("the December 7 Guidance"). 8 Not only does it give carte 

5 ld. § 7479(2)(C); see id. § 7411(4) ("The term '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."). 6 E.g., Envtl. Def. v. Duke Energy Corp., 549 U.S. 561 (2006) (holding EPA could apply annual 

emission test for NSR); New York v. EPA, 443 F.3d 880 (D.C. Cir. 2006) (holding EPA's 

industry-friendly routine maintenance exclusion, based on replacement value of equipment, 

violated CAA); Wisconsin Elec. Power Co. v. EPA, 893 F.2d 901 (7'h Cir. 1990) (upholding 

EPA's determination that fossil-fueled power plant's replacement of major generating equipment 

constituted a "modification"). For further history, see Thomas 0. McGarity, When Strong 

Enforcement Works Better Than Weak Regulation: The EPA/DO.! New Source Review 

Enforcement Initiative, 72 MD. L. REV. 1204 (2013). 7 The Mission of the US. Environmental Protection Agency Before the H Comm. on Energy & 

Commerce, Subcomm. on Env't., ll5'h Cong., Tr. 11. 1264-66 (Dec. 7, 2017) (Testimony of Scott 

Pruitt, Administrator, EPA). 8 Memorandum from E. Scott Pruitt, Administrator, EPA, to Regional Administrators, Re: New 

Source Review !'reconstruction Permitting Requirements; Enforceability and Use of the Actual3 
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blanche to polluters who want to ignore the NSR's preconstruction requirements, but also it was 

issued silently, without any opportunity for democratic process. 

The December 7 Guidance tells major sources of air pollution that they need not fear 

enforcement if they fail to appropriately calculate projected emissions for NSR purposes. 

Further, EPA says it will accept polluters' "intent" to minimize pollution in the future as a reason 

not to require an NSR permit. And in perhaps the most telling sentence of the Guidance, EPA 

makes a promise to industry that is anathema to its statutory duties: "EPA docs not intend to 

substitute its judgment for that of the owner or operator by 'second guessing' the owner or 

operator's emission projcctions."9 

With this Guidance, EPA has decided to wholly abdicate its duties as a guardian of clean 

air under the NSR program. The Guidance should also be viewed in a broader context: it is yet 

another attempt by the Trump Administration to circumvent the Administrative Procedure Act's 

(APA) basic democratic procedures that work to ensure participation, deliberation, and 

transparency-fundamental values of good governance and lcgitimacy. 10 The President, 

Administrator Pruitt, and Members of Congress have all spoken against the perils of overreach 

when agencies make major policies through nondemocratic procedures, yet the December 7 

Guidance would do just that. When an agency adopts a policy so blatantly contrary to its 

mandate, and does so without any public input, that action has no legitimacy. [n the words of the 

Supreme Court in Heckler v. Chaney, this agency "has consciously and expressly adopted a 

to-Projected Actual Applicability Test in Determining Major Modification Applicability, Dec. 7, 

2017. 

9 Id. at 8. 10 See, e.g., Clean Air Council v. Pruitt, 862 FJd I (D.C. Cir. 2017) (holding arbitrary and 

capricious EPA's attempt to stay effective date of final rule without undertaking notice and 

comment rulemaking); John McQuaid, Make America Wait Again: Trump Tries to Delay 

Regulations Out of Existence, Sci. AM., July 24, 2017) (discussing widespread attempts to delay 

final rules). 

4 
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30134.052

general policy that is so extreme as to amount to an abdication of its statutory responsibilities." 11 

This institution should hold EPA to task-not give it cover to make our air dirtier. 

II. Clean Air Protections Save Lives and Promote Economic Growth 

These observations arc particularly urgent when viewed against what is at stake when we 

talk about clean air: the lives of people across our country, and the benefits of economic growth. 

You will hear a lot from industry about the costs of clean air protections and the supposed 

impediments clean air poses to economic growth, but they won't tell you about the attendant 

benefits because the numbers are compelling and clearly rebut these protestations. 

Between 1970 and 20 II, aggregate emissions of air pollutants dropped 68% while the 

U.S. Gross Domestic Product (GOP) increased 212%. During that same period, private sector 

jobs increased by 88%. 12 Our population has increased, we have used more energy, and we have 

built more infrastructure-all while improving our environment. 

Consider as well that rules issued by EPA undergo a rigorotts cost-benefit analysis. EPA 

is required to follow Office of Management and Budget (OMB) accounting principles and assess 

both the costs and the benefits of regulations. Many researchers have concluded that these 

constrained analyses "vastly understate" the benefits of environmental rcgulations. 13 Thus, 

OMB-drivcn cost-benefit analyses should be understood as very conservative because they 

11 As explained in the Court's opinion, such abdication may overcome the ordinary presumption 

of nonreviewability of enforcement decisions. 4 70 U.S. 821, 833 n.4 (1985) (internal quotations 

omitted). 

12 ENVTL. PROTECTION AGENCY, TilE CLEAN AIR ACT AND THE ECONOMY, at 

https :/ /www.epa.gov /clean-air-act -overview/clean-air-act -and-economy#_ ednref6 (last visited 

Feb. 15, 2016). 13 E.g., Elsie M. Sunderland et al., Benefits of Regulating Hazardous Air Pollutants from Coal 

and Oil-Fired Utilities in the United States, 50 ENVTL. SCI. & TECH. 2117, 2117 (Feb. 5, 2016); 

see generally FRANK ACKERMAN & LISA HEINZERLING, PRICELESS: ON KNOWING THE PRICE OF 

EVERYTHING AND THE VALUE OF NOTHING (2004). 

5 
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systematically undervalue things like human life and a clean environment. 14 Even with this 

caveat, the results are compelling. For example, OMB reported to Congress that from 2004 

through 2014, the economic benefits of all ofEPA's major rules exceeded the costs by a ratio of 

nearly 21 to 1. 15 

Just what are some ofthose conservatively estimated benefits? Air pollutants have 

considerable adverse health and environmental effects: ozone, for instance, is linked to 

respiratory illnesses, heart attacks, premature death, and negative effects on forests and crop 

yields. 16 When people are sick, caring for ill loved ones, or dying too early, they cannot work, 

which is detrimental to the economy. By contrast, clean air protections offer savings: 

• OMB reports that the monetized benefits of CAA regulations accounted for 80% of the 

benefits of all regulations analyzed for its 2015 report to CongressY 

A 2011 peer-reviewed EPA study showed that the benefits of the 1990 CAA 

Amendments and implementing regulations exceed costs by a factor of more than 30 to 

!.18 

• The 2011 study also revealed that EPA's CAA rules saved over 164,000 lives in 2010, 

and are projected to save 237,000 lives in 2020. 19 

14 The Congressional Research Service and others have demonstrated that a September 20 I 0 

report widely cited by opponents of environmental regulations like the Small Business 

Administration relied on flawed methodology. Curtis W. Copeland, ANALYSIS OF AN ESTIMATE 

OF THE TOTAL COSTS OF FEDERAL REGULATIONS, CONG. RESEARCH SERV. No. 7-5700 (Apr. 6, 

2011). In fact, the report's authors failed to even consider regulatory benefits. !d. at 25; see also 

Joseph P. Tomain, The Twin Demons of the Trump-Bannon Assault on Democracty, CTR. FOR 

PROGRESSIVE REFORM 16-21 (June 20 17) (providing background). 15 OFFC. OFMGMT. & BUDGET, EXECUTIVE OFFICE OF THE PRESIDENT, 2015 REPORT TO 

CONGRESS ON TilE BENEFITS AND COSTS Of FEDERAL REGULATIONS AND AGENCY COMPLIANCE 

WITH THE UNFUNDED MANDATES REFORM Acr 9 (20 15). 16 See generally Final Rule, National Ambient Air Quality Standards for Ozone, 80 Fed. Reg. 

65,292 (Oct. 26, 2015). 17 OMB, supra note 15, at 12. 18 ENVTL. PROTECTION AGENCY, TilE BEJ\EFITS AND COSTS OF THE CLEAN AIR ACT FROM 1990 

TO 2020, 7-1 (Mar. 20 II). 19 !d. at 7-9. 

6 
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• These same rules saved 13 million days of lost work and 3.2 million days of missed 

school in 2010. By 2020, these numbers will increase to 17 million and 5.4 million days, 

respectively.20 

Since EPA began regulating lead as a criteria pollutant under the CAA, the median 

concentration of lead in the blood of children between I and 5 years old has decreased 

93% as of2011-12. Moreover, several studies have documented an association between 

redueing exposure to lead and a reduction in criminal behavior.21 

• A study published in the proceedings of the National Academies of Sciences found the 

cumulative benefits to the economy of CAA air taxies regulations by 2050 to be over 

$104 billion.22 

These numbers speak for themselves and demonstrate that opponents of clean air protections 

have set up a false choice: clean air and economic growth do go hand-in-hand. 

III. Conclusion 

EPA's effort to encourage regulated sources to escape NSR-without regard to the 

adverse health and environmental impacts of their emissions-would vitiate the kinds of benefits 

that clean air protections have provided in the past. I urge you to bring the Administrator back 

before this Subcommittee. Hold him to his commitment not to use guidance documents 

improperly, and most importantly, to his duty to ensure that our clean air protections remain 

strong. 

20 !d. at 5-25 (Tbl. 5-6). 21 Id. at A216. 22 Amanda Giang & Noelle E. Selin, Ben~fits of mercury controls for the United States, 113 

PNAS 286 (Jan. 12, 2016). 

7 
72 

Mr. SHIMKUS. The chair thanks the gentlelady. 

And now the chair recognizes, and I mispronounce the last 

name—Mr. Walke. You’re recognized for 5 minutes. I apologize for 

that. 

STATEMENT OF JOHN D. WALKE 

Mr. WALKE. You got my first name right so that’s good. Thank 

you. 

Thank you, Chairman Shimkus, Ranking Member Tonko, and 

distinguished members. My name is John Walke and I am clean air 

director and a senior attorney for the Natural Resources Defense 

Council. 

Any so-called reform to the Clean Air Act’s New Source Review 

program first should answer one simple question—will it let industry pollute more. 

In my experience, unfortunately, the answer to that question is 

usually yes. That is the case for changes to New Source Review 

safeguards that industries comment—that industry commenters 

are seeking from the Trump administration. 

That is also the case for changes sought in testimony by other 

witnesses at today’s hearing apart from Professor Hammond’s. 

Many of the requested changes would let industry pollute more by 

significantly higher amounts and in the process evade pollution 

controls and pollution offsets. 

Insufficient political attention and concern are being given to the 

problems with a tax on clean air safeguards. In a 2017 Gallup poll, 

67 percent of Americans favor setting higher emission standards 

for industry. In that same poll, 69 percent of Americans favor 

stronger enforcement of federal environmental regulations. 

New Source Review is a Clean Air Act preconstruction permitting program that imposes cleanup requirements only when industries—industrial facilities significantly increase air pollution. 

I urge you to remember that pollution increase trigger during today’s hearing. Attempts to evade NSR applicability translate into 

the ability to increase air pollution significantly without control. 

Taking evasion that would allow huge air pollution increase is 

reflected in two bills referred to this committee—H.R. 3127 and 

H.R. 3128. 

Several witnesses endorse the bill and the approach contained 

therein, which would allow huge air pollution increases so long as 

a source did not increase its capacity to pollute only by exceeding 

an extraordinarily high maximum hourly emissions rate plucked 

from its past history. 

One of the problems here is comparable to saying police should 

never fine drivers to be speeding if they don’t exceed the maximum 

speed they have ever driven. 

The second problem is even worse. By weakening the law so extremely, to ask only whether a polluting facility exceeded its maximum capacity to pollute, this concept would allow massive enormous increases in actual emissions of harmful air pollution in the 

real world. 

Americans care about increases in actual pollution that worsens 

air quality and harms their health, not whether a plant exceeds its 

polluting capacity. 

73 

For the parents of a child being rushed to the ER due to an asthma attack caused by massive pollution increases from a nearby 

plant, it is not solace to tell them that the higher pollution levels 

that choked their daughter’s breathing did not result from the 

plant exceeding its maximum hourly emission rate. 

How bad could these pollution increases be? Well, under the 

Bush administration when Mr. Holmstead worked there, EPA’s enforcement office calculated the weakening effect of a maximum 

hourly emissions rate approach. 

In just one power plant example, the plant increased its toxic 

sulfur dioxide pollution by 13,000 tons per year without exceeding 

this maximum rate. That is 327 times higher than the level that 

the law considers significant and subject to control today. 

My testimony identifies an astonishing number of coal-burning 

power plants that still lack air pollution—modern air pollution controls today or that are uncontrolled and these two bills and the approaches sought by some of the members of this panel would make 

that even worse by allowing emissions increases of thousands and 

even increases in excess of 10,000 tons. 

No acceptable NSR reform should give an affirmative answer to 

the question posed at the top of this testimony—will it let industry 

pollute more. 

This committee should reject any appeals for reform that would 

let industries pollute more by significantly higher amounts and in 

the process evade are pollution controls and pollution offsets in 

areas already experiencing unsafe air quality. 

Americans deserve better. 

Thank you. 

[The statement of Mr. Walke follows:] 

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30134.055

TESTIMONY OF JOHN D. WALKE 

CLEAN AIR DIRECTOR 

NATURAL RESOURCES DEFENSE COUNCIL 

COMMITTEE HEARING ON "NEW SOURCE REVIEW PERMITTING CHALLENGES FOR 

MANUFACTURING AND INFRASTRUCTURE" 

BEFORE THE SUBCOMMITTEE ON ENVIRONMENT, 

COMMITTEE ON ENVIRONMENT AND COMMERCE 

U.S. HOUSE OF REPRESENTATIVES 

February 14, 2018 

Thank you, Chairman Shimkus and Ranking Member Tonko for the opportunity to testify 

today. My name is John Walke, and I am clean air director and a senior attorney for the Natural 

Resources Defense Council (NRDC). NRDC is a nonprofit organization of scientists, lawyers, 

and environmental specialists dedicated to protecting public health and the environment. 

Founded in 1970, NRDC has more than 1.3 million members and online activists nationwide, 

served from offices in New York, Washington, Los Angeles, San Francisco, Chicago, and 

Beijing. 

I have worked at NRDC since 2000. Before that I was a Clean Air Act attorney in 

the Office of General Counsel for the U.S. Environmental Protection Agency (EPA). Prior to that 

I was an attorney in private practice where I represented corporations, industry trade associations 

and individuals. Having worked on air pollution issues for the entirety of my career, I have done 

a great deal of work relating to the New Source Review (NSR) provisions ofthe Clean Air Act 

(CAA). I believe the NSR provisions of the Act strike a responsible balance, requiring new and 
75 


30134.056

modified stationary sources of air pollution to protect our nation's air quality through appropriate 

pollution controls and other measures. I would like to thank the subcommittee for the 

opportunity to testify, and I look forward to your questions. 

Any proposed NSR "reform" first should answer one simple question: will it let industry 

pollute more? Unfortunately, the answer to that question in my experience, is usually yes. Most 

of the changes to the NSR safeguards that industry commenters are seeking from the Trump 

administration, for example, would Jet industry pollute more, by significantly higher amounts, 

and in the process, evade air pollution controls and pollution offsets. 

If the answer to that question is no, other questions deserve asking: will the proposed 

reform make the safeguards less transparent or accountable to Americans? Will it make the 

protections less enforceable by regulators and citizens? Will the reform make the program more 

flexible or cost-efTective for industry, while still fully preserving the health and environmental 

safeguards? Will it facilitate economic growth without harming air quality or Americans' health? 

Insufficient political attention and concern are being given to the problems with attacks 

on clean air safeguards, like New Source Review. Those problems include increased air 

pollution; violations of national clean air health standards; greater health risks for Americans, 

including more asthma attacks, heart attacks, strokes and even premature deaths; more 

hospitalizations and missed school days for our children; hazier skies over America's national 

parks; reduced regulatory and public transparency and accountability for pollution increases; and 

amnesty from lawbreaking. 

New Source Review (NSR) is a Clean Air Act pre-construction permitting programwith requirements for modern pollution controls, offsets of any remaining emissions increases, 

air-quality impact analyses, and public participation-that imposes those requirements only 

2 
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when industrial facilities significantly increase emissions of regulated air pollutants like fine 

particulate matter (PM2s) pollution, sulfur dioxide, or precursors to smog, such as nitrogen 

oxides or volatile organic compounds. 

Accordingly, so-called NSR "reforms" that industry lobbyists and political critics are 

seeking generally fall into one or more of the following categories: 

(I) evasion of requirements, to allow significant emissions increases to occur without 

requiring modern pollution controls, offsets, air quality analysis or public participation; 

(2) weaker requirements, to nominally meet NSR requirements but in a weaker fashion 

than today' s law allows-for example, worse pollution controls; pollution increases that violate 

national health standards; offset of more dangerous air pollution with less dangerous pollutants; 

increased air pollution near communities, nominally offset by pollution decreases very far from a 

community; and 

(3) amnesty from applicable requirements, through failure to enforce those requirements 

or attempts to rc-characterize those requirements, in a way that allows significant emissions 

increases to evade control and other safeguards. 

The Trump administration has issued a deregulatory report targeting these New Source 

Review safeguards that flatly mischaracterizes their statutory purpose and requirements: "New 

Source Review (NSR) is a prcconstruction permitting program intended to ensure that new and 

modified stationary sources of air pollution do not significantly degrade air quality." 1 That 

characterization is erroneous and/or incomplete. The broader purposes of the NSR program (in 

areas meeting and not meeting national clean air health standards) include: application of best 

available control technology, or lowest achievable emission rate control technology; air quality 

1 U.S. EPA, !'Ina/ Report on Review opj Agency Actions That Potentially Burden the Safe, Efficient Development of 

Domestic Energy Resources Under Executive Order /3783 (Oct. 25, 2017), at 2 ("13783 Report"). 

3 
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30134.058

impact analyses to ensure national health standards will not be violated in areas with safe air 

already; protection of air quality in national parks and wilderness areas; adoption of air quality 

monitoring; and offset of remaining emissions following application of LAER controls in areas 

with unsafe air quality, in increasing offset ratios, generally in the same nonattainment area, with 

some exceptions. See 42 U.S.C. § 7475 & § 7503. 

EPA's 13783 Report goes on to assert that "[i]n some circumstances, the NSR process 

discourages the construction of new facilities or modifications of existing ones that could result 

in greater environmental improvcments."2 It is important to recognize that no evidence or data 

back that claim; it is sheer assertion. The 13783 Report backs neither the 'discouragement' claim 

nor the 'greater environmental improvements' claim with any proof or verifiable facts. 

It is equally important to acknowledge that the 13783 Report credited only commcntcrs 

that sought to weaken these public health and clean air safeguards. Numerous commenters 

opposed rolling back the safeguards, but the 13783 Report does not even deign to mention those 

objections and perspectives by ordinary Americans. Id. 

Recognize too that the 13783 Report lists only industry recommendations for reforms that 

would result in: increases of harmful emissions in local communities; failures to adopt modern 

pollution controls that the law requires; evasion of air quality impact analyses and review by 

regulators and the public; and emissions trading of less dangerous air pollutants for more 

dangerous pollutants. 3 EPA never has adopted these weakening recommendations previously, 

because they arc unlawful and harmful to air quality and Americans' health. 

I. Evasion of NSR Requirements to Allow Increases in Harmful Air Pollution That 

Escape Control, Offsets, Air Quality Impact Analyses & Regulatory/Public Review 

2 Id., at 3. 3 !d., at 3. 

4 
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30134.059

A. H.R. 3127 & 3128 Would Weaken Current Law and Allow Massive Increases 

in Harmful Air Pollution to Escape Control, Offsets, Air Quality Impact Analyses & 

Regulatory/Public Review 

Two bills have been referred to the Committee on Energy and Commerce that would 

eviscerate the Clean Air Act's prcconstruction permitting programs for stationary sources of air 

pollution-H. R. 3127 and H.R. 1328. I will analyze these bills and explain their extremely 

harmful consequences. The Committee should not allow these irresponsible bills to become law. 

1. H.R. 3127 & H.R. 3128 radically deregulate all significant increases in 

actual air pollution from air pollution controls unless a polluting facility 

exceeds an extraordinarily high level called its "maximum achievable hourly 

emissions rate." 

H.R. 3127 and H.R. 3128 badly fail the test of my simple question: both bills let industry 

pollute more, by significantly higher amounts, and in the process, evade air pollution controls. 

H.R. 3127 and II.R. 3128 would overturn four decades of Clean Air Act safeguards concerned 

with increases in actual emissions of harmful air pollution. The bills would replace those greater 

protections with a test for air pollution controls, offsets and air quality impact analysis that would 

apply only if a polluter ever managed to exceed, implausibly, its vastly higher capacity to emit 

air pollution, measured from some point in the plant's past. By doing so, both bills would allow 

increases in actual emissions totaling hundreds or even thousands of tons from individual 

facilities to evade pollution controls, offsets, air quality analyses and regulatory/public oversight. 

H.R. 3127 would do so using a test for capacity increases measured by a facility's "maximum 

hourly emissions rate,'' while H.R. 3128 would do so using a substantially similar capacity test 

measuring increases in a facility's "maximum achievable hourly emissions rate." 

The Clean Air Act-and Americans-are rightly concerned with increases in actual 

emissions of harmful air pollutants. Significant increases in actual emissions must be controlled 

either with Best Available Control Technology (BACT) in areas meeting national health 

5 
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30134.060

standards, or Lowest Achievable Emissions Rate (LAER) control technology-as well as the 

ofl'set of remaining emissions increases-in areas failing to meet those health standards. H.R. 

3127 and H.R. 3128 overturn the Clean Air Act's 40-year concern with actual emissions 

increases, and also overturn the leading NSR federal court opinion upholding the law's critical 

emissions increase requirement. 4 The bills would allow massive increases in actual emissions of 

harmful air pollution, so long as a polluting facility does not exceed its maximum capacity to 

pollute, measured by its "maximum hourly emissions rate," or "maximum achievable hourly 

emissions rate." 

Americans care about increases in actual air pollution that worsens air quality and harms 

their health, not failures to increase theoretical 'capacity'-a facility's maximum hourly 

emissions rate from the past. Both bills would sanction enormous increases in dangerous air 

pollutants, ensuring such increases escape control and review in the real world. For the parents of 

a child being rushed to the emergency room due to an asthma attack caused by massive soot 

pollution increases from a nearby power plant, it is no solace to tell them that the higher 

pollution levels that choked their daughter's breathing did not result from the plant exceeding its 

"maximum hourly emissions rate." Asthma attacks, heart attacks and strokes are brought on by 

higher levels of actual, harmfu I air pollution in the real world, regardless of whether those higher 

amounts are caused by increases above the artificial concept of a plant's maximum hourly 

emissions rate from some point in the plant's past. 

2. What are some requirements of today's stronger Clean Air Act that 

H.R. 3127 & H.R. 3128 would weaken? 

4 New York v. EPA, 4!3 F.3d 3, 39 (D.C. Cir. 2005). 

6 
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30134.061

The Clean Air Act requires an existing sm1rce to undergo NSR whenever it makes a 

"modification," which is defined in the statute as, inter alia, any physical or operational change 

that "increases the amount of any pollutant emitted." CAA § I I I (a)(4). In the controlling D.C. 

Circuit Court of Appeals decision, the Court held, "the CAA unambiguously defines 'increases' 

in terms of actual emissions." 413 F.3d 3, 39 (D.C. Cir. 2005) (emphasis added). Specifically, 

after reviewing the various ways that the 1977 Congress chose to modify the terms "emit" and 

"emitted, the Court concluded that Congress was "conscious of the distinction between actual 

and potential emissions," and "use[d] the term 'emitted' to refer to actual emissions.'" Id. 

The Court fmther explained that "[i]fCongress had intended for 'increases' in emissions 

to be measured in terms of potential or allowable emissions, it would have added a reference to 

'potential to emit' or 'emission limitations.' The absence of such a reference must be given 

effect." Id. at 40. The Court added, "even if the word 'emitted' docs not by itself refer to actual 

emissions, the phrase 'the amount of any air pollutant emitted' plainly refers to actual 

emissions." Id. (emphasis in original). See also Alabama Power v. Castle, 636 F.2d 323, 353 

(D.C. Cir. 1979) (holding that the term "emit" is a "reference to some measure of actual 

emissions."). 

Both EPA and industry have rightly described measures of a facility's potential or 

allowable emissions-what a facility is able to emit, its capacity to emit-in terms of the 

facility's maximum hourly emissions rate, just as H. R. 3127 and H.R. 3128 do: 

[A]s a practical matter, for most, if not all [electric generating units, or EGUs], the 

hourly rate at which the unit is actually able to emit is substantively equivalent to that 

unit's historical maximum hourly emissions. That is, most, if not all EGUs will operate at 

their maximum actual physical and operational capacity at some point in a 5-year period. 

In general, highest emissions occur during the period of highest utilization. As a result, 

both the maximum achievable and maximum achieved hourly em1~~sions increase tests 

allow an EGU to utilize all of its existing capacity, and in this aspect the hourly rate at 

which the unit is actually able to emit is substantively equivalent under both tests. 

7 
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30134.062

72 Fed. Reg. 26,202,26,2\9/3 (May 8, 2007) (emphases added). 5 Industry attorneys, too, 

understand that capacity-based maximum achievable and maximum achieved hourly tests (like in 

H.R. 3127 and H.R. 3128) are "potcntial"-based emissions increase tests. 6 The Clean Air Act 

and D.C. Circuit decision in New York v. EPA make very clear that NSR unambiguously defines 

'increases' in terms of actual emissions," not a facility's potential or capacity to emit. 413 F.3d, 

at 39. 

3. Allowing sources to increase actual emissions so long as the source 

does not increase its maximum hourly emissions rate would allow massive 

pollution increases to evade control, offset and analysis. 

Why do these difference matter? Because adopting H.R. 3127 & H.R. 3128 would 

severely weaken the Clean Air Act and allow enormous increase in actual, harmful air pollution 

to evade pollution controls, offsets, air quality impact analyses and regulatory/public oversight. 

EPA has recognized again and again that basing NSR only on emissions increases that exceed a 

facility's higher maximum hourly emissions rate would allow changes that cause actual, 

significant emissions increases to evade review, pollution controls and offsets: this "could 

sanction greater actual emissions increases to the environment, often from older facilities, 

without any preconstruction review."7 EPA has explained how these actual emissions increases 

5 EPA long has recognized that maximum achievable emissions tests under NSR arc a function of increases in a 

source's far higher potential emissions, rather than its lower actual emissions: "1l1e "achievable' test is a measure of 

the 'potential' emissions of a source ... in the classic and historic sense of the use of that term." Memorandum from 

Adam M. Kushner, Director of EPA's Air Enforcement Division, Office of Enforcement and Compliance 

Assurance, to William Harnett, dated August 25, 2005, at 9 ("EPA Enforcement Memo"). 6 See, Joint Brief oflndustry Petitioners, New York v. EPA, at 6 (characterizing an increase in a facility~s maximum 

hourly emissions rate as an increase in its existing capacity to emit); at 9 (for a project to "create 'new' capacity to 

emit," it "must first increase an existing facility's maximum achievable emissions rate"); at 10-11 (equating 

"potential to emit" with a facility's "existing design capacity," just like II.R. 3128); at 23 (equating a unit's 

""maximum emissions rate" with its "capacity to emit''); sec also, Joint Brief oflndustry [ntervenors, New York v. 

EPA, at 11 ('"potential-to-potential' test'' compares ''maximum emissions before a change to maximum emissions 

after a change.") & 12 (linking increases in potential emissions rate to operation at full design capacity) & 13 

("increase in a major source's "potential" emissions, i.e., in the source's maximum pre-change emissions level.") 7 67 Fed. Reg. 80,186, 80,205 (December 31, 2002). See also. id. ("actual emissions increases resulting from 

unreviewed projects could go largely undocumented until a [NSR] review is performed by a new or modified facility 

8 
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30134.063

would result, taking the example of a widget factory: a physical change at a facility could "allow 

the owner to usc fa] machine at much higher levels (e.g., more hours per day or week) than it had 

in the past. As a result, actual emissions (measured in [tons per year}) could more than double 

due to the increase in utilization even though hourly potential emissions remain the samc."8 

It is important to realize that the highest hourly emissions rate that a source could have 

achieved, or has achieved, does not reflect the source's actual hourly emissions, on a day-to-day 

basis. Indeed, in a case study undertaken by EPA's enforcement office, "the achievable hourly 

emission rate was calculated to be more than ten times higher than the average hourly emission 

rate in the five-year period prior to the change." EPA Enforcement Memo, supra note 5, at 3 

(emphasis added). This provides some idea of the reckless magnitude of actual emissions 

increases that could occur by adopting the "maximum (achievable) hourly emissions rate" 

approaches in H.R. 3127 or H.R. 3128. 

EPA's enforcement office previously has examined the weakening effect of a "maximum 

achievable hourly emissions rate text" on NSR, and the enormous emissions increases that could 

result. Examining actual emissions data for coal-burning electric generating units (EGUs) from 

the EPA Clean Air Markets Division, the agency's enforcement office concluded that a 

maximum hourly achievable emissions rate test would fail to control actual annual emissions 

increases of 50 tons per year ("tpy") ofS02 and 978 tpy ofNOx in one case study (EPA 

Enforcement Memo attachment, at I 0); increases of 13,096 tpy of S02 in another case study (id. 

at 2); increases of 939 tpy of S02 and I ,405 tpy ofNOx in another (id. at 20); and increases of 

I ,700 tpy of S02 and 507 tpy ofNOx in a fourth case study (id. at 27). In one example, the annual 

that ultimately must undergo review. By that time, however, a violation of an increment could have unknowingly 

occurred."), id. ("We agree that a potential-to-potential test for major NSR applicability could lead to unreviewed 

increases in emissions that would be detrimental to air quality."). 8 61 Fed. Reg. 38,250,38,269 (July 23, 1996) (emphasis added). 

9 
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S02 emissions increase that evaded control was over 327 times the level that EPA considers de 

minimis and therefore exempt. 9 These exempted emissions increase levels are significantly 

higher than even the major stationary source threshold for brand new power plants (I 00 tpy) that 

EPA continues to recognize should be subject to IlACT and LAER. And in many cases, these 

uncontrolled emissions increases are well above the total S02 and NO, emissions from 

individual power plant units that a rule like EPA's Clean Air Interstate Rule would have covered. 

4. Allowing sources to increase actual emissions so long as the source 

does not increase its maximum hourly emissions rate would allow large 

numbers of uncontrolled or poorly controlled industrial facilities to 

experience massive pollution increases that evade control, offset and analysis. 

One ofthe dirty little secret of air pollution control in the United States in 2018, nearly 50 

years after the Clean Air Act was adopted, is that significant numbers of large industrial polluters 

remain either uncontrolled or lack state-of-the-art pollution controls for regulated air pollutants, 

such as sulfur dioxides or nitrogen oxides that form smog pollution. Using the most recent 

annual data available from EPA (2016), and focusing on coal-burning electric generating units 

(EGUs) in EPA's National Electric Energy Data System, NRDC identified the following 

numbers of EGUs that still lack state-of-the-art air pollution controls, in the form of selective 

catalytic reduction (SCR) or selective non-catalytic reduction (SNCR) for nitrogen oxides (NO,); 

or that lack wet or dry scrubbers for sulfur dioxide (S02) emissions. Some of these units are 

uncontrolled for the relevant pollutant; others are equipped with sub-par measures like so-called 

"low NO, burners." 

These results show that an astonishing 390 coal-burning electric generating units lack 

state-of-the-art air pollution controls for nitrogen oxides, and 306 lack such controls for sulfur 

dioxide. The 306 uncontrolled or poorly controlled EGUs emitted an even more astonishing 

9 ld 

10 
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580,070 tons per year of sulfur dioxides in 2016. The 390 uncontrolled or poorly controlled 

EGUs emitted 451,638 tons of nitrogen oxides in 2016. The table on the following two pages 

breaks those units down by state. You will notice the large geographic imbalance, with 

significantly higher numbers of uncontrolled or poorly controlled coal units in the Midwest and 

some Southeastern states. These are among the most heavily polluting coal units whose 

transported smog and soot pollution plague air quality in downwind states in the mid-Atlantic 

and Northeastern states, up into New England. 

Coal-Burning Electric Generating Units 

That Lack State-of-the-Art Air Pollution Controls (at end of2016) 

Lack SCR or SNCR Lack Wet or Dry Scrubbers 

U.S. States for Nitrogen Oxides tO for Sulfur Dioxide 

TotaHJ:s. 390 .. 306 

Alabama 9 9 

Ar!>ansas st 4 

Arizona 10 1 

California : 3 ... ... 4 

Colorado 15 7 

Connecticut 1 1 

Florida 1 2 

Georgia . .· .5 .. . · . 2 

Illinois 21 22 

Indiana .. .· 2:3 16 

Iowa 19 16 

Kansas 7 .. 4 

Kentucky 22 11 

Louisiana 4 6 

Maine 2 2 

. . .. .. ·. ·.··· 2 

Michigan 19 23 

Minnesota .•... l3 . .·.··. 14 

Mississippi 6 7 

Missouri 23 • ... 30 

Montana 8 3 

Nebraska 12 .· · ..... 12 

10 Selective Catalytic Reduction or Selective Non~Catalytic Reduction air pollution control devices. 

11 
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Nevada 2 

New Mexico .. 3 

New 

Hampshire 

New York 5 

North Carolina 12 

North Dakota . 11 .. Ohio 16 

Oklahoma 12 

Oreoon 1 

Peonsvlvania .. 14 

South Carolina 7 

Tennessee 4 

Texas 20 

Utah 10 

., 

Virginia 12 

Washil)frton 1 

West Virginia 2 

Wisconsin l3 .· 

Wyoming 14 

Some of these dirty dinosaur EGUs were placed online as long ago as 1947. The average 

age of these dirty coal units is 48 years-old. Analysis performed by Synapse Energy Economics 

for NRDC reveals that "capacity factor is related to generator age, with older units operating at 

lower capacity factors, by roughly one percentage point for each year of age, which the memo 

deems a "conservatively low presumption."ll These conclusions demonstrate the motivation, 

desire and need for EGU owner/operators to undertake physical changes, for example, in order to 

replace equipment, undertake upgrades or otherwise restore decreased capacity. As EPA 

recognizes, this in turn provides owners with an incentive and opportunity to increase the hours 

n Memo from Bruce Bicwald and David White, Synpase Energy Economics, Inc., to David Hawkins, NRDC (Aug. 

12, 1998), in docket for EPA's Proposed "Supplemental Notice of Proposed Rulemaking for Prevention of 

Significant Deterioration and Nonattainmcnt New Source Review: Emissions Increases for Electric Generating 

Units," 72 Fed. Reg. 26,202 (May 7. 2007). 

12 

1 

2 

4 

8 

3 

8 

ll 

I 

23 

6 

17 

2 

3 

0 

4 

13 

2 
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30134.067

of operation and availability of the EGUs, thereby increasing total air pollution amounts into 

Americans communities. 12 

With the aging utility fleet of uncontrolled and poorly controlled EGUs extending into 

lifetimes of 50-70 years, and EGU capacity factors declining one percentage point each year, the 

owners/operators of these EGUs are certain to need to undertake physical changes at these units 

in order to keep these units running, and to restore decreased capacity. As the table shows, many 

of these units still lack advanced pollution controls and continue to emit at very high emissions 

rates. It would be irresponsible to weaken the Clean Air Act by eliminating legal constraints on 

huge annual emissions increases that would result from physical changes at power plants 

increasing hours of operation. 

By ignoring the direct relationship between increases in hours of operation and total 

emissions increases, H.R. 3127 and H.R. 3128 would work in tandem with well-understood and 

inevitable industry phenomena, 13 to create guaranteed, significant emissions increases from 

EGUs that increase hours of operation sufficiently to cause those emission increases. Indeed, 

H.R. 3127 and H.R. 3128 would have the effect of placing dirty grandfathered coal units on 

steroids, facilitating their ability to extend their lives and remain as dirty or become even dirtier 

than they were: older, uncontrolled and poorly controlled coal-burning power plant units could 

12 U.S. EPA, Technical Support Document, at 3-1; 5-3 ("'We believe it is unlikely that an EGU would increase its 

efficiency without also increasing its operating and physical capacity," including availability.), in docket for EPA's 

Proposed "Supplemental Notice of Proposed Rulemaking for Prevention of Significant Deterioration and 

Nonattainment New Source Review: Emissions Increases for Electric Generating Units/' 72 Fed. Reg. 26,202 (!\.1ay 

7, 2007). 13 These phenomena include forced outages of increased number and length over time; capacity factors declining 

with age; economic incentives to increase availability of capitalized bascload units with low fuel costs; economic 

incentives to avoid the expense of advanced pollution control devices; and economic incentives to avoid installation 

of pollution controls where not legally obligated to do so. The U.S. is very familiar with these phenomena, industry 

motivations and industry legal evasions as a result of decades long NSR enforcement initiatives against coal-burning 

power plants. Especially against this backdrop, it would be reckless to adopt bills whose very design allows EGUs to 

operate more hours per year as a result of physical changes and significantly increase annual emissions of smog, 

soot! mercury and hazardous air pollutants. 

13 
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30134.068

increase actual nitrogen oxide and sulfur dioxide emissions by very significant amountshundreds and thousands of tons, annually. These units could extend their heavily polluting lives 

and remain grand fathered in perpetuity-all the while avoiding BACT/LAER controls required 

by an annual emissions test, evading pollution offsets in areas not meeting national health 

standards, analyses of actual health standard violations in areas meeting standards, and 

regulatory/public oversight. 

It is critically important to emphasize that H.R. 3127 and H.R. 3128 do not eviscerate the 

clean air safeguards and obligations described above just for power plants. These extreme bills 

apply to any "stationary source," meaning the entire universe of industrial pollution facilities 

regulated under the Clean Air Act: hazardous waste incinerators, oil refineries, chemical plants, 

lead smelters, and many hundreds of other industrial sectors and types of polluting equipment. 

All would be allowed to increase emissions of harmful air pollutants like nitrogen oxides, sulfur 

dioxide, particulate matter and lead, while evading air pollution controls, offset of remaining 

emissions in areas with currently unhealthy air, analysis of violations of health standards and 

regulatory/public oversight. 

5. H.R. 3127 would additionally weaken current law and allow massive 

increases in harmful air pollution to escape control, offsets, air quality 

impact analyses & regulatory/public review. 

H.R. 3127 has two additional clements that badly fail the test asking whether the bill lets 

industry pollute more. First, the bill outright exempts so-called "pollution control projects" that 

are "undertaken to reduce the emission of any pollutant":(!) even if that project significantly 

increases one or more other regulated air pollutants; (2) even if that project reduces a less 

dangerous air pollutant while increasing more dangerous air pollutant(s) significantly; and (3) 

even if the project reduces one pollutant by a small amount that is substantially outweighed by 

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enormous increases in the amount of other air pollutants. The Clean Air Act has never allowed 

these harmful outcomes, and H.R. 3127 would weaken longstanding law, while also overturning 

the controlling D.C. Circuit Court of Appeals decision that rejected a similar Bush EPA 

"pollution control project" exclusion. 14 

Second, 1-I.R. 3127 would outright exempt from NSR safeguards so-called "reliability 

projects" undertaken at any stationary source-not just power p !ants-to "improve[] the ability 

of the electric system" to meet various electricity descriptions. The bill is so sweeping in these 

descriptions that it would absurdly exempt the nation's power plants from NSR clean air 

safeguards altogether, when plants undertake physical or operational changes that significantly 

increase emissions by thousands or even tens of thousands of tons per year. Indeed, this element 

ofH.R. 3127 is so extreme and reckless that it includes no constraint on a stationary source's 

ability to increase harmful air pollution, not even the irresponsible "maximum hourly emission 

rate" condition, or the single air pollutant "pollution control project" condition, in the other parts 

ofH.R. 3127. 

B. Suggested NSR "Debottlenecking" Reforms Would Allow Significant 

Emissions Increase to Occur Without Requiring Modern Pollution Controls, 

Offsets, Air Quality Impact Analysis or Regulatory/Public Oversight. 

Another pollution-increasing NSR "reform" request by industry addresses what is 

referred to as "debottlenecking." This is an obscure term that fails to capture the resulting 

hazards of the requested deregulation: letting significant increases in emissions of harmful air 

pollution evade state-of~ the-art pollution control equipment, avoid the offset of remaining 

emissions in areas not meeting national health standards, ignore safeguards against health 

violations in areas meeting standards, and circumvent regulatory and public oversight. Industry 

14 New York v. EI'A, 413 F.3d 3 (D.C. Cir. 2005). 

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long has lobbied EPA to deregulate emissions increases that result from units upstream and 

downstream of the unit(s) being changed, even though those emissions increases either would 

not occur or would be unlikely in the absence of that change. In other words, there is a causal 

link between the change and the emissions increase that industry would like to ignore, in order to 

avoid the NSR pollution control obligations. In 2006, the Bush Administration EPA issued a 

proposed rulemaking that would have succumbed to these industry demands, entitled 

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

Dcbottlcnecking, Aggregation, and Project Netting," 71 Fed. Reg. 54,235 (Sept. 14, 2006). The 

proposal was never adopted, for good reason, but it illustrates the harmful, real-world pollution 

impact exempting pollution increases from debottlenecking. 

EPA proposed to deregulate significant emissions increases made possible when a change 

"dcbottlenecks" a facility, i.e., when a change to one unit removes a constraint that was causing 

another unit at the same facility to operate below capacity. See 71 Fed. Reg. at 54238/1. 

According to EPA's proposal, even if a "debottlenecking" change to one unit leads to increased 

operations-and increased emissions-at another unit, that emissions increase was not "caused" 

by the change, so long as "the debottlenecked unit's post-project emissions were already 

authorized by a pre-existing air quality permit." !d. at 54,240. In 2017, industry comments 

advocate for EPA to revisit this proposal, and also reveal a desire to dispense with the 

"causation" requirement of the 2006 proposal entirely, since it "suffers from ambiguity over 

whether emissions increases are 'caused' by the change." 15 Both the original2006 

"dcbottlcnccking" proposal and today' s even more deregulatory industry proposals are reckless 

15 Air Permitting Forum Comments on Department of Commerce, Impact of Federal Regulations 

on Domestic Manufacturing; Notice; Request for Information, 82 Fed. Reg. 12,786 (Mar. 7, 

20I 7), Docket ID No. 170302221-7221-01. 

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and would allow harmful air pollution to increase significantly, all while evading the suite of air 

pollution safeguards in the Clean Air Act NSR program, 

The Clean Air Act long has been concerned with "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." See CAA § lll(a)(4). The D.C. Circuit Court of Appeals has recognized that only 

increases in the amount of any air pollutant emitted by a stationary source that are entirely 

unrelated to a change may be excluded from consideration. New York v. EPA, 413 F.3d 3, 32-33 

(D.C. Cir. 2005). This common sense understanding guards against the circumvention of 

pollution controls for emissions increases caused by and related to the change that itself 

increased emissions at the source. 

EPA's 2006 rulemaking proposal acknowledged-as it had to, reallythat post-change emissions increases it sought to ignore and exclude were related to the 

dcbottlenecking change. 16 EPA proposed to exempt those pollution increases anyway. But the 

Clean Air Act plainly does not authorize EPA to ignore emission increases made possible by a 

change simply by deeming those increases to be caused solely by some other contributing 

factor. Rather, any post-change emissions increase that is related to a change must be counted in 

determining whether the change triggers NSR, regardless of whether other factors also play a 

role in bringing about that increase. 

EPA admitted that its 2006 deregulatory proposal "may result in fewer 

16 As an example of its proposed approach, EPA described "a physical change to expand the capacity of[a) 

melting unit," after which "the casting unit can operate at a higher throughput." 71 Fed. Reg. at 54240/3. 

Though EPA acknowledged that it was the change to the melting unit that allowed the casting unit to operate at 

a higher throughput, EPA explained that under its approach, it would simply deem the emissions increase resulting 

from that higher throughput not to be causally linked to the change. /d. That explanation was plainly wrong and 

EPA's conclusion was, therefore, indefensible. 

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projects undergoing NSR than would the current actual-to-projected-actual emissions test 

with its wider view of causation," 71 Fed. Reg. at 54243/3, and "may result in sources not 

needing BACT/LAER review for the changed units." !d. at 54,240/3. When a modification 

triggers NSR and a unit is required to satisfy BACT or LAER, emissions from that unit and the 

source are typically decreased by an amount far more than the amount that emissions would have 

increased if the modification had proceeded without NSR. Thus, for example, even though the 

projected emissions increase resulting from a planned change may only modestly exceed the 

NSR de minimis level of 40 tons per year of SO,, say 50 tons per year, installation of up-to-date 

technology may reduce the source's annual emissions by hundreds of tons. This outcome makes 

sense. After all, Congress' intent in requiring NSR for modifications was not just to discourage 

sources from increasing emissions significantly, but to establish a sensible trigger for when an 

uncontrolled or poorly controlled unit (perhaps a unit that was grand fathered from NSR 

requirements initially) must install up-to-date pollution controls capable of reducing the source's 

emissions substantially. Deregulatory "debottlenecking" proposals not only would allow 

significant emissions increases to evade control, such deregulation would forego hundreds of 

tons of emissions reductions that the law long has required. 

II. Amnesty From New Source Review Requirements 

The Trump EPA is reversing clean air enforcement positions against coal-burning power 

plants that EPA has taken and that federal courts have upheld not once, but twice. Moreover, the 

Trump administration promises EPA enforcement relief to all industrial polluters covered by the 

Clean Air Act's NSR programs, thereby allowing regulated industries to increase harmful air 

pollution and evade modern pollution controls, offsets, air quality impact analyses, and 

regulatory and public oversight. These retreats, along with other reversals in EPA practices, 

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reflect the Trump administration granting effective amnesty from legal requirements that protect 

Americans and uphold the Clean Air Act. 

All of these reckless steps arc taken in a memorandum17 from EPA Administrator Scott 

Pruitt that EPA quietly released after hours on the same day that Pruitt appeared before a 

congressional oversight committee for the first time since taking office. He made no mention of 

the enforcement reversals or attacks on clean air safeguards during his testimony. 

In Pruitt's memo, EPA effectively adopts the position of a coal-burning power plant 

defendant in a clean air enforcement case, DTE Energy, represented by the same law firm where 

the political head ofEPA's clean air office worked before the Senate confirmed him last month. 

Pruitt announces EPA will exercise its "enforcement discretion" not to enforce the Clean Air Act 

against not just power plants, but all industrial polluters, that fail to properly project how much 

they will increase harmful air pollution following construction projects. The Trump EPA is 

reversing course on enforcement stances that EPA is taking in lawsuits today, including in cases 

where federal courts have sided with EPA and against defendant positions that the Trump EPA 

now adopts. 

The Trump EPA enforcement retreat amounts to permission for industrial polluters to 

commit fraud and make false projections about their increased emissions, so long as those 

projections are "procedurally" adequate-even if they arc substantively bogus and 

ultimately harmful to air quality. EPA specifically promises polluting lawbreakers it does not 

intend to enforce the law against failures to perform "required" air quality analysis, or failures to 

follow emissions calculation requirements. EPA Amnesty Memo, at 8. What's most remarkable 

17 U.S. EPA, New Source Review ?reconstruction Permitting Requirements: Enforceability and Use of the Actualto-Projected-Actual Applicability Test in Determining Major Modification Applicability (Dec. 7, 2017) ("EPA 

Amnesty Memo"), https://www.epa.gov/sites/production/files/20 17-12/documents/nsr policy memo.l2. 7.17.pdf. 

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is EPA is presently in court enforcing against Clean Air Act violations that led the Trump EPA 

Administrator to issue a memo saying, "Never mind. We won't enforce against that lawbreaking 

from now on." 

Equally remarkable, the central promise and approach of Pruitt's memo--that EPA will 

not "second guess" polluters-is precisely the approach that a federal appellate court has 

characterized as a straw man. In the second U.S. v. DTE Energy case, the federal appeals 

court wrote that "the focus on so-called 'second-guessing' is misplaced," because obviously EPA 

may bring enforcement lawsuits to challenge a company's improper emissions projcctions. 18 The 

court continued by noting "the EPA definitely is not confined to a 'surface review' or 'cursory 

examination. "' 19 The EPA Amnesty Memo confines EPA enforcement to just those indefensible 

failings, in a concerted political effort to obstruct EPA enforcement against companies' improper 

air pollution projections. Pruitt says archly that "the court decision does not compel the EPA to 

pursue enforcement in such situations"; EPA won't pursue enforcement at all, meddlesome 

judges. 

Pruitt's action plainly is meant to sabotage the ongoing clean air enforcement case 

against DTE Energy. Worse, Pruitt openly disavows the possibility of similar enforcement cases 

against other industrial polluters during the Trump administration. Pruitt promises that "EPA 

does not intend to pursue new enforcement cases in circumstances such as those presented in the 

DTE matter." Enforcement sabotage, through and through. 

It is challenging to convey to those unfamiliar with the NSR program just how reckless 

this Pruitt memo is. At one point, the memo "clarifies" the EPA regulations to mean that when a 

company projects emissions increases and follows procedural requirements, EPA will not 

13 U.S. v. DTE Energy, 845 F.3d 735 (6'' Cir. 2017), https:l/www.leaglc.com/decision/infco20170 110108. 

19 !d. 

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challenge false or wrong or even fraudulent pollution projections unless there is "clear error" in 

application of the procedures. Forget the substance of the projections-the intended or actual air 

pollution increases. Nothing in the EPA Amnesty Memo says that a company's projection of 

pollution increases needs to be right or even reasonable; indeed, the clear import is polluter 

projections need be neither. 

The only example of a "clear error" exception in the EPA Amnesty Memo is applying an 

incorrect number in the regulations during those procedural steps; applying the right number 

during the procedural steps and giving that piece of paper to the government suffices, even if the 

company's pollution projection is manipulated, unreasonable, wrong or it results in unlawful air 

pollution increases. 

The EPA Amnesty Memo further blesses a deregulatory invention that appears nowhere 

in the statute or EPA regulations, to allow polluters to exclude emissions increases and thereby 

reduce the chance that a facility will need to install modern pollution controls, obtain air 

pollution offsets, conduct air quality impact analyses or undergo regulatory/public oversight. The 

memo says that a "source must exercise judgement to exclude increases for which the project is 

not the 'predominant cause."' EPA Amnesty Memo, at 7. That italicized legal test is an 

invention, appearing nowhere in the Clean Air Act or EPA regulations. It grants industrial 

emitters an unfounded loophole to argue that actual emissions increases are not cognizable legal 

emissions increases based solely on the "judgment" of the self-interested source operator, and 

based on an invented legal test designed to allow more emissions increases to escape review, 

control, and offset. The Trump administration20 and EPA's political critics condemn agency 

guidance documents when it suits their purposes but, as here, this administration embraces 

20 U.S. Department of Justice, Limiting Use Q{ Agency Guidance Documents in Affirmative Civil Enforcement Cases 

(Jan. 25, 2018), https://www.justice.gov/file/1028756/download. 

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deregulatory guidance documents when it furthers an agenda to grant industry amnesty from 

environmental violations and permission to increase harmful air pollution. 

Moreover, the memo goes out of its way to reverse EPA's regulatory and enforcement 

practice to allow companies to purport to "manage" projected air pollution increases to prevent 

significant increases, but to do so in completely unenforceable ways. EPA to date has not 

recognized unenforceable industry claims about managing emissions increases, for the simple 

reasons that there is no way to ensure that companies have been or will be controlling pollution 

in the way they claim, and no way to enforce any failures to control pollution increases after the 

fact. Incredibly, the Pruitt memo says that the mere "intent" of a company to manage emissions 

increases-notwithstanding failure to do so-is good enough for government under the Trump 

administration. EPA Amnesty Memo at 6. This is enforcement sabotage, through and through. 

This is not simply capitulation by the Trump EPA. It is abdication ofEPA's law 

enforcement responsibilities to uphold the law against polluters that may be knowingly breaking 

the law, and that EPA believes may be breaking the law. Administrator Pruitt says that matters 

not-procedural niceties will suffice, and EPA will not "second-guess" those polluters through 

inquiry or disagreement. 

By effectively promising industrial lawbreakers that EPA will not enforce certain Clean 

Air Act NSR requirements, Pruitt's memo represents a Trump administration attempt to grant 

amnesty from these requirements. The memo uses coded language about what EPA will "focus 

on" and what EPA "does not intend to pursue," to bless activities that the law considers 

violations. As noted, the memo even "clarifies" what the NSR regulations mean, and blesses a 

loophole nowhere found in the regulations, re-casting those regulations to mean something they 

do not say. 

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Pruitt's memo predictably uses boilerplate language that EPA includes in memos when 

the agency wants to let regulated industries rely on winked agency promises of deregulation, at 

the same time that EPA wishes to be immune from citizen lawsuits to uphold the law, and 

immune from judges reviewing improper final agency action that breaks the law. It's especially 

perverse for an EPA Administrator that testified21 in Congress in the morning against the evils of 

EPA guidance documents, to turn around in the evening and issue a guidance document that 

deregulates clean air responsibilities and promises to abdicate EPA's duty to enforce the law. 

But the trouble goes well beyond that: in 2002, the Bush administration EPA weakened 

the clean air regulations at issue here, to insert loopholes and exemptions that let industry 

increase harmful air pollution significantly and evade any modern pollution controls to reduce 

emissions. A central author of those 2002 Bush EPA clean air rollbacks was a former industry 

attorney named Bill Wehrum. Mr. Wchrum left EPA to join the law firm of Hunton & Williams, 

where he and his colleagues represented coal-burning power plant companies. Among the power 

plant companies that Hunton & Williams represents is DTE Energy, the defendant in a Clean Air 

Act enforcement case that sought to exploit one of the loopholes Mr. Wehrum added to weaken 

the clean air regulations. The DTE Energy clean air enforcement case is the driving force, and 

the high-profile enforcement retreat, at the heart of Mr. Pruitt's memo. 

As you know, Mr. Wehrum now is the political head of the Trump EPA air office tasked 

with carrying out these clean air regulations. Mr. Wehrum's name does not appear on the EPA 

Amnesty Memo. Presumably, the DTE Energy case appears on a list of matters from which Mr. 

Wchrum recused himself. He should have. Nevertheless, the public deserves to know what role, 

21 U.S. House of Representatives, Energy & Commerce Committee, 

https :// e nergycommerce. house. g ov /hearings/miss ion-u-s-environ menta 1-protection-agency/. 

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if any, Mr. Wehrum, Hunton & Williams, and/or DIE Energy played in producing this Trump 

administration give-away to polluting industries. 

For good reason, law enforcement agencies like EPA rarely issue so-called "enforcement 

discretion" guidance that promises not to enforce some aspect of federal law: these promises 

undermine the Rule of Law and the public's confidence in law enforcement; they threaten the 

concerns and rights protected by the law, such as clean air & Americans' health; and in their 

worst form, these promises can suggest a sordid collusion of interests with corporations that skirt 

the law. As a Reagan administration EPA policy put it, enforcement discretion promises "may 

erode the credibility of EPA's enforcement program by creating real or perceived inequities in 

the Agency's treatment of the regulated community." That Reagan-era enforcement policy still 

stands, and it is a testament to why enforcement discretion promises are highly unusual. 

At EPA, there is a specific enforcement office process for issuing what are called "no 

[enforcement] action assurances" to specific facilities, in specific situations, based on casespecific circumstances. 22 The Trump EPA has issued "no action assurances," for example, 'for 

the import of power generators to be donated for use in communities impacted by Hurricanes 

Harvey and Irma in Texas and Florida, to assist in recovery efforts.' Proper EPA "no action 

assurances" promising the exercise of"enforcement discretion" ordinarily arc issued by the 

highest-ranking official ofEP A's Office of Enforcement and Compliance Assurance. 23 At the 

very least, EPA policy dating to 1984 requires the "advance concurrence" of the enforcement 

office. 

22 U.S. EPA, Policy Against "No Action" Assurances (Nov. 16, 1984), 

https://www .epa.gov/sites/production/files/20 13-1 0/documcnts/noactionass-mem.pdf. 23 See, e.g., U.S. EPA, No Action Assurance for Import of Yamaha Generators for Hurricane Recovery Efforts in 

Texas and f1orida (Sept. 15, 20 17), https:i/response.epa.gov/sites/12382ifiles/yamahanaa091817.pdf 

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Pruitt's "enforcement discretion" memo represents a form of"no action assurance" that 

differs from any I have previously seen in several highly unusual, even unprecedented ways. 

First, I know of no other EPA "enforcement discretion" guidance that was issued in the middle 

of a pending enforcement case against a corporate defendant accused of the very failings that the 

agency says it will turn a blind eye to, henceforth. 

Second, the added insult to injury here is federal courts twice have sided with the legal 

views of EPA enforcement officials prosecuting these failings, while rejecting the defendant's 

contrary views. 

Third, I am unaware of any "enforcement discretion" promise or no action assurance 

signed by the EPA Administrator. Pruitt's decision to do so clearly is intended to assure 

corporations that EPA's enforcement retreat and grant of amnesty enjoy the highest level of 

political support. Amazingly, the memo even goes out of its way to trace that high level political 

support all the way back to President Trump. Pruitt says his memo is consistent with an agenda 

to "reduce burden on regulated sources in accordance with recent Presidential actions," citing a 

Trump executive order and memo to 'reduce regulatory burden' and 'enforce regulatory reform.' 

Fourth, I offer an observation from my days working as an EPA attorney: it is 

extraordinary, possibly unprecedented, for EPA to issue an "enforcement discretion" assurance 

that omits the name of even a single official from EPA's enforcement office. Pruitt is the 

memo's author, the addressees are Regional Administrators, and the only two officials copied on 

the memo are Pruitt's chicfofstaffand the political deputy to the head of EPA's air office, Bill 

Wehrum. 

An already-reckless memo ends, aptly, on a foreboding note. In the memo's last 

paragraph, Pruitt observes that states are approved by EPA to carry out the clean air program in 

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question. He goes on to say, ominously, that if EPA "later determine[s] that the [clean air 

program] approved [by EPA] is deficient, the EPA has authority ... to call for a state to revise its 

regulations." This none too subtle threat signals that states that fail to follow the Trump EPA 

rollbacks could face demands by EPA to weaken state regulations. 

These outrageous Trump EPA actions raise a host of questions that Americans deserve to 

have answered: Were Mr. Wehrum's former law firm, Hunton & Williams, DTE Energy or any 

other non-governmental parties involved with this memo or the process that led to it? What about 

Mr. Wehrum, or his deputy? Who helped write the memo? Did EPA's enforcement office write 

it? Were they consulted about it? If so, in what capacity and when? Were EPA and Department 

of Justice lawyers prosecuting the case against DTE Energy and handling its appeals, involved or 

consulted? What about enforcement officials in EPA regional offices, where power plant cases 

often are prosecuted? And EPA's Office of General Counsel-what roles, if any, did it play in 

this fiasco? Has EPA assessed how much harmful air pollution could increase from 

Administrator Pruitt's effective grants of amnesty and abdication of law enforcement duties? 

Many more questions and concerns are certain to emerge about the Trump 

administration's abdication and other reckless actions described here. 

Public health and environmental groups have submitted a Freedom oflnformation Act 

request to EPA and the Department of Justice to obtain all records associated with this 

irresponsible transaction. Congress and EPA's Office oflnspector General also should 

investigate these deeply troubling actions. 

Finally, an agency like EPA may not issue guidance that relieves regulated industries of 

legal obligations, unless the agency first undertakes notice-and-comment rulemaking that 

provides the public fair opportunities to comment and oppose unlawful or harmful actions. The 

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Trump EPA did not do this. In the meantime, nothing in the Administrator's action stops states, 

public health and environmental groups, and ordinary citizens from bringing enforcement 

lawsuits to uphold clean air protections that the Trump administration proclaims it will not. 

III. Final Thoughts on Calls for NSR "Reform" 

To a remarkable degree, political and industry attacks on the NSR program have 

trafficked in rhetoric, assertion and anecdote, unsubstantiated by verifiable evidence or facts. I 

am aware of no peer-reviewed studies substantiating these attacks. This dynamic is especially 

true when critics and opponents assert that the NSR program discourages investments and 

activities that would result in net environmental benefits, compared to the status quo. The Trump 

EPA's 13783 Report, for example, contends that "[i]n some circumstances, the NSR progress 

discourages the construction of new facilities or modifications of existing ones that could result 

in greater environmental improvements."24 There is not so much as a footnote or any other 

evidence to back this claim; it is raw assertion. Surely the burden of proof should be on interests 

seeking to weaken clean air, public health and environmental safeguards, before amending the 

Clean Air Act or EPA regulations. 

The Trump Commerce Department report targeting NSR suffers from the same lack of 

evidence or independently verifiable facts. 25 It is not so much a report as a compendium of 

complaints and demands for deregulation. It is a litany of assertions from industry comments that 

themselves are self-serving contentions rather than evidence. Neither of these Trump 

administration documents provide any factual basis for legislation, certainly none that weakens 

and worsens clean air, public health and environmental protections. 

24 13783 Report, at 2-3. 25 See generally, U.S. Commerce Department, Streamlining Permitting and Reducing Regulatory Burdens for 

Domestic Manufacturing (Oct. 6, 2017). 

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Leading industry complaints about NSR fare no better on the evidentiary score. In an 

article entitled EPA's New Source Review Program: Time for Reform, co-authored by one of my 

co-panelists, the claim is made that "recent changes in the N02, S02, fine PM, and ozone 

NAAQS have further complicated the NSR process, resulting in permitting delays and, in some 

cases, the decision by industry to defer or cancel projccts." 26 Following this last inflammatory 

charge, the authors drop a footnote, which reads in relevant part: "For example, the Baton Rouge 

Area Chamber reported that four major industrial projects were either put on hold or redirected 

to another location after EPA proposed to revise the ozone NAAQS in December 2015."27 

I read this claim when the Baton Rouge Area Chamber first made it, and invited the 

Chamber to substantiate that claim and to identify, publicly, the "four major industrial projects." 

They refused. After other industry lobbyists took up and used this same example, repeatedly, I 

challenged the Baton Rouge Area Chamber to identify the four projects. Again, they refused. I 

have reached the conclusion that there arc no such projects or, if there are, there arc other factors 

influencing the project decisions-location, general economic conditions, tax incentives, 

available labor, financing, the possible list is long-and the supposed project developers are 

unwilling to submit their accusations blaming the Clean Air Act to the most basic scrutiny, to the 

point of refusing to disclose the identity of the projects or the accusing companies. 

A similar phenomenon--eschewing actual evidence, relying on assertion or 

speculation-surrounds industry suggestions that NSR has prevented greater emissions 

reductions and health and environmental improvements: 

26 Art Fraas, John Graham & JeffHolmstead, EPA's New Source Review Program: Time for Reform 47 

Environmental Law Reporter 10026, 10031 (20 17) (hereinafter, Fraas eta/.); sec also, id at I 0028 ("discussions 

with industry sources suggest that the cost of emissions offsets effectively prohibits the siting of major new 

industrial plants in certain [nonattainment] areas"). 27 !d., at 10031, n. 36. 

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"Thus, it has arguably been more economic in some cases to continue to operate 

relatively old, inefficient, and high-polluting plants than to install new facilities 

or upgrade existing facilities with better pollution control tcchnology." 28 

• "To the extent this has occurred, NSR review has had the perverse effect of 

delaying reductions in pollutants such as S02 and NOx." 29 

"Arguably" and "to the extent this has occurred" provide no reasonable basis for legislation. Left 

unsaid in these criticisms, of course, is the reality that industrial facilities always may decrease 

emissions, and upgrade facilities with better pollution control technology to reduce emissions, so 

long as overall emissions do not increase significantly. Criticisms that lay blame with NSR for 

this not happening deserve to be looked behind; invariably one will find there an unmentioned 

objective to increase emissions of one or more regulated air pollutants by significant amounts, 

and to evade controls and other safeguards for those increases. 

To its credit, the Fraas et al. article does not argue that the weakening reforms it 

advocates would achieve the same or greater health & environmental benefits. It says simply the 

regulatory program would still be allowed "to achieve significant environmental results," 30 

which of course is in the eyes of the industry reform beholders. Like many similar critiques of 

the NSR program, this article's reform proposals tend to gloss over the emissions increases that 

the proposed reforms would allow. 

Finally, it's worth drawing attention to some of the internal inconsistencies and crosspurposes associated with competing NSR ''reform" proposals. For example, the Fraas eta/. 

article seeks to dispense with air pollution offsets within the same air shed-pointing to 

putatively more cost-effective opportunities to reduce air pollution transported from long 

28 Fraas, et al., 47 ELR at 10030, n.27. This article cited "evidence" backing this claim in an EPA 2001 NSR report 

prompted by then-Vice President Cheney's energy task force. But that EPA report itselflacks evidence to support 

the claim, and is itself an example of a government report simply repeating self-serving industry assertions as 

evidence. See U.S. EPA. New Source Review Report to the President (2002). 29 ld at I 0030. 30 Id, at 10027. 

29 
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distances-while rollback reforms such as H.R. 3127 and H.R. 3128 would allow large industrial 

polluters like coal-burning power plants to massively increase air pollution transported over long 

distances.31 

No acceptable NSR "reform" should give an affirmative answer to the question posed at 

the top of this testimony: will it let industry pollute more? This Committee should reject any 

appeals for reforms that would let industries pollute more, by significantly higher amounts, and 

in the process, evade air pollution controls and pollution offsets in areas already experiencing 

unsafe air quality. Americans deserve better. 

3' Fraas, eta/., 47 ELR at 10035. 

30 
104 

Mr. SHIMKUS. The chair thanks the gentleman. 

The chair now recognizes Mr. Holmstead for 5 minutes. Welcome 

back. 

STATEMENT OF JEFFREY R. HOLMSTEAD 

Mr. HOLMSTEAD. Thank you. Thank you for inviting me to be 

here today. 

As some of you know, for almost 30 years I’ve focused my professional career on the Clean Air Act as a White House staffer, as 

head of the EPA Air Office, and as an attorney in private practice. 

I think even that my good friend John Walke here would concede 

that I know a lot about the various programs that apply to major 

manufacturing and energy facilities. 

But some of you may not be quite so aware—you might be surprised to know that there are many different Clean Air Act programs that regulate the very same pollutants from the very same 

facilities. 

For example, SO2 and NOx emissions from coal-fired power 

plants would seem to be the pollutants of greatest concern. These 

pollutants from these plants are regulated under at least 14 different Clean Air Act programs—yes, 14—the acid rain program, 

the NOx SIP Call, MATS, NSPS, regional haze program, the 

110(a)(2)(d) good neighbor provision, Section 126, CSAPR, BART, 

the SO2 NAAQS, the NO2 NAAQS, the Ozone NAAQS, the PM2.5 

NAAQS, and NSR. 

If I had said the full names of these programs instead of the 

acronyms, I would have used up all of my time. Over the last 25 

years, serious regulators and researchers have learned that good 

regulatory design makes an enormous difference and they will tell 

you that of these programs, some of them are much more effective 

than others. 

Because of all of the overlapping regulatory programs, our society—you and I and all the people you represent—are paying much 

more than we need to pay for preserving and improving air quality. 

If we take advantage of the lessons that we have learned over 

the last 25 years and we use the most effective approaches for reducing air pollution, we can achieve the same air quality goals that 

we have today at a much lower cost. 

Today, we are talking about just one Clean Air Act program. As 

the name implies, New Source Review, this is an important program for regulating emissions from new sources. 

But over the last 20 years as EPA has tried to expand it to capture as many existing sources as possible, NSR has become a convoluted, burdensome, and completely unnecessary mess. 

As someone who has worked on Clean Air Act policy for almost 

three decades, I can say with confidence that the NSR program as 

it applies to existing facilities is the least successful and most counterproductive of the dozens of programs created under the Clean 

Air Act. 

To the extent it provides environmental benefits, those same benefits can be preserved by reforming the program in a thoughtful 

way and by relying on other much more effective programs that 

regulate the same pollutants from the same facilities. 

105 

The critique offered by my friend here from NRDC is more than 

a bit over the top. I did a Word search last night and found 10 different places in his testimony where he says that the reforms being 

proposed by Congressman Griffith would allow, quote, ‘‘massive or 

enormous increases in harmful air pollution,’’ 15 places where he 

says the bills would allow facilities to evade pollution controls, and 

11 places where he used the words reckless or irresponsible to refer 

to the proposed reforms. 

Statements like this are just plain silly and they are demonstrably untrue. They ignore the fact that every single existing facility that is covered by the NSR program is also regulated by multiple other Clean Air Act programs—in the case of coal-fired power 

plants by as many as 13 other programs that regulate the very 

same pollutants. 

Even—and I can guarantee you this—even if the NSR program 

disappeared completely tomorrow, there would not be a massive increase in air pollution. 

In fact, there would not be any increase in air pollution at all 

and we would see, because of the many other programs that regulate the same pollutants from the same facilities, air pollution 

would continue to decrease as it has since 1990. 

As I explain in my written statement, the reforms being proposed 

by Mr. Griffith would simply reintroduce some common sense into 

the NSR program and make sure that it does what it was intended 

to do—ensure that when a new industrial facility is built or an existing facility is significantly expanded, modern pollution controls 

will be used to minimize its emissions and, two, ensure that the 

NSR program does not make it hard for companies to keep their 

facilities in good working order and where possible to reduce the 

operating costs of these facilities by making them more efficient. 

Again, I thank you for inviting me here today. I hope we can 

have a serious discussion about Clean Air Act policy and I look forward to answering any questions that you might have. 

[The statement of Mr. Holmstead follows:] 

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Testimony of Jeffrey R. Holmstead 

before the 

House Committee on Energy and Commerce 

Subcommittee on Environment 

Hearing on 

New Source Review Permitting Challenges 

for Manufacturing and Infrastructure 

February 14,2018 

Chairman Shimkus, Ranking Member Tonko, and distinguished members of the Subcommittee, 

thank you very much for inviting me to participate in today's hearing. My name is Jeff 

Holmstead. I am a partner in the law firm of Bracewell LLP and have been the head of the firm's 

Environmental Strategies Group (ESG) since 2006. 

For almost 30 years, my professional career has been focused on policy, regulatory, and legal 

issues arising under the Clean Air Act. From 1989 to 1993, I served in the White House 

Counsel's Office as Associate Counsel to President George H.W. Bush. In that capacity I was 

involved in many of the discussions and debates that led to the passage of the 1990 Amendments 

to the Clean Air Act- and was then deeply involved in the initial efforts to implement the 1990 

Amendments. From 200 I to 2005, I was the Assistant Administrator of EPA for Air and 

Radiation and headed the EPA Office in charge of implementing the Clean Air Act. I am well 

acquainted with the legal, policy, and practical issues associated with the Clean Air Act and the 

many regulatory and permitting programs that have been designed to protect and improve air 

quality in the U.S. 

When not in the federal government, I have been an attorney in private practice, representing a 

wide variety of clients on Clean Air Act (CAA) and other environmental issues. Since I joined 

Bracewell in 2006, I have worked primarily with companies and trade groups in the energy and 

manufacturing sectors. Today, however, I am not appearing on behalf of my firm or any of my 

clients, and I have not submitted my testimony to anyone else for their review or approval. 

Instead, I speak as someone who has worked on CAA issues for many years -as a policymaker, 

a regulator, and an attorney in private practice representing companies who are trying to 

manufacture products or develop energy resources in the U.S. in an environmentally responsible 

manner. Based on my experience in all these roles, I can say that one particular CAA program 

known as New Source Review (NSR) is badly in need of reform. 

Over the years, the NSR program has become a complicated mess that makes it more difficult for 

companies to do things that we should all want them to do -like maintaining the reliability and 

safety of their facilities and making them more efficient. In some parts of the country, it 

effectively bans the construction of new facilities even if they use state-of-the-art pollution 

controls and would not have a meaningful impact on the environment- and even though the 

communities where they would be located desperately want them to be built. 
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It is certainly true that the NSR program does result in environmental benefits, especially as it 

applies to new facilities. But these benefits can be preserved by reforming NSR in a thoughtful 

way that would provide regulatory certainty and dramatically reduce the burden that it imposes 

on U.S. businesses, workers, and consumers. 

Background 

The Clean Air Act has been a remarkable success Since it was adopted in 1970 -and especially 

since the passage of the 1990 Amendments- air quality has dramatically improved in virtually 

every part of the country. Since 1970, emissions of the six common pollutants that EPA has 

targeted for reduction- particles (generally called particulate matter or PM), ozone, lead, carbon 

monoxide (CO), nitrogen dioxide (N02) and sulfur dioxide (S02)- have dropped by more than 

70 percent while gross domestic product has grown more than 250 percent. 

More importantly, the emissions reductions have dramatically improved the quality ofthe air that 

we breathe. Between 1990 (when the current CAA was put in place) and 2015, national 

concentrations of air pollutants improved 85 percent for lead, 84 percent for CO, 67 percent for 

S02, and 60 percent for N02. 

Most important of all have been the recent reductions in concentrations of fine particles (PM2.5), 

which EPA and many outside researchers have identified as representing the greatest risk to 

public health of all pollutants. Just since 2000, shortly after EPA began to regulate fine particles, 

daily average concentrations of fine particles have improved by more than 40 percent 

nationwide. 

However, these very substantial emission reductions and improvements in air quality do not 

mean that everything about the Clean Air Act is working well. The CAA created dozens of 

different regulatory programs, and, using the authority of the CAA, EPA has issued hundreds of 

different regulations. Since 1990, when Congress last amended the CAA in a meaningful way, 

we have learned a great deal about regulatory policy. We now understand that some CAA 

programs are very effective and others are not. Some programs actually create unforeseen 

problems that make them counterproductive. 

Because the CAA and regulations issued under the CAA have been developed over time, there 

are often several different regulations that apply to the same pollutants from the same facilities. 

Some of these programs have been very successful at reducing pollution and improving air 

quality cost-effectively -like the acid rain program and the various cap-and-trade programs 

around the country that have been modeled on it. Yet there are other CAA programs that target 

the same pollutants from the same facilities and impose significant costs with little benefit. 

Because there are so many overlapping programs, we, as a society, are paying much more than 

we should for preserving and improving air quality. If we take advantage of the lessons that 

have been learned over the last 30 years and use the most effective and efficient approaches for 

reducing air pollution, we can achieve our air quality goals at a much lower cost. 

As noted above, I have spent almost 30 years working on and studying the various regulatory 

programs created under the Clean Air Act. I can say with confidence that the NSR program, as it 

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applies to existing facilities, is the least successful and most counterproductive of all the Clean 

Air Act programs. To the extent that it provides environmental benefits, those same benefits can 

be preserved by reforming the program in a thoughtful way and by relying on other, much more 

effective CAA programs that regulate the same pollutants from the same facilities. 

Claims Made by NSR Proponents 

Proponents of the current NSR program like to point to settlements (usually in the form of 

consent decrees) that have been reached over the years in a number ofNSR enforcement cases. 

They argue that the current program should remain unchanged so that EPA enforcement officials 

can bring more NSR cases. 

Tf you take the claims made in government press releases at face value, you might think that 

these NSR settlements have achieved large reductions in air pollution- especially from coalfired power plants. But if you look carefully at the terms of the settlement agreements, you'll 

find that most of the things that a company has agreed to do in terms of reducing pollution from 

its plants are things that the company is already required to do under other Clean Air Act 

regulations. If you look at some settlements, you'll see that the companies are simply agreeing 

to do things that they have already done. This means that government enforcement officials, in 

their press releases, are claiming credit for things that have already been done or pollution 

reductions that would be achieved anyway- i.e., even without the settlement. And if you're 

familiar with the other CAA programs that regulate the same emissions from the same facilities, 

you would sec that all the pollution reductions that have been claimed for these NSR 

enforcement could be achieved by other, more cost-effective CAA programs. 

Again, it is instructive to look at the NSR program as it has been imposed on the power sector. 

The NSR settlements that have required companies to reduce emissions from their coal-fired 

power plants apply almost exclusively to planL~ located in areas that, under other CAA programs, 

have ''caps" on the total amount of pollution that can be emitted by the coal-fired plants in these 

areas. Because of the area-wide cap, a settlement requiring emission reductions from certain 

plants does nothing to reduce total emissions in that area. It simply ensures that they are achieved 

at some plants rather than others- and not necessarily where the emission reductions are most 

needed or where they can be achieved most cost-effectively. 

The NSR Program as it Applies to New Facilities 

In a recent paper published in the Environmental Law Reporter (ELR), Art Fraas (a Visiting 

Fellow at Resources for the Future), John Graham (the Dean of the School for Public and 

Environmental Affairs at Indiana University), and I discuss the NSR Program at some length and 

outline a number of reforms that would make it easier to build new manufacturing facilities in 

the U.S. as long as they use the best available technology to control their emissions. That paper, 

entitled "EPA's New Source Review Program: Time for Reform?" is focused primarily on the 

ways in which the NSR Program applies to new facilities. Rather than summarize that paper 

here, I have asked that it be included in the record for this hearing. That said, I would be happy 

to answer questions that any members of the Subcommittee might have about it. 

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The NSR Program as it Applies to Existing Facilities 

As the name implies, the New Source Review or NSR program was designed primarily for "new 

sources" of emissions (new manufacturing facilities and power plants). Before any new major 

source can be constructed, it must first go through a permitting process that identifies the "best 

available control technology" to minimize emissions from the new facility. The permit applicant 

must then obtain an NSR permit that requires the new facility to meet emission limits that can be 

achieved with that technology. The basic theory of the program is that modern pollution controls 

should be part of the design and construction of any new major source of emissions. The NSR 

program is probably the most important CAA program for controlling pollution from new 

sources. 

The NSR program also applies to existing sources, but only if they make "major modifications" 

as defined under EPA regulations. Again, the theory is that, when there will be a modification to 

an existing plant that will significantly increase emissions, modern pollution controls should be 

designed into the modification. Although the NSR program is the primary regulatory tool for 

controlling emissions from new plants, it was not intended to be a key program for controlling 

emissions from existing facilities. As EPA stated in a 2002 Report on the NSR program: 

The NSR program is by no means the primary regulatory tool to address air 

pollution from existing sources. The Clean Air Act provides for several other 

public health-driven and visibility-related control efforts: for example, the 

National Ambient Air Quality Standards Program implemented through 

enforceable State Implementation Plans, the NOX SIP Call, the Acid Rain 

Program, the Regional Haze Program, etc. Thus, while NSR was designed by 

Congress to focus particularly on sources that are newly constructed or that make 

major modifications, Congress provided numerous other tools for assuring that 

emissions from existing sources are adequately controlled. 

New Source Review: A Report to the President (2002) at pp. 3-4. 

The question of what is a "major modification" that triggers NSR at an existing source has been 

the source of much controversy and is discussed in several EPA regulations, more than a 

thousand pages of guidance documents and Federal Register notices, and dozens of court cases 

and there is still much uncertainty about how to determine whether something is a major 

modification. 

This is important to industry because, if a company makes a "major modification" to a facility, 

the cost of going through NSR, and the delays it can cause, are very substantial. In some cases, 

companies that have undertaken a $500,000 project that, according to EPA, is a "major 

modification" have been forced to spend hundreds of millions of dollars in new control 

equipment. Even without the cost of new equipment, the time it takes to go through the NSR 

permitting process can be very long- perhaps a year on average but, in some cases, many years. 

Because of the cost and delays, companies arc very reluctant to do anything that might trigger 

NSR. 

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Over the last 15 years, EPA enforcement officials have tried to expand the definition of major 

modification in an effort to capture more facilities into the NSR program. At the same time, 

companies have spent much more time and effort figuring out how they can maintain their 

facilities without triggering NSR. I know of companies that actually employ teams of people 

full-time to make sure that the investments they make to maintain their facilities do not trigger 

NSR, and companies often make suboptimal decisions about investing in their facilities because 

ofthe current NSR program. As a result, the NSR program makes it more difficult for 

companies to do things that we should all want them to do like maintaining the reliability and 

safety oftheir facilities and making them more efficient. 

The Emissions Increase Test 

Under the statute and EPA's regulations, a major modification is a "physical change or change in 

the method of operations" at an existing source that will cause a "significant emission increase," 

which is defined as an increase in annual emissions that is greater than certain thresholds (which 

are different for different pollutants). As EPA has noted, this definition essentially creates a twostep test that a plant operator must use in order to determine the applicability ofNSR 

requirements to any particular project at an existing source: "first, you will determine whether a 

physical or operational change will occur. If so, then you will proceed to determine whether the 

physical or operational change will result in an emissions increase over baseline levels." 67 

Fed. Reg. 80186,80187 (Dec. 31, 2002). 

Under EPA regulations, "routine maintenance, repair, and replacement" projects are exempted 

from the definition of a physical change, so there has been much litigation over whether certain 

specific projects are "routine." But, perhaps surprisingly, there has also been much controversy 

over the question of how to determine if a physical or operational change will result in an 

emissions increase. 

Another CAA program, referred to as the New Source Performance Standards or NSPS program, 

employs the exact same definition of the term "modification." In fact, when Congress added the 

NSR program to the CAA in 1977, it simply adopted the existing statutory definition of 

"modification" that had been used since 1970 for the NSPS program. Under the NSPS, EPA 

determines whether a project at a plant is a "modification" by looking at the maximum hourly 

emission rate of the plant before the project and comparing it to the maximum hourly emission 

rate of the plant after it. If a project does not increase this rate -that is, if the plant has not been 

changed in a way that would increase its maximum hourly emissions rate- then the project is not 

a modification. There is rarely any controversy about this issue because the maximum hourly 

emission rate is a readily available number that is based on the design of the facility. 

Under the NSR program, however, EPA has adopted a very different approach for determining if 

a physical or operational change will cause an emissions increase not based on plant design but 

on projections of future annual emissions that depend on many other factors besides the physical 

design of a facility. First, a company must determine its "baseline" emissions. For power plants, 

this is annual average emissions of the highest 2-year period of operation over the last 5 years. 

For other facilities, it is the highest yearly emissions during the last I 0 years. 

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Then, a company must make a projection of what its future annual emissions will be during the 

5- or I 0-year period after the change (depending on the type of project being undertaken). If 

projected future emissions are higher that baseline emissions by more than the "significance 

thresholds," then the company is allowed to subtract the amount of its projected future emissions 

that are unrelated to the physical change at the facility (such as increased demand for the product 

being produced). If projected future emissions are still higher than the "significance threshold," 

then the physical change is a "major modification" that triggers NSR. 

This is complicated enough, but there has been substantial controversy as to how future annual 

emissions should be projected. Some power companies have projected future emissions using 

sophisticated computer modeling techniques that they use to plan future investments- only to 

have EPA enforcement officials insist that they should have used another method that would 

have predicted higher emissions and thus that the project triggered NSR. Like virtually every 

other NSR issue, this has been the subject of protracted litigation. 

Because of all the uncertainty and controversy caused by the "emission increase test," it would 

be helpful for Congress to clarify this issue. In my view, the best approach would be to make 

clear that there is not a "major modification" under NSR if there is not a "modification" as 

defined under NSPS. Thus, companies (and EPA) would evaluate a project to determine whether 

it would increase the maximum hourly emission rate at the plant. If not, then the project does not 

trigger NSR. If so, then the project would be a modification and would then be evaluated under 

the current NSR test to determine whether it would be a "major modification" that would trigger 

NSR. 

There are at least two important reasons for Congress to consider such an approach. First, it 

would provide much more certainty to EPA, states, and the regulated industry. As opposed to 

the current NSR approach, the maximum hourly emission rate is an objective measure based on 

the design of the facility and is easily ascertainable. As recent experience has shown, there is 

much subjectivity under the current approach and many different ways to project future annual 

emissions and then determine the amount of those emissions that are unrelated to the project 

being evaluated. 

Second, from an environmental perspective, a one-hour test is much more meaningful because 

the most stringent EPA standards are based on maximum concentrations of a pollutant averaged 

over one hour (for S02 and N02), eight hours (for ozone and CO), and 24 hours (for PM2.5). 

The only pollutant for which a longer "averaging time" is meaningful is lead, for which the airquality standard is based on a 3-month average (and which has rarely, if ever, been addressed by 

NSR.) Simply put, in terms of protecting human health, the maximum amount of a pollutant that 

a facility emits in one hour is much more important than the amount it emits in a year. 

Energy Efflciency Projects 

I believe that Congress should also consider legislation to ensure that NSR is not an impediment 

to improving energy efficiency. There is much interest in reducing carbon dioxide (C02) 

emissions in the U.S. and around the world. And I believe that there is a consensus that the most 

cost-effective way to reduce C02 from existing facilities is to improve their energy efficiencythat is, to make physical or operational changes that would enable them burn less fossil fuel 

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(coal, oil, or natural gas) to produce a given amount of product (whether it be electricity or 

gasoline or widgets). 

However, the current NSR program is a significant impediment to energy efficiency projects 

because EPA, in a number ofNSR enforcement cases, has argued that energy efficiency projects 

trigger NSR- i.e., that an existing facility must go through the cumbersome and costly NSR 

permitting process before it can do such a project. I am aware that, for this reason, a number of 

companies have identified energy efficiency projects that they would like to undertake but have 

decided not to do them for fear of triggering NSR. 

It may seem strange that EPA would take a position that actively discourages energy efficiency, 

but here is the theory espoused in several NSR enforcement cases against power plants: When a 

facility owner makes a physical or operational change at a facility to make it more energy 

efficient, this reduces the cost of operating the facility, because it uses less fuel per unit of 

production. For this reason, the more energy efficient facility would have a competitive 

advantage over other facilities that make the same product. As a result, the more energy efficient 

facility will take away business from less efficient facilities and operate longer hours. Because it 

operates longer hours, it will increase emissions and, as a result, the energy efficiency project 

triggers NSR. 

If you have followed this convoluted reasoning, l think you will be outraged by it. For one thing, 

if a more energy efficient facility takes away business from its competitors, then it will certainly 

reduce total C02 emissions- because less fuel will be burned per unit of production. As a 

general rule, I think we should all agree that government should adopt policies that encourage 

energy efficiency. 

However, in its zeal to bring NSR enforcement actions, EPA has implemented the NSR program 

in a way that clearly makes it more difficult and costly to make energy efficiency improvements 

to existing plants. If Congress wants to encourage energy efficiency, it should adopt legislation 

to make it clear that any physical or operational change at an existing facility that makes it more 

energy eflicient- that enables it to reduce its C02 emissions per unit of production - does not 

trigger NSR. 

* * * * 

Again, I very much appreciate the opportunity to appear before the Subcommittee and hope my 

testimony will be helpful to you as you review the New Source Review program and decide 

whether Congress should take action to reform it. 

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Mr. SHIMKUS. And I thank the gentleman for his testimony and 

thank you all, and you all were very punctual to the—to the dot 

almost and that’s going to be helpful. 

I recognize myself 5 minutes for the—for the opening round of 

questions, and Mr. Holmstead, you answered by question about 

how many different tools are there out there. So I don’t need to ask 

that one. 

Mr. Spencer, first, just to clarify your role for the record, you 

are—you are the responsible authority in your state for implementing air quality standards which includes New Source Review 

permitting. Is that correct? 

Mr. SPENCER. Correct. Yes. 

Mr. SHIMKUS. And to perform your job you rely upon engineers, 

scientists, and an attorney, I think you said in your—— 

Mr. SPENCER. I wanted to clarify. Yes, we do have one in-house 

in the Office of Air Quality. 

Mr. SHIMKUS. But you also have engineers and scientists and—— 

Mr. SPENCER. Epidemiologists, meteorologists, chemists, biologists. 

Mr. SHIMKUS. Given your experience, do you believe the New 

Source Review reforms you describe in your testimony will create 

a gap in protection or will result in declining air quality standards 

for your state, and let me add one other—will it allow industry to 

pollute more? 

Mr. SPENCER. No and no, and I would like to acknowledge something that Mr. Holmstead said. It’s important to recognize the 

projects or the programs that are working in tandem with each 

other. We have several different—we have our NAAQS SIPs that 

are state implementation plans that we prepare and submit to EPA 

that are—that indicate and acknowledge that we’ll be protective of 

those individual criteria pollutants. 

We have our regional haze plans that we submit and, as Mr. 

Holmstead indicated, those are specific to controlling particularly 

NOx, SO2, and PM 2.5. 

So there are a number of different programs which we implement 

that stack up on each other to ensure that we have protective programs. 

Mr. SHIMKUS. So let me go to Mr. Noe. I was struck by the example you shared where it took—and I use this many times, this example, when I’ve talked about this program for 20 years now— 

the—when it took a paper mill owner 18 months to obtain a New 

Source Review preconstruction permit for a project to replace two 

older inefficient boilers with a single larger energy efficient boiler, 

which uses less energy, and I want to underline this because it’s 

in response to one of the other panellist’s statements—did not result in an emissions increase. 

So to you, Mr. Noe, does it really make sense that an owner has 

to receive a preconstruction permit just to install newer more environmentally beneficial technology, especially considering how long 

it takes to obtain a permit? 

Mr. NOE. What we would like, Mr. Chairman, is for projects that 

are going to have decreases associated as well as increases, just net 

the increases and decreases at the start. 

114 

So if there’s not really a significant net increase, why go through 

this onerous process and delay? If I could, I would like to give you 

another example where a company was going to do something that 

would decrease emissions but because of this way in which EPA 

does the math, this two-step process, it was slowed down and you 

basically took a longer time to get less emissions. 

This was a wood products facility that essentially wanted to use 

better emissions control, reroute its exhaust from a unit to better 

emissions control. It had to do a $100,000 study. 

There was months of delay. The agency ultimately concluded this 

was a good thing. But there was a delay in getting a beneficial 

project done and more emissions because of the delay from NSR. 

Mr. SHIMKUS. And I think your response was following up on my 

second question about affecting the development of and implementation of newer and cleaner technologies. So I don’t’ need to ask 

that. 

Let me go to you all, if I have time. A report conducted by Resources for the Future showed that from 2002 to 2014 the average 

time to obtain a prevention of significant deterioration—an NSR 

permit—throughout the country was 420 days. 

More specifically, in certain states, during that time period the 

average permit time was 770 days. Do you think—and if you can 

get yes or no or as short as possible—do you think that is reasonable for an owner to wait one or two years on average just to obtain 

a preconstruction permit? 

Mr. Spencer. 

Mr. SPENCER. No. I can say that the permit backlog and permit 

issuance time frames were very important to our administration— 

to this current administration and we’ve seen that —— 

Mr. SHIMKUS. Quickly. Quickly. Quickly. 

Mr. SPENCER. Yes. So no, that’s not a reasonable time frame. 

Mr. SHIMKUS. Thank you. 

Mr. Sunday? 

Mr. SUNDAY. No. 

Mr. SHIMKUS. Mr. Noe? 

Mr. NOE. Agreed. 

Mr. SHIMKUS. Ms. Hammond? 

Ms. HAMMOND. I agree that efficiency is important to an agency 

but I think taking the time is worth it to do it right. 

Mr. SHIMKUS. OK. 

Mr. Walke? 

Mr. WALKE. I am not here defending delays. I am opposing pollution increases. So no. 

Mr. SHIMKUS. OK. 

Mr. Holmstead? 

Mr. HOLMSTEAD. There’s no reason for it to take that long. 

Mr. SHIMKUS. Thank you very much. 

My time is expired. The chair now recognizes the ranking member of the subcommittee, Mr. Tonko, for 5 minutes. 

Mr. TONKO. Thank you, Mr. Chair. 

New York has done a lot to clean up air pollution in our state 

but we are still facing problems that blow in from the West. We 

need the New Source Review program to work. 

115 

We have to make progress on air quality together as a nation because cleaning up the air is a common responsibility and we all 

have to do our part. 

Mr. Walke, I am very concerned about the implications of Administrator Pruitt’s December 7th memo for state enforcement of the 

New Source Review program. 

I have a number of questions for you related to that memo. In 

your experience both as an EPA employee and as a representative 

for various interests on clean air issues, would you say that it is 

usual or unusual for the administrator of EPA to issue a memo 

that announces the agency’s intent not to enforce a statute, regulation, or other legal requirement? 

Mr. WALKE. Extraordinary, and I’ve never seen it before. 

Mr. TONKO. So we go with unusual there. 

I have the 1984 enforcement office’s memo related to issuance of 

assurances of no enforcement that you mentioned in your testimony. 

To your knowledge, has the policy in this 1984 memo issued during President Reagan’s administration ever been rescinded or replaced? 

Mr. WALKE. No, it has not. 

Mr. TONKO. Are there provisions of the Clean Air Act or within 

the NSR regulations that expressly provide EPA with discretion to 

not enforce the requirement for a facility to provide credible estimates of their projected actual emissions in the NSR program? 

Mr. WALKE. No, and to the contrary, Mr. Pruitt contravened the 

EPA regulations. 

Mr. TONKO. Is there any credible argument that loosening the 

criteria for estimating projected actual emissions or foregoing enforcement of this NSR regulation would be in the public interest 

and therefore justify issuing an assurance of no enforcement as discussed in this memo? 

Mr. WALKE. None whatsoever. Those emissions increases are 

what harm the public and Mr. Pruitt has granted amnesty to industries that get it wrong including badly wrong. 

Mr. TONKO. Administrator Pruitt has made much of his dedication to cooperative federalism. But this memo appears to do the opposite. 

Doesn’t EPA’s declaration that the agency will not pursue enforcement in these situations undercut states that want to enforce 

New Source Review standards? 

Mr. WALKE. Yes. Many states will choose not to grant amnesty 

and the last paragraph of the memo is really coercive federalism— 

threatening states that don’t buckle under to withdraw their program approval. Again, it’s very unusual. 

Mr. TONKO. Thank you. 

Your written testimony refers to a cryptic warning in the memo 

to states that—to states to toe the line. Would you elaborate on 

that, please? 

Mr. WALKE. Sure. So states administer the NSR program approved by EPA and states don’t have to follow EPA’s decisions to 

grant enforcement discretion or, in this case, outright amnesty 

across the board. 

116 

Mr. Pruitt’s memo seems to anticipate that and says in the very 

final paragraph in what’s not even a very subtle veiled threat that 

EPA has the ability to withdraw its approval from states that don’t 

conform to the understanding of the program that EPA has. 

And a memo like this, this is clearly a threat of coercive federalism to remove approval from states that don’t follow this amnesty approach. 

Mr. TONKO. Thank you. 

As administrator of this agency, Mr. Pruitt is supposed to uphold 

and enforce the law, not subvert it. This program is supposed to 

clean up the air and bring older facilities up to modern pollution 

standards. 

The people that I represent need a functioning program. For us, 

cooperative federalism means that EPA is a partner in enforcement, not a partner in sidestepping the law and creating more pollution. 

Ms. Hammond, is there anything you want to add about the December 7th memo? Do you think if a polluter believes EPA will not 

check their work it incentivizes applicants to underestimate their 

emissions projections? 

Ms. HAMMOND. Absolutely. It incentivizes the kind of gaming 

that we’ve seen throughout the entire history of this program. Over 

and over again we see polluting industries, especially old dirty coal, 

looking for loopholes and this just opens that wider. 

Mr. TONKO. EPA’s leaders often speak about the rule of law. 

That phrase takes an outsized role in the EPA’s latest budget request. 

For Mr. Walke or Ms. Hammond, can you help us understand 

how EPA is upholding its rule of law commitment by shirking its 

responsibilities to enforce the Clean Air Act as outlined in the administrator’s December 7th memo? 

Mr. WALKE. Well, the president’s budget now twice has proposed 

historically high cuts to EPA’s enforcement program. Thankfully, 

Congress did not follow suit the first time. 

I hope they will not this time. But what we have seen is an enforcement amnesty memo issued by the administrator himself that 

does not contain the name of any enforcement official on it, and as 

I detail in my testimony there’s some very serious concerns about 

the process that resulted in that amnesty. 

Mr. TONKO. Ms. Hammond, anything? 

Ms. HAMMOND. Yes. Just the further point that when an agency 

uses a guidance document to set binding policy, that evades the 

rule of law set forth in the Administrative Procedure Act. So we 

have that further problem as well. 

Mr. TONKO. Thank you. 

Mr. Chair, I yield back and thank you for your—— 

Mr. SHIMKUS. Gentleman yields back his time. 

The chair now recognizes the vice chair of the subcommittee, Mr. 

McKinley, for 5 minutes. 

Mr. MCKINLEY. Thank you, Mr. Chairman. 

I’ve been listening to testimony about this for now seven years 

in Congress and I think one of the conclusions I am hoping we will 

come to is that the—something’s broken, because we are hearing 

some strong push back from both sides. 

117 

But I am—I feel like a couple of you up there are unwilling to 

recognize that the system may need some modification. Is that fair 

to say, Mr. Walke? 

Mr. WALKE. No, sir. 

Mr. MCKINLEY. You don’t think it needs modification? 

Mr. WALKE. We are happy to discuss modifications that don’t result in pollution increases. But that’s what’s before this committee. 

Mr. MCKINLEY. Well, no one’s talking about increasing pollution —— Mr. WALKE. I was answering your question, Congressman. 

Mr. MCKINLEY. That’s what I just—and thank you on that. But, 

you know, I just feel that in many respects the previous administrations have used—have weaponized the EPA’s rule on NSR and 

it’s delayed, cost grief and—I spent my career in the engineering 

field and many of them in power plants getting these permits and 

I saw the delay, the delay and delay and the costs that were associated with those, and it was unnecessary. But I believe their—the 

intent was to try to slow walk the project so it didn’t happen. 

So I am first trying to recognize or get people to—the system, it’s 

broken. It needs modification. Been talking about, I think, Mr. 

Holmstead, you said 15 years ago they were talking about making 

modifications to it. 

I don’t know why we haven’t during this—is this just because 

we’ve got people with their head in the sand? There’s a problem 

here associated with this issue and we need to have an adult conversation instead of saying no and trying to focus on a distraction 

that none of us in the engineering field or in the energy generation 

want to have this problem or increased emissions. 

But I am afraid that what’s going to happen is that we are going 

to close down more and more of our power plants and as a result— 

with this delay and the fear of the unknown of our power plants 

and we are going to reach into that issue that we’ve been talking 

about for now the last two years has been about grid reliability and 

resiliency. 

When we have more and more—since the Polar Vortex of 2014, 

we’ve had 82 coal-fired power plants shut down. I know during this 

last winter that many of our gas and coal-fired power plants were 

under advisory about that there was maybe a shut down because 

of the lack of supply, particularly in gas. 

So I am very concerned that we are continuing to focus on something where we should be able to cooperate and get something accomplished. 

So, Mr. Holmstead, I’ve seen you just be very frustrated with 

this. You and I have had numbers of conversations about this. 

Can you give us some direction or advice? Because I applaud 

what Morgan Griffith is trying to do is to have an adult conversation and address this issue. 

So, Mr. Holmstead, do you have some thoughts about how? Because I thought Mr. Spencer laid out a good plan. I thought Sunday 

did as well on that. But what’s your perspective? What should we 

be doing to resolve the differences? 

Mr. HOLMSTEAD. I think we should just be having an honest conversation about how all of the Clean Air Act programs work together. I can’t tell you how many times someone who’s criticized a 

118 

reform says that, you know, you’re tearing at the heart of the 

Clean Air Act. 

As far as I know, the Clean Air Act must have 30 different 

hearts because no matter you try to reform, you know, you’re tearing at the heart of the Clean Air Act. 

Look, there are—air pollution control is enormously important. 

The benefits of controlling air pollution are very significant. 

No one is talking about increasing pollution. There’s no such 

thing as a massive increase that would occur even if we eliminated 

it. 

Come on, let’s have a serious conversation about this and that’s 

the frustrating part. Let’s be honest with each other about how 

these programs work and how some of them don’t. 

Mr. MCKINLEY. Thank you. 

Speaker—Chairman, I yield back. 

Mr. SHIMKUS. Gentleman yields back his time. 

The chair now recognizes the ranking member of the full committee, Mr. Pallone, for 5 minutes. 

Mr. PALLONE. Thank you, Mr. Chairman. 

My questions are of Mr. Walke and I am going to continue where 

my colleague, Representative Tonko, left off. I have also serious 

concerns about Administrator Pruitt’s December 7th memo. 

In your written testimony, you discuss a number of concerns with 

the memo and I want to explore that you did not mention in your 

written testimony. 

I understand that several circuit courts have now rendered decisions that limit EPA’s authority to enforce New Source Review violations by upholding a statute of limitation of 5 years from the time 

the first violation occurs. 

Is that correct? Yes or no. 

Mr. WALKE. Yes. 

Mr. PALLONE. The December 7th memo states that EPA will not 

take enforcement actions against any facility operator in relation to 

preconstruction permit requirements under the New Source Review 

program and these requirements include estimating projected actual emissions, determining whether they need a permit or not, 

and any other actions that are required before a construction 

project is initiated and completed. 

Administrator Druitt justifies this in part by initiating a policy 

that defers consideration of enforcement actions until the agency 

sees the actual emissions ‘‘during the 5- or 10-year record keeping 

or reporting period after,’’ the project in question has been completed and the facility resumes operation. 

So, Mr. Walke, am I correct in my concern that deferring enforcement to this post-construction period places any enforcement action 

past the 5-year statute of limitations being upheld by the circuit 

courts? Again, yes or no. 

Mr. WALKE. Absolutely. Yes, you are—have a right to be concerned. 

Mr. PALLONE. Thank you. 

So it appears that Administrator Pruitt has ensured that the 

agency will never act because the time period for action designated 

in the memo will always be beyond the statute of limitations. 

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Any action taken by the agency deferred until this time period 

would very likely be overturned by the courts. So Mr. Walke, again, 

do I have that right, yes or no? 

Mr. WALKE. One hundred percent right. 

Mr. PALLONE. OK. It doesn’t seem likely to me that these circuit 

court decisions would be unknown or overlooked by the administrator or by Mr. Wehrum, the Air Office chief who came on board 

at the agency about one month before this memo appeared. What 

do you think about that? That’s not a yes or no. 

Mr. WALKE. I can guarantee you Mr. Wehrum is aware of those 

cases. 

Mr. PALLONE. OK. So the next thing is, look, the bottom line is 

the policy Mr. Pruitt is pushing in the December 7th memo is inconsistent with the law, in my opinion, and clearly will allow any 

facility owner that wants to get around the NSR program to do so 

and that’s terrible public policy and will commit us to many more 

tons of harmful pollution and, in my opinion, it should be rescinded 

immediately. 

So I just have a few more questions on this memo and its relationship to the policy memo from the Reagan administration mentioned by Mr. Tonko. 

Hasn’t it been longstanding established EPA policy and direction 

to all agency personnel not to give either written or oral assurances 

to regulated parties that EPA will not take an enforcement action 

if a violation occurs? 

Mr. WALKE. Yes, and Mr. Pruitt’s memo directly contradicts a 

memo dating to the Reagan administration that lays out very specific criteria for no action assurances that he did not follow. 

Mr. PALLONE. OK. However, I am aware that there are cases in 

which EPA has provided assurances of no action to regulated parties. 

But these are in special narrowly-tailored circumstances and 

with limited time periods often associated with emergencies such 

as in the aftermath of a catastrophic storm like Hurricane Maria, 

for example. 

So is that correct? 

Mr. WALKE. Yes. They are very short lived, directed to specific 

companies, and not broad grants of amnesty like Mr. Pruitt’s 

memo. 

Mr. PALLONE. All right. 

So does the DTE Energy case or any other situation described in 

this memo fit within the narrow circumstances that warrant an enforcement holiday? 

Mr. WALKE. It does not fit within EPA’s policy. 

Mr. PALLONE. All right. So Mr. Walke, I have another question 

related to the administrator December 7th memo. The memo appears to create a new exclusion for emissions increases based on a 

facility operator’s intent to manage emissions increases once a 

project is completed. 

Now, how is such emissions management to be measured, if 

that’s the case? 

Mr. WALKE. We never know because they don’t have to self-report. If it’s done after 5 years, EPA cannot enforce. It’s completely 

120 

trusting the source with a promise that EPA will not second guess 

whatever they decide. 

Mr. PALLONE. So if a facility operator intends to manage emissions but then does not manage them, how would this failure be 

documented? Could EPA enforce this policy? 

Mr. WALKE. EPA would never know about it. It won’t be documented because the memo doesn’t require it and, indeed, the EPA 

will probably never find out about it and the emissions increases 

will go uncontrolled. 

Mr. PALLONE. All right. 

Thank you so much. Thank you, Mr. Chairman. 

Mr. SHIMKUS. Gentleman yields back his time. 

The chair recognizes the gentleman from Texas, Mr. Flores, for 

5 minutes. 

Mr. FLORES. Thank you, Mr. Chairman. I appreciate the panel 

and their enlightened testimony today. 

Mr. Spencer, I am going to start with you. You support the administration’s recent guideline memo on NSR permitting which 

clarifies that the EPA will not second guess a facility reconstruction emissions analysis. 

And so explain for me—for the committee what was the problem 

with the second guessing and why this memo is helpful for states’ 

work on NSR permitting. 

Mr. Holmstead, I will follow up with you on this as well. 

Mr. SPENCER. I think that the clarification was needed and it 

doesn’t necessarily create a blanket exemption from the responsibility that facilities have. 

I think that there should be some accountability such as if there 

is an error in a calculation that’s clear if their companies use a 

wrong significant emissions threshold. And so there are backstops 

for that kind of empirical data to be provided that would ensure 

that the calculations that have been submitted by the company are 

in fact accurate. 

Mr. FLORES. OK. 

Mr. Holmstead, do you have any additional comments? 

Mr. HOLMSTEAD. Yes. This whole situation shows that—why 

this—why this program is so broken. Here’s what happened. 

The company used a very sophisticated modelling technique that 

has been approved by, you know, other regulators to estimate its 

future emissions and it showed that there wouldn’t be an emissions 

increase. 

EPA brought an enforcement action and they said you didn’t do 

it right—you should use this methodology. Methodology that EPA 

enforcement officials wanted to use always showed every project 

would cause an emissions increase. 

So you have these two different ways of projecting out 5 years 

into the future and it’s so subjective and we have so much litigation over it that’s why we just need to use the simple engineering 

technique of saying look, what is your—what is your hourly emission rate. 

That’s what we do in other programs. That’s knowable, that’s ascertainable, and instead we have these kind of ridiculous fights, 

and what makes this particularly ridiculous is that case was 

brought more than 5 years ago. 

121 

So we now have 5 years of data showing that the plant actually 

decreased its emissions. But EPA is insisting that they should have 

predicted an increase and we know that whatever EPA was— 

turned out to be wrong because emissions have actually gone down. 

Mr. FLORES. OK. That leads me to into my next—a follow-up 

question for you and Mr. Noe and Mr. Sunday. 

An important component of the NSR program focuses on how an 

owner must calculate the anticipated emissions increase associated 

with the potential project which determines whether or not an 

owner is required to obtain an NSR reconstruction permit. 

So my questions are this. Did the NSR program’s rules on emission accounting typically result in a calculated emissions value that 

accurately reflects the true emissions increase? 

Do you want—do you want to waive off to somebody else? 

Mr. HOLMSTEAD. No. I would just say there is not an approved 

EPA method for predicting and that’s one of the problems. 

And because every circumstance is so different and because future emissions depends so much on things that are completely out 

of the control of the plant owner it’s kind of a fool’s errand to be 

saying that you can predict with accuracy what your emissions are 

going to be next year and year after. 

And we ought not to be putting people in the position to do that 

and one of the problems is there is no approved method for doing 

this. 

Mr. FLORES. Now, does—do you think that the current NSR 

emissions projections are overestimating the actual change in emissions? 

Mr. HOLMSTEAD. Certainly, the current approach is better than 

the way it used to work. But, again, it creates all kind of uncertainty and problems and it ought to be fixed. 

Mr. FLORES. OK. 

Mr. Noe, do the NSR program’s rules on emissions accounting 

typically result in a calculated emissions value that accurately reflects a true emissions increase? 

Mr. NOE. My sense is not and—— 

Mr. FLORES. Oh, microphone. I am sorry. Yes. 

Mr. NOE. My sense, Congressman, is no and we’d like a simpler 

way to do the math that allows you to move quickly if you don’t 

have a significant emissions increase. 

Mr. FLORES. OK. 

Mr. Sunday, same question. 

Mr. SUNDAY. No. In general, our facilities are obligated to account for emissions that they’re never going to produce. 

Mr. FLORES. OK. All right. 

I yield back the balance of my time. Thank you. 

Mr. SHIMKUS. Gentleman yields back his time. 

The chair now recognizes the gentleman from California, Mr. 

McNerney, for 5 minutes. 

Mr. MCNERNEY. Well, I thank the chairman. 

Mr. Walke, sometimes it’s hard to see the negative consequences 

of deregulation, especially if they sound reasonable. 

In this case, industry recommended that to improve the NSR 

program, we should allow owners of a facility to avoid the requirements of the NSR program if they improve facility energy efficiency 

122 

or if they invest in a project for pollution prevention or pollution 

control simply on those bases. 

What’s wrong with that argument? 

Mr. WALKE. Congressman, you have to look behind the labels. 

We all support energy efficiency projects that decrease emissions. 

Mr. McKinley said so. 

But these energy efficiency projects, the way the label is misused 

will allow and result in emissions increases. That’s the only way 

that the New Source Review requirements apply. 

The same is true for the pollution control project label. If they 

just reduced emissions, NSR requirements would not apply. Instead, they increase emissions. 

So the labels are very important and the requirements only apply 

when pollution increases. They do so in both examples that you 

provided as used by industry. 

Mr. MCNERNEY. I think that was pretty clear. Thank you. 

Mr. WALKE. Thank you. 

Mr. MCNERNEY. Ms. Hammond, it’s clear that the Clean Air Act 

has driven innovation and the U.S. economy has continued to grow 

and innovation has continued to thrive. 

Is there any evidence that the cost of pollution controls are so 

high that we’ve seen massive layoffs and loss of revenue? 

Ms. HAMMOND. The studies that I am aware of suggest that do 

the extent companies do have to change their business plans because of Clean Air Act controls, it’s not that. 

It’s market conditions that they’re responding to and, indeed, 

that’s the case with coal, most certainly. And in fact, with New 

Source Review we are often talking about these very old, very dirty 

coal-fired power plants and what you don’t hear is that in most jurisdictions these power plants can recover the cost of pollution control technology from their ratepayers. So they’re not even asking 

shareholders to bear those costs. 

Mr. MCNERNEY. So is there any evidence that current regulations have caused a reduction in economic growth? 

Ms. HAMMOND. No, and in fact, the opposite is true. 

Mr. MCNERNEY. Well, industry claims that the NSR program has 

stifled innovation and discouraged investment in technologies, new 

factories, and renovations that would deliver significant benefits. 

Is there any evidence for that claim? 

Ms. HAMMOND. No, and in fact, pollution control technology is 

itself a business and there are many small businesses that benefit 

from developing those technologies. 

So you can also add that to the list of more generalized economic 

benefits that we see. 

Mr. MCNERNEY. Geez, you’re getting ahead of me. I was going to 

bring that up. 

Manufacturing gets left out of the conversation. American domestic manufacturing does get left out of the conversation—manufacturers that produce pollution control equipment. 

And a report from 2013 states that the market for these systems was expected to grow to $78 billion a year by 2019 and a 2017 report expects the market to grow to $92 billion by 2022, and more 

than 75 percent of that growth is overseas and continues to grow 

as other countries invest in pollution control equipment, and these 

123 

are medium to small-sized private businesses located throughout 

the country. 

Would you anticipate the economic impact of these companies 

and their employees to be if the air quality protections are deregulated and unenforced? 

Ms. HAMMOND. Indeed, they will suffer in that case. 

Mr. MCNERNEY. So do you believe, based on facts and economic 

realities, that there is a choice between environmental control and 

regulation on the one hand and economic prosperity on the other 

hand? 

Ms. HAMMOND. No. It’s a false choice. They go together. We see 

over and over again the clean air is good for the economy. It’s good 

for health. People can go to school. They can work. We prosper with 

clean air. 

Mr. MCNERNEY. OK. 

Mr. Holmstead, I am going to throw you a bone here. You talked 

about good regulatory design. What do you mean by that? 

Mr. HOLMSTEAD. I mean trying to find the most effective, the 

most cost-effective ways of reaching our air pollution goals. 

Mr. MCNERNEY. Is there an academic model for good regulatory—— 

Mr. HOLMSTEAD. Yes. There are academic studies that look at all 

kinds of regulatory programs and in particular—I will say this. The 

way we have regulated cars and fuels has been very successful. 

That’s probably been the most successful part of the Clean Air Act. 

But if you look at these so-called stationary sources, the programs that have been most cost effective, where we have the highest rates of compliance, are these cap and trade programs where 

an overall cap is set. 

That really started with the acid rain program. There’s been a 

number of programs that are built upon that—the NOx SIP Call, 

the Care Program, CSAPR, state programs, and those programs 

are very cost effective and very effective at reducing pollution. 

Mr. MCNERNEY. So we shouldn’t just deregulate everything? 

Mr. HOLMSTEAD. No, no, no. No one’s—— 

Mr. MCNERNEY. And that’s what I—what I hear a lot. 

Mr. HOLMSTEAD. No, no, no. No. 

Mr. MCNERNEY. Not from you, necessarily. 

Mr. HOLMSTEAD. So I think what we need to do is just let’s figure 

out the most cost effective ways of achieving our air pollution goals. 

That’s what I—I mean, I agree about all the benefits of reducing 

air pollution. Let’s just do it in the most cost effective way. 

Mr. MCNERNEY. OK. Thank you. 

I yield back, Mr. Chairman. 

Mr. SHIMKUS. I apologize to my Republican colleagues for letting 

my Democratic colleague go so long. 

But the chair now recognizes the gentleman from Michigan, Mr. 

Walberg, for 5 minutes. 

Mr. WALBERG. Thank you, Mr. Chairman. Thanks to the witness 

team here as well. Appreciate your involvement. 

Mr. Noe, you have highlighted a couple of improvements to the 

NSR and PSD programs in your testimony. Given your description 

of how broken the program is, are there any other reforms you 

124 

think are critical to streamlining the permitting process while protecting the environment, which we all agree on? 

Mr. NOE. Thank you, Congressman. 

I think there’s a couple I want to mention quickly. First of all, 

EPA presumes that emissions from multiple projects at a plant 

over several years should be aggregated when determining significance for NSR applicability. 

They believe the projects are connected economically if they serve 

the basic purpose of the plant even if they incur many years apart 

or undertaken for very different business reasons and by themselves are minor. 

Once those emissions are added together, NSR can potentially be 

triggered with its heavy burdens and delays and we believe the 

EPA should only add together emissions from projects that are 

truly linked. So that’s one example. 

A second is EPA’s PSD modelling guidelines historically have required excessively conservative assumptions about dispersion 

model inputs that frequently result in gross over estimates of a 

project’s air quality impacts and regulatory air quality models have 

the capability to calculate ambient air concentrations based on 

variable emissions background and modern probabilistic tools and 

meteorological conditions. 

So rather than assuming, for example, that the facility is going 

to be running at maximum levels, all the other nearby sources are 

going to be running 24/7 at maximum potential level and that they 

ought to look at the distributions of the emissions in a probabilistic 

way. 

And EPA can address this rapidly-developing permit gridlock by 

having more flexible policies that actually reflect the realistic emissions and the realistic modelling. 

Mr. WALBERG. Rather than always the worst case scenario? 

Mr. NOE. Yes, sir. 

Mr. WALBERG. What other Clean Air Act obligations does the forest products industry face? 

Mr. NOE. You know, we have a whole bunch of regulations that 

we are covered by. Jeff gave you some examples with power plants. 

For us, let me just give you some of the major ones. So for hazardous air pollutants, EPA’s MACT program has targeted pulp and 

paper operations, wood product driers and presses, industrial boilers and coating operations where emissions have reduced as much 

as 92 percent. 

For criteria pollutants that are regulated by the NAAQS, those 

criteria pollutants have been dramatically reduced through a regulatory action such as the NOx SIP Call regional haze program and 

state efforts to implement the NAAQS through state implementation plans. 

For example, our SO2 emissions are down by over 50 percent 

since the year 2000. 

Mr. WALBERG. OK. Thank you. 

Mr. Holmstead, you were involved at the EPA in the early 2000s, 

have, as you said, three decades of experience on NSR reform. 

As a former EPA official, speaking from that experience, why has 

EPA over the past 28 years had so much difficulty finalizing NSR 

guidance documents? 

125 

Mr. HOLMSTEAD. Well, I think some of the controversy you have 

seen here gives you a hint at why that is. 

Mr. WALBERG. I am not egging you on. I am just—— 

Mr. HOLMSTEAD. No. But, you know, part of the problem here is 

that this NSR program has become primarily an enforcement program. We refer to it as a permitting program but when it comes 

to existing sources, it’s become the program where EPA puts almost all of its money when it comes to enforcement. A huge percentage of the budget for EPA enforcement and DOJ enforcement 

goes to NSR. 

They love this program because they believe that if they just look 

long enough they can find NSR violations wherever they look and 

they don’t want to give up that weapon because if we actually 

made the program more sensible so it really was a fair and predictable regulatory program you wouldn’t be able to bring all these 

lawsuits. 

And that—I mean, I am being pretty candid here but that I 

think is the main reason why we haven’t been able to reform the 

program. 

Mr. WALBERG. Kind of target rich. 

To the extent court decisions and litigation have contributed to 

this, what’s the cure to ensure regulatory certainty? 

Mr. HOLMSTEAD. Boy, if we could just have some narrow 

thoughtful legislative reforms, I mean, that’s the best way to take 

care of it. 

Mr. WALBERG. To get the job done and do it in the least restrictive but most efficient way? 

Mr. HOLMSTEAD. Yes, sir. 

Mr. WALBERG. OK. Thank you. I yield back. 

Mr. SHIMKUS. Gentleman’s time is expired. 

The chair now recognizes the gentleman from Texas, Mr. Olson, 

for 5 minutes. 

Mr. OLSON. I thank the chair, and welcome to our six witnesses. 

A special welcome to you, Mr. Noe. I am a fellow paper guy. My 

dad got a Ph.D. in paper chemistry from the Institute of Paper 

Chemistry when it was in Appleton, Wisconsin in 1967—a long, 

long time ago. 

He spent over 30 years working for Champion International, now 

became International Paper. He worked at mills in Ohio, North 

Carolina, Alabama, and Texas. 

And your association has members all across America. As to the 

members of Region 6—Texas, Arkansas, New Mexico, Oklahoma, 

and Louisiana by their new regional administrator, Ann Idsal, and 

she has already said that she sees major differences between the 

regions in terms of enforcement of some of these things involving 

the NSR. 

My question is, as you deal with EPA’s regional differences in 

the offices, do you see these differences and how they impact your 

members of your association? 

Mr. NOE. Yes, Congressman. We—our members do see these differences and, you know, there is, unfortunately, a lot of confusion 

with the NSR program. 

I can’t tell you how complicated it is and, honestly, I’ve literally 

been in discussions with some of the best lawyers you could find 

126 

anywhere and people get into debates and I’ve seen examples 

where none of them can figure it out and they maybe defer to one 

in the room. 

I mean, this is just not how our government should work where 

things are that complicated and where the law might be different 

based not only on what region in the country you’re in but who actually is the person dealing with your permit. That’s just not the 

way a democracy ought to work. That’s not the way a good regulatory process should work. 

Mr. OLSON. So there’s lots of uncertainty in that process, correct? 

Mr. NOE. Yes, sir. 

Mr. OLSON. Another question—a crucial step in any construction 

project, probably the most crucial step is to obtain necessary financing—the money. 

Have you members had a hard time getting project financing due 

to uncertainty like multiple standards in multiple regions of the 

EPA and time delays caused by the NSR process? 

Mr. NOE. I think any time there’s regulatory uncertainty that 

creates business uncertainty. It creates risk. So it does impede 

projects from going forward. 

Mr. OLSON. Mr. Sunday, how about you? Difficulty getting permitting process with all the financial stuff as well? 

Mr. SUNDAY. Yes. If you’re going into the debt markets or to do 

private financing, the lender is not going to give the revenue or 

capital until all appeals are settled. 

And so what we’ve seen is perpetual litigation by third party 

groups where the permit goes through the process. There’s a challenge. They go through the court. Now the universe of controls is 

different. Lender is still not giving the capital. We go through the 

litigation again. So it really hangs up the process because we can’t 

get that clear path to yes. 

Mr. OLSON. One question for you, Mr. Spencer. In your testimony, you describe some of the issues with the NSR in terms of 

enforcement. 

Specifically, you said, and I quote this, ‘‘It’s important to reorient 

policies toward pursuit of actual violations that create emissions increases,’’ end quote. 

I assume the NSR was involved with pursuing actual violations 

and you say we have to reorient that process. Can you explain that 

more—elaborate on why you made that statement? 

Mr. SPENCER. Yes. Thank you, Congressman. 

I have been dying to say bizarre NSR all day long. So I got that 

into the record. 

I wrote down a few phrases here—unintended consequences, perverse incentives, absurd results—and those are terms I’ve heard 

more in my practice with Clean Air Act regulations and enforcement than I’ve heard in my entire career. 

And so I think what you’re looking at is something that Mr. 

Holmstead alluded to earlier. When you have a facility that has engaged in an emissions projection but the reality of the situation is 

that time had advanced since that projection was made and there 

has been no actual increase. 

127 

And so as a state regulator, when we exercise our enforcement 

ability, we are looking for actual events—actual emission violation 

events. 

Mr. OLSON. One final question. From your perspectives, does 

EPA’s memo of December 7th improve the reorientation of the 

NSR? Is that what you tried to do? I am sorry, the NSR. 

Mr. SPENCER. Yes. I would agree with that. 

Mr. OLSON. OK. 

And Mr. Chairman, I yield back the balance of my time. 

Mr. SHIMKUS. The gentleman yields back. 

The chair now recognizes the gentleman from Georgia, Mr. Carter, for 5 minutes. 

Mr. CARTER. Thank you, Mr. Chairman. 

Mr. Noe, I too—I grew up in the South where paper mills are 

plentiful. In fact, my dad worked in a paper mill. He didn’t have 

a degree. 

He was just a laborer. He worked in a paper mill for over 35 

years and the best thing he ever did for me after my freshman year 

in college was to put me to work on a broke beater. Do you know 

what a broke beater is? 

Mr. NOE. I—I am not sure. 

Mr. CARTER. Well, it’s at the end of the process. It’s where all 

the excess paper goes and you—— 

Mr. NOE. The broke comes out. Yes. 

Mr. CARTER. Yes, and you just take it and you assemble it and 

you put it back and then you recycle it, per se. But I can tell you 

that it was as close to hell as I’ve ever been. 

[Laughter.] 

I have never been that close. But it may—I could not get to 

school quick enough. I could not get back to school and study hard 

quick enough, I will tell you that. It was a life lesson. 

Air quality was important to us. People would visit us and they 

would say, ‘‘What’s that smell?’’ And we’d say, ‘‘That’s money you 

smell,’’ because that’s what it was for us. 

But it is important and I understand that. But I want to try to 

understand. Tell me what project netting is. What essentially is 

that? 

Mr. NOE. So, basically, what we want to make sure we have is 

a system when we do the math and we look at a project to see if 

it results in a significant emissions increase. If it does, then by all 

means, let’s go through the heightened scrutiny. Let’s put on best 

controls if that’s indeed the case. 

But when we do the math, let’s look at the increases and decreases together so we don’t wind up getting the project gummed 

up in the works, delayed, spend hundreds of thousands of dollars 

on consultant studies just to get to the obvious answer that when 

there’s not a real significant emission increase we should be putting into NSR. We ought to go forward with the project because 

these beneficial projects. 

And one point I would like to make is, you know, I think one 

thing that’s being lost is when a regulatory program inhibits efficiency improvements at one facility. It’s doing that all around the 

country for a bunch of them. 

128 

So when we have demand X to meet, we are going to do it as 

a nation in a more inefficient and higher-polluting way. When we 

can get these efficiency improvements in by nature we are going to 

have not only less CO2 but other pollutants as well. 

Mr. CARTER. OK. You know, I’ve heard the process. Tell me—tell 

me how we reform the process. Tell me what we’d do differently 

from what we are doing now that makes it practical and sensible 

because that’s what we all want to get to. 

Mr. NOE. Sure. And some of the things I’ve mentioned these are 

things EPA can do either through guidance or through rule making. There are some things Congress can do. Mr. Holmstead mentioned some of them. 

Ones I would like to highlight is we would like to ensure that 

clean units have legislative support. So, in other words, an emission unit that’s been through the permitting process, to have best 

controls put on it—that that ought to be only an increase in the 

units permitted allowable emissions would trigger NSR. 

For pollution control projects, those need legislative support and 

they’re excluded under the New Source Performance Standards 

program. It makes sense to do the same thing in the NSR program, 

we believe. 

Mr. CARTER. Right. Right. 

Well, Mr. Noe, I want to—I want to thank you and I want to 

thank you for what the paper industry did for me and for my family. 

It provided us a living. 

Mr. NOE. Well, Congressman, if I could just briefly thank you 

and Mr. Olson and I am glad to hear you have a connection to the 

industry. Our workers are up here visiting many of your offices 

this week. 

Mr. CARTER. Yes, they are. 

Mr. NOE. I hope you get to meet them. And you know these are 

very proud hardworking people—— 

Mr. CARTER. Absolutely. 

Mr. NOE. —and they’re not asking for anything from any of you 

other than the right to compete in this country. They can beat anyone in the world as long as they are given a playing field that’s 

workable. 

No one is here asking you to take controls off projects that ought 

to have emissions controls. We just don’t want the delay and the 

unnecessary red tape that is gumming up our modernization. 

Mr. CARTER. Thank you, Mr. Noe. 

Mr. Chairman, I yield back. 

Mr. SHIMKUS. Gentleman yields back his time and the chair now 

recognizes the gentleman, if he’s ready, the gentleman from Texas. 

Do you want me to go to—all right. The gentleman is recognized 

for 5 minutes. 

Mr. GREEN. Thank you, Mr. Chairman. I am thanking you and 

the ranking member for holding the hearing today on the New 

Source Review and I would also like to thank our panellists. 

I come from an area—a very urban area in Houston. We have 

issues. We have 5 refineries and more chemical plants than I can 

count. 

129 

This is a question for, I think, everyone on there. Many stakeholders have noted that the substantial delays for air permits 

under the New Source Review program delays two years or even 

longer. 

My question is are the delays for issuing the permits the fault 

or the EPA or the state agencies that are administering the program? 

Mr. SPENCER. Since I am with a state agency I am going to say 

it’s EPA’s fault. 

[Laughter.] 

No, I think that, as we’ve indicated in our testimony, certainty 

adds to the process of being able to issue timely permits. So the 

more certainty we have and clearing up the muddied guidance documents, applicability determinations, court cases, the better, and 

more efficient permits we can issue. 

Mr. GREEN. Anybody else? 

Mr. NOE. We’d like to say, Congressman, what we’d like to see 

happen to streamline the process is just make sure that we get 

the—sort the wheat from the chaff. The truly significant projects 

with significant increases ought to go through NSR. They ought to 

put on controls. 

But for these minor projects, why gum them up in the works 

with these consultant studies that take all this time and money 

and delaying these projects from going forward? 

So we’d like to streamline the process. I believe EPA could do 

that. 

Mr. WALKE. Congressman, the permits in this country are issued 

primarily and overwhelmingly by the states, and it’s the—it’s, 

frankly, a lack of resources and capacity at the state level that’s 

responsible for most of the permitting delays. 

There was a good Houston Chronicle article about a week or two 

ago in which a Texas regulator said exactly that about issuing air 

permits in Texas. 

Now, the Trump administration yesterday just proposed a 33 

percent cut to the state and tribal air grants, which are the moneys 

from Congress responsible for issuing permits in a timely fashion. 

So we’ve got cross purposes and I expect that our friends at 

AAPCA and the National Association of Clean Air Agencies would 

like to see Congress fully fund them so they can issue permits on 

time. We all want to see that. 

Mr. GREEN. I was involved in a permit a few years ago because 

right now we are seeing in east Harris County, particularly along 

the Gulf Coast, expansion of chemical plants just because of the 

low price of natural gas, and the delay in the permits were a combination. And I would call EPA and say, oK, tell me what’s going 

on. It was for Exxon Mobil in Baytown—huge expansion of their 

chemical facility—jobs and everything else. 

And so sometimes it’s both sides. It’s both the Feds and the—because at that case it delayed it a little bit because there was—I 

didn’t know the EPA, Mr. Chairman, had an appeals process within their agency and when I was told by the deputy EPA administrator he said, oh, we got a good result—I mean, we got a good 

brief and it’ll go to this group. 

130 

I said, ‘‘Well, who are they? I want to do a letter to them.’’ And 

he said, ‘‘Oh, no, they’re all EPA administrators.’’ I said, ‘‘Well, how 

long will that happen?’’ He said, ‘‘It will take a few months,’’ and 

it took six months to get through that EPA appeals board. So, you 

know, which didn’t do anything to it. Just delayed it six months. 

Why are there long waits for air permits in industry-friendly 

states like Texas? Could delays from the state agencies be a result 

of the budget cuts? And I think you answered that. 

Earlier this week, President Trump’s 2019 budget proposed a 25 

percent cut in EPA and reduced the EPA’s workforce by over 3,000 

employees and I think it’s already answered that if you believe 

these cuts in EPA will improve air permitting times, I don’t know 

if you can do it with less—do it faster with less people. Is that possible? 

Mr. WALKE. I don’t see how it’s humanly possible, and you’re 

right, that it’s EPA and states contributing and the Trump budget 

proposes cuts to both. 

Mr. GREEN. OK. 

Thank you, Mr. Chairman. I yield back. 

Mr. SHIMKUS. The gentleman yields back his time. 

The chair now recognizes the very patient, although he’s not a 

member of the subcommittee, Mr. Griffith, for 5 minutes. 

Mr. GRIFFITH. Mr. Chairman, I am just very appreciative to be 

here as we discuss this issue, which is very near and dear to my 

heart. 

I will say that I appreciated somebody saying that what we need 

is narrow thoughtful regulatory reform. I believe that was you, Mr. 

Holmstead, and I am attempting that with my bills and open to 

suggestions and, you know, I am looking in my file here—all kinds 

of changes and rewrites and so forth, and that’s what we are trying 

to do is just have a narrow thoughtful regulatory reform that works 

right. 

And it comes about because, as some people say, you know, 

there’s a lot of people out there that want to see this thing work. 

We all want clean air. 

Mr. Noe mentioned his industry. They were out in the hallway. 

I had to step out right at the beginning just to say hi because I 

have probably a couple thousand employees at West Rock at two 

different facilities in my district and it’s important. 

Likewise, I thought we’d touched on maybe part of the problem 

in Ms. Hammond’s comments earlier when she was talking about 

putting on controls at coal-fired power plants and she said the 

plants can—agencies or the power companies can pass—and I am 

going to—I hope I get it right but it’s pretty close—can pass the 

cost on to the ratepayers so it doesn’t cost their shareholders anything. 

That’s the problem. It’s the ratepayers who get it. And so I received—I thought it was interesting—exactly two weeks ago I received a series of texts from a friend of mine in the district and it 

said, ‘‘Just opened my AEP bill.’’ 

She gives me the numbers and I calculated it. It’s 70 percent 

higher than what she said her highest bill was last year. She goes 

on to say, ‘‘We can handle it but many are suffering. Do you think 

131 

we can get it turned around?’’ Big subject on Facebook. Everyone 

is panicking. 

So when we do regulations that—you know, maybe it doesn’t affect the shareholder. But most of my constituents in southwest Virginia aren’t shareholders. They’re ratepayers, and it’s easy to sit 

here in Washington where people have big incomes and say, well, 

we are just going to pass this on to the ratepayer. 

But when you’re dealing with a lot of folks who have modest 

means, we can handle it. I can handle it. This lady who wrote me 

can handle it. But many in my district are suffering and we have 

to come up with reasonable reform that makes sense, where we 

don’t open up for pollution but we do make sense. 

And I am going to give you another example. I got a furniture 

manufacturer in my district and I haven’t been there in a couple 

years now so maybe they fixed it somehow. 

But Mr. Noe mentioned earlier about the confusion on the law, 

and he had a loop in his conveyer belt that was about half the size 

of this room and there was nothing there. It was just a big loop. 

And he said, ‘‘I bet you wonder why we have that,’’ and I said, 

‘‘Yes, I do.’’ And he said, ‘‘It’s because if we change this—this was 

once a part of our paint system and if we change it, we have to 

get permission from the EPA in advance. So we built these ramps 

to go over it and we just leave it there and it just runs off here 

into the middle of nowhere and back.’’ 

That’s what we are trying to fix. It is—you know, that’s the one 

I can understand best. Some of you all can talk about all the different controls and different improvements at the—at the big 

power plants. 

But I know that it also deals with things like conveyer belts and 

the end result if we don’t get it right, and we haven’t, is a 70 percent increase and the people back home having to pay for their 

electricity. 

All right. Got that off my chest. I appreciate you all’s patience 

on that. 

I do think that we can work together to get this done. Mr. 

Holmstead, you had some concerns that you raised earlier and I 

understand in the written testimony that Mr. Walke claims that 

when you were head of the EPA Air Office back in 2002 the Bush 

administration weakened the clean air regulations at issue here to 

insert loopholes and exemptions that let industry increase harmful 

air pollutants significantly and evade any modern pollution controls. Would you like to respond? 

Mr. HOLMSTEAD. Thank you. 

What you just read indicates part of the problem here, and just 

in terms of the honesty of the debate. 

So that was a quote from my friend’s testimony who said that 

the Bush administration weakened them to insert loopholes and exemptions that let industry increase harmful pollution significantly 

and evade any modern pollution controls. 

I don’t know how anyone can say that. That was 2002. You go 

on EPA’s Web site. You do a search and you see where emissions 

have gone since 2002 and all of these pollutants that we are talking about have been reduced by about 35 percent since 2002. 

132 

So we did do some important reforms that I think made the— 

made the program better. We didn’t let industry increase harmful 

pollution significantly. 

We tried to do things in a thoughtful way, and that’s part of the 

problem here. 

Mr. GRIFFITH. And I appreciate that and I appreciate the opportunity to be with you all today and appreciate everybody’s testimony. 

And what I appreciate most is that two of you who completely 

disagree—Mr. Holmstead and Mr. Walke—are sitting side by side 

and that’s the way it’s supposed to be in America. 

We can disagree. We can have battles of ideas. But we don’t have 

to be completely disagreeable or get so angry that we can’t sit at 

the table together. 

Thank you for that and appreciate your testimony. I yield back. 

Mr. SHIMKUS. The gentleman yields back his time. 

Seeing no further members wishing to ask questions for the first 

panel I would like to thank you for being here and joining us today. 

Before we conclude, I would like to ask unanimous consent to 

submit the following documents for the record. 

We have a letter on the EPA’s NSR program. We have this article, ‘‘EPA’s New Source Review Program: Time for Reform?’’—Mark 

Fraas, John Graham, and a guy named Jeff Holmstead. 

[The information appears at the conclusion of the hearing.] 

And pursuant to committee rules, I remind members they have 

10 business days to submit additional questions for the record and 

I ask the witnesses to submit their responses within 10 business 

days upon receipt of the questions. 

Without objection, the subcommittee is adjourned and I would 

encourage my colleagues to get downstairs for our markup. 

[Whereupon, at 3:54 p.m., the committee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

133 


30134.092

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

WASHINGTON, D.C. 20460 

Enforcement Confidential and Deliberative 

Privileged and Confidential 

MEMORA:l'<'1HJC\1 

To: 

From: 

Subject: 

Date: 

William Harnett, Director 

IPTID/OAQPS 

Adam M. Kushner, Director \ -'~ AED/OECA ~ 

Air Enforcement Division's Comments on the Draft New Source Review Clean 

Air Interstate Rule (August 24, 2005 draft) 

August 25, 2005 

The Air Enforcement Division (AED) bas reviewed the draft New Source Review Clean 

Air Interstate Rule (August 24, 2005 draft) and has significant concerns about the test proposed 

and the positions taken in this proposed rule. The proposed rule will adversely impact our 

enforcement cases and is largely unenforceable as written. AED's concerns are outlined in more 

detail be! ow. 

AED received the latest (and substantially revised) draft of the proposed rule on August 

24th. The proposed rule represents a significant departure from heretofore applied New Source 

Review (NSR) emissions tests for electric generating units (EGUs). We are diligently working to 

assess the impact the proposed rule will have on both the filed cases as well as our ability to 

bring future enforcement actions, as appropriate. In addition, we are assessing the relative 

enforceability of the proposed rule as drafted. While we have completed a good deal of work 

(which we share below), our work to assess the impact of the rule continues. We will be certain 

to share with you the additional work we perform as it becomes available. 

We will not restate our prior general comments on earlier drafts of the proposed rule as 

contained in our memoranda of June 30, 2005 and August !8, 2005. However, to the extent that 

the latest proposed draft of the rule does not reflect those comments, we again request that such 

comments be addressed in subsequent drafts of the proposed rule. Thank you for the opportunity 

to comment on this draft and I look forward to discussing these matters with you. 
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Enforcement Confidential and Deliberative 

Privileged and Confidential 

The Emissions Tests 

We stated in the draft rule that one of its purposes is to ensure that existing sources that 

increase their operating capacity be subject to major NSR permitting. In the section of the draft 

rule entitled "Significant Emission Rates," OAR states: 

By eliminating the use of a significant rate, we balance the differences in these 

tests, and focus permitting authority resources on reviewing all changes that result 

in increases in existing capacity. We believe that this result is consistent with our 

interpretation of Congressional intent in that it assures that, at a minimum, 

capacity increases undergo major NSR review. 

See Draft Rule at p. 23. 1 

To assess whether the proposed alternative applicability test(s) in the rule in fact preserve 

EPA's stated intention to capture modifications that increase emissions as a result of an increase of 

capacity, AED analyzed emissions data obtained from EPA's Clean Air Markets Division from 

units with known capacity increases. AED evaluated such data both pre- and post-change. The 

changes selected for analysis were based on data availability. The results of our analysis are set 

forth in Attachment A to this memorandum. 

As currently written, the draft rule sets forth two possible methods that an EGU could apply 

in assessing whether or not a change would trigger major NSR. As we understand the "achievable" 

emissions test proposal, an EGU must obtain a major NSR permit if the modification to be made 

increases the maximum achievable hourly emissions.' To apply the proposed test, an EGU would 

first select a maximum achievable hourly emission rate that could have been obtained within the 

five years before the change. It would then project what the maximum achievable hourly emission 

rate could be after the change. If the projection shows that the change would cause an increase in 

the maximum achievable hourly emission rate, the source would trigger major NSR and would need 

to apply for and obtain a pre.:Construction permit before p~rforrning the change. 

AED believes that a utility would have many ways to show that a particular capacity is or 

was theoretically achievable, which makes analysis of the impact of the test difficult and 

application of the test largely unenforceable. Because most of the information and data that might 

inform application of the test would be solely in the possession of the EGU (under the draft 

1 As noted elsewhere in this memorandum, AED believes that conflating the emissions test 

for triggering NSR with the NSPS emissions test is contrary to Congressional intent. See State of 

New York v. EPA, Slip op. at pp. 9-11,24-26. 

2 Compare Definition of"major emitting facility" at CAA Section !69 (1) ("stationary 

sources which emit or have the potential to emit, one hundred tons per year or more." 

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30134.094

Enforcement Confidential and Deliberative 

Privileged and Confidential 

proposal as I'.Titten), a pennitting authority would have exceedingly difficult time assessing whether 

or not a change at an EGU in fact triggered NSR. Thus, this theoretical achievable test creates a 

subjective test leading to a "battle of the experts," and consequently greatly handicaps the efficient 

administration of a meaningful pre-construction pennitting program. The proposed test will make 

it difficult for both a utility and the regulators to assess the compliance status of an EGU. 

An illustration of the problems associated with such a test is contained in our analysis of a 

project at Case Study# 2. See Attachment A page 12. See Attachment A. In this example, a 

reasonable theoretical "achievable" emission rate was calculated using the methodology described 

in this memorandum. Using this method, the achievable hourly emission rate was calculated to be 

more than ten times higher than the average hourly emission rate in the five-year period prior to the 

change. Comparispn of this baseline to a calculated maximum achievable emission rate after the 

change would make meaningful analysis of the change impossible, because the achievable emission 

rate is not a clear indicator of capacity. Any increase in capacity or emissions caused by this 

change would not register because the comparison takes place at a level 10 times higher than 

representative emission rates of the unit. · 

In addition, because NSR is a pre-construction permitting program, the unit would retain the 

ability to apply for a limit at this achievable hourly rate. Since the rate is not based on 

representative emissions and is not indicative of capacity, a source could increase capacity 

significantly and still not exceed the limit. Because the analyses in the attachment were performed 

using actual operating data, and, presumably, the rule woul\1 not restrict the calculation of 

achievable emissions, we would expect a source to calculate achievable emission rates higher than 

those in these examples by using theoretical heat rates or emission rates, exacerbating the 

enforceability problem. 

Because of the difficulties associated with anticipating all of the arguments which a utility 

could make as to what is or is not "achievable," AED used actual maximum historical emissions 

coupled with maximum heat rate data to analyze the "achievable" test. AED believes that this 

approach is more conservative, and consequently probative of the practical implications of the 

proposed "achievable" test(~, it has a better chance of triggering the NSR pre-construction 

permitting requirements) than applying the ''achievable" test to determine what emission rates 

were potentially or theoretically "achievable. 

For each case study, the baseline level is represented as a horizontal line across the graph. 

The maximum achievable hourly baseline represented in the attached case studies were calculated 

using the maximum heat rate, expressed in mmbtulhr, multiplied by the maximum emission rate, 

expressed in lbs/mmbtu, within the years prior to the change, but no earlier than 5 years before the 

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30134.095

Enforcement Confidential and Deliberative 

Privileged and Confidential 

modification.3 Significantly, these two input values (heat rate and emission rate) may not have been 

(and are not typically in the real world) temporally coincidental. AED believes that the draft rule 

allows such an interpretation, although we strongly suggest that there would be no basis for 

characterizing such an approach as representative of operations of an EGU either prior or 

subsequent to a change. 

AED further understands that we are proposing to seek comment on an alternative 

emissions test that would use an "achieved" baseline calculated by using the maximum hourly 

emission rate, in lbsfhr, in the 5 years prior to the change. As we understand this proposal, an EGU 

must obtain a major NSR permit if the change is projected to cause an emissions increase above an 

actually achieved maximum hourly emission rate. An EGU would first select a maximum achieved 

hourly emission rate that occurred within the five years before the change. It would then project 

what the maximum hourly emission rate could be after the change. If the projection showed that 

the change would cause an increase in the hourly emission rate, the source would need to obtain a 

major NSR permit before performing the change. 

The achieved baselines represented in the attached case studies set forth in Attachment A, 

were selected as the maximum hourly emission rate, expressed in lbslhr, within the years prior to 

the change, but no earlier than 5 years before the modification. No calculation of this baseline was 

necessary because the CAMD data contain these values.4 As with our previous analysis, AED 

compared the baseline level to actual emission rates that occurred after the change to identify any 

hourly emissions rates which exceeded the baseline level. 

3 Data collected by the Clean Air Markets Division's is available for the calendar year 

beginning in 1995. As a consequence, where a change occurred before 2000, less than five years of 

emissions data was available to be used in determining baseline emissions. Please also note that 

foi some units, we have identified a very small subset of hourly data which is clearly outside a 

reasonable operational range, which we attribute to data substitution, continuous emission 

monitor malfunction or other reasons. There was probably no need for CAMD to address these 

data issues in that the acid rain program evaluates EGU performance on an annual, not hourly, 

basis. For this subset we have applied a data correction factor which eliminated the extreme 

0.1% of heat rate data points only. After application of this correction factor, all the data seemed 

to fall within reasonable operating parameters. See ~. Comanche analysis at Attachment A. 

As noted above and elsewhere in this memorandum, the proposed rule does not allow for any 

data correction nor does it have any requirement that the maximum achievable hourly rate or 

emission rate be representative of operating conditions. 

4 Note that the preamble states that these two baseline should be similar. As illustrated in 

the attached graphs, this is not the case. The analysis of this "achieved" proposal contains the same 

data limitations noted above. 

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30134.096

Enforcement Confidential and Deliberative 

Privileged and Confidential 

The attached analysis shows that even where we have known capacity increases, the 

proposed test and the test for which EPA seeks comments, does not fulfill the stated intent of the 

proposed regulation. Consequently, one can only conclude from application of the so-called 

"achievable" test that no "change" causing an emissions increase (capacity or otherwise) at an EGU 

would trigger NSR requiring the source to seek a pre-construction permit from its permitting 

authority and install po!Iution controls. Moreover, one can only conclude from application of the 

so-called "achieved" test that only under' the rarest of operational circumstances would a "change" 

causing an emissions increase (capacity or othernise) at an EGU trigger NSR requiring the source 

to seek a pre-construction permit. 

Specific Comments on Proposed Rule 

The following are AED's specific comments to the August 24, 2005 draft rule: 

Language: 

Comment: 

Language: 

Comment: 

Pages 3; 11: wfhe revised applicability test is the same as that in the New Source 

Performance Standards Program under CAA Section 111." 

We suggest that you modify the sentence as follows: "The revised applicability 

test is the same as that for the emissions test for the New Source Performance 

Standards Program.'' The modified sentence emphasizes that it is the emissions 

aspect of the new source performance standards (NSPS) program applicability test 

only that is being purportedly adopted for purposes of measuring emissions 

increases in the NSR program. Such an approach will give us a better chance of 

disentangling the proposed rule from the issues raised in the Duke and New York 

matters, while minimizing collateral and unintentional adverse impacts on the 

NSPS program for other non-EGU sources. We believe, however, a better 

approach would be to not tinker with the NSR test at all. Nonetheless, should a 

decision be made to alter the NSR applicability test for EGUs we suggest t!Jat a 

new and distinct NSR rate-based test be developed that, at a minimum, in fact 

captures emission increases that are the result of unit expansions and design 

changes. We suggest that the proposed rule be conformed in its entirety to 

conform to this recommendation. 

Pages 3 and ll: ''we are proposing to compare the maximum hourly emissions 

achievable at that unit during the past five years to the maximum hourly emissions 

achievable at that unit after the change ... " Compare to page 16: "by comparing 

the pre-change maximum achievable actual hourly emission rate to the postchange maximum achievable actual hourly emission rate assuming the source is 

operating at its maximum operating capacity. 

The language used to identify the test should be referenced consistently 

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30134.097

Enforcement Confidential and Deliberative 

Privileged and Confidential 

Language: 

Comment: 

throughout the draft role. Based on the language offered it is difficult to discern 

whether OAR intends to propose a "malCimum achievable hourly emission rate" 

test or a "maximum achievable actual hourly emission rate" test. AED prefers the 

latter formulation. 

Page 12: "There is little additional benefit to be gained by applying the 

requirements of the major NSR program to existing sources that modify without 

changing their current operating capacity." 

As discussed in detail above in the Section of this memorandum entitled "The 

Emissions Test," the "achievable" test offered by OAR in the draft rule is not 

triggered by an increase in "current operating capacity," and the ''achieved" test is 

triggered only in rare instances. 

Language Page 12: "We designed these regulatory systems [cap-and-trade] to encourage 

reductions from the higher, less efficient emitters .... " See alsop. 37 

Comment: While it may be true that the intent of EPA in fashioning the cap-and-trade 

programs over the years is to encourag~ reductions fr~m the higher, less efficient 

emitters, and while in fact it may be the case that some utilities have elected to 

install controls on those dirtier plants, our experience demonstrates that in fact 

many "higher, less efficient emitters" have not been controlled. 

Language: Page 11: "[f]or existing EGUs, we are proposing to compare the maximum 

l;10urly emissions achievable at that unit during the past five years Jo the maximum 

hourly emissions achievable at that unit after the change to determine NSR 

applicability. 

Page 21: "As a practical matter, little difference exists between our proposed 

maximum achievable hourly emissions test and this [achieved] alternative. Both 

approaches provide a measure of a source's actual emissions." 

Comments: As noted above in the Section of this memorandum entitled "The Emissions 

Test," it is unclear how a maximum hourly emissions achievable test would be 

applied in pnactice, as there are many ways one could formulate such a test or 

demonstrate what is "achievable." Consequently, it is difficult to compare the two 

tests and the question remains as to how either test measures actual emissions 

when neither consider hours of operation. 

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139 


30134.098

Enforcement Confidential and Deliberative 

Privileged and Confidential 

Language: 

Comment: 

As written the draft rule would permit a utility to rely on any "maximum hourly 

achievable emissions" to both establish an emissions baseline and to project its 

emissions post change. This is problematic because the rule fails to proscribe that 

the maximum hourly achievable emissions be representative of typical operating 

conditions and be representative of good air pollution control practices. Failure to 

establish data standards will afford a utility an opportunity to rely on artificially 

high, non-representative emissions data. For this reason, application of any test 

should require that the data used by a utility be representative of typical operating 

conditions and good air pollution control practices. 

The stated intent of the rule is to capture emissions increases that are the result of 

modifications that are caused by an increase in design capacity. We have two 

overarching concerns with these statements. First, an increase in achievable or 

achieved emissions is not in and of itself and indicator of an increaSe in capacity. 

Second, the emissions impact from recapturing lost.utilization or through life 

extension projects are equal to (and in many instances) greater than emissions 

increases that may result from capacity and expansion projects. Thus,.there is no 

rational basis for establishing a test that excludes emissions increases associated 

with boiler changes that are intended to recapture lost utilization or extend the life 

of a unit. Third, as proposed, and as demonstrated in Attachment A, NSR is not 

necessarily triggered where there are capacity increases, notwithstanding 

significant emission increases. 

Page 13: "Once the Court's opinion is entered into the record (what's correct 

tenninology for this)" 

There is no mention that EPA is seeking reconsideration of either or both the 

Duke and/or New York v. EPA decisions. In addition, the summaries of both 

decisions contained on pages 75-77 is inaccurate as it is incomplete. Given the 

pendency of both decisions, it is unwise to comment on either decision at this time 

in a way that may hurt our chances in either case, should an appeal be granted. 

The discussion oftbe D.C. Circuit's decision in Alabama Power on pages 78-79 

of the proposed rule also re-characterizes that decision in a way that is contrary to 

one of the central holdings of the D.C. Circuit in that case. In Alabama Power, 

the D.C. Circuit remanded an EPA regulation exempting changes below a certain 

size from PSD coverage, fmding that EPA could grant only limited exemptions 

from the permitting requirements of the Act. Alabama Power, 636 F.2d at 400. 

The discussion of the Alabama Power decision on pages 78-79 of the proposed 

rule glosses over the fundamental point that exemptions to the term modification 

should be narrowly construed. The D. C. Circuit also noted that the Act would 

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Language: 

Comment: 

Language: 

Comment: 

Language: 

Comment: 

Language: 

Comment: 

clearly require "grandfathered" industries to undergo PSD review if they made 

modifications; even though this would be costly and inconvenient: "If these plants 

increase pollution, they will generally need a permit. Exceptions to this rule will 

occur when the increases are de minimis, and when the increases are offset by 

contemporaneous decreases of pollutants .... " 636 F. 2d at 400. 

Footnote 2 

There are many instances in the draft rule (including footnote 2) where the drafting 

of the rule appears incomplete. AED reserves its comments on those portions of the 

draft until such language is offered for review. 

Page 15, "Unlike ourNSPS regulations, our major NSR regulations do not contain a 

specific definition of the term "modification." 

While perhaps technically correct, it is misleading to say that the NSR regulations 

do not contain a definition of"modification" when in fact we have been effectively 

arguing to the contrary in our briefs in the various court proceedings at which the 

issue has been joined. We suggest revising this statement to comport with what has 

been stated in our filed briefs, which reflects the consensus amongst all the 

interested EPA offices. 

Page 20 and the paragraph that follows: "[w]e are not proposing to change the types 

of physical or operational changes regulated by the ml\ior NSR program." 

While it is true that the draft rule does not in fact re-define what physical or 

operational changes are modifications for NSR purposes, the effect of the rule is to 

make very few, if any, changes modifications that trigger NSR. 

Page 21: "The pre-change maximum actual hourly emission rate would be the 

average rate at which the EGU actually emitted the pollutant within the 5-year 

period immediately before the physical or operational change." 

This language describes the "slightly revised" version of the proposed maximum 

achievable hourly emissions test, based on assessing an emission unit's historical 

maximum hourly emissions. First, "average rate" is a new term and needs to be 

defmed to be enforceable. Second, see comments below regarding enforceability 

generally of these proposals (i&, Jack of record keeping/reporting requirements, 

discussion of prospective only effect of the new test). Third, see comments above, 

in the context of discussing the proposed "achievable" regarding the need to ensure 

that a source relies on data that is typical of its operations and representative of good 

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Language: 

Comment: 

Language: 

air pollution control practices. The same concerns are at issue with respect to the 

proposed "achieved" test. 

Page 21: "Both approaches provide a measure of a source's actual emissions." 

The "achievable" test is a measure of the "potential" emissions of a source (and not 

an accurate one at that) in the classic and historic sense of the use of that term. 

Unless the draft rule incorporates standards regarding representativeness of data and 

data correction, neither the "achievable" or "achieved" test can be characterized as 

an accurate measure of actual emissions as a source would be able to inflate its 

baseline or change its practices to ensure that NSR was never triggered. . 

Moreover, the draft proposed rule should indicate explicitly that EPA is considering 

whether the NSPS test is an "actuals" test in the sense meant by the D.C. Circuit in 

NY v. EPA. The proposed rule should further highlight that EPA is taking comment 

on that particular issue. Doing so (rather than indicating or implying that EPA has 

already so decided) will (1) make the rule more defensible by defusing criticism that 

EPA without explanation (i&, arbitrarily and capriciously) reversed course from the 

position expressed in the enforcement briefs (in~ most notably) and (2) keep 

the Fourth Circuit (and other courts with pending enforcement actions) from 

accusing EPA of being duplicitous (or at least minimize that chance). Taking a 

defmitive position in a proposal rather than in a fmal rule is not necessary, and we 

fail to see how it gains us anything rather than merely inviting attack in both the 

inevitable petitions for review and the pending enforcement actions. 

Adjustments could be made in this vein to page 21 (for instance, taking out the 

sentence "Both approaches provide a measure of a source's actual emissions.") and 

the paragraph on pages 82-83 (the paragraph beginning "As we explained in the 

statutory and regulatory background section, we codified the maximum hourly 

emissions test in the NSPS program as a way of measuring actual emissions to the 

atmosphere."). We could there include a sentence or a footnote stating: "For such 

reasons, some parties have suggested that the NSPS test measures 'actual' emissions 

in the sense meant by the D.C. Circuit in New York v. EPA. We invite comment on 

that issue." Gratuitous references to the NSPS test being an "actuals" test u on 

page !6, in the repeated phrase "maximum achievable actual hourly emission rate") 

should also be removed. 

Page 22: We are concerned that adopting this alternative approach would 

undermine some of secondary policy objectives supporting this proposal. We 

stated that two of our goals for this proposal are to streamline the regulatory 

requirements applying to EGUs by allowing EGUs to apply the same test for 

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Comment: 

Language: 

Comment: 

Language: 

Comment: 

Language: 

Comment: 

measuring emissions increases from modifications under both the NSPS program 

and NSR program, and to provide some nationwide consistency in the emissions 

calculation procedures in light of the Fourth Circuit's decision in Duke. 

These goals are not met under either an achievable or achieved test because: 1) the 

proposed NSR emissions test does not accurately reflect the current NSPS 

emissions test; 2) the proposed NSR test and the current NSPS test are not the 

same because differences will still remain in application of the term 

"modification" as recognized on page 20 of the draft proposed rule; 3) the 

proposed new NSR emissions test and the current NSPS emissions test will still 

be different for PM and CO after promulgation of this rule. 

Page 23, and seriatim: The use of the term "significant rates," "significant 

emissions rate." 

The draft rule is unclear by what is meant by "significant emissions rates." The 

discussi~n appears to distinguish between "significant rates" and significant 

thresholds" but the loose use of those terms causes the discussion to be confusing. 

Consistent with the stated intent of the rule, in AED's view, no significance 

threshold (level) should attach to emissions increases associated v.ith an increase in 

design capacity. 

Page 28: "We believe that implementing our proposed maximum achievable hourly 

emissions rate test for EGUs offers significant benefits over the existing actual-toprojected actuals emissions test" and the paragraph that follows. 

Since as written NSR would never be triggered it is fair to say that the so-called 

"alternative applicability test" would reduce the administrative burdens. 

Page 29, "It reduces record keeping and reporting burdens on sources because 

compliance will no longer rely on synthesizing emissions data into rolling average 

emissions." 

The referenced statement is unclear. This is the only instance in the entire proposal 

where either record keeping or reporting requirements are discussed. The proposal 

does not put any obligation on the source to maintain records to support a claim that 

it has not triggered NSR. Significantly, enforcement and enforcement impacts of 

the proposed rule are not addressed at all in the proposal. Absent record keeping 

and reporting requirements the rule is effectively unenforceable. Sgg_ State of New 

York v. EPA. Further, the records that an EGU maintains that would bear on a 

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Language: 

Comment: 

determination of whether NSR is triggered as a result of a change is no different 

under the current test than under the proposed test. Moreover, a sources obligation 

to maintain such records exists independent of the NSR program. For example, 

hourly data and annual emissions for S02 and NOx ·are recorded and reported by a 

source to EPA in order to comply with Title IV and now CAIR. Similarly, records 

of changes made to a unit are recorded and reported independent of the NSR 

program- i&, for, inter alia, the IRS and public utility commissions. 

Page 29: The draft rule does not state that it is intended to apply to prospective 

conduct only. 

We again urge you to include in the proposed rule the same language that was 

inserted into the equipment replacement proposal regarding enforcement and that 

the proposal does not affect past/future conduct (and associated liabilities) of the 

source. In addition, we must insist that we review the proposed language to ensure 

that it addresses our concerns. We recite some of the relevant ERP language below 

with conforming changes noted in brackets: 

Today's rule provides revisions to the major NSR program to specify [a new 

emissions test that will become applicable] in the future. As recognized by 

the U.S. Supreme Court, an agency may not promulgate retroactive rules 

absent express congressional authority. See Bowen v. Georgetown Univ. 

Hasp., 488 U.S. 204,208, 102 L. Ed. 2d 493, 109 S. Ct. 468 (1988). The 

.CAA contains no such expressed grant of authority, and we do not intend by 

our actions today to create retroactive applicability for today's rule. 42 

U.S.C. 7401 et seq. Today'srule applies only to conduct that occurs after the 

rule's effective date. None oftoday's rule revisions apply to any changes 

that are the subject of existing enforcement actions that the Agency has 

brought and none· constitute a defense thereto. Furthermore, prior 

applicability determinations on major modifications that result in control 

requirements in an NSR permit that currently applies to a source remain 

valid and enforceable as to that source. [Once effective,] if you subsequently 

undertake an activity that does not meet the applicable provisions of these 

new [provisions] and do not obtain a preconstruction permit if you are 

required to do so, you will be subject to any applicable enforcement 

provisions (including the possibility of citizens' suits) under the applicable 

sections of the CAA. Sanctions for violations of these provisions may 

include monetary penalties of up to $27,500 per day of violation, as we!! as 

the possibility of injunctive relief, which may include the requirement to 

install air pollution controls. 

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Language: 

Comment: 

Language: 

Comment: 

Language: 

Comment: 

Page 29: "The CMA ExhibitB Settlement Agreement" approach. 

We have not reviewed the referenced settlement agreement and consequently we are 

unclear of its terms. Please forward a copy of the settlement agreement at the 

earliest possible opportunity. 

Page 41: "These analyses [by economists J assert that NSR requirements allow 

existing sources to operate under less stringent emissions standards than new 

sources." 

Prior to EPA's coal-fired enforcement initiative few, if any, EGUs soughtNSRpreconstruction permits because of the industry-wide held view (rightly or wrongly) 

that changes to their boilers (no matter the magnitude) were routine and therefore 

exempt. However, in recent years many sources (both existing and new) have 

sought and obtained NSR permits. A review of those pennits, the control 

requirements, and the emission limits required indicates that existing sources are 

operating under (in many instances) as, or more, stringent standards than new 

sources. We also note that much of the literature that is relied upon to support the 

efficiency and stringency arguments pre-date the coal-fired enforcement initiative. 

Page 54, Relationship of BART and CAIR, and discussion about non-CAIR units 

not subject to BART 

There are several reasons why we believe that extending the alternative test to nonCArR units and relying on BART to do so is misplaced. CAIR has a regional 

emission cap backstop for both NOx and S02, BART does not. BART applies only 

to facilities constructed between 1962 and 1977, and only those th~t directly impact 

Class I areas. All non-CAIR EGUs constructed prior to 1962 or after 1977 would 

be receiving the benefit of the proposed new rule, but would not have the BART or 

CAIR backstop. BART applies to all major sources ofNOx and S02 (26 major 

source categories) and is not limited to just EGUs, creating arguments for other nonEGU sources to argue that tl1e NSR alternative emissions test should apply to them. 

CAIR assumes NOx-controlled units will meet a presumptive limit of 0.05 

1b/mmBtu and a regional limit of 0.125 lb/mmbtu in 2015. BART presumes that 

subject units will meet a presumptive limit between 0.!5- 0.62lb/mmBtu for NOx 

and does not require a regional or national rate limit or ton cap. CAIR assumes 

S02-controlled units will have removal efficiencies of approximately 98%. BART 

assumes S02-controlled units will have removal efficiencies of between 90-95%, or 

even lower if using low sulfur coal. We have stated in the CAIR rule that BART is 

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not as effective as CAlR in obtaining emission reductions. Finally, NSR requires 

BACT or LAER at a source where there is a modification, but neither CAIR nor 

BART require the same. 

Language: Pages 61-62, discussions about how CAlR and BART programs are expected to 

protect local air quality. 

Comment: This issue is never really addressed. There is considerable discussion as to how 

CAlR will improve air quality throughout the Eastern United States, and there is 

little doubt that the emissions reductions that will be realized from implementation 

of CAIR represent a dramatic improvement from existing emissions levels. 

However, CAlR does not require a source to install BACTILAER-type controls to 

meet its CAIR obligations (although out of necessity it may have to). Moreover, in 

the instance where a source might install BACTILAER-type of controls there is 

nothing in CAIR that would require.a source to operate those controls at 

BACTILAER-levels or to even operate such equipment at all times. This is an issue 

because as we acknowledge in the CAIR rule making package and preamble some 

areas will remain in non-attainment even after full implementation of CAIR. Thus, 

we believe that NSR remains an important tool in ensuring that the Clean Air Act's 

air quality objectives are achieved, and once achieved maintained (as envisioned by 

Congress). For this reason, and as discussed above, we believe that so-called 

applicability test(s) as proposed does not comport with Congressional intent and 

should be revised consistent with the concerns reflected in the comments in this 

memorandum in the section entitled "The Emissions Test." 

Language: Page 63, fn. 37: "As explained above, such new sources may take the form either of 

entirely new facilities or expanded or modified facilities, or of expanded or modified 

operations which result in substantially increased pollution .... " 

Page 64, ''we interpret the Congressional history to show that at a minimum, 

Congress was concerned about regulating new sources of emissions caused by 

expanding or modifying the existing capacity of operations, as the following two 

statements indicate .... " 

Comment: This notion is fatal to our cases to the extent "expanded" is measured from design 

capacity or capacity at the time of original placement into service or original 

permitting. This also appears to be inconsistent with the D.C. Circuit decision in 

Alabama Power. This is Duke's, and every other Defendant's, favorite defense in 

the NSR enforcement cases: we have not expanded capacity and, consequently, 

NSR was not triggered. The views expressed in the draft rule are inconsistent with 

the D.C. Circuit's decision in Alabama Power, wherein the court rejected the idea 

that Congress intended to cover only physical changes that resulted in increased 

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Langauge: 

Comment 

Language: 

Comment: 

Language: 

Comment: 

Language: 

Comment: 

operating capacity. The court noted that the legislative history indicates that one 

Senator thought this was the proper scope, but that Congress rejected this notion. 

The D.C. Circuit stated: "Describing the scope of the senate bill, Senator Buckley 

stated 'No significant deterioration' is a policy that has no effect on existing sources, 

unless a source undertakes a major expansion program .... " When this debate took 

place, the statutory language did not apply PSD preconstruction review to source 

"modification." In November 1977, the Senate and House passed technical 

amendments, one of which had the effect of defining "construction" to include 

"modifications." It was this new language that had the effect of overriding Senator 

Buckley's interpretation of the meaning of 'no significant deterioration.'" Alabama 

Power, 636 F.2d 323, 400 (D.C. Cir. 1979). We suggest that all references to 

expanded and congressional intent as to the NSPS be deleted. 

Page 68: "However, since the NSPS test is based on actual operating capacity rather 

than design capacity, we believe that the potential-to-potential terminology can be 

misleading, and prefer the name 'maximum achievable hourly emission rate' .... " 

As demonstrated in "The Emissions Test" section of this memorandum, the 

proposed achievable test does not reflect emissions at operating capacity or even 

during typical operating conditions. Moreover, there is little ability for the 

permitting authority to meaningfully distinguish between operating and design 

capacity particularly where a utility conflates the two to support an inflated baseline. 

Page 76-77: Duke Energy discussion. 

See discussion above regarding characterization of the status of the decision and 

EPA's request for rehearing en bane. 

Page 88, "In a 2003 (cite RM11R) rule, we articulate our position that activities 

designed to promote safety, reliability and efficiency of emissions units should not 

be subject to major NSR, yet it is often these types of projects that raise questions a.s 

whether post-change emissions are related to a change." 

The ERP rationale should not be re-stated here without also acknowledging that the 

rule has been stayed. We suggest you delete this sentence altogether. 

"Major NSR Program" 

Need to expressly and plainly state that the draft rule would be prospective only. 

As discussed above, we suggest lifting the "prospective only" language from the 

ERP and inserting it in the draft rule. 

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Conclusion 

Thank you for the opportunity to comment on the draft rule. We believe that a good deal 

of additional work and analysis should be done before finalizing the proposed rule and making it 

available for public comment. Not only does the text of the preamble itself need to be revised to 

better identify what we are specifically proposing, but the impact of the proposed rule needs to be 

better understood. As you can see from our analysis, the proposed test(s) do not reflect the stated 

intent of the proposed rule·- i.e., to have an increase in emissions associated with an increase in 

operating capacity trigger NSR pre-construction pennitting requirements. 

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Copyright© 2017 Environmental Law Institute®, Washington, DC. Reprinted with permission from ELR®, http://W'MI'J.eli.org, 1-800-433-5120. 

ARTICLES 

EPA's New 

Source Review 

Program: Time 

for Reform? 

by Art Fraas, John D. Graham, 

and Jeff Holmstead 

Art Fraas is a Visiting Fellow at Resources for the 

Future; John 0. Graham is Dean of the Indiana 

University School of Public and Environmental Affairs; 

andJeffHolmstead is a Partner in Bracewell LLP. 

-------Summary-------

This Article examines the complex CAA program 

known as new source review (NSR), which affects virtually every major manufacturing facility and power 

plant in the United States. The NSR program provides important health and environmental benefits bur 

has become a significant impediment to the growth 

and modernization of the U.S. manufacturing sector. 

Because of a newl more stringent air quality standard 

for ozone, the resulting changes in the NSR program 

may effectively prevent industrial development in some 

parts of the country. The authors propose administrative reforms that EPA could take to address some of 

the major concerns about NSR while still maintaining 

the environmental benefits of the program: (!) replace 

current deterministic~ upper-bound modeling require~ 

mcnts with a probabilistic approach to air quality 

modeling; (2) expand the pool of emission reduction 

credits chat may be used to offset emissions from new 

or expanded facilities; and (3) take actions to facilitate 

NSR permitting when there arc changes to national 

ambient air quality standards. 'Ihe authors also offer 

two potential statutory reforms. 

The administrations of both George W. Bush and 

Barack Obama recognized that manufacturing is 

one of the most heavily regulated sectors in the U.S. 

economy. Since 1981, manufacturers have become subject 

to more than 2,200 unique regulations, almost one-half 

attributable to one federal agency, the U.S. Environmental Protection Agency (EPA). 1 Both administrations also 

sought to streamline existing federal regulations that apply 

to the manufacturing sector in order to reduce economic 

burdens that threaten the competitiveness of U.S. manuf:l.cturing. However, a recent report by the Regulatory 

Studies Center at George Washington University found 

that the retrospective reviews of manufacturing regulations under both presidential administrations have had 

limited impact. Indeed, some of the retrospective reviews 

appear to have led to greater rather than diminished regulatory burdens. 2 

EPA's new source review (NSR) program is of special 

interest because it affects virtually every major manufactUring facility and power plant in the United States-and 

any company that might want to build such a facility in the 

future. 3 In this Arricle, we discuss the major concerns about 

the NSR program that have been raised by industry and the 

policy community, and also highlight the expanding hurdens of the program resulting from increasingly stringent 

national ambient air quality standards (NAAQS). However, since the NSR program is also recognized as a source 

of significant environmental benefits, the simple option of 

deregulation does not seem to be particularly promising. 

We argue that creative regulatory reforms can accomplish 

most or all of the anticipated environmental benefirs at 

considerably reduced cost to the regulated industry and 

the U.S. economy. 

Authors' Note: lhis Article was originally prepared as a working 

paper by Art Fraas ttnd)ohn Graham for discuuion among acadmzics 

and industry professionals at a workshop at Indiana University on 

October 29, 2015, in Indianapolis, Indiana. Fh1ancialsupport was 

provided to the two working paper authors by Indiana University 

through funds m.ised from individual philanthropists interested in 

a revival of US. manufitcturing. We are gratefUl for the com mom 

provided on earlier drafts by Lynn Hutchimon and Nathan 

Richardson and the research assistance of ]ames (Hunter) Odom. 

Jhe 1Jiews exprmed ure entirely those of the authorJ. 

2, 

PAL'L BFRN'ITE!N ET 

RF.Gt!LH!ON OF THE 

Productivity and Innovation 

3. NAT!ONt\t. Rr.sEARCH CouNciL, NEw SouRc~ REviEW l'OR STATION"ARY 

SouRcEs or ArR PoLLt;T!ON 68-76 (2006). 

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Copyright© 2017 Environmental Law Institute®, Washington, DC. Reprinted with permission from ELR®, http:/!w.vw.eli.org, 1"800-433"5120. 

We start with a brief summary of certain key features of 

the Clean Air Act (CAA) and a brief discussion of how the 

NSR program fits within the structure of the Act. We then 

identify aspects of the current NSR regulatory approach 

that are likely to impose increasing costs on manufacturers in the near future. We propose options for regulatory 

reform that are designed to streamline and modernize 

regulatory requirements and reduce regulatory costs, while 

still allowing the regulatory program to achieve significant 

environmental resulrs. We recognize that reforms that can 

be adopted through executive action are more likely to 

occur than those that require new legislation by the U.S. 

Congress, but we also outline two variants of a potentially 

promising legislative reform that could replace the existing case-by-case NSR review process with a system of economic incentives. 

I. Background 

A. NAAQS 

The CAA requires that EPA establish NAAQS for certain 

pollutants known as "criteria pollutanrs": pollutants that 

come from a variety of sources, are widespread in many 

geographic areas, and "reasonably may be expected to 

endanger public health or welfare.'4 EPA has identified and 

set NAAQS for six such pollutants) including ozone and 

particulate matter (P1v1). The statutory language requires 

primary health-based NAAQS to be set at levels "which in 

the judgment of the Administrator, based on such criteria 

and allowing an adequate margin of safety, are requisite to 

protect the public health."'> This requirement has yielded an 

underlying health science based on an increasingly sophisticated set of studies focused on sensitive subpopulations 

and more subtle health endpoinrs. 

'!he CAA also requires EPA review of NAAQS every 

five years.6 Although EPA has not been able to meet the 

five-year deadline in recent years, environmental groups 

have used litigation effectively to force EPA into what 

amounts to almost continuous review of NAAQS, especially NAAQS for ozone and PM. The result has been a 

series of more stringent standards over the past decade. 

And given the focus on sensitive subpopulations and more 

subtle healrh effects, it appears likely that there will be continuing pressure to ratchet down NAAQS even further in 

future years. 

4. 42 U.S. C. §§740!~767lq, §7408; ELR SnT. CAA §§101-618, §108. 

5. 42 U.S.C. §7209. Secondary standards ate required to protect welfare: EPA 

h.as generally set welfare $J;andards at the same Je..,.eJ as the prirrHlry health 

NAAQS. 

6. fd. 

Since 2009, EPA has set more stringent NAAQS for four 

of the six criteria pollutants: nitrogen dioxide (N02

) 1 sulfur 

dioxide (SO,), PM, and ozone. lhese NAAQS impose substantial costs on the U.S. economy and, in particular, on 

the manufacturing sector. For the recently revised ozone 

NAAQS, for example, EPA estimated annual costs of $1.4 

billion (not including the cost in California, which faces 

a particularly difficult challenge in reducing ozone levels), 

but some experts believe that the cost will be much higher. 

Some major metropolitan areas such as Los Angeles, 

Houston, and the East Coast megalopolis have had a continuous classification as "nonattainment" (NA) for the 

ozone and fine PM NAAQS.7 These areas face continuing 

pressure to reduce emissions from the transportation and 

manufacturing sectors and severe restrictions on the siting 

of major new sources. Other large cities find that, with the 

lowering of NAAQS, they are in NA again (afrer spending years to meet an earlier standard) and must adopt even 

more stringent emissions controls for their manufacturing, 

commercial, and transportation sources. 8 In addition~ as 

discussed below, the continuing ratcheting downward of 

NAAQS is making it increasingly difficult to site major 

new manufacturing sources. 

Studies of the historical effect of the CAA on economic 

activity report significant economic costs in NA areas.9 For 

example, Michael Greenstone estimated that, as compared 

to attainment counties in the United States, NA counties 

lost $37 billion in capital, $75 billion of economic production (in 1987 dollars), and 590,000 jobs during the period 

from 1972 to 1987.10 In a more recent study, Greenstone et 

al. estimated a significant decline in toral factor productivity for pollutant-intensive plants in NA areas.11 They report 

that this decline in productivity translates into a loss of 

7. Whil-e classified as nonanainment areas, the alr gu:Uity in these areas is 

benet than the NAAQS for a significant number nf days in the year. 

8. To be sure, additional health and welfare benefits are a,;sociated with more 

stringent NAAQS. In the case of ozone, EPA estimates that benefits increase 

significantly with more stringent standards. And even net 

benefits (benefirs mlm1s arguably increase with rhe more 

ozone srandards. This largely driven on the benefit side 

substantial additional mortality with 

9. 

10. 

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47 ELR 10028 ENVIRONMENTAL LAW REPORTER 1-2017 

$450 billion for manufacturing plants in NA areas during 

the 1972 to 1993 period of study." 

While these studies suggest a substantial shift of pollution-intensive industry away from NA areas in the 

United States, these studies may simply reflect a shift of 

activity within the United States from NA areas to attainment areas. In other words. although the CAA has clearly 

imposed significant economic costs on NA areas, it may 

have created commensurate economic gains in manufacturing activity and employment in attainment areas, 

Unfortunately, relatively few studies in the economic literature evaluate the effect of environmental regulation on 

the competitiveness of the U.S. manufacturing sector as a 

whole. A variety of other factors likely play an importanteven dominant-role in decisions on whether to locate in 

the United States versus another country. These factors 

include, for example, access to (and cost of) important 

factors of production, transportation costs, existing invest~ 

ment in facilities and infrastructure, tax considerations, 

and exchange rate effects. 

Any empirical evaluation of the effect of environmental 

regulations is difficult to do because it must account for 

these other factors in teasing out any regulatory effect. 

Only a few studies have attempted to do it. This lim ired 

empirical literature suggests that environmental regulation has been a relatively minor factor in decisions as 

to whether manufacturing plants will be located in the 

United States or another country.n On the basis of this 

limited set of studies, Joseph Aldy and William Pizer have 

suggested that the adverse effect of CAA requirements in 

shifting economic activity and jobs away from NA areas 

to "clean" areas within the United States has been more 

important than the effects in terms of forcing this economic activity offshore to countries with less stringent 

environmental rcquirements.14 

However, these economic studies have looked at the past 

history of the CAA in the decades before 2000, With the 

substantial tightening of NAAQS in more recent years, 

the difficulty of siting or expanding major manufacturing 

facilities in the United States may have created a more sig~ 

nificanr incentive to shift industrial activity to other countries wirh less burdensome regulatory requirements. 

B. New Source Review 

The CAA requires that, before a company can construct a 

new industrial facility or expand an existing faciliry in the 

United States, it must firsr go through the NSR permit12. 

13, 

14< JosEPH A. Prl.ER, THE IMl'ACTS OF 

CUMATE CHANGE MmGATION PoucJES (NBER Working Paper 17705, 

availnble at lmp://wv.'W.nbcr.org/papers/w17705. See lllw 

& Naomi R. Lamoreaux, Regulatory Ram: 7l!e 

'"'''d"''''""'l c'""''"''" Rfgu!.tJtary 5tllndmds, 54 J. EcON. LTTERATUR£ 

ring process and obtain a permit that} among other things, 

ensures that the new or expanded facility wilt employ upto-date pollution control technology. The NSR program 

creates somewhat different requirements depending on 

whether the facility is located in an attainment area (an 

area that meets NAAQS or is unclassifiable due to the 

lack of data) or an NA area (an area that does not meet 

theNAAQS), 

In NA areas, new planrs and major modifications to 

existing plants are required to meet the lowest achievable emission rate (LAER), meaning that the plants must 

install state-of-the-art pollution controls in order to match 

or exceed the emission rate achieved by the lowest-emitting similar facility in the country. In addition, they must 

obtain pollution "offsers" from other facilities in the same 

area. These requirements reportedly make it difficult or 

even impossible to site new plants in certain NA areas. 15 

In particular, discussions with industry sources suggest that the cost of emissions offsets effectively prohibits the siting of major new industrial plants in certain NA 

areas. The idea behind offsets is that, in order to build a 

new industrial t3.cility in anNA area, a company must pay 

someone else to reduce emissions in that same area by an 

amount that exceeds the emissions that will come from the 

new facility. Depending on the area, it must obtain offsets 

that are between lOo/o and 50% greater than the projected 

emissions from the new facility. 

Not surprisingly, offsets cannot be created on the basis 

of actions already required by EPA or state regulations. 

To be counted as an offset, an emissions reduction must 

go heyond what is required by law. But for more than 40 

years, EPA and states have been looking for every conceivable way to reduce emissions related to ozone. In many 

areas, aU the cost-effective emissions redncrions have been 

mandated by regulation. Where any reductions can be 

made, they are very expensive, 

For example, the Houston area, especially near the 

Houston Ship Channel, has numerous industrial facilities, but they are generally well-controlled. Because there 

is so much industry, it is possible to purchase offsers, but 

they are very expensive. Houston-area off.'iet prices vary 

from $150,000 to $200,000 per ton for volatile organic 

compounds (VOCs) and $80,000 to $100,000 per ton 

for nitrogen oxide (N0).16 Even a relatively small facility 

with stare-of-the~art controls wHI emit more than 100 tons 

per year of these pollutants. The so-called "otf<;et ratio" in 

the Houston area is 1.4 to I, meaning that the new facility would need ro off.'>et 140% of jts projected emissiom. 

1hus, even if rhe new facility will emit only 100 tons per 

year of NO, and VOCs, the company trying to build it 

15. Existing in these areas may also find it difficult to make 

major moo1"""'"'"'· 16. MrKn T11.YLOll. UrDAT!'. ON 5CARCl1Y oF HousTON·GAt.Vf.STON-BRAZORTA 

(HGB) EMISSION REDUCTION CREDITS (ERCs) AND ALLOWANCES, .'I.ND 

UsE O.l' NO, ERCs POR VOC ERCs (20 14), avai!Jb!t at hnp:/ /wwv.·.awmagcc.org/docs/Sept2014Presn.pdf; Tt:XAS CoMMISSION ON ENVIRONMENTAL 

QUAUll' (TCEQI, TRAD£ Rl!.PORT(201S), availa.b!e arwww.tceq.tens.gov/ 

assets/publidimp!cmentation/alrlbanking/repons/ecnadercpott.pdf. 
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1-2017 NEWS &ANALYSIS 47 Elf\ I 0029 

would need to purchase 140 tons of NO, offsets and 140 

tons ofVOC offsets. Ar current offset prices, this means an 

npfront cost of $32 million to $52 million just to purchase 

emissions offsets. 

In the South Coast NA area in California, average offset 

prices in 2014 were $23,500 per ton for VOCs and $63,000 

per ton for NOx. 17 Table 1 provides reported prices and 

quantities for major areas in California. In addition, the 

quantities involved in these emissions off:(let transactions 

for any pollutant; and (2) even if projected emissions will 

not violate NAAQS, they will not result in an increase in 

ambient concentrations of any pollutant that exceeds the 

allowable PSD "increments" set by the CAA.19 

'The requirement to show that emissions from a new 

facility will not "cause or contribute" to a violation of any 

NAAQS will he more challenging now that the ozone 

standard has been lowered from 75 to 70 parts per billion 

(ppb), because many areas of tbe country that have always 

been in attainment do 

Table I. 2014 California Offset Prices for Emission Reduction Credits ($/ton) not meet the new standard. Until these areas 

are designated as NA 

areas, a permit applicant 

would need to show 

that the proposed plant 

will not "contribute to" 

a violation of the new 

standard, which would 

appear to be impossible 

in or near areas that are 

already in violation of 

the standard. EPA has 

VOC($/ton) VOC (tons) NO. ($/ton) NO.(tons) 

Bay Area $1,200-$9,500 [$6,196] 212 $14,500-$15,000 [$14,643] 73 

San joaquin $900-$6,000 [$3,877] 255 $18,000-$44,000 [$36,519] 177 

Santa Barbara $125,000 0.06 $125,000 0.56 

South Coast $7,400-$32,880 [$23,462] 26 $63,014 5.5 

Ventura $15,000-$70,000 [$50,938] 21 

Source: CALIFORNIA AIR RESOURCES BOARD (CARB), EHISS!ON REDUCTION OFFSET TRANSACTION CosTS: 

SUMMARY REPORT FOR 20!4 (2015), available at http://www.arb.ca.gov/mr/erca/ercl4.pdf. 

Brackets denote average (mean) price. 

are relatively small compared with the emissions from a 

new major source coming into anNA area. 18 If the applicant does not have a facility in the NA area that it can readily control (or tear down) to provide ofTsets, then emissions 

offsets for five or more years in the future are reportedly 

hard or even impossible to find. 

More stringent NAAQS standards will also have an 

important effect on rhe siting of new sources in attainment 

areas. Under the "prevention of significant deterioration" 

(PSD) provisions of the CAA, new plants and major modifications in attainment areas must also go through a preconstruction permitting process. This process requires that 

these plants: 

Adopt the best available control technology (BACT) 

to control all pollutants (not just criteria pollutants) 

that are regulated under the CAA. BACT is sometimes no different from LAER but may be less stringent, and less costly, for certain types of facilities. 

Provide an analysis of the effect of anticipated plant 

emissions on ambient air quality, including both preconstruction monitoring of air quality in the area 

and air quality modeling of the effect of the plant 

emissions on ambient air quality. 

To obtain a permit, the permit applicant must show, to 

the satisfaction of the permitting authority (generally the 

state environmental agency), that (1) projected emissions 

from the new plant will not result in changes in ambient 

air quality that would cause the area to exceed NAAQS 

17. CAUFORNJA A1R RnsouRcES BoARD, EMJSSJON REoucnoN 

TRA:-iSACT!o:-.· Cons: SuMMARY REPORT FOR 2014 {2015), 

http:lh'IW'.v.arb.ca.gov/nsrlerco/ercl4.pdf. 

18. NSR generally applies tn sources emitting 100 tons/year of a precur~ot 

ozonepolltLtant. 

said that it intends to create at least two options that would 

address this concern: (I) by setting certain de minimis 

emissipns thresholds below which a new facility would be 

deemed not to "contribute" to a violation of the NAAQS; 

or (2) by allowing the permit applicant to purchase offsets. 

Given the history of CAA regulation, it is likely that 

these options, when finalized by EPA, will be challenged in 

court. Even if they pass muster in the courts, it remains to 

be seen whetha either of these options will be practically 

viable-especially for large industrial facilities. 20 If not, it 

will not be possible to build or expand a new industrial 

facility in certain areas, even if the facility would use stateof-the-art technology to control its emissions and even if 

the local community desperately wants it to be built. 

II. Analyses of the NSR Program 

A. Costs of the NSR Process and Permitting Delays 

In a 2001 report on NSR, EPA observed that the permit 

application process can involve up to five different stages: 

preparation of a permit application; agency determination 

of application "completeness" (a process that may include 

extensive discussion between the applicant and permitting officials and the preparation and submission of additional information}; public notice and comment on a draft 

19. The CAl\ establi~hed PSD increments for PM and SO, for the three classes 

of attainment areas: C!:Us l (intermediate), and Cl:m HI 

(growth). EPA hao; for the other convemiona! 

po!!utant> through rulemaking. 

20. For example, it appears that a number of rural areas may exceed the new 

70 ppG ozone standard--not because of local emissions, but ~cause of 

background ozone and transported from distant sources. Some 

have no local and thus no way to gcm'tate 

can be new plants. In such cases, the offset 

most type.~ of industrial devc!opmcm. 
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47 ELR I 0030 ENVIRONMENTAL LAW REPORTER 1-2017 

permit; issuance of a final permit along with response to 

comments; and administrative and judicial appeals. 21 ~Ibis 

same report notes that "most developers describe [NSR] 

permitting as an extremely complex and time-consuming 

process."22 A recent comment filed by an industry coalition stated: "Sources generally invest years in engineering, 

design and assessment studies before submitting a permit 

application for a major source. Even under optimistic conditions, it can take at least two years from the beginning 

of the frontcnd engineering work until public notice of the 

draft permit is published."23 

The NSR process imposes direct costs in terms of the 

time and resources required to prepare the permit application and to provide responses to questions and issues 

that arise in the permitting process. 1be uncertainty and 

delay that attend the permitting process may impose additional costs, including financial costs and penalties. 24 The 

opportunity costs associated with delays or cancellation of 

projects include the additional production forgone and, in 

some cases, forgone emissions reductions from retrofitted 

facilities. In addition, the potential for long delays and the 

uncertainty that attends the NSR process could lead to 

suboptimal decisions in upgrading existing capacity and 

installing new capacity.25 

Some economists and industry representatives have 

argued that the focus ofl'\SR on preconstruction review of 

new or modified plants, and the attendant significant costs 

associated with the NSR program, have penalized the construction of new plants and the retrofit of existing plantsresulting in a "new source bias."16 Thus, it has arguably 

been more economic in some cases to continue to operate 

relatively old, inefficient, and high-polluting plants than to 

2L U.S. EPA, NSR 90-D.w Rnvmw RAcKGROUNn PAr•nR 5 (2001). 

22. Jd. at II. 

23. SHANNON BROOME & Bol:l rvtOREHOU.SE, CoMMENTSO~THEAJ R PERM!T'J'lNG 

foRCM: NAnONAl. AMBIENT An< Qt:AUTY STANDARDS l'OR OzoNE (2015). 

avai&.bk at hnps://www.regt!ladons.gov/ll!documenrDetail;!.hEPA-HQ0AR-200B-0699-3578. 

24. 

"Delay, for example, call cause a developer to miss advantageous 

circumstances when interest and equity cnsn are lnw." fd_ ar II. In addition, 

the applicams may have penalty clauses a.>sociated with delays in 

of construCtion in their contracts with engineering and consrrunlon 

According ro industry sources, these pcnaldes can be as much as $35,000 to 

$10,000 per day. 

25. 'lhese rime-co~t consideratiom 

peuolcum rrlining indu~try, where 

that ~the most critical factor in the U.S. refining industry's to meet 

new fuel requirements in a timely manner is the ability to obtain permits." 

!d. at 44. ARCHIE \V. DwmAM H AL., U.S. PETROLECM REFJNlNG: 

AsSESSlSG THE ADEQUACY AND AFF0R.D,\Bll.l1Y OF CLEANER FUEL> 

Petroleum CouncH 2000). EPA's 2001 backgrou(Jd report also 

statements by several company executives claiming that tbe NSR 

process impedes the U.S. industry's C!.pachy 10 expJnd. Str U.S. 

EPA, supra. note 21, at 44. 

26. Howard K. & Robert N. St:wins, New Sourer Reviw Undtr 

the C1eanAtrAtt: 147 REsouRCES 19,20.21 See 

alro U.S. 

install new facilities or upgrade existing facilities with better pollutant control technologyY To the extent this has 

occurred, NSR review has had the perverse effect of delaying reductions in pollutants such as S02 and N0".28 

B. The Time Needed to Obtain an NSR Permit 

Under the CAA, EPA and other permitting agencies are 

required to either grant or deny an NSR permit within one 

year of receiving a permit application, but there is no practical way to enforce this deadline, and the permitting process often takes longer-sometimes much longer-than a 

year. A 2015 Resources for the Future discussion paper provides a snapshot of the NSR process from the date EPA or 

state authorities notify applicants that the NSR application 

is complete to the issuance of the final permit. 29 During 

the period from 2002 to 2014, the nationwide average time 

to obtain an NSR permit for coal- and natural gas-fired 

electric generating units (EGUs) and refineries was roughly 

14 months. 30 ]his represents a substantial increase in average processing time for NSR permits compared with the 

reported permitting times for the 1997-2001 period. The 

distributions are skewed-median values are less than the 

mean-with some projects requiring substantially longer 

to obtain NSR approvalY In addirion, there was a significant variadon across EPA regions in tbe processing time 

required for approval of new natural gas-fired EGUsfrom seven months for Region 7 (Iowa, Kansas, Mississippi, and Nebraska) to 19 months for Region 9 (Arizona, 

California, and Nevada). 

rihe data also show substantial year-to-year variation in 

processing times, wirh markedly longer processing times 

during the 2003-2005 and 2009-2011 periods (Table 2). 

lhe increase in permitting time during the 2003-2005 

period may reflect rhe uncertainty in the NSR program 

27. EPA's 2001 NSR report found some evidence to support this argumcm, 

reporting that NSR for sources "has impeded or resulted in the 

cancellation of projccn would maintain (\nd lmprovo: reliability, 

efficiency, and safety of existing energy capacity." U.S. EPA. NEw SouRCE 

fliviEW: flirORT TO THE PRESIDENT J (2002), a11at/.zbkat hnps://wv.'w.epa. 

gov/sites/pwduction/files/20 15·08/documcnr.s/uscreport_to~rtcsiJeut. 

pdf (dtcd by NI\TJONAl. AcADEMY oF SciENCES, NEw SouRCE Rr.v1Ew FOR 

STi\TlOSARY SouRCES or AIR PoLLUTJOS 45 (National Academies Pr~s.s 

2006)). 

28. U.S. EPA, Cfnm Air Act Rrquirmmw and llmory, https://www.epa.gov/ 

dean·air·a<::t-overview/dean·air·act-requirementS·aml-hlstnry (last visited 

Nov 15, 2016). '10 be sure, supporters of the current NSR program argue 

that NSR review yields important reductions in the covered pollutants. For 

example, EPA's 2001 NSR estimated that PSD BACI" permitting 

during !997-1999 avoided million tons per year in conventional 

emhsions reductions in SOl and NO, emissions). U.S. 

s11pra note at abl) RICHARD L R£YESZ & jACK LlENKE, 

SntUGGU:-;G FOR AtR: PoWEJi. PLANTS AND THE "WAR ON CoAt." (Oxford 

Unive-rsity Press 2016). 

29. ARTHUR f-RAAs n AL., EPA's NEw SouRCE REVIEw PRoGRAM: EvmENCF oN 

PROCFSSTNG TIME (Resources for the Future 2015). 

30. ·n1e difference in processing times berween :NA a(jd :mainment areas was 

small and not sratistically significant. These data are taken from EPA's 

RACI'/BACT/l.AER Clearinghou>e (RBLC). EPA stalf believe only one 

half of the approved NSR projects are reported to the RBLC database. 

31. However, the clearinghouse database had few entries for new plants in 

recent years--only one addidona! N"SR permit for a new coal-fir~d plant in 

2012 and no additional permits f<>r r.:oal·lired plants in 20U and 2014. 
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1-2017 NEWS & ANALYSIS 47 ELR 10031 

due to the U.S. Court of 

Appeals for the District 

of Columbia (D.C.) Circuit review of EPA's 2002 

and 2003 revisions to the 

program." The longer processing times during the 

2009-2011 period may 

reflect a transition as the 

Obama Administration 

put its climate policy in 

place (meaning that sources 

for the first time had to use 

BACT to control their carbon dioxide emissions) and 

as sources faced new air 

quality modeling requirements with EPA's revision of the NO,, SO,, and 

fine PM NAAQS. During the 2010-2014 period, 

for example, one-third of 

the combined cycle plants 

received NSR permits after 

Table 2. Average Permitting Time for Natural Gas 

EGUs (Including PSD and NA Areas) 

All natut"al gas 

Yea!" Mean Number 

2002 321 73 

2003 379 64 

2004 612 46 

2005 463 27 

2006 290 23 

2007 343 24 

2008 377 21 

2009 409 J3 

2010 468 24 

2011 436 21 

2012 268 31 

2013 225 26 

2014 235 3 

Average 384 416 

processing delays by the state or EPA permitting authorities ranging from more than one year-the statutory deadline for action-to three years."13 

Ill. Historical Concerns About the NSR 

Program 

A. Delays Caused by Regulatory Overlap 

For NSR, several different layers of government are likely 

to be involved. Where EPA has approved the state implementation plan (SIP) provisions for NSR, the state is the 

primary permitting authority. However, under EPA regulations) EPA retains authority over air quality modeling, 

and the states may be required to consult with the EPA 

region (and EPA headquarters in some cases) on modeling 1ssues.34 

In states that have nor obtained EPA SIP approval for 

their NSR process, EPA is the permitting authority. In 

most of these states, EPA has delegated the NSR process 

3L "!he D.C. Circuit largely upheld EPA'5 2002 revisions to its J'\SR program in 

June 2005. New York v. Environmental Prot. Agency, 413 F.3d 3, 35 ELR 

20135 (D.C. C!r. 2005). On Dec. 24, 2003, however, the D.C. Circuit 

blocked the 2003 NSR rule revising the routine maintenance, repair, and 

replacement provisions from going into effect unril the court reached a fin.J 

decision. In New York Jl, rhe D.C. Circuit held that the 2003 NSR revision 

was invalid. New York v. Environmental Prot. Agency, 443 E3d 880, 36 

ELR 20056 (D.C. Cir. 2006). 

33. Section J65(c) of the CAA requires comple1ion of NSR within one year 

of the completcnes~ determination. Combined (:ycle EGUs 3re the "cream 

of the crop~ in terms of low-cost, efficient, dean generation of electricity. 

ARTHUR FRAAS r.r AL, IUpra note 29, at 2. Sa abo ARTHVR fRAA.s & }OliN 

0. GRAHAM, REGULATORY REFORMS TO N'I!R1l.JRE THE RESURGENCE OF 

THE US MA:-!U!'ACT\JRING SECTOR 20 (working paper 2015}, hnps:l/spea. 

i udiana.edu/ doc/ research/ m anufacmrin g-ini tialive/fraas-graham-2 0 J 5. pdf. 

34. 40 C.F.R. §51 app. W (2005). 

New permits Additions Modifications 

Mean Number Mean Number Mean Number 

324 47 299 25 769 I 

362 36 406 27 267 I 

521 27 829 13 551 6 

665 15 124 3 241 9 

355 6 286 II 231 6 

371 16 393 3 223 5 

384 3 715 4 278 14 

439 25 364 5 2ll 3 

554 14 372 5 321 5 

587 8 415 5 297 8 

245 14 223 II 403 6 

270 II 228 7 161 8 

- 0 - 0 235 3 

411 222 391 119 293 75 

to the states (meaning that state officials rake the administrative steps to process permit applications) but retains 

ultimate permitting authority and must be consulted on 

all substantive issues, including modeling, the selection 

of BACT, emissions limits, and monitoring and recordkeeping requirements. In a relatively few cases, a state has 

refused to do NSR for one or more pollutants, and in these 

cases, EPA issues the NSR permit.35 

B. Changes in NAAQS: Problems in Transition and 

Lack of Timely EPA Guidance 

The recent changes in the N02

, S02, fine PM, and ozone 

NAAQS have further complicated the NSR process, resulting in permitting delays and, in some cases, the decision 

by industry to defer or cancel projects.J.6 New or revised 

NAAQS must be addressed immediately in the NSR permit process, even before EPA makes formal designations as 

to which areas of the country are in attainment or NA with 

the new standard. 37 

As a result, the new NAAQS can have an immediate 

impact on pending permit applications. 38 Even if a permit 

JS. Por example, EPA issued NSR permits for greenhouse gas emissions in 

Texas from 2010·2014, while theTCEQ issued NSR permits for the other 

regulated NSR pollutants. 

36. For example, the Baton Rouge Area Chamber reported that four major 

37. 

38. 

indmtrial projects were either put oa hold or redirected to another location 

afr:er EPA proposed to revise rhe ozooc NAAQS in December 2015. Baton 

monirored owne levels of 72 ppb, a level above EPA's revised 

of 70 ppb. Baton Rouge Area Chamber, BH.AC Public Policy 

Eighteen Top·Performing Metro Economies ar 

Ozone (Mar. 2, 2015), http;!/www.bracorg/ 

w 

b, 
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47 ELR 10032 ENVIRONMENTAL LAW REPORTER 1-2017 

application has been pending for months or years and the 

permit applicant has shown that the new facility \\'ill not 

cause or contribute to the violation of any NAAQS, EPA 

has often required the permit applicant to redo irs modeling analysis using the new standard. 

In some cases, this has proven difficult, costly, and rife 

with delays hecausc EPA's practice has been to adopt a 

revised, more stringent NAAQS and begin work on implementation and modeling guidance only after adopting the 

newly revised NAAQS. Although EPA staff have claimed 

that state environmental agencies know how to proceed 

when a NAAQS is changed, the state agencies have disagreed in comments to the Agency, and have sometimes 

delayed action on permit applications until EPA issues the 

necessary guidance. 3? 

In the case ofEPNs 2010 revision of the NO, NAAQS, 

for example, EPA adopted stringent one-hour primary 

standards-the 98th percentile one-hour daily maximum 

averaged over three years-to supplement the existing 

annual standard. Shortly after the one-hour N02 NAAQS 

was issued, EPA put out a memorandum stating that anyone with a pending permit application-even with applications that had been pending for several years-would need 

to redo a modeling analysis ro demonstrate that projected 

plant emissions would not cause or contribute to a violation of the new one-hour N02 NAAQS.40 

However, the adoption of the short-term N01 standard 

greatly complicated the air quality modeling that new 

sources were required to ptovide in obtaining an NSR permit. The standard air quality models in place incorporate 

overly conservative assumptions for modeling single source 

effects on ambient N02 levels. This over-conservatism was 

not a problem with the annual N02 NAAQS but, with 

the new, stringent one-hour NO)_ NAAQS, it effectively 

prevented showing that these new plants would not cause 

or contribute to NA.41 

39. 

"complete" before the new stanrlard was established. U.S. 

Ambient Air Quality Standards for Ownc, 80 Fed. Reg."'""· '"""-Y Z015). In such cases, permit applic3ms are not required w 

of '""'lf><h""ccdieocr the new standarJ. Importamly, "E"P'A'd"'d·idd---•!.hough 

STAT£ E;-.;v;RoNME:-:TAL ON I\ACXGROt!No OzoNn 

REGULATORY REuEI' (2015), llf!tfibble at http://www.csg.org/aapca_site/ 

documents/AAPCASur.·cy-StatcEnvironmenta!AgencyPerspccrivcsonBack 

groundOwne:andRegulatoryRelief-June20l.pdf; Dylan Brown et a!., 

Air Pol!utwtl: Strong Opiniom, Shaky {)ma in Argumrrlt<: 01Yr Permittmg, 

Gll.EEN~'tRE, May 14, 2015, http://www.cenews.nethtori~fl0600J8570.ln 

the final o:wne NAAQS, EPA acknowledges that it rectivcd comments from 

states and organiz3riom requesting that the 

rules and guidance in a r!mely m:~_nner. 

40. Memorandum from Stephen D. Page, tn Air Directors and 

4!. 

Deputies Regions I-X {Apr. l, 2010) (on ii!e wi,h EPA), aiJai!a:ble at hnps;// 

www.cpa.gov/sitr:s/production/files/2015·07/documcnrs/psdnaaqs.pd[ 

EPA identifies these de minimh !evds as omnc signific;wt irnp.1.ct levels 

It appears that EPA did not fully anticipate these issues, 

but Agency officials have been working through the modeling issues raised by the short-term one-hour N02 NAAQS 

ever since it was adopted. A year after setting the revised 

NO, NAAQS, EPA provided initial guidance on some 

of the modeling issues. (e.g., the treatment of intermittent, auxiliary sources) and additional flexibility in terms 

of modeling the cumulative effect of other sources within 

the region. Ilut EPA still has not provided the modeling 

tools rhar, according to many state environmental officials, 

should have been in place before the new standard was 

adopted. EPA finally issued a notice of proposed rulemaking in July 2015 to address these remaining issues-five 

years after promulgating the one-hour NO, NAAQSand a final rule is expected in the next few m~nths.42 

lbe Avenal Power Center, one of the combined cycle 

projects affected by the 2010 N01 NAAQS revision, provides a stark lesson in the obstacle course associated with 

the NSR permitting process. Avenal was a proposed stareof-the-art comhined cycle electric generating project to 

be located in California, and an EPA regional office was 

the permitting authority, EPA's Region 9 notified Avenal 

that its l"SR permit application was complete on March 

19, 2008. 

On February 9, 2010, EPA revised the N01 NAAQS by 

adopting a new stringent one-hour N02 standard to supplement the existing annual N02 NAAQS, and EPA took 

the position that the Avenal developers were now required 

to show that it would not cause or contribute to a violation 

of the one-hour NC\ NAAQS. lhe developers submitted a 

new modeling analy~is to demonstrate compliance with the 

new standard, bur EPA said it could not determine whether 

it was acceptable because the Agency had not yet adopted a 

new modeling protocol for use with the one-hour standard. 

On l'vlarch 9, 2010, two years after Region 9 found 

that its NSR application was complete, Avenal filed suit 

in federal district court charging that EPA had failed to 

act within one year as required by §165(c) of the CAA." 

~Ihe developers rook the position that, because EPA had 

been legally required to take final action on the permit 

application well before the new one-hour standard was 

even proposed, it should not be required to redo its permit 

application to demonstrate compliance with the new standard. In January 2011, after briefing and oral argument on 

these issues but before the court reached a decision, EPA 

informed the courr that it had decided to grandfather certain PSD applications, including the Avenal application, 

from the NSR requirement that projects meet the one-hour 

th.e 502 NAAQS, see Ashley Jones, Presentation at the lOth Modeling 

Conference, Challenges With Modeling for the 1-hr SO, NAAQS Standard: 

An Aluminum Plant Case Study {Mar. 15, 2012), tfVaiiablr at https:// 

www3.epa.gov/nn/scram/ I Othrnodconf/presematioos/.3-24-Challenges_ 

with_Modeling__lhr_S02_1\'AAQS-An_Alumlnum_.Pbnt_Case_Study_ 

03-15-12.pdf. 

42. EPA proposed its revisions to the guideline on Ju!y 29, 20! 5 (80 Fed. Reg. 

45.339, 45346-49). The existing guideline is published as 40 C.ER. §51 

app. W(200S}. 

43. Jeff Hz1lmm•ad. one of the ambon of this Article, represented the plaintiA. 

inthisca;;e, 
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1-2017 NEWS & ANALYSIS 47 ELR 10033 

NO, NAAQS, and explained that it would request comments on its grandfathering proposal. 

On May 26, 2011, the court issued an order requiring 

EPA to take final action on the NSR permit within 60 days 

(i.e., by August 27, 2011). The EPA regional office issued 

the NSR permit to Avenal one day later, on May 27, but 

this did not constitute final action because of the possibility for opponents of the project to appeal the permit to 

EPA's Environmental Appeals Board (EAB). Project opponents did appeal ro the EAB in cady June, submitting four 

petitions seeking a review of the permit. 

On August 18, 20ll, the EAB issued its decision, 

declining to review the permit given the time constraints 

imposed by the district court order requiring the Agency 

to make a final permit decision by August 27. The environmental opponents of Avenal also filed suit with rhe U.S. 

Court of Appeals for the Ninth Circuit. "I he Nimh Circuit 

agreed with the environnlemal groups that Avenal must 

show that it would not cause or contribute to a violation 

of the one-hour N02 NAAQS44 It appears that, after the 

Nimh Circuit decision, Avenal decided not ro go forward 

with the project. 

IV. Heightened NSR Concerns Under the 

New Ozone Standard 

'Ihe new ozone standard illustrates some of the difficulties 

that arise when EPA adopts a new standard before deciding how it should be implemented. There are several areas 

of concern with siting new sources under NSR given the 

interaction with the revised ozone NAAQS, including the 

effect of modeling requirements, rhe difficulty of securing 

needed emissions offsets, and the issues associated with 

the adoption of a standard at or near background levels 

of ozone. 

A. Modeling Requirements 

In the past, EPA's approach has been to "assess the ozone 

impacts of an individual source ... on a case-by-case basis 

in consultation with the appropriate EPA Regional Office 

and/or permit reviewing authority."15 There has not been a 

"preferred or recommended analytical technique or modeling system," and analyses of single-source effects for 

NSR have usually involved only a qualitative assessment 

(although in a few cases, applicants have been required to 

use sophisticated chemical transport modeling). 

In its July 2015 proposal to revise its Guideline on Air 

Quality Modeling, EPA asserts that advances in pborochemical modeling have reached the point where it is 

reasonable to identify specific air quality models appro~ 

priate for use in assessing the ozone effects of individual 

44, Sierra Club v. Environmental Prot. Agency, 762 E3d 971 {9th Cir. 2014), 

45. Memorandum from Tyler j. Fox. ro the Proposed Regulatory Docket No. 

EPA-HQ-OAR-2015~0310 (june 30, 2015) (on file with EPA). atJail.ablr at 

https:/l.,•A'AV3.epa.gov/ttnl5cram/11 thmodconf/20 1506.30-0wne Docket_ 

sources seeking an NSR permit. As a result, EPA states 

that it plans to require more rigorous single-source modeling for ozone under the PSD permirting program.46 l'hus, 

a qualitative evaluation will no longer be sufficient, and 

new sources must provide air quality modeling to show 

that the plant will not cause or contribute to a violation of 

the new ozone NAAQS. 

If the final air quality modeling rule-expected in 

the next few months-retains a requirement for singlesource modeling for the ozone NAAQS, nothing will be 

in place in terms of dear direction on the specific modeling required. New sources and the permitting authorities will face continuing uncertainty about the modeling 

required to demonstrate that plant emissions wlll not cause 

or contribute to a violation of the ozone NAAQS. Coupled 

with the more stringent ozone standard, the new modeling requirements for ozone will likely create a significant 

new challenge for many companies seeking to build new 

manufacturing plants or industrial facilities in the United 

States. 1he bottom line is that new sources will be in a kind 

of limbo. 

EPA has suggested that it will address this concern in 

part by creating a new de minimis exemption for proposed 

sources whose emissions are roo low to have a meaningful 

impact on ozone formation. However, EPA does not yet 

have anything in place to help identify de minimis sources 

that would be exempt from modeling requirements. 

Instead, in its recent air quality modeling proposal, EPA 

explains that it will undertake a new rulemaking that will 

provide a technical basis to identify emissions levels and 

ambient impacts that would not be expected to contribute 

significantly to ambient ozone levels.47 EPA has set a schedule for this rulcmaking that will rake at least another two 

years-substantially lagging behind last October's change 

to the ozone NAAQS. 

B. Finding Emissions Offsets in PSD Areas 

As noted above, EPA policy allows new sources in PSD 

areas to use emissions offsets to address cases where the 

plant emissions would cause or contribute to a violation 

of NAAQS. In theory, this would provide an option for 

sources located in areas that meet the prior ozone standard of 75 ppb but have monitored levels that exceed the 

new 70 ppb standard. Until these areas are designated as 

NA (a process that takes several years), sources located in 

these areas will be subject to the PSD provisions for NSR, 

including the requirement that sources show that they will 

not cause or contribute to a violation of the new ozone 

NAAQS. Since monitored levels in these areas exceed the 

new standard, the only recourse these sources may have is 

to obtain emissions offsets. 

at 45346. !n 2012, EPA granted a Sierra Club pcdtion and 

to undertake a ndcmaking to evaluate whnher updates m rhe 

if so, to incorporate new analytical techniques 

Memo.pdf. 47. 
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47 ELR 10034 ENVIRONMENTAL LAW REPORTER 1-2017 

The problem, however, is that these areas will not have 

the arrangements in place to generate offsets for several 

years. History has shown that it takes several years for 

an area tO develop the institutional arrangements necessary for the generation of acceptable offsets. EPA does, at 

least in theory, allow offsets from other areas under certain 

circumstances, but the opportunity to use these "uades" 

across areas has historically been constrained by EPA. In 

particular, the applicant must demonstrate a "net air quality benefit" across the region-a showing that must be 

made through detailed computer modeling to EPA's satisfaction. Some commenrers on the ozone NAAQS proposal highlighted the difficulty of obtaining EPA approval 

of such trades.48 Finally, it should be noted that rural areas 

with ozone levels exceeding 70 ppb that do not have any 

other controllable sources may never be able to generate 

the needed emissions offsers. As a result, the recent ozone 

NAAQS may effectively ban the construction of new 

sources in these rural areas. 

C. Dealing With Background Ozone 

In the case of the recent ozone NAAQS, the new 70 ppb 

standard likely approaches background levels in some 

areas of the United States, leaving little "headroom" fOr 

new manufacturing facilities in terms of showing that 

their residual emissions, even after installing the best 

available pollution control technology, will not violate the 

ozone NAAQS. Recenr research has found that stratospheric intrusions and long-range transport-particularly 

in western states-have resulted in daily maximum eighthour ozone levels of 70 ppb or more.49 With the ozone 

NAAQS at or below background, sources will find it 

impossible to show that they will not "contribute to" a 

violation of the standard. 

EPA has argued that stratospheric intrusions can be 

dealt with through its exceptional events policy, which 

aiJows EPA to disregard exceedances of a NAAQS caused 

by certain types of exceptional evenrs. However, states thar 

48. For example, the Somh Grolina agency in charge of implementing the 

CAA commented: 

49. 

One of recent emission control measures is that there are 

potentia! offsets available for any potential new 

source review in fumre nonattainmcnt areas. the 

EPA broadens acceptance of oftSer opportunities, mos1, 

all future ofEct~ may only be obtained from dosed fad!itie~. In 

practical terms, the opening of a new business means the closure 

of another business. 

Carolina Department of Health and Environmental 

have tried to use the policy in the past claim that it has 

been extremely difficult, costly, and rime-consuming to 

get EPA recognition of any exceptional events-perhaps in 

part because EPA has established a high hurdle for accepting state claims of exceptional events. In any event, the 

existing rule sets restrictive requirements for such claims, 

in part by requiring the affected srates to show a "clear 

causal relationship" between the measured level and the 

event that has affected air quality in rhe area. 

This requirement necessitates extensive monitoring and 

modeling to establish a clear causal relationship in a context where there continue to be significant questions about 

the accuracy of ozone air quality modeling. Further, the 

state must show that the exceedance is in excess of normal 

historical fluctuations. It is not dear that states will be able 

to meet these restrictive conditions because Utde historical data exist on such intrusions. In the final ozone rule, 

EPA signaled rhar it intended to complete revisions ro the 

Exceptional Events Rule and guidance document before 

October 2016.50 

In Octoher 2016, EPA issued revisions to its existing 

Exceptional Events Rule as promised. The rule addresses 

some of the issues raised hy stakeholders since promulgation of the current rule in 2007, with the ohjective of 

providing clarity on the criteria needed to prove an exceptional event and increasing the administrative efficiency of 

rhc process. Unlike existing EPA policy, however, the rule 

restricrs the scope of the Exceptional Events Rule to specific 

regulatory actions, such as the designation of areas suhject 

to a NAAQS as attainment or NA and determinations of 

attainment of a NAAQS by NA areas. EPA explains in 

the preamble that it is preparing a guidance document to 

address the exclusion of data for other applications, such as 

NSRY EPA has not announced a schedule for issuing such 

a guidance document and, if history is a guide, there may 

be uncertainty for many years about ways in which exceptional events will affect the NSR program. 

V. Potential Administrative Reforms 

Past efforts to reform the NSR program have largely 

focused on changes that would ease the burden on existing 

sources hy reducing the number of projects and activities 

that would be treated as major modifications of an existing source that require an NSR permit. For example, the 

most recent changes-issued in 2002-allow the use of 

projected future actual emissions, rather than potential 

emissions, in measuring emissions increases; a longer lookback period in selecting the baseline against which future 

projected actual emissions are compared; and a new program referred to as the plantwlde applicahiliry limitations 

(PAL) program, which creates an incentive for sources to 

50. U.S. EPA, supra note 38, at SO Fed. Reg. 65437. 

51. 81 Fed. Reg. 68229-30 (Oct. 3. 2016). 
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NEWS & ANALYSIS 47 ELR 10035 

reduce their emissions as a strategy for avoiding NSR in 

the future. 5

1 

'Ihere certainly is merit in exploring additional NSR 

reforms for existing sources, but this Article is primarily 

focused on the ways in which the current NSR program 

may impede construction of new facilities, even with stateof-the-an emission controls. Below, we discuss a set of 

reforms designed to address these issues and to make the 

NSR program more sensible when it comes to new sources. 

A. A More Realistic Approach for Air Quality 

Modeling 

EPA's current modeling guidance requires deterministic air 

quality models using the maximum allowahle emissions 

rate and the maximum allowable operating conditions for 

each averaging time. 53 It alsn requires the use of modeling 

assumptions that yield the maximum impact on air quality in calculating background, including the effect of other 

sources in the area. However, sources typically operate 

well below their maximum allowable emission rates, and it 

would he highly unusual for all the sources in an area to be 

emitting at their highest allowable rates at the same timeand during a period when weather conditions would maximize the ambient impacts of their emissions. As a result, 

EPA's current modeling guidance suhstantially overstates 

the ambient air quality effects of a potential new source. 

One solution to the over-conservatism of the current 

approach would be to adopt a probabilistic modeling 

approach. Adoption of probabilistic methods would allow 

the use of distributions to reflect the varia.bilitv in actual 

emissions, meteorology, and background. On~ common 

approach is to use Monte Carlo analysis to combine the 

information from the various probability distributions to 

provide an estimate (in the form of a distribution) of the 

effect on air quality. Thus, probabilistic analysis provides 

information on the variability and uncertainty in the estimated air quality effects and on the extent to which current deterministic modeling requirements overestimate the 

actual air quality impacts of a new source. 

Adoption of probabilistic ait quality modeling 

approaches would be particularly appropriate with the statistical form adopted fOr the short-term NAAQS.54 Where 

52. 67 Fed. Reg. 80189 (Dec. 31, rn 1005, the D.C. Circuit upheld 

these provlsiom.-but rejected two provi.>ions intended to ease the 

bltrden of NSR for existing plants. New York v. Environment:t! Pmr. 

Agency, No. 02-1387, 35 EI.R 20135 (D.C. Cir. 2005} (New York/). 'Il;c 

D.C. Circuir also turned down a separate 2003 EPA rule-the "Safe I Iarbor 

Rule"--in 2006. New York v. Environmental Prot. Agency, 443 F..'ld 880, 

Cir. 

53. operating conditions 

emission limits, operating level, and 

and averaging time. U.S. EPA, NF.w 

Soui\C£ Rf.vlEW MANUAl. C.44-45 {dl';l.ft 1990). Similar 

language in EPA's mlc revising its Guiddine on Air Qualiry Models requites 

the use of the operating conditions causing the "maximum ground-level 

concemratiom." 70 C.ER. §51. 

54. 'lhc one-hour NO, and 24-hour fine PM NMQS 

the 98th percentile- averaged over three the 

requires area.> to meet the 99th 

a short-term NAAQS has been established to protect a sensitive subpopu!ation, it might also be possible to use probabilistic modeling to predict the likelihood that a member 

of such a subpopulation might be present and potentially 

exposed to peak concentrations caused by unusual circumstances related to weather or emission events. 

Obviously, in order for probabilistic modeling to be 

helpful, EPA must indicate a receptivity to such modeling. But the Agency should also provide guidance on what 

probabilistic cutpoint must be met when making a determination that a new source will not contribute to adverse 

air quality impacts. EPA is already using probahilistk 

modeling to various degrees in other programs, so it should 

be feasihle to develop guidance for appropriate use of such 

modeling in the NSR program. 

B. Reforms to the Offset Program 

'Ihe statutory offset requirements for the NSR program 

were established in 1977 and were based on the assumption that, if an area was in NA, the problem was largely 

caused by local industrial sources that needed to install 

pollution controls. Therefore~ if a company wanted to 

locate a new facility in that area, it could pay for pollution 

controls at another facility and thus obtain the emissions 

reduction credits it would need to offset emissions from 

the new facility. 

Although this may be the case in some areas of the 

country, it is not the case in many others-especially when 

ir comes to ozone. With the lowering of the ozone standard to 70 ppb, it appears that a number of rural areas will 

become NA areas, including areas that currently have no 

industrial facilities at all. In such areas, violations of the 

ozone standard arc typically caused hy a combination of 

natural background, motor vehicles that travel through the 

area, and pollution transported from long distances. Here, 

no offsets are available and, depending on how the offset 

program is implemented, the offset requirement may well 

serve as an effective prohibition on the construction of any 

industrial facilities. 

The other scenario in which the offset requirement may 

effectively ban new industrial facilities arises from the facr 

that some areas of the coumry have been very aggressive 

over many years in their regulatory efforts to reduce ozone 

levels. It may be true, as some critics suggest, that some of 

these areas did not take aggressive regulatory action until 

passage of the 1990 CAA Amendments, but states with 

persistent ozone problems have spent the past 25 years looking for every conceivable way to reduce emissions related ro 

ozone. In these areas, all the cost-effective emissions reductions (and some very costly ones as well) have already been 

mandated by regulation, and EPA does not allow such 

emissions reductions to be used as offsets. Where there are 

any offsets ro be had in these areas, they are very expensive and often make it economically infeasihle to locate any 

for the average fourth 
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47 ELR 10036 ENVIRONMENTAL LAW REPORTER 1-2017 

new industrial £.1.ciliry in the area, even a relatively small 

facility with state-of:rhc-art pollution controls. 

Fortunately, potential administrative reforms would 

help address both concerns-rural areas where no offsets 

are available and heavily regulated areas where offsets, if 

they are available at all, are very costly. First, the CAA 

allows the developer of a proposed new facility to obtain 

offsets from another area {i.e., an area outside the NA area 

where the new facility will be located) as long as (1) the 

orher area is also in NA and has "an equal or higher nonattainmem classification" and (2) emissions from the other 

area contribute to NA in the area in which the new source 

will be located. Historically, it has been very difficult to 

obtain permission to use out-of-area offsets hecause EPA 

and states have required extensive modeling studies to show 

that emissions from the offset-producing area contribute ro 

pollution levels that exceed NAAQS in the area in which 

the new facility is to be located. Industry representatives 

also report that, even where such modeling has been done, 

EPA has heen reluctant to approve it. 

However, advances in our understanding of air pollution have shown that ozone and fine PM (often referred to 

as PM2 ~) are more a regional issue than a local issue, and 

that elevated levels of these pollutants in a parricular area 

are caused in part by emissions from many other areas, 

including some that arc very distant. 'I his finding-based 

on EPA modeling studies showing that there is long-range 

transport of emissions thar contribute to ozone and fine 

PM NA-is the basis for EPA's recent Cross-State Air 

Pollution Rule. The Rule required substantial emissions 

reductions from power plants in 28 states because EPA has 

found that they conrrihutc to ozone and fine PM NA in 

other states. 

Thus, instead of requiring case-by-case modeling studies to justify the use of out-of-area offsets, EPA and states 

could in many cases rely on the long-range transport studies that EPA has already done to show that emissions from 

28 states contribute to ozone and fine PM NA in many 

other states. Even where EPA has not already done such 

modeling, companies seeking to rely on out-of-area offsets should he able to employ similar studies to justify rhe 

use of such offsets. This reform would not address all the 

concerns about current offset requirements, but it would 

significantly expand the pool of potential offsets in many 

parts of the country (especially in rural areas) while still 

achieving the program's environmental goals. 

Unfortunately, the usc of out-of-area offsets may not be 

an option for some heavily regulated areas such as the South 

Coast Air Quality Management District (SCAQMD) and 

the San Joaquin VaHey in California because of the requirement rhar such offsets must come from an area rhat has "an 

equal or higher nonatrainment classification." For the purposes of ozone, there are five different NA classifications-~­

marginal, moderate, serious, severe, and extreme~~-and a 

developer who might want to huild or expand a facility 

in an extreme area like SCAQMD would be able to use 

out-of-area offsets only from another extreme area, where 

offsets will also be very costly and may not be available. 

Even in these areas, however, other reforms to the offset program may expand the pool of offsets and allow 

the development of some new manufacturing facilities. 

Por example, EPA has hisrorically insisted that emissions 

reductions required by regulation may not be used as offsets. 'lhis may be true when it comes to regulations promulgated by EPA, but srates are also required to adopt their 

own sets of regulations, SIPs, to show how rhey will come 

into attainment. If an area wamed to preserve the option of 

attracting new manufacturing facilities, it could be allowed 

to set aside some of its SIP emissions reductions to be used 

as offsets, as long as rhe SIP shows that other reductions 

would allow the area to continue making reasonable further progress toward attainment. 

As discussed above, a number of srudics have shown 

that NA areas have lower levels of economic growth than 

attainment areas. rlhis is likely caused, to a large extent, 

by current offset requirements, which have been developed 

over many years in a series of restrictive EPA policies and 

guidance documents. It may be time, especially in light of 

the new ozone standard, to revisit these requirements to 

ensure that they strike the right balance between improving air quality and allowing continued economic growth 

in NA areas, 

C. Adoption of a Consistent Treatment for Pending 

Permit Applications 

EPA has heen inconsistent in its treatment of NSR permit 

applications that are pending when a new NAAQS comes 

into effect. Before 2010, it appears that such decisions were 

generally made on an ad hoc basis by individual stare agencies. Some would require permit applicants to redo their air 

quality modeling to show compliance with a new standard, 

but others believed that this approach was not required. In 

their view, if an applicant had done the necessary modeling 

to show compliance with the standards in place when the 

permit application was submitred, no additional air quality 

modeling was required. 

EPA did not address this issue when it adopted its onehour N02 standard in 2010, but it became a point of 

contention between several permit applicants and environmental groups that were opposing their proposed projects. ln response, EPA said that it did have authority to 

grandfather pending permit applications whenever a new 

or revised NAAQS was adopted, so applicants would not 

need to redo their air quality studies based on the standard. 

However, the Agency said, because it did not explicitly 

include a grandfathering provision as part of the new N02 

NAAQS, all applicants with pending permit applications 

were required to do another air quality study to show that 

emissions from their proposed projects would not cause or 

contribute to a violation of the new standard. 
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Perhaps, because of the problems that this created 

for many permits that were pending back in 2010, the 

Agency did include an explicit grandfathering provision 

as part of the 2015 ozone standard. The Agency could 

easily adopt this approach in connection witb any future 

NAAQS revisions and grandfather those NSR applications that are reasonably complete before the new 

NAAQS comes imo effect as a part of its final rule. In its 

ozone NAAQS proposal, EPA is already moving in this 

direction. It could also extend this approach to protect 

applicants for projects that are proposed for artainment 

areas~ as long as their applications are complete before the 

area is designated NA. 

Without this type of protection, project opponents will 

have an incentive to delay the permitting process as long 

as possible in the hope that the area will be designated 

NA before a final permit can be issued. A more consistent 

grandfathering approach would ensure that companies do 

not spend years trying to ohtain a PSD permit, only to 

reach the end of rhe process and find they now need to get 

anNA NSR permit (with offsets that may not be available) 

rather than a PSD permit. 

D. Timely Issuance of Implementation Rules and 

Modeling Guidance 

As mentioned earlier~ one of the most important reforms 

EPA could make is simply to make sure that the necessary 

implementation rules, guidance, and air quality models are 

already in place when a revised NAAQS comes into effect. 

This would require a commitment of EPA resources that 

the Agency has so far not been willing to make, hut it certainly could be done. 

Part of the problem may be that the nuts and bolts 

of implementing a new standard are not terribly "sexy." 

lhe most senior EPA officials, those who arc politically 

appointed, understand that tbey will be in place for only 

a few years, and they generally want to spend their time 

and attention on higher-profile issues. When it comes to 

NAAQS, they receive praise from the environmental community for lowering rhe standards, but not for the difficult task of actually figuring out how a lower standard can 

be implemented. It is rare to have political leaders at EPA, 

either Republican or Democratic, who want to make their 

mark on the world by dealing with air quality modeling 

and the arcane world of offsets. 

On the other hand, it would be relatively simple to 

address this issue with a basic structural reform at EPA. lhe 

Agency already has a well-established process for reviewing NAAQS~a process thar normally takes several years. 

At present, this process does not involve key stakeholders 

involved in implementing the NSR permitting program. 

'The NAAQS review process shouid be structured so that 

by the end of the process, the necessary implementation 

rules and modeling guidance bave also been finalized. This 

simple step would address many of the concerns that have 

arisen over the past few years. 

VI. Potential Statutory Reforms 

A. A Narrow Fix: Emissions Fees in Lieu of Offset 

Requirements 

Current modeling and offset requirements may be the mosr 

significant regulatory impediment to the development of 

new and expanded manufacturing plants in the United 

States, In attainment areas, more stringent NAAQS coupled with conservative modds and modeling assumptions 

make it difficult (and sometimes impossible) for a permit 

applicant to show that a new facility will not "cause or contribUte to" a violation of any NAAQS. Even where it may 

be possible to make such a showing, the process is uncertain, lengthy, and burdensome. 

When a new or expanded source in an attainment area 

cannot make sucb a showing, it musr obtain emissions offsets in order to obtain a permit. In this sense, it is treated 

just like a facility in an NA area. In either case, a new facility may not be built unless the permit applicant can obtain 

sufficient pollution offsets. However, as outlined above, 

offsets are not available in many areas, and in areas where 

they are available, they can be prohibitively costly. 

We propose a narrow statutory reform that could 

address these issues while still obtaining most or perhaps 

even more of the environmental benefits of the current 

program: allow permit applicants to pay emissions fees in 

lieu of meeting tbe current off'set requirements, and require 

the state or local environmental agency to use these fees to 

pay for or subsidize emissions reductions that the agency 

believes will do the most good in terms of reducing environmental risks. 5

5 

Depending on the size of the fee, states may or may not 

be able to obtain the emission offsets required by the current NSR program, but they may be able to obtain even 

more because they could seek emissions reductions from 

a much broader range of sources than allowed under the 

current program. Current EPA practice favors offsets that 

come from other industrial sources-not from "mobile 

sources'' {including cars, trucks, and construction equipment) and not from "area sources" (such as dry cleaners, 

auto body shops, and other paint and coating operations). 

Our proposal would have emissions fees paid into a fund 

that would be under the control of the state or local environ mcnral agency, which could use the proceeds to finance 

emissions reductions and other air quality programs. In 

some cases, this might include subsidizing diesel retrofits 

or other emissions reductions from mobile or area sources 

55. Air Investment Funds (the Carl 

Program and the To:xas 

h.1.ve proven effective 

!;or example, the 

Program provides grants to owners heavy-duty vehicles 

to replace older heavy.duty engines with new and cle.aner engines, and 

to instal! electric idling-reduction 'Il\C TERP has funded 

;'1'~";;'";-;";~ive:;h;u~c~l; :£.~"~:;":"~';,~.~;;,,;;;;:;~~'~:;.;;h;,;;among other projects, Su ~: and https:/fwww,tceq. 
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47 ELR 10038 ENVIRONMENTAL LAW REPORTER 1-2017 

that can be more important in terms ofimproving ambient 

air quality than traditional offsets. 

In some cases, states could use their existing regulatory authority to obtain emissions reductions that could 

be used as offsets. Under current law, existing sources do 

not necessarily have an incentive to make even cost-effective emissions reductions hecause (1) they do not have to 

pay for their emissions and (2) they may want to "hoard" 

potential reductions to offset future emission increases.56 

As a result, existing plants have an incentive to retain any 

potential reductions to support their own plans for plant 

expansion, instead of generating emission oft:~ets for a new 

plantY States could use their existing regulatory authority 

to obtain such reductions and creare offsets that could be 

used by anyone seeking to build a new source (or expand 

an existing one), 

Under the approach tbat we are proposing, a new or 

expanded facility would still need to obtain a permit to 

ensure that it will be built with modern pollution control 

technology-BACT in attainment areas and LAER technology in NA areas-but instead of obtaining offsets, ir 

would make a payment to the state or local environmental 

agency based on its projected emissions. We anticipate that 

such per-ton emissions fees would be different for different 

pollutants based on rhe "reasonable cost" of a technologybased level of control. Some examples ofidentifying a "reasonable" control cost include the following: 

• Section 185 ot the CAA (adopted in 1990), which 

established an emissions fcc of $5,000 per ton 

adjusted annually by the Consumer Price Index. In 

2013, the tee was $9,400 per ron tor NO, and VOC 

emissions for severe and extreme NA areas. 

EPA's regulatory impact analysis for the recently 

adopted ozone standard, which used a control cost of 

$15,000 per ton as a reasonable estimate of the highest per-ton cost that would be necessary for the cost 

of "unknown" controls required to meet the current 

ozone NAAQS. 

We anticipate that these numbers ($9,400-$15,000 

per ton) would he at the upper end of the range of potential emissions fees, since they reflect the projected cost of 

obtaining emissions reductions in the areas wirh rbe most 

serious air quality problems. 

B. Broader Structural Reform: Emissions Fees in 

lieu ofNSR 

A more sweeping statutory reform could replace the entire 

NSR permitting program with a system ofindustrial emissions fees. 'TI1e fees could be based on the projected petton cost of controlling different pollutants, or they could 

'56 Plant.<; do pay nominal Title V fees based on their emissions 

57. This asymmetry between the grandf.athering of emission> for existing 

p!ants while new plants mnst obtain emission Dffsers serves as an important 

wedge in terms of cleaner new firms huying om the dinier existing plants 

inNAareas. 

instead be damage-based. Damage-based fees could vary 

based on geographic location, insofar as reasonable estimates of damages are available. Different fees would he 

applied to different pollutants, based on the best available knowledge of their relative roxicity to human health 

and the environment. Emissions near population centers 

would likely be assessed a higher fee than emissions in 

rural areas. 58 

A virtue of emissions fees compared with the NSR process is that companies can build the fees into their cost 

structures, creating a clear economic incentive to control 

or modify their production processes to reduce emissions. 

Because the fee is automatic, it circumvents all the costly 

preparations and delays associated with NSR and reduces 

the power ofEPAand state officials over specific companies 

involved in new construction or in the upgrade or repair of 

existing facilities. With emissions fees, the company docs 

not face any uncertainty about how the regulator will react 

to a facility that is new or undergoing repair and maintenance. With NSR, there is considerable uncertainty as to 

how state or EPA officials will define the NSR obligation 

for a specific facility. And it is this regulatory uncertainty 

that may discourage a company from making investments 

in new facilities. Note that an emissions fee could also 

be extended to apply to existing sources, removing new 

source bias. 

However, there are important barriers and hurdles to 

implementing an emissions fee approach. First, a growing body of scientific evidence calls into question a key 

assumption of the CAA: that there is a "safe" amount of 

pollution that can he established by environmental science. 

While a threshold dose for adverse effects seems likely for 

each individual, there is a wide range of susceptibility to 

adverse effects, considering the differences among healthy 

adults, senior citizens, asthmatics, children, and people 

with cardiopulmonary problems. If the safe population 

dose threshold is defined as tbe safe dose for rhe mos[ susceptible individual, then the population threshold may be 

very close to zero or background levels. 

As a result, the environmental community may oppose 

the adoption of an emissions fee approach in place ofNSR 

modeling requirements to ensure protection of air quality, 

out of their concern for the adequacy of protection of puhlic health. On the other hand, some environmental groups 

are simply looking for rhe most effective way to reduce 

emissions, and they may see emissions fees a.s more effective than an NSR program that is politicized, fragmented, 

and under constant litigation. 

58. 
161 


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Copyrlght © 2017 Environmental Law Institute®, Washington, DC. Reprinted with permission from ELR®, http://'.WN.I.eiLorg, 1-800-433-5120. 

1-2017 NEWS & ANALYSIS 47 ELR 10039 

To the extent that fees would be based on estimated 

damages, an emissions fee approach would require a rigorous benefit analysis. While EPA has developed benefit 

estimates for the ozone and fine PM NAAQS pollutants, 

debate is ongoing (and controversial) over the uncertainty 

in EPA's estimates of the health effects of ozone and PM 

exposure.s9 In particular, considerable uncertainty exists 

in the estimated health effects associated with exposures 

at the low ambient levels of ozone and fine PM that characterize U.S. air quality. Even EPA acknowledges significant uncertainty associated with mortality estimates for 

exposures at the low ambient levels of ozone and fine PM 

thar are present in the United States.60 Nonetheless, EPA 

knows bow to use tools of uncertainty analysis and those 

tools could be applied to help develop appropriate emis~ 

sions fees. 

Second, current NSR requirements are designed to protect against short- and long-term violations of the several 

NAAQS. However, there is substantial seasonal, day-today (and even hourly) variability in the effect of emissions 

from a major plant on ambient air quality. This variability 

arises from variations in such factors as background emissions and meteorological conditions. As a result, a fixed 

emissions fee may approximate the effect of emissions in 

terms of long-term average ambient air concentrations of 

pollutants such as ozone and fine PM, but such fees would 

have to vary substantially on a day-to-day (and even hourly) 

basis across different locations within an urban area to 

track the daily effect of plant emissions on air quality and 

the associated air pollution damages. 

'lhus, a stable annual emissions fee would only rarely 

be "right" on a day-to-day (or hourly) basis in protecting 

against short-term violations of NAAQS and in reHecting the damages of plant emissions. A short-term, variahle 

emissions fee responding to variations in meteorological 

and atmospheric conditions would more closely approximate (although still imperfectly) the damage effects of 

emissions from a major facility, but implementation of such 

a variable fee would be challenging. ~fbe variability in the 

fee would also give up some of the "certainty" advantages 

that would accompany a stable long-term emissions fee. 

Nonetheless, with modern compurer technology and 

"big data" systems, a variable emissions fee may be fea~ 

sible and could prove to be less administratively onerous 

for industry and EPA than the current NSR program. 

59. :-.iAnO:-IAL R~:si:.ARCII Cou:-:c!L, EsnMATlNG THE PullLJC I h:ALTHlh~NlTJTS 

Ol' Pll.Ol'OSED AIR PoLLl!TlON Rl::GULATJONS (National Press 

Anhur 7hc 

GO. 

Clearly, however, it would have to be structured in a way 

that provides certainty and predictability for source own~ 

ers, perhaps by limiting the range in which the fee can 

fluctuate and setting the fee far enough in advance that 

they can plan their operations based on the amount of 

the fee. 

The air chemistry associared with NOx emissions is particularly complicated. The resulting non-convexity in rhe 

relationship between reductions in NOx emissions and 

ambient ozone and fine PM levels yields negative benefits 

in some major metropolitan areas. In other words, reducing 

NO, emissions can actually make air quality worse in some 

areas. As a result, it is not dear how best to implement an 

emissions fee program for NOx emissions in these major 

urban areas.61 However, such modeling difficulties are also 

a conundrum in the command-and-control approach to 

NSR that EPA is now implementing. 

lbird, an emissions-fee approach will require that 

covered facilities estimate or monitor their emissions of 

multiple pollutants on a continuing basis. Much of this 

information is already reported by companies to state 

environmental agencies, EPA, or both. Since companies 

would know that under this new approach, fees would 

be charged for emissions, they would have an additional 

incentive to understate their emissions to EPA. A rigorous 

EPA enforcement system-with substantial penalties for 

false reporting-will be required to ensure the integrity of 

reported emissions. 

Although intensive monitoring and enforcement programs are feasible for major manufacturing plants (the 

kinds of sources subject to tbe NSR program), these intensive programs would nor be feasible for the large number 

of smaller stationary/area sources and the transportation 

programs required to achieve and maintain air quality that 

meets NAAQS. Thus, for rhese smaller sources, something 

like the current CAA processes to implement 1\:AAQS 

(e.g., SIPs) will continue to he necessary. 

VII. Conclusion 

lhe NSR program has become a significant impediment to 

the construction and expansion of manufacturing facilities 

in the United States. With increasingly stringent NAAQS, 

and especially under the new ozone standard, it may effectively prevent industrial development in some parts of the 

country. We have identified several administrative actions 

that EPA could take to address these issues while still maintaining the environmental benefits of the program. 

We start with two reforms that would be beneficial 

even if none of the NAAQS is revised again. First, EPA 

could adopt a probabilistic approach to air quality modcling to replace its current deterministic, upper-bound 

modeling requirements. Such an approach would more 

61. Fann eta!., supra note )3; Muller & Mendelsohn, supra note 58; Arthur Fraas 

& Randall Lutter, Do SCJmr NO, Emiuiom l!aVI: Negati!'e EnvirCJnmentit/ 

DmlutgeJ·? Evidemr:<md lmpfi,atiomjbr PCJliry, 15 ENYTL. Sc!. & TECH. 7613, 

7613-14 (201 l); Fraas & Lutter, supra note 58. 
162 


30134.122

Copyright© 2017 Environmental Law Institute®, Washington, DC. Reprlnted with permission from ELR®, http://w'ww".e!Lorg, 1-800-433-5120. 

accurately predict the air quality impacts of a new or 

expanded facility and thus make it easier to obtain permits for new and expanded facilities in attainment areas. 

Second, EPA could adopt reforms that would expand the 

pool of offsets and allow more clean development in borh 

attainment and NA areas while preserving the program's 

environmental benefits. 

We also recommend two simple reforms that would 

explicitly address the NSR issues that arise when a NAAQS 

is revised. First, EPA should revise its regulation to clarify 

that permit requirements and standards will be based on 

the date a complete permit application is submitted (which 

is within the control of tbe permit applicant) and not on 

the date the permit is actually issued (which may be years 

later and is solely within the control of the permitting 

authority). Second, the Agency should adopt internal sraffing reforms to ensure that the necessary implementation 

rules, guidance, and air quality models are already in place 

when a revised NAAQS comes into effect. 

Additionally, we offer two potential statutory reforms. 

The first would be fairly narrow but would significantly 

improve the NSR program by allowing permit applicants 

to pay emissions fees in lieu of meeting the current offset 

requirements. These fees would go into a fund that the 

state or local environmental agency would use to pay for 

or subsidize emissions reductions that the agency believes 

will do the most good in terms of reducing environmental risks. 

Finally, we note that a more fundamental reform would 

be to change the statute and replace the NSR program for 

major manufacturing facilities with a system of emissions 

fees for each of the NSR pollutants. By monitoring emissions1 each company would know its financial responsibility for pollution and could take steps to reduce or prevent 

emissions and thereby avoid fees. Such an approach would 

eliminate the uncertainty and unpredictability of the NSR 

process and encourage the expansion of existing manufacturing plants and the construction of new ones. 

Appendix: Chronology for PSD Application for Footprint Power Salem Harbor 

Development LP Gas-Fired Combined Cycle EGU (630 MW) 

Initial application 

Additional information submitted 

Draft PSD permit issued for public comment 

Public hearing 

Public comment extended 

Revised General Electric (GE) guarantee 

Response to EPA & other comments; emissions update with additional GE guarantee 

Additional letter on startup/shutdown 

Additional air quality monitoring for PM, & updared emissions rates for carbon monoxide & 

sulfuric acid 

Draft final permit issued 

Petition submirted ro EAB 

Petition denied 

Final permit issued 

47 ELR 10040 ENVIRONMENTAL LAW REPORTER 

Dec. 21, 2012 

Apr. 12, 2013 

June 10, 2013 

June 18, 2013 

Aug. 6, 2013 

Aug. 20, 2013 

Sept. 4, 2013 

Se t. 9, 2013 

Sept. 9, 2013 

Oct, 10, 2013 

Nov. I, 2013 

Nov. 1, 2013 

Dec. 11, 2013 

Jan. 10, 2014 

Jan. 16-21, 2014 

Jan. 30, 2014 

Mar. 3, 2014 

Sept. 2, 2014 

Sept. ll, 2014 

1-2017 
163 


30134.123

GREG WALDEN, OREGON 

CHAIRMAN 

Mr. Stuart Spencer 

Associate Director 

ONE HUNDRED FIFTEENTH CONGRESS 

FRANK PALLONE, JR., NEW JERSEY 

RANKING MEMBER 

cttongress of tbc ~nitcb ~tatcs 

j!)ouge of l~epre!)etttntii.Je!) 

COMMilTEE ON ENERGY AND COMMERCE 

2125 RAYBURN HousE OFFICE BuiLDING 

WASHINGl'ON, DC 20515--6115 (702)125--2927 

(:?02)225"36<11 

March 9, 2018 

ADEQ, Office of Air Quality 

530 I Northshore Drive 

Little Rock, AR 72118 

Dear Mr. Spencer; 

Thank you for appearing before the Subcommittee on Environment on February 14, 2018, to 

testifY at the hearing entitled "New Source Review Permitting Challenges for Manufacturing and 

Infrastructure." 

Pursuant to the Rules of the Committee on Energy and Commerce, the hearing record 

remains open for ten business days to pennit Members to submit additional questions for the record, 

which are attached. To facilitate the printing of the hearing record, please respond to these questions 

with a transmittal letter by the close of business on Friday, March 23,2018. Your responses should 

be mailed to Kelly Collins, Legislative Clerk, Committee on Energy and Commerce, 2125 Rayburn 

House Office Building, Washington, DC 20515 and e-mailed in Word fonnat to 

kclly.collins@mail.housc.gov. 

Thank you again for your time and effort preparing and delivering testimony before the 

Subcommittee. 

JL 

John Shimkus 

Chairman 

Subcommittee on Environment 

cc; The Honorable Paul Tonko, Ranking Member, Subcommittee on Environment 

Attachment 
164 


30134.124

ADEQ 

A R K A N 5 A 5 

Department of Environmental Quality 

March 23,2018 

Kelly Collins 

Legislative Clerk 

Committee on Energy and Commerce 

2125 Rayburn House Office Building 

Washington, DC 20515 

RE: Responses to Additional Questions for the Record 

Dear Ms. Collins: 

On February 14, 2018, I testified before the House of Representative's Committee on Energy and 

Commerce's Subcommittee on Environment at the hearing entitled "New Source Review 

Permitting Challenges for Manufacturing and Infrastructure." On March 9, 2018, the 

Subcommittee Chairman, the Honorable John Shimkus, caused to be delivered to me additional 

questions for the record. I have enclosed herewith my responses to the questions tendered to me. 

Thank you again for the opportunity to present testimony before the Subcommittee and for the 

opportunity to supplement my testimony with the enclosed answers to the Subcommittee 

Members' questions. 

Associate Director, Office of Air Quality 

Enc. 

ARKANSAS DEPARTMENT OF ENVIRONMENTAL QUALITY 

S301 NORTHSHORE DRIVE I NORTH UTILE ROCK I ARKANSAS 72118-5317 

TELEPHONE 501-682-0744/ FAX 501-682-0880 I www.adeq.state.ar.us 
165 


30134.125

Witness Stuart Spencer's Responses to Additional Questions for the Record 

The Honorable John Shimkus 

I.a. As an environmental regulator, I can tell you that complexity can breed uncertainty. 

Uncertainty can in tum have a chilling effect on projects that could otherwise improve a 

facility's efficiency and emission rates. We need guidance documents, rules, and - where 

appropriate - targeted legislation, that is clear and precise enough to encourage the facilities in 

our regulated communities to invest in modernization projects without fear of tripping or 

triggering cumbersome New Source Review (NSR). I am pleased that the U.S. Environmental 

Protection Agency (EPA) has recently taken steps to clarity its positions on key NSR issues. On 

December 7, 2017, the EPA Administrator Scott Pruitt (Administrator Pruitt) released a 

memorandum in which he relayed that the EPA would no longer "second guess" a company's 

estimate of future pollution levels under its NSR regulations before retrofitting a plant. 

Administrator Pruitt indicated this move would diminish regulatory uncertainty. I agree. It is a 

positive step. 

On March 13, 2018, Administrator Pruitt issued another memorandum on NSR reform, this one 

re-interpreting "project netting". This latest memorandum marks an important shift in the EPA's 

methodology for calculating whether a project will result in a significant emissions increase at 

Step I of the NSR applicability analysis. Relying on certain rule language and regulatory and 

legislative history, the EPA found that under its current NSR regulations, both emissions 

increases and decreases resulting from a proposed project may be considered in Step 1 of the 

NSR analysis, in what the agency now calls "project emissions accounting"- "i.e., taking 

account of the true emissions impacts of the project itself." The effect of both of these EPA1 
166 


30134.126

issued memoranda is positive, in that it helps provide needed guidance, clarity, and certainty to 

the application of the NSR program. 

2. As I referenced in my answer number La. above, Administrator Pruitt issued a memorandum 

on NSR project emissions accounting on March 13, 2018. This memorandum is a positive step 

in addressing the statement I made in my testimony that the NSR rules often times discourage 

rather than encourage pollution control and efficiency projects. In the March memorandum, the 

EPA stated that its prior interpretation of "project netting" had the effect of blocking certain 

projects and significantly delaying others, "even though those projects would not have resulted in 

a significant emissions increase" if considering both emissions increase and decreases at Step 1 

of the analysis (underline added). Within the memorandum, Administrator Pruitt stated, " The 

EPA recognizes that because of the complexities associated with doing multi-year 

contemporaneous netting under Step 2 at a large facility, some companies may have been 

dissuaded from undertaking some projects," even if those projects may have resulted in increased 

efficiency and reduced emissions. I am encouraged that the EPA is taking steps to address this 

issue. Hopefully this will help promote additional pollution control and efficiency projects. 

3.a. The term "cooperative federalism" has been referenced often in the past several years in 

regard to the relationship between the EPA and state environmental protection agencies. ADEQ 

Director Becky Keogh testified before the U.S Senate Environment and Public Works 

Committee that the prior administration of the EPA was demonstrably more coercive that 

cooperative in nature, where states were being made to be more pawns than partners. The states 

have supported a shift to cooperative federalism, a priority of the current administration, from a 

"coercive" federal role to one which supports the states' proper role. I'm happy to report that the 

dynamic is changing. The EPA/state relationship is becoming more collaborative. That is the 

2 
167 


30134.127

key to improving the interaction between the federal government and the states: meaningful and 

early engagement and input in a truly collaborative fashion. The states are, in most instances, 

delegated to implement nearly all Clean Air Act programs. The EPA should recognize that the 

states have on-the-ground experience with regulating the facilities within their borders and defer 

to them and their expertise in appropriate instances on important permitting and planning issues. 

4. As I suggested in my testimony, the terms "modification" and "routine maintenance, repair, 

and replacement" (RMRR) need to be clarified in order to allow regulated facilities to proceed 

with plant improvement and maintenance projects with more certainty. This proposed certainty 

is called into question when rules are muddy and open to interpretation. This in tum leads to a 

host of unanswered questions, including on issues such as how long a plant may operate under its 

existing air permit without having to renew and/or update its emissions control systems to 

current state-of-the-art technology. These questions are especially pertinent in regard to power 

plants. That particular industry sector wrestles with the question of when an upgrade or 

maintenance project at a power plant is significant enough to require a retrofit. 

I have been encouraged by the memoranda the EPA issued in December 2017 and March 2018. 

I hope the EPA takes up the issue of clarifying what constitutes a RMRR project in a future 

memorandum and that the EPA engages the states on this issue when it sets meetings associated 

with its announced NSR Task Force. 

5. Yes it would. In responding to this question, I defer largely to my fellow witness, Mr. Jeff 

Holmstead, because I agree wholeheartedly with his assessment. As he stated in page 5 of his 

witness statement, "Under the NSPS, EPA determines whether a project at a plant is a 

'modification' by looking at the maximum hourly emission rate of the plant before the project 

3 
168 


30134.128

and comparing it to the maximum hourly emission rate of the plant after it. If a project does not 

increase this rate - that is, if the plant has not been changed in a way that would increase its 

maximum hourly emissions rate then the project is not a modification. There is rarely any 

controversy about this issue because the maximum hourly emission rate is a readily available 

number that is based on the design of the facility." 

Mr. Holmstead goes on to say on page 6 of his witness statement, "Because of all the uncertainty 

and controversy caused by the "emission increase test," [under NSR] it would be helpful for 

Congress to clarify this issue. In my view, the best approach would be to make clear that there is 

not a "major modification" under NSR if there is not a "modification" as defined under NSPS. 

Thus, companies (and EPA) would evaluate a project to determine whether it would increase the 

maximum hourly emission rate at the plant. If not, then the project does not trigger NSR. If so, 

then the project would be a modification and would then be evaluated under the current NSR test 

to determine whether it would be a "major modification" that would trigger NSR. There are at 

least two important reasons for Congress to consider such an approach. First, it would provide 

much more certainty to EPA, states, and the regulated industry. As opposed to the current NSR 

approach, the maximum hourly emission rate is an objective measure based on the design of the 

facility and is easily ascertainable. As recent experience has shown, there is much subjectivity 

under the current approach and many different ways to project future annual emissions and then 

determine the amount of those emissions that are unrelated to the project being evaluated. 

Second, from an environmental perspective, a one-hour test is much more meaningful because 

the most stringent EPA standards are based on maximum concentrations of a pollutant averaged 

over one hour (for S02 and N02), eight hours (for ozone and CO), and 24 hours (for PM2.5). 

The only pollutant for which a longer "averaging time" is meaningful is lead, for which the air4 
169 


30134.129

quality standard is based on a 3-month average (and which has rarely, if ever, been addressed by 

NSR.) Simply put, in terms of protecting human health, the maximum amount of a pollutant that 

a facility emits in one hour is much more important than the amount it emits in a year." 

I could not agree more with the points Mr. Holmstead makes. The following fix is simple and 

protective of the environment: 

I. Evaluate a project to determine whether it would increase the maximum hourly emission 

rate at the plant. 

a. If not, then the project does not trigger NSR. 

b. If so, then the project would be a modification and would then be evaluated under the 

current NSR test to determine whether it would be a "major modification" that would 

trigger NSR. 

6. Yes it has. Moreover, there has been relatively little controversy associated with the NSPS 

program, because, as Mr. Holmstead stated in his written statement, the maximum hourly 

emission rate is a readily available number that is based on the design of the facility. If a project 

does not increase this rate - that is, if the plant has not been changed in a way that would 

increase its maximum hourly emissions rate then the project is not a modification. 

6.a. Yes it would. Please see response number 6 above. 

7. No I do not. First, I believe the NSPS hourly emissions rate test would be protective, 

because, as stated by Mr. Holmstead on page 6 of his witness statement, "in terms of protecting 

human health, the maximum amount of a pollutant that a facility emits in one hour is much more 

important than the amount it emits in a year." Second, states are required to maintain a robust 

ambient air monitoring network to ascertain the design value of criteria pollutants throughout 

5 
170 


30134.130

their geographical boundaries. If, in spite of the safeguards present in facility permits, a monitor 

in an area or areas of a state were to violate a particular National Ambient Air Quality Standard 

(NAAQS) value, then steps could be taken in a State Implementation Plan (SIP) to address 

control of that pollutant. In order for this to occur, the state regulator would first need to 

determine if point sources were the primary contributors to the NAAQS violation, as opposed to 

non-anthropogenic sources or exempt categories (i.e., post-crop agricultural activities). If that 

was determined to be the case, a SIP addressing specific pollutant-emitting activities at regulated 

sources within a certain segment of the state would then be appropriate 

The Honorable David B. McKinley 

1. Yes I do. Please see response number 4 to the Honorable Shimkus's question above. 

2. Please see response number 4 to the Honorable Shimkus's question above. Additionally, 

RMRR was not explicitly defined until the proposed Equipment Replacement Provision (ERP) of 

the final RMRR rule promulgated on August 27, 2003. The ERP was ultimately struck down. 

Thus, the need still exists to create a viable exemption, either through rulemaking or via an 

amendment to the Clean Air Act, to define the circumstances when RMRR activities will not trip 

or trigger NSR requirements. 

Review for a new source is fairly clear. The "modification" definition is where the issue gets 

muddy. A modification is any physical change or change in the method of operation. Regulated 

facilities look to EPA's RMRR exclusion for guidance. Although RMRR is a listed NSR 

exclusion, the courts will generally assess five factors when determining whether or not a project 

is routine or non-routine. These factors are: 

a. The nature of the project; 

6 
171 


30134.131

b. The extent of the project; 

c. The purpose of the project; 

d. The frequency of the project; and 

e. The cost of the project. 

These factors are open to disparate judicial interpretation, as has been demonstrated in the 

outcome of court cases around the country on the RMRR issue. The EPA should endeavor to 

create industry-specific RMRR exemptions that account for criteria like those listed in a. - e. 

above. An amendment to the Clean Air Act to that effect would be an even stronger step !O take 

to clarify the issue. 

The Honorable H. Morgan Griffith 

1. Yes it would. Please see response numbers 5, 6, 6.a., and 7 to the Honorable Shimkus's 

questions above. 

2. Yes it would. Please see response numbers 5, 6, 6.a., and 7 to the Honorable Shimkus's 

questions above. 

3. The EPA has already undertaken efforts to clarify and re-interpret issues ofNSR applicability 

and implementation via the issuance of recent memoranda. Please see response numbers l.a. and 

2 to the Honorable Shimkus's questions above. While these memoranda are valuable to the 

regulated community and to the states in that they provide additional certainty as to how the EPA 

intends to implement components of the NSR program, they do not provide the durability and 

enforceability of a rule or regulation. I believe that the EPA does have the authority to undertake 

rulemaking to memorialize its latest efforts at clarifications to NSR. 

7 
172 


30134.132

4. Yes it would. As stated in my response directly above, I do believe that the EPA has the 

authority to promulgate regulatory revisions to the NSR program. That being said, 

Congressional action would be more impactful and longstanding in its effect. 

The Honorable Frank Pallone, Jr. 

1. For your review, I am providing the following link to the Arkansas Pollution Control and 

Ecology Commission's website: 

https://www.adeq.state.ar.us/commission/agenda.aspx 

Once you click on the link above, you will be able to access Commission meeting agendas with 

attachments. The attachments include the Arkansas Department of Environmental Quality's 

monthly permits report. The report includes a description of permits issued by the Office of Air 

Quality. The list includes all types of permit actions, including initial permits, major 

modifications, minor modifications, registrations, and administrative amendment. Each action 

includes a permit number and permit issuance date. Specific information regarding each 

permitted facility may also be located at the following on the following ADEQ website page: 

https :/ /www .adeq .state.ar. us/home/pdssqllpds.aspx 

2. The definition of "modification" is the same under the NSR and NSPS programs. The 

analysis under the NSPS program is simple: the EPA determines whether a facility's project is a 

"modification" by looking at the maximum hourly emission rate of the plant before the project 

and comparing it to the maximum hourly emission rate of the plant after it. If a project does not 

increase this rate, then the project is not a modification. The analysis under the NSR program is 

much more cumbersome and complex. Fortunately, the EPA recently released a guidance 

8 
173 


30134.133

memorandum on March 13, 2018 regarding "project emissions accounting". This memorandum 

memorializes the EPA interpretation that current NSR regulations provide that emissions 

decreases as well as increases are to be considered in Step 1 of the NSR applicability process, 

provided they are part of a single project. Thus, although there have historically been frequent 

instances where a "modification" under the NSPS program has not translated to a "modification" 

under the NSR program and vice versa, the EPA's March 2018 memorandum will help true-up 

the initial accounting of"increases" so that only those true major modification projects will trip 

NSR review. Any increase in emissions should be offset and balanced with decreases, if they 

are part of the same project, in order to produce a true accounting for a particular project. 

3. As stated in my response directly above, any increase in emissions should be offset and 

balanced with decreases, if they are part of the same project, in order to produce a true 

accounting for a particular project. Only after that accounting is done can the actual emissions 

impact be appropriately characterized. 

4. As stated in my response number 3 directly above, any increase in emissions should be offset 

and balanced with decreases, if they are part of the same project, in order to produce a true 

accounting for a particular project. Only after that accounting is done can the actual emissions 

impact be appropriately characterized. 

9 
174 


30134.134

GREG WALDEN, OREGON 

CHAIRMAN 

Mr. Kevin Sunday 

ONE HUNDRED FIFTEENTH CONGRESS 

FRANK PALLONE, JR., NEW JERSEY 

RANKING MEMBER 

Ql:ongress of tbe ~niteb ~~Mates 

~)ou!J'e of l\eprr5'entatlbe5' 

COMMITIEE ON ENERGY AND COMMERCE 

2125 RAYBURN HousE OFFICE BuiLDING 

WASIIINGTON, DC 2051~115 

M<:~Jonly (.2:1J2)1:i'5-2n27 

Minority (202)225-3641 

March 9, 2018 

Director of Government Affairs 

Pennsylvania Chamber of Business and Industry 

417 Walnut Street 

Harrisburg, PA 17101 

Dear Mr. Sunday: 

Thank you for appearing before the Subcommittee on Environment on February 14, 2018, to 

testify at the hearing entitled "New Source Review Permitting Challenges for Manufacturing and 

Infrastructure." 

Pursuant to the Rules of the Committee on Energy and Commerce, the hearing record 

remains open for ten business days to permit Members to submit additional questions for the record, 

which are attached. To facilitate the printing of the hearing record, please respond to these 

questions with a transmittal letter by the close of business on Friday, March 23, 2018. Your 

responses should be mailed to Kelly Collins, Legislative Clerk, Committee on Energy and 

Commerce, 2125 Rayburn House Office Building, Washington, DC 20515 and e-mailed in Word 

format to kclly.collinsr.'l>mail.house.gov. 

Thank you again for your time and effort preparing and delivering testimony before the 

Subcommittee. 

JL 

John Shimkus 

Chairman 

Subcommittee on Environment 

cc: The Honorable Paul Tonko, Ranking Member, Subcommittee on Environment 

Attachment 
175 


30134.135

PAChamber'M __. of Business and Industry 

The Honorable John Shimkus 

C/0 United States House of Representatives 

Committee on Energy and Commerce 

Subcommittee on Environment 

2125 Rayburn Office Building 

Washington, DC 20515-6115 

417 Walnut Street 

Harrisburg, PA 17101 

717 255-3252/800 225-7224 

fAX 717 255-3298 

\V\VW.pachamber.org 

March 20, 2018 

RE: "New Source Review Permitting Challenges for Manufacturing and Infrastructure" Hearing 

and Questions for the Record 

Mr. Shimkus, 

Thank you for the honor and opportunity to testify before your subcommittee on Feb. 14 regarding "New 

Source Review Permitting Challenges for Manufacturing and Infrastructure." Reforms to this program are 

necessary to secure the vitality and vibrancy of our nation's economy and competitiveness and can (and 

should) be done in a way that not only does not unwind the significant and documented progress this 

country has made in improving air quality, but furthers that progress as the economy expands. As I and 

other panelists noted at the hearing and in submitted testimony, policy changes that allow businesses the 

certainty to proceed with efficiency upgrades and facility improvements will yield a net positive 

environmental benefit. 

Please find below responses to your Questions for the Record, as written in your March 9, 2018 letter. 

Will you explain the various costs that an owner experiences when complying with the NSR 

program? 

The costs associated with NSR compliance can be placed on a wide spectrum. On the low end, in cases 

where there is not disagreement with and among state and federal air regulators and where third-party 

NGO's do not litigate, large companies may be able to handle permitting obligations using in-house 

managers, resources and staff. In such an ideal case, the company could also utilize expected line-items 

trom a project's business plan to pay for the costs of goods and services paid for the construction and 

installation of the controls or equipment to comply with the rate. But more common, particularly for small 

or mid-sized manufacturers or in cases where there arc disputes with and among regulators and where 

third-party NGO's litigate, arc expenditures totaling tens of thousands to hundreds of thousands for legal, 

consulting and engineering fees. Equipment costs can total into the millions of dollars, and, depending on 

the company's compliance strategy and availability of such credits, the securing and retirement of 

Emission Reduction Credits can also result in six to seven-figure expenditures. 

Discussions pertaining to compliance costs should also not exclude consideration of circumstances in 

which protracted periods of time spent wading through the NSR permitting process result in a company 

failing to capitalize on a market opportunity or being unable to scale or alter production schedules. In 

these cases, the company may well have lost out on tens of millions of dollars in revenue. 

Which industries or manufacturing arc most affected by NSR permitting issues? 
176 


30134.136

NSR permitting affects a wide swath of industries, including manufacturers in petrochemical, pulp and 

paper, glass, cement and asphalt, landfills, refining and power generation sectors. In addition, in certain 

cases, distributed power generation and heating projects to provide heat and power to data centers, 

hospitals, educations campuses, and financial institutions may also be subjected to NSR permitting. 

I am told that the complexity of the NSR program makes it difficult for facility owners to 

understand and comply with NSR requirements. Can you provide a few examples of how the NSR 

program is unnecessarily complex or unclear? 

In some cases, there is dispute among state and federal regulators regarding the interpretation or 

application of regulatory criteria, such as the methodologies applicable to calculating potential future 

emissions. Our members have reported that, in addition to disputes between state and federal regulators, 

EPA staff who work in separate permitting and State Implementation Plan teams will make separate and 

in some cases contradictory demands on projects in order to secure permits and SIP modifications. 

There have also been, over the past several decades, multiple and conflicting administrative memoranda 

from EPA re-interpreting key regulatory criteria for the so-called "demand growth exclusion" and single 

source aggregation. 

Most challenging to businesses is the lack of a precise (and consistently applied) definition of routine 

maintenance, repair and modification. While the Clean Air Act provides exemption for NSR permitting 

for projects undergoing routine maintenance, repair and modification, EPA interpretation and a host of 

court cases have resulted in considerable ambiguity over when activity at existing sources will be subject 

to NSR permitting requirements. This tension must be resolved, and could in part do so via an EPA 

rulemaking to define routine maintenance, repair and modification. It could also be done by Congress 

answering the question in statute and making clear where it was ever the legislative's intention to 

establish policy that encourages the retirement and shutdown of existing manufacturing plants and, in 

their place, the building of new facilities outside the country's borders. 

In closing, the PA Chamber endorses and supports legislative, regulatory and administrative remedies that 

will reform NSR in a thoughtful manner. Thank you for the opportunity to testify and for your leadership 

on this issue. 

Sincerely, 

Kevin Sunday 

Director of Government Affairs 
177 


30134.137

GREG WALDEN, OREGON 

CHAIRMAN 

Mr. Pau!Noe 

ONE HUNDRED rJFTEENTH CONGRESS 

FRANK PALLONE, JR., NEW JERSEY 

RANKING MEMBER 

<!ongre.~>.~> of tbe 'mnitell .i>tate% 

1[~ou!ir of i'eprr!ientntibe!i 

COMMITTEE ON ENERGY AND COMMERCE 

2125 RAYBURN HousE OFFICE BuiLDING 

WASHINGJON, DC 20515--6115 Mii!OfltV (202) 225 ~~921 

Minoflly ~20217:?f><3641 

March 9, 2018 

Vice President Public Policy 

American Forest and Paper Association 

and American Wood Council 

1101 KStreet,N.W. 

Washington, DC 20005 

Dear Mr. Noe: 

Thank you for appearing before the Subcommittee on Environment on February 14, 2018, to 

testify at the hearing entitled "New Source Review Permitting Challenges for Manufacturing and 

Infrastructure." 

Pursuant to the Rules of the Committee on Energy and Commerce, the hearing record 

remains open for ten business days to permit Members to submit additional questions for the record, 

which are attached. To facilitate the printing of the hearing record, please respond to these questions 

with a transmittal letter by the close of business on Friday, March 23, 2018. Your responses should 

be mailed to Kelly Collins, Legislative Clerk, Committee on Energy and Commerce, 2125 Rayburn 

House Office Building, Washington, DC 20515 and e-mailed in Word format to 

kcllv.collinsliilmail.house.gov, 

Thank you again for your time and effort preparing and delivering testimony before the 

Subcommittee. 

"JL 

John Shimkus 

Chairman 

Subcommittee on Environment 

cc: The Honorable Paul Tonka, Ranking Member, Subcommittee on Environment 

Attachment 
178 


30134.138

American 

Forest & Paper 

Association AMERICAN WOOD COUNCIL 

March 23, 2018 

Representative John Shimkus 

House Energy & Commerce Committee 

Chairman Subcommittee on Environment 

2125 Rayburn House Office Building 

Washington, D.C. 20515 

Dear Chairman Shimkus: 

Attached please find the response from the American Forest & Paper Association and 

the American Wood Council to the additional questions for the record from the February 

14, 2018, Subcommittee on Environment's hearing entitled "New Source Review 

Permitting Challenges for Manufacturing Infrastructure". 

Please let us know if there is any additional information we can provide. We greatly 

appreciate the opportunity to testify before the Committee on this important matter. 

Sincerely, 

PauiNoe 

Vice President, Public Policy 

1101 K Street NW, Suite 700 • Washington, DC 20006 

• 202 463-2700 Fax: 202 463-2785 • www.afandpa.org 

222 Catoctin Circle SE, Suite 201 • Leesburg, VA 20175 

• 202463-2766 Fax: 202463-2791 • www.awc.org • 
179 


30134.139

Response from the American Forest & Paper Association and the American Wood 

Council to the additional questions for the record from the February 14, 2018, 

Subcommittee on Environment's hearing entitled "New Source Review Permitting 

Challenges for Manufacturing Infrastructure". 

Shimkus 

Q1: Will you explain the various costs that an owner experiences when 

complying with the NSR program? 

A1: There are many different costs that an owner can and does encounter when 

complying with the NSR program. The magnitude of these costs varies based on the 

complexity of the facility and the project Because the requirements of the NSR 

program are so complex, it is common for owners to engage a consultant to conduct 

emissions calculations and the PSD applicability analysis, conduct the modeling 

analysis, prepare the permit application, and perform emissions testing. Whether a 

consultant is engaged or not, the major cost components associated with complying 

with the program are carrying out these pre-application studies, preparing the permit 

application itself, and responding to agency comments on the submittaL Additionally, 

there are costs involved with complying with new or revised emission limits, which 

typically involve capital and operational costs for new emissions controls and emissions 

monitoring equipment 

Owners sometimes incur costs associated with having to reconfigure or modify existing 

or planned equipment if the dispersion modeling or BACT analysis indicates that the 

project as originally designed may not be able to comply with emission standards. 

Reconfiguration costs are also incurred if the permit review agency will not accept 

flexible approaches or reasonable interpretations of guidance. Owners also incur costs 

associated with delays (e.g., market share impacts or energy/operational costs) while 

waiting for a PSD permit to be issued. Finally, there can be many lost opportunity costs 

if a project cannot be permitted on time or at aiL These opportunity costs can include 

lost business opportunities for the company, lost job opportunities for workers, lost 

products for customers, lost tax revenue for the community, and diminished 

competitiveness of the facility, which can place its future viability at risk. 

Q2: I am told that the complexity of the NSR program makes it difficult for facility 

owners to understand and comply with NSR requirements. Can you provide a few 

examples of how the NSR program is unnecessarily complex or unclear? 

A2: There are 695 documents that span 40 years and multiple administrations on 

EPA's NSR policy and guidance website1. These many documents reflect changes in 

1 https:/ /www. epa .gov I nsr /new-source-review-policy-an d-gu ida nee-document -index 

1 
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30134.140

EPA policy interpretations and guidance over time. This large and cumbersome body of 

guidance is challenging to navigate even for state and local regulatory agencies. 

Accordingly, there are differences in policies/interpretations between states and regions, 

creating an uneven playing field across the United States for sources trying to get NSR 

permits in a timely manner for strategic projects. The policies pertaining to what 

constitutes "ambient air'' constitute one example of the complexity of the program. A 

very simple definition of what "ambient air" means has over time evolved into a very 

stringent set of policy documents pertaining to how computer-based air dispersion 

modeling is to be conducted under NSR. The same project can have a different 

permitting path from state to state, so there is little certainty in how to permit most 

projects prior to having a detailed pre-application meeting with the permitting agency, 

and even after the application is submitted. Particularly for larger projects, the permitting 

agency will often ask for additional information or analyses during their review because 

they want to see additional detail that was not contemplated in the facility's original 

permitting plan. 

Q3: Currently, pollution control projects are considered exempt from the NSPS 

but are not exempt from the NSR program, meaning that an owner must receive 

an NSR permit to carry out a pollution control project. Can you explain why it 

would be beneficial to exempt pollution control projects from having to obtain an 

NSR preconstruction permit? 

A3: The purpose of a pollution control project (PCP) is to reduce air emissions. 

Exempting PCPs from NSR review allows such environmentally beneficial projects to 

proceed quickly and efficiently. Because PCPs are not currently exempt from NSR, 

however, facilities that want to install more efficient pollution controls, switch to cleaner 

fuels, and make modifications to improve energy efficiency must go through the NSR 

permitting process. In many cases, the inflexible and overly conservative nature of the 

NSR process forces such beneficial projects to trigger PSD review. In this way, the 

current NSR permitting program creates a disincentive for companies to pursue PCP 

and/or energy efficiency improvement projects because the process results in delay and 

increased costs in implementing the project and could result in an environmentally 

beneficial project not moving forward at all. Particularly at times when capital resources 

are limited, companies often choose investment options with greater capital returns than 

PCPs because the permitting process would impose additional onerous requirements 

beyond the original goal of the project or could eliminate or significantly diminish any 

return on investment Providing an exemption for PCP and energy efficiency projects 

from NSR would benefit the environment because it would encourage facilities to 

implement such environmentally and otherwise beneficial projects. 

2 
181 


30134.141

Q4: Do current NSR program regulations make it more difficult for owners to 

carry out maintenance, repair, or replacement activities aimed at maintaining or 

improving safety or reliability? Please explain. 

A4: There is conflicting guidance on what constitutes routine maintenance, repair or 

replacement (RMRR) projects, so typically owners must obtain concurrence beforehand 

from permitting agency that a particular project is RMRR. If the agency does not agree, 

or if carrying out the maintenance activity could result in a small increase in a facility's 

utilization due to improved reliability, a permit application must be prepared and a 

revised permit obtained. Concerns about triggering NSR review can lead to major 

maintenance being deferred in favor of small "band-aids" that do not trigger NSR but 

also may not result in as effective reliability or safety improvements as more 

comprehensive maintenance would. 

As a result of technological advances to process equipment, many times routine repair 

projects implement improved, more efficient technology that does not technically qualify 

as a "like kind" replacement and may not increase emissions, but nonetheless is 

required to be evaluated as a modification under the NSR program requirements. 

Routine repair projects that improve reliability are beneficial because they reduce the 

occurrence of excess emissions related to malfunctions and improve reliability or safety, 

and the NSR program should encourage facilities to make these improvements. 

Q5: Would reforming the NSR program to use a maximum hourly emission rate 

test clear some of the confusion and uncertainty surrounding the NSR program? 

Please explain. 

A5: Yes, reforming the NSR program to use a maximum hourly emission rate test 

would make PSD applicability calculations much easier and more straightforward. For a 

complex facility, NSR applicability assessments typically involve very complex annual 

emissions calculations using Microsoft Excel workbooks. Permitting agencies often 

question the post-project emissions projections and frequently require the facility to 

track its annual emissions against the projection following the project, creating an 

additional annual recordkeeping and reporting exercise. A maximum hourly emission 

rate test applied to just the modified emission unit(s) would be much easier to 

understand in concept and practical to implement, resulting in quicker preparation and 

review of permit applications or applicability determination requests. 

Q1: Do you agree that NSR may actually hinder a company that wants to reduce 

emissions? What should be the federal response to encourage investment in 

these new technologies while making sure they are adequately scrutinized? 

3 
182 


30134.142

A1: Yes, the complicated and overly cumbersome NSR process currently serves as a 

disincentive for the regulated community to undertake projects that have a primary 

purpose of reducing emissions or improving the energy efficiency of their processes. 

Production efficiency improvements ("debottlenecking") changes are also discouraged. 

The permitting system should reward technology-advancing improvements, particularly 

those that reduce reliance on energy and raw materials and provide innovative products 

and new markets. Projections of a particular project's environmental impacts should use 

realistic, easily verified metrics (actual to future actual or current potential to future 

potential emissions comparisons). 

Pallone 

Q1: Please identify all instances that you are aware of, during your tenure with 

the AF&PA and the AWC, in which a member company's facility or facilities 

undertook a "modification" as defined under EPA's NSPS regulations, and 

triggered the obligation to comply with the applicable standards of an NSPS. 

Please be specific concerning the facility or facilities, locations and date ranges 

to allow the Committee to examine those instances. 

A1: AF&PA and AWC advocate on broad policy issues and are not involved in individual 

member NSPS permitting actions. Our members are potentially subject to several 

NSPS, including regulations addressing emissions from Kraft pulp mills, industrial 

boilers, storage of volatile organic liquids, and reciprocating and spark ignition engines. 

Projects that trigger NSPS include installation of new equipment and production 

capacity increase modifications to existing covered equipment within the individual 

source categories. Many of the larger individual facilities of our member companies are 

subject to NSPS requirements for several categories of their production equipment. 

Specific examples of potential projects that might trigger NSPS applicability could be 

replacement of a smelt dissolving tank, a physical modification to a recovery furnace 

that allows an increase in throughput, installation of a new pulping line, or a 

replacement of an older boiler with a new, more efficient boiler. 

Q2: Do you agree that under today's PSD and nonattainment NSR regulations, a 

non-exempt physical change at a stationary source could increase its actual 

annual emissions and be considered a "modification," and not increase its hourly 

potential to emit and therefore not be considered an NSPS modification? Would 

you consider this to be an increase in air pollution? 

A2: There are many examples of situations where a source is required by the NSR 

provisions to assess the emission impacts associated with increased annual utilization 

even when its maximum hourly emission rates will not increase. As an NSPS 

modification only occurs when an affected source's hourly emission rate increases, an 

4 
183 


30134.143

annual increase without an hourly increase from an existing source would not constitute 

a modification under the NSPS program. Whether the change constitutes a modification 

under the NSR program would depend on the magnitude of the net emissions increase. 

An example is where the non-exempt physical change occurs to non-emitting 

equipment such as steam turbines, pumps, or heat exchangers. Under the NSR 

program, the impact of such changes on a stationary source's annual emissions are 

required to be evaluated even if the changes have no impact on the maximum hourly 

emission rates of individual emission units. Sources subject to NSR typically must make 

a demonstration through computer-based air dispersion modeling that a project's 

significant emissions increases will not cause or contribute to a violation of the NMOS. 

However, as noted in the answer to your next question, if a source is increasing actual 

emissions but not potential emissions, the facility may have already demonstrated 

compliance with the NAAQS based on its potential emissions. 

The NSPS program is a set of technology-based standards that apply to specific 

categories of stationary sources that EPA has concluded may cause air pollution that 

could endanger public health or welfare. By requiring new or modified sources in these 

categories to employ the latest pollution control technologies, the NSPS program 

ensures that new and modified sources are less polluting than older ones. And when 

the market demand for specific products is met by these more efficient facilities, the 

emissions to produce those products goes down. In doing so, the NSPS program also 

reduces impacts to the environment. 

Q3: Do you consider an increase in annual pollution emissions even, if hourly 

potential emissions do not increase, to be "an increase in air pollution?" 

Q4: Do you consider an increase in annual pollution emissions, even if a 

maximum hourly emission rate does not increase, to be "an increase in air 

pollution?" 

A3 & A4: We agree that annual pollutant emission increases constitute "increases in air 

pollution," as that term is used in the context of the NSR program, even if a source's 

hourly potential or maximum hourly emission rates do not increase. The most common 

example of an annual emission increase occurring without a corresponding increase in 

hourly emissions is when a source's annual utilization rate increases due to higher 

demand for the source's products as a result of overall expansion of the economy. 

However, such annual increases do not automatically translate to a violation of an air 

quality standard or requirement, or otherwise endanger public health. While the NSR 

regulations were designed to allow for economic expansion to occur, the reality is that 

economic expansion can cause concurrent increases in air emissions from industrial 

5 
184 


30134.144

and electric utility sources. NSR is intended to ensure that economic growth and 

prosperity can occur while protecting air quality. 

Outside of the federal NSR program, there are additional regulatory safeguards. For 

example, individual state regulatory agencies have the ability to consider the impact of a 

particular source or group of sources on ambient air quality by requiring that dispersion 

modeling be conducted to demonstrate NAAQS compliance as part of the Title V 

operating permit renewal process. 

Finally, there are many instances where annual increases in emissions are projected to 

occur in the context of the NSR program at sources where the equipment has already 

been permitted and the projected increases will not exceed existing permit conditions. 

Often in these situations, the impact to the environment of operating this equipment at 

its current maximum capacity has already been assessed through computer-based air 

dispersion modeling. 

6 
185 


30134.145

GREG WALOEN, OREGON 

CHAIRMAN 

ONE HUNORED FIFTEENTH CONGRESS 

FRANK PALLONE, JR., NEW JERSEY 

RANKING MEMBER 

QCongrcss of tbc Wnttcb ~Mates 

~oull'c of l-\eprcll'cntatibcll' 

COMMIITEE ON ENERGY AND COMMERCE 

2125 RAYBURN HousE OFFICE Bun.DING 

WASHINGTON, DC 20515--£115 

March 9, 2018 

Ms. Emily Hammond 

Glen Earl Weston Research Professor of Law 

The George Washington University Law School 

2000 H Street, N.W. 

Washington, DC 20052 

Dear Ms. Hammond: 

Thank you for appearing before the Subcommittee on Environment on February 14,2018, to 

testify at the hearing entitled "New Source Review Permitting Challenges for Manufacturing and 

Infrastructure." 

Pursuant to the Rules of the Committee on Energy and Commerce, the hearing record 

remains open for ten business days to permit Members to submit additional questions for the record, 

which are attached. To facilitate the printing of the hearing record, please respond to these 

questions with a transmittal letter by the close of business on Friday, March 23,2018. Your 

responses should be mailed to Kelly Collins, Legislative Clerk, Committee on Energy and 

Commerce, 2125 Rayburn House Office Building, Washington, DC 20515 and e-mailed in Word 

format to kclly.collinsliimaiLhouse.gov. 

Thank you again for your time and effort preparing and delivering testimony before the 

Subcommittee. 

~L ·v 

John Shimkus 

Chairman 

Subcommittee on Environment 

cc: The Honorable Paul Tonka, Ranking Member, Subcommittee on Enviroament 

Attachment 
186 


30134.146

THE GEORGE 

WASHINGTON 

UNIVERSITY 

--~~--··· 

LAW SCHOOL 

The Honorable John Shimkus 

Chairman, Subcommittee on Environment 

Committee on Energy and Commerce 

Congress of the United States 

House of Representatives 

2125 Rayburn House Office Building 

Washington, DC 20515 

Attn.: Kelly Collins, Legislative Clerk 

via Email 

Dear Chairman Shimkus: 

March 23,2018 

Thank you for the opportunity to testify at the February 14, 2018 hearing entitled "New 

Source Review Permitting Challenges for Manufacturing and Infrastructure." This letter 

responds to the additional question from the Honorable Frank Pallone, Jr., which states: "Rep. 

Griffith questioned your earlier comment regarding the costs of pollution control technology, but 

did not give you an opportunity to respond." The question thereafter inquires about the benefits 

and costs of New Source Review. 

My response is as follows: 

I strongly disagree with Mr. Griffith's characterization of my testimony as it relates to the 

worries of Southwest Virginians. Indeed, I am from Mr. Griffith's district, and am especially 

concerned that air pollution from facilities that attempt to evade New Source Review imposes 

significant costs not just on people from the Southern Appalachian region, but on citizens across 

the nation. The bill that Mr. Griffith has sponsored, H.R. 3127, would permit massive increases 

in air pollution by allowing major sources of pollution to evade New Source Review through a 

mathematical sleight-of-hand.' 

The costs of pollution control should not be understood as costs at all, but rather, a partial 

means of ensuring that polluters pay for harms they cause, rather than imposing those costs on 

others. Air pollution is a negative externality costing Americans billions of dollars, as my written 

testimony documents. The benefits of curbing air pollution exceed the costs by a ratio of more 

than 30 to 1.2 These benefits include hundreds of thousands of lives saved, millions of 

individuals' ability to work, and millions of children's ability to attend school. Any myopic focus 

on costs of pollution control technology alone represents yet another sleigh-of-hand that should 

not serve as the foundation for policymaking. 

1 See JOEL EISEN, EMILY HAMMOND, ET AL., ENERGY, ECONOMICS, AND TilE ENVIRONMENT 266 

(4'" cd. 2015) (illustrating why accounting for emissions on an hourly basis undcrcounts total 2 ENVTL. PROTECTION AGENCY, THE BENEFITS AND COSTS OF THE CLEAN AIR ACT FROM 1990 TO 

2020,7-1 (Mar. 2011). 

2000 H Street, NI'J Washingto:-~, DC 20052 
187 


30134.147

I appreciate the opportunity to provide this response and would be happy to respond to 

any additional questions. 

Sincerely yours, 

2 
188 


30134.148

GREG WALDEN, OREGON 

CHAIRMAN 

Mr. John D. Walke 

Clean Air Director 

ONE HUNDRED FIFTEENTH CONGRESS 

FRANK PALLONE, JR., NEW JERSEY 

RANKING MEMBER 

ctCongrc%9' of tbc mtniteb .i>tatc% 

1!)ourse of l'\epre£lentati\.Je5 

COMMITTEE ON ENERGY AND COMMERCE 

2125 RAYBURN HousE OFFICE BuiLDING 

WASHINGTON, DC 20515-6115 (201')225.,".2921 

(202)225-3fN1 

March 9, 2018 

Natural Resources Defense Council 

1152 15th Street, N.W.; Suite 300 

Washington, DC 20005 

Dear Mr. Walke: 

Thank you for appearing before the Subcommittee on Environment on February 14,2018, to 

testify at the hearing entitled "New Source Review Permitting Challenges for Manufacturing and 

Infrastructure." 

Pursuant to the Rules of the Committee on Energy and Commerce, the hearing record 

remains open for ten business days to permit Members to submit additional questions for the record, 

which are attached. To facilitate the printing of the hearing record, please respond to these questions 

with a transmittal letter by the close of business on Friday, March 23, 2018. Your responses should 

be mailed to Kelly Collins, Legislative Clerk, Committee on Energy and Commerce, 2125 Rayburn 

House Office Building, Washington, DC 20515 and e-mailed in Word format to 

kelly.collinsiZilmail.house.gov. 

Thank you again for your time and effort preparing and delivering testimony before the 

Subcommittee. 

John Shimkus 

Chairman 

Subcommittee on Environment 

cc: The Honorable Paul Tonko, Ranking Member, Subcommittee on Environment 

Attachment 
189 


30134.149

The Honorable John Shimkus 

1. Seeing that you do not support reforming the NSR program to include a maximum hourly 

emission rate test, do you believe that the m<L'<imum hourly emission rate test used under 

the EPA's New Source Performance Standards has not been successful. Please explain. 

Response: I believe that the maximum hourly emission rate test used under the EPA's New 

Source Performance Standards has not been successful. 

A maximum hourly emission rate test measures increases in an emissions unit's potential 

emissions rate, rather than its actual emissions rate. 1 Accordingly, changes at a facility that do 

not increase a unit's potential emissions rate may nonetheless increase actual harmful air 

pollutants by very significant amounts and evade air pollution control equipment; avoid air 

quality impact analyses; escape need for emissions offsets in areas experiencing unsafe air 

("nonattaitm1ent" areas); worsen local and air quality; and harm public health. Experience with 

EPA's new source review ("NSR") regulatory and enforcement activities have demonstrated that 

power plants, for example, have increased actual harmful air pollution by thousands and even 

tens of thousands of tons, without increasing an emissions unit's maximum hourly emissions 

rate. Indeed, the NSPS hourly emissions rate test is so extreme and unprotective, that existing 

1 See, e.g., 68 Fed. Reg. 61,248,61,272 (Oct. 27, 2003) ("The NSPS program requires a change 

to result in an increase in the hourly potential to emit of the facility. 40 CFR 60.14(a)-(hl. In 

contrast, under NSR, we require an increase in annual emissions. E.g., 40 CFR 51.165(a)(l)(x).") 

(emphasis added). Numerous industry statements confirm that maximum hourly emissions rate 

tests are ''potcntial"-based emissions increase tests. Sec Joint Ilrief oflndustry Petitioners, New 

York v. EPA, 431 F.3d 801 (D.C. Cir. 2005) ("New York f') at 6 (characterizing an increase in a 

facility's maximum hourly emissions rate as an increase in its existing capacity to emit, and 

recognizing that to be a modification under NSPS regulations); at 8 (the NSPS modification 

provision applies to "activities that increase a unit's 'potential' emission rate"); at 9 (for a project 

to "create 'new' capacity to emit," it "must first increase an existing facility's maximum 

achievable emissions rate"); id. ("Activity that increases an existing facility's maximum 

achievable emissions rate is referred to hereinafter as 'NSPS modification activity."'); at 10-11 

(equating "potential to emit" with a facility's "existing design capacity.''); at 23 (eqLmting a unit 

"maximum emissions rate" with its "capacity to emit"); at 26 (NSPS regulatory "'modification' 

is a physical or operational-method change that creates new pollution capacity- i.e., that 

increases an existing unit's maximum emissions rate) (emphasis in original); id. (equating the 

preceding test to a change that "increases the potential emission rate" of a regulated pollutant") 

(emphasis in original); see also Joint Ilrief oflndustry Intervenors, New York I, at 3 (Alleging 

that "EPA established a regulatory definition of''modification" [under NSPSJ, which provided 

that the determination of whether an emissions increase occurs is made by reviewing whether 

maximum emissions after a change would be greater than maximum emissions at full capacity 

before the change, i.e., a "potential-to-potential" test. 40 C.F .R. § 60.14; see 67 FR 80,199 

(2002)."); & at 11 ('"potential-to-potential' test" compares "m<L'<imum emissions before a 

change to maximum emissions after a change.") & 12 (linking increases in potential emissions 

rate to operation at full design capacity) & 13 ("increase in a major source's "potential" 

emissions, i.e., in the source's maximum pre-change emissions level.") 
190 


30134.150

stationary sources could increase emissions by orders of magnitude higher than the 100 and 250 

ton per year thresholds that Congress specified for entire major stationary sources under the 

Clean Air Act. Clean Air Act§ 169(1). Were the NSR program to usc the same potential-based, 

maximum hourly emission rate test employed in the NSPS program, these increases of thousands 

to tens of thousands of ton.~ of harmful air pollution would evade review, cleanup, and offset, and 

worsen air quality and public health. 

EPA has concluded repeatedly that an hourly emissions test would allow changes that 

cause actual emission increases to evade review. For example, in 1996, EPA explained that it did 

not intend to adopt an hourly emissions increase test supported by industry, because: 

For example, assume the emissions unit at the widget factory that is emitting 10 pounds 

an hour but has historically operated at 40 percent capacity due at first to operating cost, 

but with age, reduced efficiency and reliability. Under the Exhibit B alternative, the 

owner could modernize the unit, thus lowering the operating costs and increasing 

efficiency and reliability. This change will allow the owner to use the machine at much 

higher levels (e.g., more hours per day or week) than it had in the past. As a result, 

actual emissions (measured in tpy) could more than double due to the increase in 

utilization even though hourly potential emissions remain the same." 

61 Fed. Reg. 38,250,38,269 (July 23, 1996) (emphasis added). Likewise, when the Bush 

Administration EPA squarely rejected industry's proposed hourly emissions test in 2002, the 

agency explained that an hourly test "could sanction greater actual emissions increases to the 

environment, otlcn from older facilities, without any preconstruction review." 67 Fed. Reg. 

80,185, 80,205 (December 31, 2002). See also, id. ("actual emissions increases resulting from 

unrcviewed projects could go largely undocumented until a [Prevention of Significant 

Deterioration ("PSD") review is performed by a new or modified facility that ultimately must 

undergo review. By that time, however, a violation of an [air quality] increment could have 

unknowingly occurred."), id. ("We agree that a potential-to-potential test for major NSR 

applicability could lead to unrcviewcd increases in emissions that would be detrimental to air 

quality."). 

One significant problem with the hourly emissions rate test concerns the vast gulf 

between actual and allowable emissions in areas that EPA studied. As EPA found following its 

analysis of Texas and Illinois emissions data: 

The results of the Texas and Illinois analysis indicate that typical source operation 

frequently does result in actual emissions that are substantially below allowable 

emissions levels. In these two States, actual emissions represent from 30 to 86 percent of 

the allowable emissions, depending on source category and pollutant. 

61 Fed. Reg. at 38,270; see generally "Results of Data Gathering and Analysis Activities for the 

CMA Exhibit B Settlement Agreement," Prepared for Dennis Crumpler, U.S. EPA, by Radian 

Corporation (Nov. 1988), Appendix F. In other words, the delta between actual and allowable 

emissions under an hourly potential test for NSR would allow individual sources to increase 

actual emissions by more than a factor of three without triggering NSR. 

2. 
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These data are significant because there was no instance in EPA's analysis in which an 

electric generating unit ("EGU") would not have been allowed to increase its hourly or annual 

emissions by at least 50% under an hourly emissions rate test. Again, this is due solely to the 

delta between actual and allowable emissions, without regard to additional emissions increases 

that might be allowed from abusive netting or offset practices. Fifty percent increases were on 

the low end under EPA's study, however, with emissions increases over 100% and 200% more 

the norm. EPA included this study in the docket for a 2002 Bush EPA NSR rulemaking that 

rejected an hourly emissions test for NSR. 

In 2005, EPA issued a proposed rulemaking, entitled "Prevention of Significant 

Deterioration, Nonattainment New Source Review, and New Source Performance Standards: 

Emissions Test for Electric Generating Units," proposing hourly emissions rate approaches for 

NSR. See 70 Fed. Reg. 61,081 (October 20, 2005). Section IV.F of the proposal contained a 

section entitled "Benefits of Maximum Achievable Hourly Emissions Test." See id. at 61,093. The 

most glaring characteristic of this section is the fact that not even EPA itself could ascribe a single air 

quality or public health-related benefit to its proposed maximum hourly emissions rate tests. For the 

most sweeping revision to the way that emissions increases arc calculated under the NSR and NSPS 

programs, it was highly revealing that EPA identified only air quality disbenefits. Instead of public 

health or air quality benefits, EPA described benefits that redound entirely in favor of industry and 

against Americans' health and environment: the agency claimed the proposals will "promote the 

safety, reliability and efficiency of EGUs," and improve facilities' "productive capacity." I d. at 

61,094. 

EPA conducted a briefing for the public about the 2005 NSR proposal on October 14th, 

2005 in the EPA headquarters building at Ariel Rios, I attended that briefing. At this briefing, I 

posed a series of questions to agency officials about the 2005 proposal, the 2002 NSR analysis 

discussed above, any new analysis conducted by EPA since then in support of its proposal, and 

the agency's regulatory experience with the NSPS modification provision. I relate my questions 

and the responses by the agency's officials here. 

I asked the EPA officials whether the agency had conducted any new analysis or data 

gathering similar to the 2002 NSR analysis examined here, to determine what the gap might be 

for EGUs between actual emissions, and allowable emissions under an hourly emissions rate test. 

The EPA official admitted that the agency had not. 2 I have confirmed that there was no such 

analysis or data in the 2005 docket apart from the 2002 analysis, which showed very substantial 

gaps between actual and allowable emissions for EGUs. 

I asked the EPA officials whether the agency knew what the average or typical delta was 

between actual and allowable emissions for EGU s. The EPA official admitted that the agency 

did not know. I asked whether the agency had evaluated the issue with respect to any power 

Unless otherwise noted, the responses to these questions were all provided by Mr. 

William Harnett, who participated in the briefing by telephone from North Carolina. At the time, 

Mr. Harnett was the Director of the Information Transfer and Program Integration Division in 

the Oflice of Air Quality Planning and Standards, Office of Air & Radiation, Environmental 

Protection Agency, 

3 
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plants and, if so, for how many. The EPA official admitted that the agency had evaluated none. I 

confirmed that there was no such analysis or data in the 2005 docket apart from the 2002 

analysis. 

I asked the EPA officials whether the agency had conducted any analysis to refute the 

data and conclusions underlying the 2002 analysis. The EPA official admitted that the agency 

had not. I confirmed that there is no such analysis or data in the 2005 docket apart from the 2002 

analysis. 

Considering that the agency was proposing to extend the NSPS hourly emissions 

modification test to EGUs under the NSR program, I asked the EPA officials whether the agency 

knew how many NSPS modifications had been undertaken by power plants over the lifetime of 

the program. The EPA official admitted that the agency did not evaluate this issue. I asked the 

EPA officials how many modifications the agency projected under the NSR program if any one 

of the proposals were adopted. The EPA official admitted that the agency did not evaluate this 

issue. I confirmed that there was no analysis or data in the 2005 docket concerning these 

questions. 

I asked the EPA officials whether the agency was aware of any instance of a power plant 

having triggered the NSPS modification provision during the lifetime of the program. The 

officials declined to respond. Following my insistence, the officials still refused to respond. I 

confirmed that there is no analysis or data in the 2005 docket disclosing any instance of a 

modification by an EGU triggering the NSPS modification provision. 

EPA well knows that maximum achievable emissions tests are a function of potential 

emissions-that are rarely if ever exceeded: "[t]he 'achievable' test is a measure of the 

'potential' emissions of a source ... in the classic and historic sense of the use of that term." 

Memorandum from Adam M. Kushner, Director of EPA's Air Enforcement Division, Office of 

Enforcement and Compliance Assurance, to William Harnett, dated August 25, 2005, at 9 

(hereinafter "EPA Enforcement Memo."). In a case study undertaken by EPA's enforcement 

office, "the achievable hourly emission rate was calculated to be more than ten times higher than 

the average hourly emission rate in the five-year period prior to the change." EPA Enforcement 

Memo at 3 (emphasis added). 

A series of utility industry case studies accompanying the EPA Enforcement Memo, as 

well as the Memo itself, confirm that hourly emissions rate approaches would result in actual 

annual emissions increases wildly in excess of existing NSR "significant" emission thresholds. 

See, e.g., 40 C.F.R. §52.2J(b)(23)( identifying "significant" emissions increase thresholds for 

"modifications" in attainment areas, such as 40 tons per year for NOx and S02). Examining 

actual emissions data for EGUs from the Clean Air Markets Division, the EPA enforcement 

office concluded that the maximum hourly achievable emissions rate test proposed in 2005 

would have failed to control actual annual emissions increases of 50 tpy ofS02 and 978 tpy of 

NOx in one case study (EPA Enforcement Memo attachment, at I 0); 13,096 tpy of S02 in another 

case study (id at 2); 939 tpy ofS02and 1,405 tpy ofNOxin another (id. at 20); and 1,700 tpy of 

S02 and 507 tpy ofNOx in a fourth case study (id. at 27). See also EPA Enforcement Memo at 3. 

4 
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In the 13,096 tpy example, the annual S02 emissions increase that escapes control is over 

327 times the "significant" emissions threshold for S02. As discussed elsewhere, these exempted 

pollution increase levels are significantly higher than even the major stationary source threshold 

for new power plants (100 tpy), that EPA continues to recognize should be subject to Best 

Available Control Technology ("BACT") and Lowest Achievable Emissions Rate ("LAER"). 

And in many cases, these uncontrolled emissions increases are well above the total S02 and NO, 

emissions from EGUs that EPA's Clean Air Interstate Rule would have covered in2020. In the 

case study, even though sulfur dioxide emissions increased by 13,096 tons per year, the 

maximum achievable hourly rate did not increase. 3 !d. Attachment to EPA Enforcement Memo, 

at 2 (Case Study #I) (emphasis added). Based on this analysis, the EPA enforcement office 

found that "one can only conclude from application of the so-called 'achievable' test that no 

'change' causing an emissions increase . .. at an EGU would trigger NSR . .. . "!d. at 5 

(emphasis added). 

The enforcement office also found that these changes would have produced annual 

emissions increases well in excess of the "significant" emissions thresholds under a maximum 

hourly achieved emissions rate test. See EPA Enforcement Memo attachment at 5, 8, 14, 18, 22, 

25, 29 & 32). Had S02 controls been installed, in contrast, the EGU's total emissions -not just 

the emissions increase magnitude were assumed to be reduced by 95%. For NOx controls, the 

assumed reduction was to a BACT level of 0.100 lb/MMBtu. See, e.g., id. at 6, 9. 

Similarly, experience with EPA's NSR enforcement cases against coal-fired EGUs 

demonstrate the enormous levels of S02, NOx and PM emissions increases that would escape 

control under a maximum achievable hourly emissions rate test. These levels are well in excess 

of the regulatory significant emissions increase levels, representing in some instances nearly 530 

times the significance thresholds. 

For example, maximum hourly emissions rate tests would have exempted the $23 million 

equipment replacement project undertaken by TVA at Unit I of its Cumberland plant, since that 

project did not experience an increase in maximum achievable or maximum achieved hourly 

emissions rates. Final Order on Reconsideration in In re Tennessee Valley Authority, (EPA 

Environmental Appeals Board, September 15, 2000). That projected resulted in an NOx 

emissions increase of21, 187 tpy-nearly one-and-one-halftimes the total amount ofNOx 

emitted annually by all sources in the District of Columbia. 21,187 tpy ofNOx is approximately 

530 times the 40 tpy NOx "significant" emissions tlu·eshold for modifications, and nearly 212 

times the 100 tpy statutory threshold for new "major emitting facilities." CAA § 169(1). See 68 

Fed. Reg. at 61,272 (''500 tpy is far above any level EPA has ever thought justifiable as de 

minimis. E.g., 40 CFR § 51.l66(b)(23)(i)_(definition of"significant").") 

Analysis of the NSR enforcement cases against coal-fired power plants reveals that none 

of those cases would have been viable under maximum hourly emission rate approaches; indeed, 

that is precisely why industry was relying upon their hourly-potential emissions increase 

defenses to avoid liability. See EPA Enforcement Mem. at 13 ('This is Duke's, and every other 

3 The enforcement office used actual operating data to perform the case study analyses. EPA 

Enforcement Memo, at 3. 

5 
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Defendant's, favorite defense in the NSR enforcement cases: we have not expanded capacity 

and, consequently, NSR was not triggered.") That is also why the government stipulated that the 

projects at issue in the Duke Energy NSR enforcement case would not have "caused an increase 

in the maximum hourly rate of emissions at any of Duke's units."4 Tens of thousands of tons of 

illegal NO, and S02 emissions increases were at issue in the Duke Energy case, and all of those 

increases would have been permissible under maximum hourly emission rate approaches -since 

EPA was not contending there was any maximum hourly rate increase, and was instead alleging 

significant net emissions increases in actual, annual emissions (the PSD/NSR test) at the units 

from modifications th~t resulted in the units' post-change, increased utilization. Thus, it's easy to 

see why the enforcement office conclude that basing emissions increases only upon increases in 

maximum hourly emission rates would be "fatal" to its enforcement cases. See EPA 

Enforcement Memo, at 13. 

Finally, the enforcement office concluded that application of the maximum hourly 

achievable emissions rate test would be "largely unenforceable." ld. at 2. Their analysis found 

the baseline "achievable" level to be so high that very few changes increasing emissions 

substantially could possibly result in emissions levels that would surpass it. For example, the 

enforcement office's.first power plant case study found the achievable hourly emission rate to be 

more than ten times higher than the average hourly emission rate in the five-year period prior to 

the change.Jd. (emphasis added). Thus, unless the utility were to increase its actual emissions by 

an order of magnitude, it would not be considered a regulated modification under NSR. In the 

case study, even though sulfur dioxide emissions increased by 13,096 tons per year, the 

maximum achievable hourly rate did not increase. I d. Attach. A to EPA Enforcement Memo, at 2 

(Case Study# 1 ). Based on this analysis, the enforcement office found that "one can only 

conclude from application of the so-called 'achievable' test that no 'change' causing an 

emissions increase . .. at an EGU would trigger NSR . ... "I d. at 5 (emphasis added). 

In its 2005 NSR proposal, and a subsequent 2007 supplemental NSR proposal to adopt an 

hourly emissions rate test, 72 Fed. Reg. 26,202 (May 7, 2007), the administrative records for 

both proposals failed to identify a single instance in which an EGU owner/operator would install 

controls, or would need to install controls, under any of the proposed hourly emissions rate tests, 

when the owner/operator would not also need to install controls under the annual test. The NSPS 

hourly emissions rate test is so extreme and, therefore, ineffective, that in the real world 

industrial sources simply do not experience hourly potential emissions increases in a manner that 

would trigger NSPS controls for existing sources. Extending this NSPS approach to the NSR 

modification program would thwart the very purposes of the NSR program, result in substantial 

emissions increases, worsen air quality and harm Americans' health. See EPA, Respondent Brief 

in New York v. EPA, D.C. Cir. Case No. 02-1387 (Aug. 9, 2004), at 74 ("the purpose of New 

Source Review is to require that facilities making changes that increase their emissions meet 

emission limits that reflect state-of-the-art control technology, analyze the increased emissions 

from their facilities to ensure that they will not adversely affect air quality, and, in nonallainment 

areas, offset their emissions increases with emission reduction credits.") 

4 United States v. Duke Energy Corp., Civil Action No. 1:00 CV 12620rder and Final Judgment, 

at 2 (M.D.N.C. April15, 2004). 

6 
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For all of these reasons, as well as others discussed in comments submitted to EPA on the 

agency's 2005, 2007 and 2018 NSR proposals, I believe that the maximum hourly emission rate 

test used under the EPA's New Source Performance Standards has not been successful. 

The Honorable Frank Pallone 

1. Did EPA conduct any sort of public health study or analysis of the changes proposed in 

the December 7'h Memo? 

There is no public indication, of which I am aware, that the EPA conducted any sort of public 

health study or analysis of the changes in the December 7'11 Memo. The Memo does not say that 

EPA conducted any study or analysis, nor did any EPA spokesperson say so when the Memo 

was released. There is no evidence of any public health study or analysis in any regulatory 

docket, for the Memo or otherwise. 

2. Did EPA take into account the disproportionate impact air pollution has on the most 

vulnerable among us; children, minority communities or outdoor workers? 

There is no public indication, of which I am aware, that the EPA took into account the 

disproportionate impact air pollution has on the most vulnerable among us. The Memo does not 

say that EPA took this into account, nor did any EPA spokesperson say so when the Memo was 

released. There is no evidence of EPA taking this into account in any regulatory docket, for the 

Memo or otherwise. 

3. Mr. Holmstead's written statement said that the best approach would be to make clear 

that there is not a 'major modification' under NSR is there is not a 'modification' as 

defined under NSPS. Thus, companies (and EPA) would evaluate a project to determine 

whether it would increase the maximum hourly emission rate at the plant. If not, then the 

project does not trigger NSR.'' 

Do you agree? Please explain. 

I disagree, for all the reasons explained at length in my response, above, to the question 

from the Honorable John Shimkus. 

I agree, instead, with the position and action taken by Mr. Holmstead and the Bush 

administration EPA in 2002, when Mr. Holmstead headed the agency's Office of Air & 

Radiation. There, EPA rejected use of a maximum hourly emission rate test for the NSR program 

because it "could sanction greater actual emissions increases to the environment, often from 

older facilities, without any preconstruction review." 67 Fed. Reg. 80,185, 80,205 (December 3 I, 

2002). That approach allowed emissions increases to be calculated based on "the unit's prechange and post-change potential emissions, measured in terms of hourly emissions." Jd.. at 

7 
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80,205. EPA's analysis "showed that typical source operation frequently does result in actual 

emissions that are below allowable emission levels," id., meaning very significant increases in 

actual emissions could result without exceeding allowable emission levels. See also, id ("actual 

emissions increases resulting from unreviewed projects could go largely undocumented until a 

[Prevention of Significant Deterioration] ("PSD") review is performed by a new or modified 

facility that ultimately must undergo review. By that time, however, a violation of an [air quality] 

increment could have unknowingly occurred."); id. ("We agree that a potential-to-potential test 

for major NSR applicability could lead to unreviewed increases in emissions that would be 

detrimental to air quality."). 

Mr. Holmstead and the Bush administration EPA understood that these unreviewcd 

emissions increases run counter to the purposes of the NSR program. In EPA's August 2004 

response to the legal challenges to the 2002 NSR rule revisions, for instance, EPA concedes that 

"the purpose of the NSR provisions is ... to limit emissions increases_resulting from physical or 

operational changes." See EPA, Respondent Brief in New Yorkv. EPA, D.C. Cir. Case No. 02-

1387 (Aug. 9, 2004), at 73-74 (emphasis in original); see also id., at 74 ("the purpose ofNew 

Source Review is to require that facilities making changes that increase their emissions meet 

emission limits that reflect state-of-the-art control technology, analyze the increased emissions 

from their facilities to ensure that they will not adversely affect air quality, and, in nonattainment 

areas, offset their emissions increases with emission reduction credits.") EPA "also expressed 

concern about the environmental consequences associated with the Exhibit B provisions. For 

one, you could modernize your aging facilities (restoring lost efficiency and reliability while 

lowering operating costs) without undergoing preconstruction review, while increasing annual 

pollution levels as long as hourly potential emissions did not change." 67 Fed. Reg. at 80,205. 

Indeed, in the context of the 2002 NSR rulemaking, EPA itself recognized that focusing 

the program on increases in potential hourly emissions would not adequately protect co-called 

pollution "increments," as required by the Clean Air Act. For example, in the rulemaking 

proposal, the agency observed: 

Finally, one of the most troubling side effects of [a potential-to-potential hourly emissions 

test] is that it could ultimately stymie major new source growth by allowing unreviewed 

increases of emissions fi·om modifications of existing sources to consume all available 

increment in PSD areas. After the minor source baseline date has been established in an 

area, all increases, whether subject to major NSR or not, consume increment. As illustrated 

in the example above, under the [the potential-to-potential hourly emissions] test an old 

grandfathcred source could experience a "significant" net increase in annual actual 

emissions, yet it would not necessarily be subject to review. Since increment consumption 

after the minor source baseline date is calculated based on actual emissions increases, the 

"minor" modification of the grand fathered source would still consume increment. If a 

major new source with state-of-the-art emission controls proposes to locate in an area in 

which the increment has been consumed in this manner, it would be barred from building 

unless and until the increment problem was resolved. At the same time, older plants would 

continue to be able to make changes resulting in significant unreviewed, and possibly 

uncontrolled, actual emission increases. 

8 
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61 Fed. Reg. 38,250, 38,270 (Jul. 23, 1996). And later, in its Technical Support Document for 

the 2002 NSR Rule, EPA continued in a similar vein: 

In the preamble, we discussed our concerns about the environmental eflects that could 

result from the general use of an applicability test based on the CMA Exhibit B approach. 

We indicated that the approach, based on increases in hourly potential emissions, could 

result in unreviewed emissions increases on a tons per year basis :!Tom modifications of 

existing sources consuming all available increment in PSD areas .... We continue to 

believe that the "actual-to-projected actual" test and not the CMA Exhibit B test- is the 

more appropriate method for measuring actual emissions increases that result :!Tom a 

physical or operational change, while not counting for applicability purposes .... 

With regard to the comment that the CMA Exhibit B approach would not have an impact 

on increment consumption because pern1itting, emissions inventories, and SIP's consider 

potential emissions, we believe that this conclusion overlooks the fact that the regulatory 

increment consumption process is based on changes in "actual emissions." PSD increment 

analyses performed with potential emissions tend to be screening analyses, which are 

accepted if the results show that no violations will result. Hence, while many analyses may 

be done initially with potential or allowable emissions, PSD applicants always have the 

ability to perform a more refined analysis should the initial analysis reveal problems 

meeting the increment. That is, actual emissions increases ultimately may need to be (and 

in some cases have been) used to determine whether an increment is being violated. This 

is one reason why we believe that it is important to retain an applicability process that 

triggers NSR on the basis of actual emissions increases. 

Technical Support Document for the Prevention of Significant Deterioration and Nonattainment 

Area New Source Review Regulations, Nov. 2002, Docket No. A-90-37, at I-6-9. 

It is also instructive to know about the emissions impact analysis that Mr. I-I olmstead and 

the Bush EPA included in the docket for the 2002 Bush EPA NSR mlcmaking that rejected an 

hourly emissions test for NSR. There was no instance in EPA's analysis in which an electric 

generating unit ("EGU") would not have been allowed to increase its hourly or annual emissions 

by at least 50% under an hourly emissions rate test. Fifty percent increases were on the low end 

under EPA's study, however, with emissions increases over 100% and 200% more the nonn. 

EPA and Mr. I-! olmstead included this study in the docket for the 2002 NSR rulemaking, 

and offered no agency criticism of the data or its conclusions. The agency similarly relied upon 

the study to support its 2002 final rule, rightly rejecting a maximum hourly emissions rate 

approach. EPA provided no other data to contradict the emission's impact data or conclusionseither in the docket for the 2002 rulemaking or at any time since then. The only data in the 

possession of the agency thus belie any suggestion that emissions would not be allowed to 

increase very significantly, using a maximum hourly emissions rate test instead of the current 

PSD/NSR test, based on increases in actual, annual emissions to the environment. Allowing 

actual, annual emissions to increase by a factor of many times even the major stationary source 

thresholds plainly allows significantly greater environmental and public health hazards to occur 

than under the prevailing PSD/NSR emissions increase test for modifications. 

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4. Would this approach allow companies to increase actual air pollution and escape air 

pollution controls and offsets, when that increased air pollution could require air 

pollution controls and offsets under the Clean Air Act for "modifications" today? 

Absolutely yes, for reasons explained at length in my response, above, to the question 

from the Honorable John Shimkus. That response mentioned actual examples identified by EPA 

itself in which a single emissions unit could have increased annual S02 emissions by 13,096 tons 

per year under a maximum hourly emissions rate approach now supported by Mr. Holmstcad. 

Another project identified by EPA that would have escaped air pollution controls and offsets 

under a maximum hourly emissions rate test resulted in smog-forming nitrogen oxides (NOx) 

emissions increase of 21,187 tons per year-nearly one-and-one-half times the total amount of 

NOx emitted annually by all sources in the District of Columbia. My response above discusses 

numerous other examples where companies could increase actual air pollution and escape air 

pollution controls and offsets, when that increased air pollution would require air pollution 

controls and offsets under the Clean Air Act for "modifications" today. 

5. Would this approach allow companies to increase actual air pollution and escape air 

pollution controls and offsets, when that increased air pollution could require air 

pollution controls and offsets under PSD/NSR regulations for "modifications" today? 

Absolutely yes, for reasons explained at length in my response, above, to the question 

from the Honorable John Shimkus, as well as responses to prior questions from the Honorable 

Frank Pallone. 

6. Please identify differences that EPA says exist between "modifications" under the NSPS 

and NSR regulatory programs. 13c specific concerning the air pollution increases that 

EPA says are permissible, or that require air pollution controls and/or emission 

limitations, under the two programs. 

I begin by describing some of the differences between the NSPS and NSR regulatory 

programs, quoting excerpts from recent comments submitted by NRDC and other public interest 

groups to EPA, opposing a 2018 rulemaking proposa]S to eviscerate the NSR modification 

program for EGUs. 

Congress enacted the Clean Air Act's NSR program in 1977, in order to limit air 

pollution beyond what had until that time been achieved by the NSPS. That program had 

not proven as successful at curbing air pollution as had been expected, and the NSR 

permitting requirements were added to minimize actual pollution emissions increases 

from new and modified sources. While Congress included a "grand fathering" exemption 

for existing sources, that exemption was not intended to be permanent, but rather existing 

5 "Emission Guidelines for Greenhouse Gas Emissions From Existing Electric Utility Generating 

Units; Revisions to Emission Guideline Implementing Regulations; Revisions to New Source 

Review Program," 83 Fed. Reg. 44,746 (Aug. 31, 2018). 

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sources were to be brought into the NSR program at the point when they made changes 

that would "increase cmissions."6 

As the Seventh Circuit stated in its WEPCO decision: 

Members of the House recognized that "building control technology into new 

plants at the time of construction will plainly be less costly then [sic] requiring 

retrofit when pollution control ceilings are reached." H.R. Rep. No. 294, 95th 

Cong., 1st Sess. 185, reprinted in 1977 U.S. Code Cong. & Admin. News at 1264. 

But Congress did not permanently exempt existing plants from these 

requirements; section 7411 (a)(2) provides that existing plants that have been 

modified are subject to the Clean Air Act programs at issue here. 7 

In fact, beyond balancing the goals of cleaner air for the nation with reduced 

disruption for older facilities, the modification trigger was, to the Seventh Circuit, a 

means of"forcing" investment in cleaning the nation's airsheds: 

Congress intended to stimulate the advancement of pollution control technology. 

See, e.g., S. Rep. No. 91-1196, 91 st Cong., 2d Sess. 17 (1970) ("Standards of 

performance should provide an incentive for industries to work toward constant 

improvement in techniques for preventing and controlling emissions from 

stationary sources .... "). The development of emissions control systems is not 

furthered if operators could, without exposure to the standards of the 1977 

Amendments, increase production (and pollution) through the extensive 

replacement of deteriorated generating systems. 8 

The NSR program thus was added as an additional layer of protection, beyond the 

NSPS, in order to limit or prevent actual emissions increases to a degree greater than had 

been achieved by the NSPS alone, and to ensure that advances in pollution control since 

the NSPS was established, and any source-specific pollution control opportunities would 

be captured. NSPS establishes national pollution limits for categories of sources, 

established based on an EPA determination of the best system of emissions reduction. 

NSR is source-specific, to ensure that a source that has potential to adversely impact air 

quality is required to control its actual annual emissions. Under the current Proposal, 

however, changes that significantly increase emissions would be exempt from NSR 

requirements. The Proposal addresses increases in maximum hourly emission rates, but 

docs not limit total emissions or protect NAAQS or PSD increments. It is clear that due 

to the massive emissions increases that arc allowed to result from the proposed rule, this 

exemption docs not in any way comport with the ambient air quality protection purposes 

of the statute's NSR provisions. 

6 Alabama Power Co. v. Castle, 636 F.2d 323, 350, 400 (D.C. Cir. 1979). 7 WEPCO, 893 F.2d 901, 909 (7th Cir. 1990) (emphasis added). 8 ld at 909-10 (citations omitted). 

11 
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Congress was directing additional air pollution control when it adopted the NSR 

program. The different focus of the two programs led EPA to conclude that there must be 

a stronger legal basis for the Agency to promulgate exemptions to the NSR program than 

the fact that exemptions existed in the NSPS program: 

The PSD review is a tool for air quality management and comprehensive 

consideration of increases of any pollutant regulated under the Act. The NSPS 

exemption is inconsistent with this approach .... The fact that both programs use 

the definition of modification contained in section Ill of the Act is not, in itself, 

sufficient to prove that Congress intended the NSPS exemptions then in effect 

would automatically be [sic] incorporated into PSD .... Apparently the only 

legislative history on the subject is a remark that Congress intended to conform 

the meaning of"modification" for PSD purposes to "other parts of the act [(1233 

Cong. Rec. I-!11957)]. Given the distinct differences between the NSR regulatory 

processes promulgated in response to the 1977 amendments and the preexisting 

NSPS regulations defining ''modification," it seems clear that Congress desired to 

conform the usage of that term only in the broad sense. 9 

The NSPS program, introduced in the 1970 amendments to the Clean Air Act, 

grew out of Congressional concern that the state planning process then in effect "was 

insufficient by itself to achieve the goal of protecting and improving air quality." 10 

By 1977, however, states had made little headway in the battle for clean air. 

Congress recognized that the existing NSPS program was not sufficient either to clean 

the air in the most polluted areas of the country, or to keep the air clean in areas that 

currently complied with ambient air quality standards. In addition to strengthening the 

NSPS program, Congress determined that "[s]ome mechanism [was] needed to assure 

that before new and expanded facilities are permitted, a State demonstrate that these 

facilities can be accommodated within its overall plan to provide for attainment of air 

quality standards." 11 Accordingly, Congress adopted the NSR program. 12 

At the heart ofNSR is a preconstruction review and permitting program that was 

rejected as part ofNSPS in 1970 because it was viewed as "overly elaborate and would 

9 Memorandum from Gerald A. Emison, Director, Office of Air Quality and Planning, U.S. EPA, 

to Director, Air Management Divisions, Regions I, III, V, and IX[;] Director, Air and Waste 

Management Division Region II[;) Director, Air Pesticides, and Toxic Management Division 

Region IV and VI[;) [and] Director, Air and Toxics Division Regions VII, VIII, and X, 

"Prevention of Significant Deterioration (PSD) Definition of'Modification,"' at 2-3 (July 7, 

1986). 

10 ASARCO v. EPA, 578 f.2d 319, 327 (D.C. Cir. 1978) (emphasis in original). 11 S. Rep. No 95-127, *55 (May 10, 1977). 12 42 U.S.C. §§ 7470-7479 (Prevention of Significant Deterioration); 7501-7515 (nonattainment 

areas). 

I2 
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30134.161

impose a heavy and unnecessary burden on both the Government and industry." 13 Among 

other things, the preconstruction permit requires a case-by-case determination of BACT 

(or LAER if the source is locating in a nonattainment area) rather than the automatic 

application ofNSPS, and a demonstration that emissions from the source will not cause 

or contribute to the deterioration of air quality. 

In addition, Congress chose to place much greater emphasis on public health and 

impacts on air quality, and less emphasis on economic feasibility, in designing the NSR 

program. For example, in the Conference Committee Report for the 1977 Amendments, 

in a discussion of the LAER requirement for the NSR program, the Committee stated that 

"[i]n determining whether an emission rate is achievable, cost will have to be taken into 

account, but cost factors in the nonattainment context will have somewhat less weight 

than in determining new source performance standards under section Ill. Of course, 

health considerations are of primary importance.'' 14 

Although Congress incorporated the statutory NSPS definition of modification 

into the NSR program, EPA appropriately adopted different definitions of modification in 

order to comply with the different statutory purposes of the two programs. Under NSPS, 

EPA measures an "increase [in] the [emission rate l of any air pollutant" for the purpose 

of determining whether a modification has occurred in terms of hourly emission rate 

increases in order to be consistent with the program's industry-wide focus. 1

; Under the 

NSR definition of modification, by contrast, emissions increases are measured in terms of 

total annual emissions, in order to be consistent with the NSR program's local and 

ambient air quality-based purpose: 16 

Courts have long recognized the different purposes and requirements of the NSR 

and NSPS programs, and have rejected attempts to import provisions and 

rationales from one program to the other. In Alabama Power, the D.C. Circuit 

upheld EPA's application of the "bubble concept" to calculate emission increases 

in NSR, after having rejected its use in the NSPS program. 17 As the Court 

explained: "EPA has latitude to adopt definitions of the component terms of 

'source' that are different in scope fi·om those that may be employed for NSPS 

and other clean air programs, due to differences in the purpose and structure of 

the two programs."1s 

13 91 Cong. Senate Debates 1970, at 42490 (letter from Secretary of Health, Education and 

Welfare). 

14 95 Cong. Conf. Report H. Rept. 564, 175 (Aug. 3, 1977). See also House Rep. No. 95-294, 

*214-15. 

1; 40 C.F.R. § 60.14(a), (b). 16 Id. § 51.165(v), (vi). Sec 57 Fed. Reg. 32314, 32316 (July 21, 1992) (Emissions increase 

component of modification definition differs under NSPS and NSR, reflecting distinct purposes 

of the two programs). 

17 636 F.2d 323 (D.C. Cir. 1979). See also ASARCO v. EPA, 578 F.2d 319 (D.C. Cir. 1978). 18 !d. at 397-98. See also Potomac Elec. Power Co. v. EPA, 650 F.2d 509, 518 (4th Cir. I98I) 

(upholding EPA's different construction ofthe definition of"stationary source" based on "a 

13 
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30134.162

In WEPCO, the Seventh Circuit observed that by 1977 the NSPS program, with 

its focus on hourly rates of emissions, had resulted in "only varying degrees of success in 

controlling pollution in different parts of the country." 19 Consequently, Congress added 

the PSD program, "concerned with increases in total annual emissions" from major 

sources of pollution rather than its hourly rate of emissions, and ensuring that sources "in 

relatively unpolluted areas would not allow a decline of air quality .... " 20 Likewise, the 

Ninth Circuit has, on at least two occasions, rejected attempts to import provisions and 

rationales from one program to the other. As stated in Citizensfor Clean Air v. EPA: 

"While the NSPS program and the PSD are both interrelated parts of a comprehensive 

federal legislative effort to protect and enhance this national's air quality, the two 

programs play different roles in achieving that broad general goal." 21 

As the Seventh Circuit has observed: 

To determine whether a physical change constitutes a modification for purposes 

ofNSPS, the EPA must determine whether the change increases the facility's 

hourly rate of emission .... For PSD purposes, current EPA regulations provide 

that an increase in the total amount of emissions activates the modification 

provisions of the regulations. 22 

Likewise, in the preamble to its WEPCO rule, EPA pointed to the difference in 

how the emissions increase is measured as the primary distinguishing characteristic 

between the two programs: "[The] two-step test for determining whether activities at an 

existing facility constitute a modification subject to new source requirements ... 

[branches apart at the emissions increase step,] reflecting the fundamental distinctions 

between the ... NSPS and the air quality-based provisions of NSR.'m 

Accordingly, because ofNSR's focus on a source's location and its potential effect 

on air quality and the environment, the source's hours of operation and overall annual 

emissions are key factors in determining whether NSR is triggered. Under an NSPS 

hourly emissions rate approach, a physical change to a source can result in an increase in 

hours of operation or an increase in production, and accordingly a significant increase in 

emissions, and still escape NSR24 

significant difference between the PSD and NSPS programs," noting the emphasis in PSD on 

new air emissions). 

19 WEPCO, 893 F.2d at 904. 

20 ld. 

21 959 F.2d 839, 849 (9th Cir. l992)(emphasis added). 22 WEPCO, 893 F.2d at 905 (citations omitted, emphasis in original). 23 57 Fed. Reg. 32,314, 32316 (July 21, 1992) (emphasis added). 24 Joint Comments of Environmental and Public Health Organizations on the New Source 

Review Regulatory Changes Proposed With EPA's Proposed Emission Guidelines for 

Greenhouse Gas Emissions From Existing Electric Utility Generating Units; Revisions to 

Emission Guideline Implementing Regulations; Revisions to New Source Review Program, 

Docket No. EPA-IIQ-OAR-2017-0355 (Oct. 31, 2018). 

14 
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30134.163

I turn now to the air pollution increases that EPA regulations deem permissible, or that 

require air pollution controls and/or emission limitations, under the two programs. EPA has 

established regulatory "significance thresholds," describing the level of actual tons per year 

increases of air pollutants above which impacts will not be de minimis in nature, and therefore 

would trigger NSR. See 40 C.f.R. § 52.2I(b)(23)(i), (establishing 40 tons per year significance 

thresholds for NO, and SOz, for example). In Alabama Power Co. v. Costle, the D.C. Circuit 

Court of Appeals, while recognizing the NSR program's focus on minimizing actual annual 

emissions increases, indicated EPA could (upon making specified rigorous showings) define 

levels of actual (tons per year) emissions increases which would produce no regulatory benefit 

under the statute. See Alabama Power, 636 F.2d at 360-61,400 (describing that authority to craft 

de minimis exemption is potentially available "when the burdens of regulation yield a gain of 

trivial or no value. That implied authority is not available for a situation where the regulatory 

function does provide benefits, in the sense of furthering the regulatory objectives, but the 

agency concludes that the acknowledged benefits arc exceeded by the costs."). 

Moreover, in the 1990 Clean Air Act amendments, Congress adopted a special de 

minimis rule for sources that emit volatile organic compounds, and couched that rule as well in 

terms of tons per year increases. Sec CAA § 182(c)(6), 42 lJ.S.C. § 75lla(c)(6) (discussing 

NSR applicability in areas classified as severe for ozone non-attainment). Specifically, that 

provision states: 

The new source review provisions under this part shall ensure that increased emissions of 

volatile organic compounds resulting from any physical change in, or change in the 

method of operation of, a stationary source located in the f serious nonattainment] area 

shall not be considered de minimis for purposes of determining the applicability of the 

permit requirements established by this chapter unless the increase in net emissions of 

such air pollutant from such source does not exceed 25 tons when aggregated with all 

other net increases in emissions from the source over any period of5 consecutive 

calendar years which includes the calendar year in which such increase occurred 25 

Immediately following that provision, Congress adopted another provision creating a "special 

rule for modifications of sources emitting less than I 00 tons," which applies whenever such a 

source makes a change "except for a de minimis increase" as established in§ 182(c)(6), 42 

U.S.C. § 75lla(c)(6). See CAA § 182(c)(7), 42 U.S.C. § 75lla(c)(7). Thus, the applicability of 

this provision depends on whether a change would lead to more than a de minimis increase, 

which§ 182(c)(6), 42lJ.S.C. § 75lla(c)(6) defines in terms of the annual tonnage increase 

resulting from a planned change. !d. The same is true for§ 182(c)(8), 42 U.S.C. § 75lla(c)(8), 

which establishes a "special rule for modifications of sources emitting I 00 tons or more." These 

provisions confirm that Congress understood, and intended that NSR would focus on annual 

actual emissions, not hourly emissions or output. 

By contrast, as discussed at length in my response, above, to the question from the 

!Ionorable John Shimkus, the NSPS hourly emissions rate test for modifications would allow, 

and has allowed, actual, annual emissions increases of thousands or tens of thousands of tons per 

25 42 U.S.C. § 751l(c)(6)(emphasis added). 

15 
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30134.164

year. So long as an emissions unit's relevant hourly emissions rate is not exceeded under the 

NSPS test, air quality may deteriorate by many thousands of tons per year because a physical 

change to a source can result in an increase in hours of operation or an increase in production, 

and thereby escape air pollution controls or other pollution mitigation measures. 

In his oral statement, Mr. Holmstead said "even if the NSR program disappeared 

completely tomorrow," that "there would not be any increase in air pollution at all." Do 

you agree? Please explain. 

7. I disagree. Mr. Holmstead's statement is badly, demonstrably wrong. 

First, Mr. Holmstead himself acknowledged repeatedly as Assistant Administrator for 

EPA's Office of Air & Radiation during the Bush administration that merely weakening the NSR 

program, much less eliminating it, would result in increased air pollution. In a 2002 Bush EPA 

rule issues by Mr. Holmstead's Office of Air & Radiation, EPA rejected use of a grossly weaker 

maximum hourly emission rate test for the NSR program because it "could sanction greater 

actual emissions increases to the environment, often from older facilities, without any 

preconstruction review." 67 Fed. Reg. 80,186, 80,205 (December 31, 2002). This maximum 

hourly emission rate test is comparable to the deregulatory approaches in H.R. 3127 and 1-l.R. 

3128 that I criticized extensively in my February 14, 2018 testimony. 26 See also 83 Fed. Reg. 

44, 746 (Aug. 31, 2018) (proposing maximum hourly emission increases tests for NSR for EGUs 

& pretending they are authorized by the current statute). 

Mr. Holmstead' s air office also confirmed that "typical source operation frequently does 

result in actual emissions that are below allowable emission levels," 67 Fed. Reg. at 80,205, 

meaning very significant increases in actual emissions could result without exceeding allowable 

emission levels. See also, id. ("actual emissions increases resulting from umeviewed projects 

could go largely undocumented until a [Prevention of Significant Deterioration] ("PSD") review 

is performed by a new or modified facility that ultimately must undergo review. By that time, 

however, a violation ofan [air quality} increment could have unknowingly occurred.") 

(emphases added); id. (''We agree that a potential-to-potential test for major NSR applicability 

could lead to unreviewed increases in emissions that would be detrimental to air quality.") 

(emphasis added). The Bush EPA "also expressed concern about the environmental 

consequences associated with the Exhibit B [maximum hourly emission rate] provisions. For 

one, you could modernize your aging facilities (restoring lost efficiency and reliability while 

lowering operating costs) without undergoing preconstruction review, while increasing annual 

pollution levels as long as hourly potential emissions did not change." 67 Fed. Reg. at 80,205 

(emphasis added). 

26 Testimony of John D. Walke, Clean Air Director, before the Subcommittee on Environment, 

Committee on Enviromncnt and Commerce, U.S. House of Representatives, Feb. 14, 2018, 

available at https://docs.house.gov/meetings/IF/!Fl8/20180214/l 06852/HHRG-115-IF18-

Wstate-WalkeJ-20180214.pdf. 

16 
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30134.165

In the proposal that preceded the final 2002 NSR rule, the Bush administration EPA had 

quoted an earlier agency notice capturing concerns over the emissions increases that could result 

from the maximum hourly emission rate test: "Finally, one of the most troubling side effects of 

[a potential-to-potential hourly emissions test] is that it could ultimately stymie major new 

source growth by allowing unreviewed increases of emissions from modifications of existing 

sources to consume all available increment in PSD areas .... If a major new source with state-ofthe-art emission controls proposes to locate in an area in which the increment has been consumed 

in this manner, it would be barred from building unless and until the increment problem was 

resolved. At the same time, older plants would continue to be able to make changes resulting in 

significant unreviewed, and possibly uncontrolled, actual emission increases." 61 Fed. Reg. at 

38,270 (Jul. 23, 1996) (emphasis added). 

Second, for the 2002 EPA NSR rulemaking, Mr. Holmstead's air office performed an 

emissions impact analysis that was included in the docket for the final rulen There was no 

instance in EPA's analysis in which an electric generating unit ("EGU") would not have been 

allowed to increase its hourly or annual emissions by at least 50% under an hourly emissions rate 

test. Fifty percent increases were on the low end under EPA's study, however, with emissions 

increases over I 00% and 200% more the norm. I d. 

Third, as discussed at length in my response, above, to the question from the Honorable 

John Shimkus, weakening the NSR emissions increase test with the NSPS hourly emissions rate 

test would allow, and has allowed, actual, annual emissions increases of thousands or tens of 

thousands of tons per year. The Rush EPA enforcement office, for exan1ple, concluded that 

emissions increases totaling lens to hundreds ofthousands of tons from the coal-fired power 

plants found to have violated NSR would have been permissible under a deregulatory hourly 

emission rate test for NSR. Sec EPA Enforcement Memo, at 13; see also supra responses to 

question from the Honorable John Shimkus. 

Moreover, the Bush EPA enforcement office confirmed that deregulatory hourly 

emission rate approaches for NSR would result in actual annual emissions increases ranging 

from 50 tons per year ofS02 emissions at the low end, up to 13,096/py ofS02 in another case 

study, based upon actual emissions data for EGUs from the Clean Air Markets Division, in 

EPA's Office of Air & Radiation. See EPA Enforcement Memo at 3, and Memo attachment at 2, 

10, 20 & 27. A deregulatory hourly emission rate NSR test would have allowed NOxemissions 

increases of21,187 tpy by the $23 million equipment replacement project undertaken by TVA at 

Unit 1 of its Cumberland plant that violated today's stronger NSR safeguards. See Final Order on 

Reconsideration in In re Tennessee Valley Authority, (EPA Environmental Appeals Board, 

September 15, 2000). 

Fourth, when the Bush EPA issued a 2007 supplemental proposal for a deregulatory 

hourly emissions rate test for NSR, the proposal's Technical Support Document ("TSD") found 

27 Environmental Groups' Comments on EPA's Proposed "Supplemental Notice of Proposed 

Rulemaking for Prevention of Significant Deterioration and N onattainment New Source Review: 

Emissions Increases for Electric Generating Units," 72 Fed. Reg. 26,202 (May 7, 2007), Docket 

ID No. EPA-HQ-OAR2005-0163, pp. 142-146. 

17 
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30134.166

that multiple counties across the United States would experience emissions increases in excess of 

NSR "significance" thresholds for "modifications" at EGUs under the test. Table 5.3 of the 2007 

NSR Proposal TSD found that: 40 counties would experience S02 emissions increases between 

40 and 1,000 tpy; 9 counties would experience S02 emissions increases between 1,000 and 3,000 

tpy; and 4 counties would experience S02 emissions increases between 3,000 and 34,276 tpy. 

2007 NSR Proposal TSD at 5-7. The picture for NOx was much the san1e: 30 counties would 

experience NOx emissions increases between 40 and I ,000 tpy, and 5 counties would experience 

NOx emissions increases between 1,000 and 3,098 tpy. !d. at Table 5.4 

Notably. neither Mr. Holmstead's written or oral testimony explained what laws, 

regulations, emissions limits or standards would prevent any increases in air pollution from every 

emissions unit, or even any emissions units, at each major stationary source in the U.S. subject to 

the NSR and PSD programs. The burden lies with anyone making such a claim, erroneous as it 

is, to demonstrate with particularity, and comprehensively, what laws, regulations, emissions 

limits or standards would prevent increases in air pollution from every PSD/NSR-covered 

emissions unit "ifthe NSR program disappeared completely tomorrow." As noted, Mr. 

Holmstead's testimony did not even attempt to do so. 

The reasons for this failure arc obvious: the very structure and requirements of federal, 

state and local clean air laws do not restrict all increases in air pollution. Few if any emissions 

units at major stationary sources are subject to hard caps on total annual emissions tied to current 

emissions levels, that would guarantee "there would not be any increase in air pollution at all" 

"even if the NSR program disappeared completely tomorrow." No federal Clean Air Act 

standards impose hard caps on emissions in the manner just described; to the extent that there are 

caps on annual emissions from individual major stationary sources under some federal standards, 

like the Cross State Air Pollution Rule, facility operators may purchase and trade allowances to 

exceed even those so-called 'caps' with actual emissions increases. Nor do State Implementation 

Plans or individual federal, state or local permits cap total emissions to prevent any and all 

increases in actual, annual air pollution above current levels. These regulatory tools generally 

limit emissions rates, rather than prohibiting any increases in air pollution, meaning that physical 

and operational changes would be allowed to result in significant emissions increases "if the 

NSR program disappeared completely tomorrow." 

For these reasons and many more, Mr. Holmstead's statement is wrong. 

8. In light of your testimony, how do you understand Mr. Holmstead's statement that "there 

would not be any increase in air pollution at all" even if the NSR program disappeared 

completely tomorrow"? Please explain. 

As explained in my responses to the prior question, I believe Mr. Holmstead's statement 

to be wrong and simply not defensible. The statement contradicts numerous statements and 

conclusions by the Bush Administration EPA both while Mr. Holmstead headed the air office, as 

well as statements and analyses by EPA before and after Mr. Holmstead was in the 

administration. The burden lies on someone making such a sweeping, comprehensive statement 

to back it up, with particularity, but Mr. Holmstead did not do so in either his written or oral 

18 
207 


30134.167

statement. Ordinarily, I would have understood such a statement to be simply rhetorical, in the 

context of an oral response to a hearing question; but Mr. Holrnstead' s statement represented 

both a factual and legal conclusion about the state ofU .S. clean air regulation "if the NSR 

program disappeared completely tomorrow." On both grounds, the statement is wrong and not 

defensible for the reasons touched upon in my responses to Question 7. I do not recall Mr. 

Holmstead offering any further explanation for his statement to allow it to be understood better. 

9. Would Mr. Holmstead's support for the approach to "modification" used in the NSPS 

program allow increases in actual air pollution levels from facilities subject, or 

potentially subject, to the PSD/NSR program? 

Absolutely yes, for the reasons discussed at length in my responses, above, to the 

question from the Honorable John Shimkus, as well as my responses to questions 3, 6 and 7 from 

The Honorable Frank Pallone. 

Mr. Holmstead suggested that there would not be any increase in air pollution "because 

of the many other programs that regulate the same pollutants from the same facilities." 

10. Do you agree? 

No, I disagree strongly, for the reasons discussed in my responses to Question 7, above. 

11. If the NSR program disappeared from EPA regulations and the Clean Air Act, arc there 

laws and regulations, in place, at the state and/or federal levels, that would prevent any 

and all stationary sources in the U.S. from experiencing "any increases in air pollution at 

all," that would otherwise be regulated by NSR? 

No, for the reasons discussed at length in my responses, above, to the question from the 

Honorable John Shimkus, as well as my responses to questions 3, 6, 7 and 8 from The Honorable 

Frank Pallone. Having been a Clean Air Act attorney for nearly 25 years, I have never heard any 

government official, or attorney in private, public or public interest practice even suggest that 

there are "laws and regulations, in place, at the state and/or tederallcvcls, that would prevent any 

and all stationary sources in the U.S. from experiencing 'any increases at all,' that would 

otherwise be regulated by NSR." I am not aware of any such laws or regulations, certainly not 

those that "would prevent any and all stationary sources in the U.S. from experiencing 'any 

increases at all,' that would otherwise be regulated by NSR." 

19 
208 


30134.168

GREG WALDEN, OREGON 

CHAIRMAN 

ONE HUNDRED FIFTEENTH CONGRESS 

FRANK PALLONE. JR., NEW JERSEY 

RANKING MEMSER 

~ongre~s of tbe Wniteb $tate~ 

j!)otts't of i\eprtlicntatitJeli 

COMMITTEE ON ENERGY AND COMMERCE 

2125 RAYBURN HousE OFFICE BuiLDING 

WASHINGTON, DC 20515--6115 

March 9, 20!8 

:Mr. Jeffrey R. Holmstead 

Partner 

Bracewell LLP 

2001 M Street, N.W.; Suite 900 

Washington, DC 20036 

Dear Mr. Holmstead; 

Tharik you for appearing before the Subcommittee on Environment on February 14, 2018, to 

testify at the hearing entitled "New Source Review Permitting Challenges for Manufacturing and 

Infrastructure." 

Pursuant to the Rules of the Committee on Energy and Commerce, the hearing record 

remains open for ten business days to permit Members to submit additional questions for the record, 

which are attached. To facilitate the printing of the hearing record, please respond to these 

questions ~ith a transmittal letter by the close of business on Friday, March 23, 2018. Your 

responses should be mailed to Kelly Collins, Legislative Clerk, Committee on Energy and 

Commerce, 2125 Rayburn House Office Building, Washington, DC 20515 and e-mailed in Word 

format to kelly.collins(iiltnail.housc.gov. 

Thank you again for your time and effort preparing and delivering testimony before the 

Subcommittee. 

JL 

Glhnswmkus 

Chairman 

Subcommittee on Environment 

cc: The Honorable Paul Tonko, Rariking Member, Subcommittee on Environment 

Attachment 
209 


30134.169

Questions from the Honorable John Shimkus 

1. Currently, pollution control projects are considered exempt from the New Source 

Performance Standards (NSPS) but are not exempt from the NSR program, 

meaning that an owner must receive an NSR permit to carry out a pollution 

control project. 

a. Can you explain why it would be beneficial to exempt pollution control 

projects from having to obtain an NSR preconstruction permit? 

The NSR process is long, cumbersome, and often very costly. As a result, facility owners try to 

avoid it whenever they can. ln some cases, it would be in their interest to carry out pollution 

control projects. but they choose not to do so because they do not want to trigger NSR. Ifthere 

were an NSR exemption for pollution control projects (as there already is for NSPS), it would 

remove this disincentive, and we would see more facilities can)'ing out such projectsespecially energy efficiency projects that would reduce C02 emissions. 

2. In your testimony you note that EPA enforcement officials have tried to expand 

the definition of major modification in order capture more facilities in the NSR 

program. 

a. What are the potential penalties or costs if a company does not correctly 

comply with NSR requirements? 

If EPA takes the position that a facility has not complied with NSR, the potential costs to the 

facility owner are enormous. 

By statute, EPA may impose fines of more than $95,000 per day for Clean Air Act violations. 

EPA has taken the position that, if a facility should have gone through NSR before undertaking a 

project but failed to do so, the Agency can fine the facility owner $95,000 per day for every day 

it has operated since the project was started. For a project that was done 3 years ago, this means 

potential fines of more than $100 million. 

In addition, EPA has in a number of cases argued that, even when a facility has undertaken a 

relatively minor project, it triggered NSR and now needs to install new and very costly pollution 

control equipment. In cases involving power plants, EPA has often argued that component 

replacements costing a few million dollars have triggered the need for the plant to install 

pollution control equipment costing several hundred million dollars. 

b. As a general matter, should the enforcement office be expanding 

definitions or should that be the role of the policy office? 

The policy office should be establishing clear definitions based on congressional intent and 

sotmd public policy. The enforcement office should simply be enforcing those ddinitions not 

expanding them. One of the main problems with NSR is that EPA's position on key issues has 

been announced in enforcement actions and not through the regulatory process. As a result, 

EPA's position on what constitutes a major modification is based on the desire to bring 
210 


30134.170

enforcement cases, not what makes sense from a policy perspective. This is not the way any 

regulatory program should work. 

c. Also, can you explain how this fits with the statutory goals of the NSR 

program and whether this is a result of unclear guidance. 

The NSR program was designed to ensure that when someone builds a new major source or 

expands the capacity of an existing major source, the new or modified source will use the 

modern pollution equipment to control its emissions. Over the years, EPA has tried to expand 

this program to force existing facilities to go through NSR even when they simply replace 

components with identical components. This has discouraged plants from doing things that we 

should want them to do- such as improving reliability or energy efficiency. This is not 

consistent with the goals of the NSR program. 

3. Do current NSR program regulations make it more difficult for owners to carry 

out maintenance, repair, or replacement activities aimed at maintaining or 

improving safety or reliability? Please explain. 

Yes. In numerous enforcement cases, EPA has argued that facility owners should have gone 

through the cumbersome and costly NSR permitting process before undertaking projects to 

improve the reliability or safety of their plants. Seeing these enforcement actions, facility 

owners sometimes forgo energy efficiency projects and make suboptimal decisions when it 

comes to improving the reliability of their plants because of concerns about triggering NSR. 

4. Do you have concerns that revising the NSR program to match the maximum 

hourly test under NSPS could create a scenario where a modification carried out 

at an existing facility could result in higher levels of annual pollution which air 

regulators would not have the ability to regulate or address? Please explain. 

Absolutely not. There are many different Clean Air Act programs that give EPA and state and 

local regulators the authority- and the obligation- to protect air quality by regulating existing 

sources of air pollution. Regardless of whether a plant carries out a modification, regulators 

have authority and an obligation to impose more stringent emission limitations on plants to 

protect public health and prevent other types of environmental ham1. 

Ouestjons from the Honorable Dayjd B. McKjnley 

One of the more frustrating aspects of EPA's NSR program is uncertainty 

surrounding the exemption for "Routine Maintenance, Repair and Replacement" -or 

RMRR- at existing sources. What falls under the RMRR exemption has been left up 

to case-by-case- interpretations by the EPA and various states, leaving utilities 

constantly second-guessing whether or not a change at a facility will open themselves 

up to lawsuit or EPA enforcement action. 

-2-
211 


30134.171

1. If there was greater certainty surrounding the RMRR exemption, do you believe 

that utilities and other manufacturers would be more likely to take actions at 

their facilities to improve efficiency and to reduce pollution? 

Yes. I am aware of a number of instances in which a company was considering a project 

that would have reduced emissions but chose not to undertake it because of concerns 

about triggering NSR. There is no question that facility owners would take actions to 

improve the efficiency of their facilities if there were clear and sensible rules about 

RMRR. It would be even better if Congress passed legislation to make it clear than 

energy ef!iciency ami pollution control projects do not trigger NSR. 

2. What actions could the EPA take to clarify and standardize what qualifies as 

RMRR to encourage these common-sense actions? 

In my view, EPA could and should provide industry specific guidance about the projects 

that are routinely done to maintain existing facilities. In some industries, there is now a 

great deal of infonnation about such projects. Even if EPA cannot provide a definitive 

list of all the projects that qualify as RMRR, it can certainly provide a list that would 

cover the vast majority of such projects for many industries. 

Even so, I firmly believe that Congress should make certain key NSR ref01ms through 

legislation to provide long-term certainty. In my view, the most important reforms arc 

addressed in the bills introduced by Congressman Griffith. 

Questions from the Honorable Richard Hudson 

1. In your written testimony, you cite how the NSR program is the primary 

regulatory tool for controlling emissions from new plants, but it was not intended 

to be a key program for existing facilities. Could you elaborate on this and discuss 

what tools arc better suited to regulate emissions from existing facilities? 

There are many different Clean Air Act programs that regulate the same pollutants from the 

same facilities. For example, emissions from existing coal-fired power plants arc regulated under 

at least 14 different Clean Air Act programs: 

Acid Rain 

NOx SIP Call 

MATS 

NSPS 

Regional Ilazc 

Section 126 

CSAPR (and the CSAPR Update) 

BART 

The CSAPR update 

The S02 NAAQS 

The N02 NAAQS 

-3-
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30134.172

The Ozone NAAQS 

The PM2.5 NAAQS 

NSR 

Over the last 25 years, regulators and policy analysts have learned a lot about regulatory policy 

and design and will tell you that some of these programs are much more effective than others. 

When it comes to reducing emissions from existing facilities, NSR is certainly the least effective 

and most counterproductive. Emissions from existing facilities have decreased dramatically 

since 1990, but very little of this decrease can be attributed to NSR. Yet it has made it much 

harder to maintain and improve the reliability and efficiency of existing plants. 

2. \Vhen existing facilities conduct "major modifications" they trigger NSR. As we 

have heard from others already, there can be a significant cost and time associated 

with this. In your experience, do you think this label has been applied 

appropriately to facilities that seck to make modifications to their facilities? What 

standards would you like to see included in the "major modifications" category? 

Until the mid-1990s, the definition of a "major modification" was generally appropriate. But over 

the last 20 years, EPA has tried to expand it to capture as many existing sources as possible, and 

the NSR program has become a convoluted, burdensome, and completely unnecessary mess. I 

believe that the refon11S being proposed by Mr. Griffith would simply re-introduce some common 

sense into the NSR program and make sure that it does what it was intended to do: 

I. Ensure that, when a new industrial facility is built or an existing facility is significantly 

expanded, modern pollution controls will be used to minimize its emissions; and 

2. Ensure that the NSR program does not make it hard for companies to keep their facilities 

in good working order and, where possible, to reduce the operating cost of these facilities 

by making them more efficient. 

Questions from the Honorable H. Morgan Griffith 

The goal of the NSR program is to regulate emissions at new sources and at existing sources 

undertaking major physical or operational changes, rather than regulating projects that simply 

maintain or improve upon existing plant operations. And the Clean Air Act attempts to make 

that distinction by defining an NSR modification as any physical change which "increases the 

amount of any air pollutant emitted by such source .... " 

However, EPA's current interpretation of this language -which looks at emissions on an 

annual basis- could, for example, trigger NSR for a power plant simply because it can 

operate more often or reliably after the changes. 

1. Wouldn't it make more sense, and still advance the goals of the Clean Air Act, for 

EPA to instead measure a change in emissions on an hourly basis -to actually 

capture those modifications that should be considered new sources of emissions? 

-4-
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30134.173

Yes. Because of the uncertainty and controversy caused by the current annual-actual-to 

projected-actual "emission increase test:' it would be helpful for Congress to clarify this issue. 

In my view, the best approach would be to make clear that there is not a "major modification" 

under NSR if there is not a "modification" as detlned under NSPS. Thus, companies (and EPA) 

would evaluate a project to determine whether it would increase the maximum hourly emission 

rate at the plant. If not, then the project does not trigger NSR. If so, then the project would be a 

modification and would then be evaluated under the current NSR test to determine whether it 

would be a "major moditlcation" that would trigger NSR. 

There are at least two important reasons for Congress to consider such an approach. First, it 

would provide much more certainty to EPA, states, and the regulated industry. As opposed to 

the current NSR approach, the maximum hourly emission rate is an objective measure based on 

the design of the facility and is easily ascertainable. As recent experience has shown, there is 

much subjectivity under the current approach and many different ways to project future annual 

emissions and then determine the amount of those emissions that are unrelated to the project 

being evaluated. 

Second, from an environmental perspective, a one-hour test is much more meaningful because 

the most stringent EPA standards are based on maximum concentrations of a pollutant averaged 

over one hour (for S02 and N02), eight hours (for ozone and CO), and 24 hours (for PM2.5). 

The only pollutant for which a longer "averaging time" is meaningful is lead, for which the airquality standard is based on a 3-month average (and which has rarely, if ever, been addressed by 

NSR.) Simply put, in terms of protecting human health, the maximum amount of a pollutant that 

a facility emits in one hour is much more important than the amount it emits in a year. 

2. Would making this change to an hourly emission test provide greater certainty to 

power plants and manufacturers, while still ensuring that modifications that 

actually do increase emissions go through the NSR permitting process? 

Yes. Congress should provide certainty by making it clear that, for purposes ofNSR, a change 

increases emissions only if it will increase the maximum hourly emissions rate of the facility. 

This ensures that increases in capacity (as evidenced by maximum hourly emissions) would still 

be required to go through the NSR permitting process. 

3. Do you believe that EPA has the ability to address this issue through regulation? 

Yes. The Supreme Court has made it clear that EPA has discretion under the Clean Air Act to 

define the term "emissions increase" based on hourly emissions or annual emissions. However, if 

EPA issues a regulation to change the current test to an hourly emissions test, a future EPA could 

probably change it back again. 

4. Would statutory direction from Congress provide greater, long-term certainty? 

As my prior answer suggests, I believe it would be much better for Congress to adopt legislation 

to ensure than an hourly emissions test is used to determine whether a change to an existing source 

would cause an emissions increase. In my view, this is only way to provide long-term certainty. 

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Questions from the Honorable Frank Pallone, Jr. 

1. Do you agree that under today's PSD and nonattainment NSR regulations, a nonexempt physical change at a stationary source could increase its actual annual 

emissions and be considered a "modification," and not increase its hourly potential 

to emit and therefore not be considered an NSPS modification? 

Y cs, but I do not believe that this is a concern for the reasons discussed below. 

Your question suggests that increases in annual emissions at a facility should trigger NSR, 

regardless of whether there is an increase in the facility's maximum hourly emission rate (i.e., its 

capacity). But even under the current NSR program, a facility is usually allowed to increase its 

annual emissions- even dramatically- without triggering NSR. If a facility is not increasing its 

capacity, an increase in its annual emissions is not a concern because the facility is already 

subject to a number of regulatory requirements that arc designed to ensure that air quality is 

protected when the facility is operating at full capacity. For any facility covered by the NSR 

program, these requirements are incorporated into its operating permit. 

In some cases, a permit will limit a facility's annual emissions, but this is unusual because 

regulators and air quality experts are primarily concerned about air quality problems that are 

caused by pollutants that arc emitted over a short period of time an hour, 8 hours, or 24 hours. 

From an air quality perspective, hourly emissions are much more important than annual 

emissions. As a result, most permit limits are set in terms of a maximum allowable hourly 

emission rate (or a rate per unit of production, such as lbs/MMbtu.). Of course an hourly limit 

also limits the emissions that a facility can emit over any longer time period, including a year. 

Annual emissions from stationary sources increase and decrease all the time for business reasons. 

Most often, emissions will increase at a facility because it wants to increase production in 

response to market demand for the product it produces, whether it be electricity, or steel, or 

widgets. Increased demand at a particular facility is often caused by an overall increase in 

demand for the product being produced at such facilities, but it also caused by the closure or 

curtailment of other facilities making the same product. 

The only time an increase in annual emission implicates NSR is when the increase is caused by a 

non-routine physical change at the facility, and there has been enormous controversy and 

uncertainty over what is "routine" and how to determine whether a change will actually cause an 

emissions increase. Because of this uncertainty, companies are often reluctant to do things that 

we should want them to do -like improve their efficiency, safety or reliability. By adopting an 

hourly emissions test, so that a facility would trigger NSR only if it increases its capacity, 

Congress would ensure that NSR is triggered only when it makes sense to require a facility to go 

through the long NSR permitting process. 

Permit limits are based on a variety of different regulatory requirements, but the main underlying 

reason is to protect air quality- to ensure that emissions from a facility, even when combined 

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with emissions from many other different types of"sources" (industrial facilities, cars, trucks, 

etc.) do not cause unhealthy levels of pollution in the air. If any particular facility or group of 

facilities is causing unhealthy levels of pollution, then local, state, and federal regulators are 

required to take action (usually by imposing more stringent regulatory requirements on them) to 

remedy the problem- regardless of whether there has been or will be an NSR or NSPS 

modification at any of the facilities involved. 

As noted above, facilities increase their annual emissions all the time for business reasonsperhaps because total demand for a product has increased or because other competing facilities 

have closed down. Unless a facility has increased its capacity (which can be measured in terms 

of its maximum hourly emission rate), there is often no tnlly objective way to determine whether 

a particular physical change has caused an increase in annual emissions or whether the increase 

was caused by something else. There have been dozens perhaps hundreds -of cases where this 

issue has been the subject of protracted litigation. 

Even more difficult is that, under NSR, a facility must predict, before undertaking a project, 

whether its emissions will increase after a change and, if so, whether any part of that increase is 

caused by the change. There have actually been several cases where (I) a facility predicted that 

a change would not cause an increase in annual emissions; (2) years passed after the change and 

there was never an increase in annual emissions; and (3) EPA enforcement officials nevertheless 

brought an enforcement action based on a claim that the facility "should have" predicted that the 

change would cause an increase in annual emissions even though such a prediction clearly would 

have been incorrect. 

Determining whether a particular change at a facility would cause an increase in a facility's 

maximum hourly emissions is a more objective test, and there is rarely any controversy about it 

because it's a straightforward engineering question. As noted above, in terms of protecting air 

quality and human health, hourly emissions arc also much more relevant than annual emissions. 

L Do you agree that under today's PSD and nonattainment NSR regulations, a nonexempt physical change at a stationary source could increase its actual annual 

emissions and be considered a "modification," and not increase its hourly potential 

to emit and therefore not be considered an NSPS modification? 

a. Would you consider this to be an increase in air pollution? 

Yes, but not necessarily a concern. 

2. Do you consider an increase in annual pollution emissions even, if 

hourly potential emissions do not increase, to be "an increase in air 

pollution"? 

Yes, but not necessarily a concern. It is important to note that the current NSR program does not 

prevent facilities from increasing their annual emissions, and such increases fairly often. 

Thankfully, we have many other Clean Air Act programs that are designed to ensure that an 

increase in annual emissions from any particular facility does not cause unhealthy levels of air 

pollution. 

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3. Do you consider an increase in annual pollution emissions, even if a 

maximum hourly emission rate does not increase, to be "an increase 

in air pollution"? 

Yes, but not necessarily a concern. It is important to note that the NSR program does not prevent 

facilities from increasing their annual emissions, and such increases happen fairly often. 

Thankfully, we have many other Clean Air Act programs that arc designed to ensure that an 

increase in annual emissions from any particular facility does not cause unhealthy levels of air 

pollution. 

In your oral statement, you stated that: "Even -and I can guarantee you this - even if the 

NSR program disappeared completely tomorrow, there would not be a massive increase in 

air pollution. In fact, there would not be any increase in air pollution at all and we would 

see, because of the many other programs that regulate the same pollutants from the same 

facilities, air pollution would continue to decrease as it has since 1990. 

I am very confident that these statement are correct. 

4. Is it your contention that for each stationary source in the United 

States subject, or potentially sub,ject, to the PSD/NSR program, there 

are "other programs" that would prevent there from being "any 

increases in air pollution" from any or all of these sources "if the NSR 

p1·ogram disappeared completely tomorrow"? 

I did not say that, if the NSR program disappeared completely tomorrow, there would not be any 

increase in air pollution from any source. But no one who understands the Clean Air Act would 

ever say that, with the current NSR program, there would not be any increase in air pollution 

from any source. 

As explained above, the current NSR program does not prevent facilities from increasing their 

emissions. Because most facilities do not operate at full capacity, they can increase their 

production (and thus increase emissions) without triggering NSR. A facility triggers NSR only if 

(1) it makes a non-routine change and (2) this change (and not an increase in demand) would 

cause an increase in annual emissions. 

Even if a facility does trigger NSR, this does not necessarily mean that it will decrease its annual 

emissions. The NSR program is designed to ensure that new facilities and facilities that undergo 

major modifications will be well-controlled. If a facility increases its capacity and thus must go 

through NSR, it can still increase its emissions, but it must use the best available control 

technology to minimize the emissions increase. 

Nor do other Clean Air Act programs ensure that there can never be "any increases in air 

pollution" from any source. But this is hardly the point. Air quality problems are caused by the 

combined emissions from many different sources. What policymakers care about is improving 

and protecting air quality, which involves reducing the collective emissions from many different 

sources. 

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When I said that, even if the NSR program disappeared entirely, there would not be any 

increases in air pollution, I was referring to the fact total emissions would continue to decrease as 

they have since 1990, and air quality would continue to improve throughout the country. The 

NSR program has not played a significant role in reducing air pollution from existing sources in 

the past, and there is no reason to believe that it will do so in the future. 

5. Please identify those programs, laws and regulations and explain your 

responses. 

I am not aware of any federal regulatory program that "would prevent there from being any 

increases in air pollution from any source." In my oral statement, I listed the major Clean 

Air Act programs that have reduced and will continue to reduce air pollution from power 

plants and other stationary sources and will continue to improve air quality even if the NSR 

program were to disappear entirely: 

The Acid Rain Program 

NOx SIP Call 

MATS 

NSPS 

Regional Haze 

Section 126 

CSAPR 

BART 

The CSAPR update 

The S02 NAAQS 

The N02 NAAQS 

The Ozone NAAQS 

The PM2.5 NAAQS 

This list includes only programs that apply to power plants, but many of them apply to other 

stationary sources as well- and there are other programs that apply to other types of stationary 

sources that do not apply to power plants. In terms of improving air quality in urban areas, more 

impm1ant are the regulatory programs that have dramatically reduced (and will continue to 

reduce) emissions from cars, trucks, and other mobile sources. 

6. Please identify all instances you are aware of in which a facility 

undertook a "modification" as defined under EPA'sNSPS 

regulations, and triggered the obligation to comply with the 

applicable standards of an NSPS. Please be specific concerning the 

facility or facilities, locations and date ranges to allow the Committee 

to examine those instances. 

It is not uncommon for sources to make NSPS modifications and thus become subject to 

more stringent regulatory requirements. This usually happens when sources increase their 

capacity. I have heard of this happening a number of times, but there is rarely any 

controversy about such modifications, so I have not been personally involved. Because the 

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NSPS test is objective and usually clear-cut, engineers and technical experts simply take the 

steps necessary to meet the more stringent standards without the need to involve lawyers or 

government oflicials. 

I do not believe that EPA or anyone else keeps track of facilities that make NSPS 

modifications, so it would be very difficult to put together such a list. 

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