**GAO-04-251R**                      Nov 07, 2003                  

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## Highlights

GAO reviewed the Environmental Protection Agency's new rule on the equipment replacement provision of the routine maintenance, repair and replacement exclusion. GAO found that (1) the rule would provide a category of equipment replacement activities that are not subject to Major New Source Review requirements under the routine maintenance, repair, and replacement exclusion; and (2) EPA complied with applicable requirements in promulgating the rule.

##  Environmental Protection Agency: Prevention of Significant Deterioration (PSD) and Non-Attainment New Source Review (NSR): Equipment Replacement Provision of the RoutineMaintenance, Repair and Replacement Exclusion, GAO-04-251R, November 7, 2003

B-293154November 7, 2003The Honorable James M. Inhofe     Chairman     The Honorable James M. Jeffords     Ranking Minority Member     Committee on Environment and Public Works     United States SenateThe Honorable W.J. Billy Tauzin     Chairman     The Honorable John D. Dingell     Ranking Minority Member     Committee on Energy and Commerce     House of Representatives     Subject:*Environmental Protection Agency: Prevention of Significant Deterioration (PSD) and Non-Attainment New Source Review (NSR): Equipment    Replacement Provision of the Routine Maintenance, Repair and Replacement Exclusion*Pursuant to section 801(a)(2)(A) of title 5, United States Code, this is our report on a major rule promulgated by the Environmental Protection    Agency (EPA), entitled Prevention of Significant Deterioration (PSD) and Non-Attainment New Source Review (NSR): Equipment Replacement Provision of the Routine Maintenance, Repair and    Replacement Exclusion (RIN: 2060-AK28). We received the rule on October 21, 2003. It was published in the Federal Register as a final rule on October 27, 2003. 68 Fed. Reg. 61248.     The final rule contains EPAs regulations governing the New Source Review Programs mandated by parts C and D of Title I of the Clean Air Act.  The rule provides a category of    equipment replacement activities that are not subject to Major New Source Review requirements under the routine maintenance, repair, and replacement exclusion.     Enclosed is our assessment of the EPAs compliance with the procedural steps required by section 801(a)(1)(B)(i) through (iv) of title 5 with respect to the rule.  Our review    indicates that the EPA complied with the applicable requirements.     If you have any questions about this report, please contact James W. Vickers, Assistant General Counsel, at (202) 512-8210.  The official responsible for GAO evaluation work relating to the    subject matter of the rule is Robert Robinson, Managing Director, Natural Resources and Environment.  Mr. Robinson can be reached at (202) 512-3841.                 signed     Kathleen E. Wannisky     Managing Associate General Counsel     Enclosure     cc:      Stephanie Daigle     Deputy Associate Administrator     Environmental Protection Agency            ENCLOSURE     ANALYSIS UNDER 5 U.S.C.  801(a)(1)(B)(i)-(iv) OF A MAJOR RULE     ISSUED BY THE     ENVIRONMENTAL PROTECTION AGENCY     ENTITLED     "PREVENTION OF SIGNIFICANT DETERIORATION (PSD)     AND NON-ATTAINMENT NEW SOURCE REVIEW (NSR):     EQUIPMENT REPLACEMENT PROVISION OF THE     ROUTINE MAINTENANCE, REPAIR AND     REPLACEMENT EXCLUSION"     (RIN: 2060-AK28)(i) Cost-benefit analysis     EPA prepared a Regulatory Impact Analysis for the final rule, which includes a cost-benefit analysis.  EPA notes that it is difficult to quantify the costs and benefits because the    equipment replacement approach is being made available as an option that sources may exercise at their discretion.     EPA believes that most of the benefits from the final rule will be four types of cost savings: (1) increased efficiency for industrial production, (2) improved flexibility and reaction time, (3)    reductions in the number of applicability determinations performed by industry and reviewing authorities and their associated delays, and (4) reductions in the need for construction of new    sources.     Regarding the cost impact of the final rule, EPA finds that each of the 14,500 sources of air pollution potentially subject to the final rule will expend 8 additional hours in regulatory-related    activities for a total additional cost of $8.7 million, or about $600 per source.  The 112 reviewing authorities would incur one-time costs of $15,540 for a total of $1,740,480.  EPA    expects its one-time cost to be $223,776.(ii) Agency actions relevant to the Regulatory Flexibility Act, 5 U.S.C.  603-605, 607, and 609     EPA has concluded that the final rule will not have a significant economic impact on a substantial number of small entities because the rule will decrease the regulatory burden for all small    entities.(iii) Agency actions relevant to sections 202-205 of the Unfunded Mandates Reform Act of 1995, 2 U.S.C.  1532-1535     The final rule does not contain either an intergovernmental or private sector mandate, as defined in title II, of more than $100 million in any one year.(iv) Other relevant information or requirements under acts and executive orders     Administrative Procedure Act, 5 U.S.C.  551 etseq.     The final rule was issued using the notice and comment procedures found at 5 U.S.C. 553.  On December 31, 2002, EPA published a Notice of Proposed Rulemaking in the Federal Register.     67 Fed. Reg. 80290.  EPA responds to the comments received in the preamble to the final rule.     Paperwork Reduction Act, 44 U.S.C.  3501-3520     The final rule contains an information collection that is subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act.     EPA has submitted the required information to OMB including the estimated burden hours.  EPA expects a one-time burden of $580,000 for the 112 affected reviewing authorities.     Statutory authorization for the rule     The final rule is promulgated under the authority contained in sections 101, 111, 114, 116, and 301 of the Clean Air Act, as amended (42 U.S.C. 7401, 7411, 7414, 7416, and 7601).     Executive Order No. 12866     The final rule was reviewed by OMB and found to be an economically significant regulatory action.     Executive Order No. 13132 (Federalism)     EPA states that the final rule does not have federalism implications sufficient to warrant the preparation of a federalism assessment.

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