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# OAR Box 1781 Prepped by Ollie Stewart



## Document

Number: 

# 72 ) IV-A- 5 Docket Number: 

# A-90-3 7

Printed 10/29/2008 10:46:21 AM Sheet 72 of 142P. 2 A-90-3 7 IV-A- 5



# NE W SOURC E REVIEW : REPOR T T O TH E PRESIDEN T

JUN E 

# 200 2

fi 

# V 

# ~"cf

\ U J t oP. 3

» *



## Table o f Content s

Overvie w 1
Th e Charg e t o EP A 2 Backgroun d2 Impac t o n Investment

i n Ne w an dExistin g Utilit y an dRefiner

y Generatio n Capacit

y an dEnerg y Efficienc y 4 Ne w Source s 5 Existin g Source s 8 Impac t o n Industrie s Othe r

than Electri c Utilitie s an dPetroleu mRefinerie s 2 2 NS RApplicabilit

y 2 3 Energ y Efficiency 2 5 Impac t o n Environmental Protectio n ; 2 7
Conclusio n 3 1P. 4

Ne w Sourc e Review : Repor tt o th e Presiden t Overvie w Th e Ne w Sourc e Revie w (NSR ) programi s on e o f man y program s create db y th e Clea n Ai r Ac t t o reduc e emission s o f

ai r pollutant s - particularl y "criteri apollutants " tha t are emitte dfrom awide variet y o f source s an dhav e an advers e impac t o n human healt

h an dth e environment
. Othe r ke y program s includ e th e Titl e r v Aci dRai n Program , "MACT " standard s an dothe r ai r toxic s standards , Ne w Sourc e Performanc e Standards , th e 22-stat e NO x "SI P Call, " th e Regional Haz e Program , numerou s mobil e sourc e programs , an dothe r state an dloca

l SIP-base d emission s standards
. Government

official s frombot

h major political partie s an dindustr y group s hav e expresse dth e belie f tha t th e NS Rprogrami s unnecessaril y complicate dan doften serve s a s an unnecessar y obstacl e t o environmentall y beneficia

l project s in th e energ y sector , suc h a s thos e tha t improv e energ y reliabilit

y and efficienc y an dpromot e th e us e o f renewabl e resources . Th e President' s National Energ y Polic y Development Group aske dEP A t o investigate whether th e NS Rprogramdoes , i n fact , hav e suc h impacts
. Th e Agency' s revie w o f th e NS Rprogramwa s broad-based
. EP A hel dfou r publi c hearings , ha dindividual meeting s with ove r 10 0 group s representin g th e public , industr y an dState an dlocal agencies , an dreviewe dove r 130,00 0 comment s fromprivate citizens , environmenta l groups , stat

e official s an dindustr

y representatives
. Wit h regardto th e energ y sector , EP A finds tha t th e NS Rprogramha s no t significantly impede dinvestment

i n ne w power

plant s o r refineries
. Fo r

th e utilit y industry , thi s i s evidence db y significan t recen t an dfutur e planne dinvestment

i n ne w powe r

plants
. Lac k

o f constructio n o f

ne w greenfiel drefinerie s i s generall y attribute dt o economi c reason s an denvironmenta l restriction s unrelate d t o NSR
. A s applie dt o existin g powe r plant s an drefineries , EP A conclude s tha t th e NS Rprogramha s impede do r

resulte di n th e cancellatio n o f project s whic h woul dmaintai n an dimprov e reliability , efficiency an dsafet

y o f existin g energ y capacity
. Suc h discouragement result s i n los t

capacity , a s well a s los t opportunitie s t o improv e energ y efficienc y an dreduc e ai r pollution
. Fo r th e refinin g an dother

industries , EP A conclude s tha t NS Ra s applie dt o existin g plant s discourage s project s tha

t woul dhav e provide dneede dcapacit y o r efficienc y improvement s an dwoul d no t hav e increase dai r

pollutio n - i n fact

i n som e case s ai r

pollutio n ma y hav e decreased
. EP A believe s thi s ca n resul t i n los t capacit y o r foregon e opportunitie s t o increas e capacit y withou t increasin g emissions
. Finally , with regardt o environmenta l protection , EP A conclude s tha t preventin g emission s o f pollutant s covere db y NS Rdoe s resul t i n significan

t environmenta

l an dpubli c healt

h benefits
. Specifically quantifyin g th e NS Rprogram' s contributio n t o thes e benefit s i s ver y difficul t becaus e o f

th e variet y o f Clean Ai r

Ac t program s tha

t addres s thes e pollutant s an dbecaus e there i s n o trackin g b y any governmen t

agenc y o f

th e reduction s i n emission s tha t source s mak e du e t o th e program . Moreover , EP A recognize s tha t

th e Agenc y doe s no t

currentl y hav e othe r

informatio n tha

t woul db e necessar

y t o



# JP. 5

quantif y ris k reductio n benefit s associate dwit h th e program . However , EP A believe s tha t th e inabilit

y t o mak e exac t

estimate s doe s no t

mea n that

th e benefit s o f

th e NS Rprogramar e insignificant
. EP A als o believes , however , that fo r particula r industr y sector s th e benefit s cunentl y attribute dt o NS R coul db e achieve dmuc h more efficientl y an da t muc h lowe

r cos t throug h th e implementatio n o f amulti

pollutant national ca

p an dtrad e program . I n particula r th e President' s Clea

r Side s initiativ e i s amuc h more certai n an deffectiv e way o f achievin g emission s reduction s fromth e powe r generatio n sector . Fo r virtuall y th e entire histor

y o f th e NS Rprogram , representative s o f industry , stat

e an dloca l agencies , an denvironmental group s hav e worke dwit h EP A o n developin g improvement s t o th e NS R program . Thes e effort s cam e to ahea di n 1996 , whe n EP A propose darul e t o "reform " th e NS R program . Eve n afte

r th e proposal , stakeholder s hav e investe dcountles s hour s in tryin g t o findway s to mak e th e programbetter
. Base do n th e conclusion s o f thi s study an dth e recommendation s fromth e Stat e Governor s an dEnvironmenta l Commissioners 1 an dother stakeholders , EP A no w plan s t o finish th e tas k o f improvin g an dreformin g th e NS Rprogram . I . Th e Charg e t o EP A I n it s May , 200 1 National Energ y Polic y Report , th e Nationa l Energ y Polic y Developmen t (NEPD ) Grou p recommende dtha t th e Administrato r

o f th e Environmental Protectio n Agenc y (EPA) , i n consultatio n wit

h th e Secretar

y o f Energ y an dother

Federa l agencies , "revie w Ne w Sourc e Revie w regulations , includin g administrativ e interpretation s an dimplementation , an drepor t to th e President withi n 9 0 day s o n th e impac t o f th e regulations o n investmen t i n ne w utilit

y an drefiner

y generatio n capacity , energ y efficiency , an denvironmenta l protection. " Consistent

wit h thi s recommendation , EP A conducte dit s examinatio n an di s no w issuin g thi s report . Thi s repor t describe s EPA' s conclusion s abou t th e impact s o f

NS Ro n thes e thre e issue s base do n it s revie w o f th e availabl e informatio n an d comments . II
. Backgroun d EP A assemble da

n interagenc y teamfo

r thi s project , includin g representative s fromth e Departmen t

o f Energ y (DOE) , Departmen t o f th e Interio r

(DOI) , Offic e o f

Managemen t

an dBudge t (OMB) , White Hous e Counci l o n Environmental Qualit y (CEQ) , an dth e National Economi c Counci l (NEC)
. I n consultatio n with thi s group , EP A prepare dabackgroun dpaper , whic h wa s release do n Jun e 22 , 200 1 (EP A Backgroun dPaper)
. Thi s pape r describe davailabl e dat arelevan t t o th e thre e issue s EPA wa s charge dwit h reportin g on : investmen

t i n utilit y an drefiner

y capacity , energ y efficiency , an denvironmental protection
. Th e backgroun dpape r include dEPA' s ow n data , a s wel l a s dat a provide di n asupportin g repor t b y IC F Consultin g Inc
. (IC F Report) , whic h summarize dICF' s surve y o f th e availabl e literature an dpubli c statement s o n NS Rissues
. Th e backgroun dpape r presente dth e dat ato facilitat

e publi c comment , an dt o provid e th e opportunit y fo r external reviewer s t o provid e additional relevan t

data
. Th e backgroun dpape r di dno t dra w conclusion s o r

mak e recommendations
.

1 See, Resolutio n Numbe r

01-12 , Environmenta

l Counci l o f

State s o n Refor

mo f th e Ne w Sourc e Revie w Regulation s date dAugus t 28 , 2001 , National Governor s Associatio n Polic y Position , NR-1 8 Comprehensiv e Nationa l Energ y Policy ; Sectio n 18.6
.P. 6

Followin g th e backgroun dpaper' s release , EP A initiate da n intensiv e publi c outreac h effort , consistin g o f

thre e components : (1 ) a30-da y publi c commen t

period ; (2 ) aserie s o f

fou r publi c hearing s hel di n location s acros s th e country ; an d(3 ) aserie s o f meeting s wit

h more tha

n 10 0 stakeholder

groups , includin g environmental organizations , industr y representatives , an dState an dloca l governments . Durin g thi s publi c outreac h period , EP A receive dwritte n comment s fromover 130,00 0 individual s an dorganizations
. A tota l o f 25 5 peopl e testifie da

t th e fou r hearings
. Al l o f

th e material s receive ddurin g th e publi c outreac h period , includin g writte n comments , transcript s o f th e hearings , and attendanc e list s an dwritte n material s i n connectio n wit h th e stakeholde

r meetings , are availabl e i

n publi c docke t numbe r A-2001-1 9 a

t th e EPA' s Offic e o f

Ai r an dRadiatio n Docke t

an dInformatio n Center
. Thi s report

discusse s th e statutor

y an dregulator

y provision s o f

th e Ne w Sourc e Revie w (NSR ) pre-constructio n permittin g program . Whil e th e repor t explain s th e view s o f

man y partie s regardin g th e requirement s o f

th e NS Rprogram , i t

i s no t intende dt o affect

th e NS Rprogramo r

action s tha

t EP A ha s take n t o implemen t

o r enforc e th e NS Rprogram 2

. Thi s report doe s no t substitut e for

statutor y provision s o r

regulations , no r

i s i t aguidanc e documen t

reflectin g EPA' s interpretatio n o f statutor y or regulator y provisions
. It s purpos e i s t o summariz e informatio n tha t EP A ha s receive drelatin g t o th e NS Rprogra man dt o report o n EPA' s finding s concernin g whethe r th e NS Rprogra mha s affecte d investment

i n ne w utilit

y an drefiner

y generatio n capacity , energ y efficiency , an denvironmenta l protection
. New Source Review EP A i s strongl y supportiv e o f th e goal s o f

th e NS Rpermittin g program , whos e basi c requirement s ar e establishe d i n part s C an dD o f Titl e I o f th e Clean Ai r

Ac t (CAA)
. Th e purpos e o f th e NS Rprogrami s t o protec t publi c healt

h an dwelfare , a s wel l a s national park s an dwildernes s areas , a s ne w source s o f

ai r pollutio n are buil t

an dwhe n existin g source s are modifie din away tha t significantly increase s air

pollutant emissions
. Specifically , NSR' s purpos e i s t o ensure tha t whe n ne w source s are buil t

o r existin g source s underg o major modifications : (1 ) ai r

qualit y improve s if

th e chang e occur s wher e th e ai r

currentl y doe s no t

mee t federa l ai r qualit y standards ; an d(2 ) ai r

qualit y i s no t significantly degrade dwher e th e ai r currentl y meet s federa

l standards
. Th e fundamenta l philosophy underlyin g th e NS Rprogra mi s tha t asourc e shoul dinstal l mode mpollutio n contro l equipment whe n i t i s buil t (fo r ne w sources ) o r

whe n i t make s amajor

modificatio n (fo

r existin g sources)
. Congres s believe d tha

t incorporatin g pollutio n control s into th e desig n an dconstructio n whe n ne w unit s ar e built , o r whe n major

modification s occur , i s generall y mor e efficien t tha n addin g o n control s afte

r construction
. Th e NS Rprogrami s b y n o mean s th e primar y regulator

y too l t o addres s air

pollutio n from existin g sources . Th e Clean Ai r Ac t provide s fo

r severa l other publi c health-drive n an dvisibility-relate d contro l efforts : fo

r example , th e National Ambien t Ai r Qualit y Standard s Programimplemente dthroug h enforceabl e State Implementatio n Plans , th e NO x SI P Call , th e Aci dRai n Program , th e Regional Haz e

2 Not e that

man y partie s submitte dcomment s concernin g issue s unrelate dt o th e NEPD' s recommendatio n fo

r EP A t o revie w o n th e impac t o f th e regulation s o n investment i n ne w utilit

y an d refiner y generatio n capacity , energ y efficiency , an denvironmenta l protection
. Fo r

example , numerou s partie s offere dcomment s a s t o th e merit s o f pendin g NS Renforcemen t cases . Thi s report

doe s no t summariz e issue s unrelate dt o th e NEPD' s charge
.P. 7

Program , etc . Thus , whil e NS Rwa s designe db y Congres s t o focu s particularl y o n source s tha t are newl y constructe do r

tha t mak e major

modifications , Congres s provide dnumerou s othe r tool s fo r assurin g tha

t emission s fromexistin g source s are adequatel y controlled
. Fo r example , th e nationa

l ca p o n S0 2 emission s establishe dunde r th e Aci dRai n Progra

mapplie s t o all existin g electricit y generatin g units , withou t

regardt o th e date o f

constructio n o r

whethe r agive n sourc e ha s bee n modified
. NS Roperate s b y requirin g asourc e t o obtai n apermi t prio r t o constructio n o r

majo r modification
. Th e permi t

establishe s variou s action s tha t th e sourc e mus t

undertake t o contro l it s emission s o f

ai r pollution
. However , NS Ronl y applie s i f th e constructio n projec t

wil l emi t air pollutio n tha t exceed s threshol dlevel s establishe di n th e NS Rregulations
. Fo r ane w source , NS Ri s triggere d only i f th e potentia

l emission s qualif

y a s major
. Fo r

a n existin g major

sourc e makin g amodification , NS Ri s only triggere di f

th e modificatio n wil l result in asignifican

t net increas e in emissions
. Th e majo r NS Rprogra mcomprise s tw o separate parts : Nonattainmen t NS Ran dPreventio n o f Significan

t Deterioratio n (PSD). 3 Thes e tw o program s hav e separate requirement s to addres s th e differing air

qualit y plannin g need s i n th e area s where the y apply
. Nonattainment NS Rapplie s in area s where air i s unhealthy t o breath e - i.e
. where th e establishe dnationa l ambien t ai r qualit y standard s (NAAQS ) fo

r aCA A criteri apollutan t

are no t bein g met . Thes e area s are calle dnonattainmen t areas . Nonattainmen t

NS Rfo r major source s o f

certai n pollutant s als o applie s i n th e federally designate d ozon e transpor

t regio n (OTR) , whic h consist s o f eleve n northeaster

n State s an dWashington , D.C. 4 PS D applie s t o majo r

source s locate di n area s wher e ai r qualit y i s currentl y acceptabl e - i.e. , where th e NAAQ S fo

r CA A criteri apollutant s ar e bein g met . Thes e are calle dattainmen t areas . Becaus e nonattainment

area s hav e poorer

air quality , nonattainment

NS Rrequirement s are generall y more stringent tha n PS D requirements
. III . Impac to n Investmen ti n Ne w an d Existin g Utility an d Refiner y Generatio n Capacity an d Energ y Efficienc y Th e EP A begin s b y examinin g th e questio n o f whether th e NS Rprogramha s a

n impac t on investment

i n project s tha

t woul dincreas e o r

preserv e utilit

y an drefinery generatio n capacit y or tha t woul dimprov e energ y efficiency
. W e receive dextensiv e comment s o n thi s issue , reflectin g widely varyin g view s o n whether

there i s a n impac t and , i f so , o n it s nature an dextent . I n general , comment s mad e b y bot h th e electri c utilit

y industr y an dth e petroleu mrefining industr y consistentl y asser

t tha t th e NS Rprogra

mha s asignifican

t an dadvers e impac t

o n investment

in expandin g an dpreservin g capacity , a s wel l a s o n energ y efficiency. 5 Thes e commenter s asser t tha t th e

3 Th e ter mNS Rusuall y refers t o th e overal l program , bu t i s sometime s als o use da s shorthan d to refe r to nonattainment

NSR , whic h ma

y b e asourc e o f

confusion
. I n thi s document , w e wil l us e NS Rt o refe

r t o th e genera

l program(bot

h nonattainment

NS Ran dPSD) , an dwil l us e nonattainmen t NS Rwhe n referrin g specifically t o NS Rfo r nonattainment

areas . 4 Connecticut , Delaware , Maine , Maryland , Massachusetts , Ne w Hampshire , Ne w Jersey , Ne w York , Pennsylvania , Rhod e Island , Vermont , an dWashington , D.C
.

5 Thes e comment s were consistentl y raise db y companie s representin g virtuall y al l type s (e.g., coal-fired ; oil-fire dor

gas-fired) an dsize s o f

electri c generatin g facilities
. See, e.g., Comment s o f th e Clea n Energ y Group (CEG ) [U-D-291] ; Comment s o f th e Utilit y Ai r Regulator

y Grou p (UARG ) [II

-P. 8

programi s i n nee do f

fundamenta

l reform
. Other

industrie s (a s discusse di n Sectio n IV below ) mad e simila r assertions , a s di dsom e Stat e permittin g authorities
. ITies e commenter s sai dtha t investment

i s hindere db y (1 ) regulator

y uncertaint

y an dlac k o f flexibility resultin g fromallege drecent polic y "re

interpretations " relatedt o th e applicabilit y o f th e program' s requirements ; an d(2 ) th e adde dcost s an d delay s impose db y th e NS Rprocess. 6 Other commenters , includin g environmenta l group s an dsom e State an dlocal permittin g authorities , expresse dth e opposit e view
. The y asser t tha t NS Rdoe s no t appea r to b e significantly hinderin g suc h investment , addin g tha t NS Rha s resultedi n larg e benefit s t o th e environment

whil e allowin g fo

r increase denerg y and/or

fue l supplies. 7 On e environmenta l commenter

doe s no t believ e tha

t there i s sufficien

t informatio n t o conclud e tha t NS Ri s aprimar

y facto r drivin g decision s t o inves t

o r no t t o inves t i n capacity. 8 Thi s sectio n discusse s ou r conclusion s base do n arevie w o f th e availabl e dat aan dcomment s receive dregardin g investment i n ne w capacit

y an denerg y efficiency
. Becaus e th e issue s associate d wit h ne w an dmodifie dsourc e permittin g differ , thi s pape r wil l discus s separatel y th e impac t o n ne w source s an dth e impac t

o n existin g source s undergoin g changes
. A
. Ne w Source s Focusin g first

o n th e impact s o f

NS Ro n investment

i n ne w capacity , th e EP A finds tha t NS R doe s no t appea r t o hav e asignifican

t impac t o n investment

i n ne w utilit

y or refiner y plants
. Th e discussio n belo w indicate s that , fo r utilities , significan

t ne w capacit

y ha s bee n permitte di n recent year s an dsubstantial additional greenfiel dcapacit y i s planned
. Fo r

refiners , decision s abou t

whether to construc t ne w greenfiel drefinerie s ar e primaril y drive n b y economi c an denvironmenta l considerations
. It doe s no t appea r that NS Rha s asignificant

impac t o n thes e considerations
. 1
. Utilities

D-303] ; Comment s o f

Clas s o f '8 5 Regulator

y Respons e Grou p (Clas s o f '8 5 Group ) [II-D-268] ; Comment s o f

Nationa l Rural Electri c Cooperativ e Association s (NRECA ) [H-D-322]
. Th e member s o f thes e groups , a s wel l a s individua l utilitie s tha

t filedcomment s expressin g th e same conclusion , spa n th e entire Unite dStates
. See, e.g., Comment s o f Northeas t Utilitie s Servic e Compan y (NUSCO ) [II

D-331] ; Comment s o f

Cinerg y [U-D-270] ; Comment s o f Sunflowe r Electri c Powe r

Corporatio n [II

D-292] ; Comment s o f

Tri-Stat e Generatio n an dTransmissio n Associatio n [H-D-335] ; Comment s o f Wes t Associate s [II-D-216] ; Comment s o f Sal t Rive r Projec t (SRP ) [II-D-320]
. Eve n waste-to
energ y facultie s agree dwit h thi s conclusion
. See e.g., Comment s o f American Ref-Fue l [II-D-214]
. Th e refining industr

y offeredsimila

r comments . See NPR A Lette r t o Stephani e Daigle , EPA , 7/23/2001
.

6 Se e comment s b y Michigan Department o f Environmenta

l Quality , representin g aworkgroup includin g Alabama , Michigan , Nort h Carolina , Sout

h Carolina , Virgini aan dWes t Virgini apermittin g staff
. [II-E-09]
. 7 Fo r othe r Stat e comments , se e STAPPA/ALAPCO , [II-D-313] , CAR B [II-D-468] , RAPC A [U-D-302] , Wisconsin , Missouri , et . al
. Fo r environmental groups , see , Clean Ai r Tas k Forc e [II-D-236] , NRDC , Sierr aClu b [II-D-437] , et . al
.

8 Se e Natura l Resource s Defens e Counci l (NRDC ) comment s [II-D-267 ] a t 1
.P. 9

Fo r electri c utilities , significan t ne w source s were permitte di n recen t year s (dominate db y natural gas-fire dsystems ) an dmor e are planned
. Th e backgroun dpape r note dcurren t

plan s o f certai n companie s t o brin g into servic e unit s producin g more tha n 120 Gigawatt s (GW ) i n th e comin g years . A n analysi s b y th e NorthBridg e group , prepare dfo r th e Clean Ai r

Tas k Force , use s RDI' s NewGe n databas e t o estimat e tha

t i t i s likel y tha

t 21 4 GW - an dpossibl y a s muc h a s 40 0 G W - o f ne w generatin g capacit

y wil l com e onlin e befor

e 2005 , base do n asurve y o f dat ao n plant s a

t variou s stage s o f development. 9 Several State commenter s presente dsimila r data
. Fo r example , Ne w Jerse y state d tha t i t ha dpermitte dove r

250 0 M W o f

ne w electri c generatio n sinc e Jul y 1999 , an dha dpropose dto approv e anothe r

170 0 M W i n Jul y o f

2001 10

. Anothe r

580 0 M W o f

application s wer e unde r

review , an danothe r

200 0 M W o f

project s wer e i n th e pre-applicatio n meetin g stage . Thes e project s cove r 2 2 facilitie s an d4 9 units
. Thi s 12,00 0 M W wil l resul t i n a60 % increas e over

th e 18,00 0 M W o f

existin g generatin g capacit

y i n Ne w Jersey.' ' Other

State s an denvironmental grou p commenter s presente d simila r data
. Althoug h mos t

o f thes e project s wil l b e subjec t to NSR , th e programdoe s no t appea r to b e hinderin g their

development
. I n general , th e DOE' s experienc e i s tha t fa r more capacit

y i s planne dtha

n i s ever actuall y realized
. A s i t

relate dt o th e analysi s b y th e NorthBridg e group , th e DO E project s i n it s 200 1 Annua l Energ y Outloo k

tha t onl y asmal l fraction o f

th e capacit

y estimate s b y NorthBridg e wil l actually come o n lin e b y 2005
. Fo r

th e perio do f

199 9 t o 2005 , DO E estimate s th e following : Overal l generatio n wil l increas e from338 6 billio n kilowatt-hour s (BKWH ) t o 381 0 BKWH
. Overal l capacit

y wil l increas e b y 7 4 GW (fro m74 5 gigawatt s (GW ) t o 81 9 GW)
. Fo r coal-fire dpowe r

plants , capacit

y wil l decreas e slightl y (fro m30 6 GW t o 30 1 GW) , whil e generatio n increase s from183 3 BKW H t o 208 5 BKWH , a s existin g unit s increas e thei r hour s o f operation
. Fo r gas-fire dplants , combined-cycl e unit s wil l increas e i n capacit y from2 0 G

W to 5 0 GW , whil e generatio n increase s from37 1 BKW H t o 58 4 BKWH
. Whil e thes e dat aindicate continue dexpansio n i n ne w generatin g capacity , som e industr y commenter s asser

t tha t NS Rcan nevertheles s introduc e cost s an ddelay s t o th e proces s o f bringin g ne w generatin g unit s online , a s well a s hav e a n impac t o n fue l suppl y flexibility. Utilitie s cite d implementatio n o f

th e requirement s fo

r preconstructio n monitoring , modeling , an dconsultatio n wit h

9 Thi s 21 4 GW increas e woul drepresen t a3 0 percen t

increas e ove r

th e curren t

installe d capacit y level , an dwoul drestore nationa l reserv e margin s t o about 2 5 percent , from alo w o f 8 percen t i n 1999
.1 0 Se e Ne w Jerse y DE P comment s [U-D-310]
.

1 1 Th e State o f

Kentucky , i n fact , pu t

ahol do n any ne w permi t application s fo

r electrical generatio n source s unti l i t

can analyz e th e environmenta l impact s o f

th e larg e volume o f

pendin g permit applications
.

1 2 See , e.g. , Californi aAi r Resource s Boar d(CARB ) [U-D-468] , Georgi aDepartmen t o f Natura l Resource s (DNR ) [II-D-341] , Wisconsi n DN R[II-G-71] , STAPPA/ALAPC O [II-D-303] , Clea n Ai r Tas k Forc e [U-D-236] , NRD C [U-D-267 ] an dothe r simila r comments .P.1 0

Federal Lan dManagers , sayin g tha t th e processin g time b y Federal , State an dloca l government s an d potentia l permi t appeal s can result

i n significan

t cost s an ddelay s i n obtainin g apermit
. I n particular , industr y commenters , a s wel l a s some Stat e permittin g authorities , attribut e asignifican

t portio n o f

th e dela y i n obtainin g NS Rpermit s t o th e larg e bod y o f NS Rguidanc e tha

t ha s bee n issue dove r

th e cours e o f man y years , b y bot

h EPA an dState agencie s administerin g delegate dprograms . Thi s guidanc e frequently i s case-specifi c i n nature . Man y commenter s consider th e guidanc e t o b e ambiguou s and , i n som e cases , inconsistent
. Amon g th e variou s aspect s o f th e NS Rprogramtha

t industr y commenter s mor e specifically identifie da s concern s fo

r ne w source s include dth e following :

• Ho w t o determin e whic h emission s contro l technologie s qualif y a s bes t availabl e contro l technolog y ("BACT" ) o r

lowes t achievabl e emission s rate ("LAER" ) technolog y usin g EPA' s "to p down " polic y an dth e Agency's BACT/LAE Rclearinghouse
.

• Procedural concern s abou t guidanc e issue db y Federal Lan dManager s relate dt o permittin g nea r Clas s I areas .

• Th e limitatio n o n constructio n activitie s prio r t o issuanc e o f

apermit , whic h i s o f

particula r concer n whe n (1 ) th e permi t

undergoe s lengthy appeal s processes , o r (2 ) th e climat e i s col d an dth e constructio n seaso n i s thu s shorter
.

• Th e cos t

an davailabilit

y o f offset s i n nonattainment

areas . Commenters , particularl y i n Californi aan dNe w York , note dtha t shortage s i n availabl e offset s hav e th e potential t o significantly increas e th e cos t o f NS Rpermittin g i n certai n limite dareas . Permittin g authorit y commenter s note dtha

t offset s represen t

from1-6 % o f

th e cos t o f ane w powe r

plant.' 3 Commenter s furthe

r state dtha t NS Rcontro l requirement s affect fue l suppl y choice s fo

r ne w installations
. The y poin t

ou t tha t th e cos t o f ai r pollutio n contro l represents amuc h greater proportio n o f th e cos t o f constructio n at

coal-fire dfacilitie s than a t gas-fire dplants. 1 4 Operatio n an dmaintenanc e cost s are als o higher
. The y believ e thi s discourage s investment i n ne w coal-fire dplants
. Othe r stakeholder s offere dadifferen t view
. Severa

l State an dloca

l permittin g authoritie s note dtha t th e NS Rproces s can generall y b e accomplishe di n areasonable time, an dwithi n th e sam e time frame a s th e other

element s involve di n plannin g o f atypica l electri c generato r

project.' 5 Some State s reporte dacceleratio n o f permittin g time s fo

r ne w utilit y source s consistent

wit h tha t reporte di n

1 3 STAPPA/ALAPC O comment s [II-D-313 ] a t 6
. 1 4 Th e primar

y air pollutio n contro l requirement commonl y impose do n natura l ga s combustio n i s selectiv e catalyti c reduction , whic h add s abou t $3 0 pe r kilowat t t o th e cos t

o f acombine dcycl e generatio n system . Ne w pulverize dcoal system s require electrostati c precipitator s o r fabri c filters fo

r particulate matte r

control , scrabber s fo

r sulfu r dioxid e control , selectiv e catalyti c reductio n fo r nitroge n oxid e control , an dperhap s additiona l contro l technolog y fo

r air toxics
. Cumulatively , th e system s neede dfor

coal-base dgeneratio n cos t ove r $20 0 pe r kilowatt , an dad dabou t

20 % t o th e cos t

o f a ne w coal-fire dsystem . Fo r a100 0 M W unit , thes e translate into acos t o f $20 0 million
. 1 5 See , e.g. , STAPP A [II-D-313 ] a t 3 , Ne w Jerse y DE P [II-D-310 ] a t 2
.P.1 1

th e EP A Backgroun dPaper. 1 6 On e State commente r suggeste dtha

t th e perceptio n tha

t NS Ri s lengthy , cost-intensive , an duncertai n i s reall y no t th e norm , thoug h i t

ca n b e tru e i n exceptiona

l cases. 1 7 I n EPA' s experience , NS Rhas , i n som e individual cases , impede dne w powe r projects
. However , a s ageneral matter , availabl e informatio n indicate s tha t NS Rtypicall y doe s no t

represent a significan t barrier t o th e constructio n o f

ne w electricit

y plants
. A s fo

r th e impac t

o f NS Ro n fue

l choice s fo r ne w faculties , EP A note s tha t NS Rtypicall y doe s no t

require significantly greater level s o f contro l a t ne w coal-fire dplant s tha

n th e recently update dNSP S fo r larg e electri c generatin g units
. Thus , NS Ritsel f

i s no t th e onl y driver

wit h regardt o ai r

pollutio n contro l cost s a

t ne w coal-fire dunit s an ddoe s no t

appea r t o significantly influenc e fue l choice s a

t ne w facilities
. 2
. Refineries A s note dearlier , th e constructio n o f ne w "greenfield " petroleu mrefinerie s i n th e nea r futur e seem s unlikel y fo

r variou s economi c an dregulator y reasons , primaril y unattractiv e profit margins
. Industr y ha s reportedtha

t th e rate s o f

return fo r refineries hav e average dabou t 5 percen t i n th e las t decade , roughl y equivalen t t o th e retur

n from apassboo k

saving s account , bu t

wit h muc h greater

risk
. A s aresult, buildin g ne w plant s a t ne w site s i s highl

y unlikely. I 8 Th e EP A agree s wit h thi s assessment . Moreover , whil e any ne w refinery woul db e require dt o obtai n a n NS Rpermit , th e availabl e informatio n doe s no t

indicat e tha t NS Rpermittin g i s amon g th e mos t significan t impediment s to th e constructio n o f

ne w refineries. Refiner

y commenter s indicate tha t any additional U.S
. refiner y capacit y mus t come fromeither

efficiency improvement s or expansio n a

t existin g refineries (discusse dbelow)
. B
. Existin g Source s Th e vas t majorit y o f concern s abou t

NS Rraise ddurin g th e revie w pertaine dt o existin g sources . A s discusse dbelow , th e EP A believe s tha t commenter s hav e identifie darea s wher e NS Rca n discourag e investmen

t i n bot h preservin g an dmaintainin g utilit y an drefinery generatin g capacit y a s well a s i n improvin g energ y efficiency an dexpandin g capacity
.

1
. Utilities With respec t

t o existin g sources , comment s fromacros s th e spectru mo f th e utilit y industr y consistentl y asserte dtha

t th e NS Rprogramimpose s significan t burden s o n th e utilit

y practice s necessar y t o maintai n th e safety , availability , efficiency an dreliability o f th e electricit

y suppl y a t existin g sources . The y furthe

r asser t i t can hav e ahighl y negativ e impac t o n th e nation' s power

supply
. Th e result , the y conclude , i s tha t th e progra

mhinder s investment

i n project s intende dt o expan dan d preserv e generatin g capacit y a t existin g electri c generatio n units
. I n addition , a s discusse dbelow , many utilit y commenter s believ e tha

t th e current

NS Rprogra

mha s actively discourage defficienc y

1 6 Se e CAR B [II-D-468]a t 4
. 1 7 Wisconsi n DN Rcomment s [II-G-71 ] a t 1
. 1 8 See , Testimon y o f

th e National Petrochemical an dRefiner s Associatio n (NPRA ) befor e th e Senate Subcommitte e o n Clean Air , Wetlands , Privat e Property an dNuclear Safet y o n Apr
. 5 , 2001
.P.1 2

improvement

projects , whic h the y believ e no t onl y ca n hav e ne t environmental benefits , bu t als o ca n provid e an effectiv e short-ter mresponse t o tight

reserv e margin s a

t man y location s in th e Unite dStates
. O n th e other

hand , environmenta

l group s d o no t

believ e tha

t there i s sufficien

t informatio n t o conclud e tha t NS Ri s th e primar

y factor drivin g decision s t o inves t i n ne w capacit

y at existin g source s o r

that , absent NS Rsignifican

t investment s woul dhav e bee n mad e tha t are presentl y no t

bein g mad e in recapturin g los t

existin g capacit

y du e t o deterioratio n o f

equipment
. Thi s sectio n examine s mor e closely th e capacit

y issue s a t electri c utilities , followe db y th e energ y efficiency issues
. a . Impac t

o n Utilit y Project s to Maintai n th e Availability
. Reliability , an dSafet y o f th e Electri c Powe r

Suppl y

' (i) NSR Applicability Th e utilit y industr y comment s predominantl y focuse do n th e exclusio n frommajor NS R permittin g requirement s fo r activitie s tha

t represent "routin e maintenance , repai r an dreplacement. " The y asserte dthat , i n recen t years , EP A ha s nanowe dit s interpretatio n o f thi s exclusio n t o th e point where NS Rpotentiall y applie s t o repair an dreplacemen t

activitie s tha

t ar e customaril y undertake n withi n th e industr

y t o assure th e availability , reliability , an dsafet y o f powe r plant operations
. Commenter s believ e tha

t unde r suc h a n interpretatio n NS Rwoul db e require dwheneve r th e wor k involved : (1 ) acomponent tha t i s replaced infrequentl

y in th e lif e o f a n industria l facility ; (2 ) a componen t

tha t i s larg e an dexpensiv e (i n absolute terms) ; o r (3 ) areplacement

componen t

tha t i s bette r designe dan dwil l improv e th e availabilit y o r efficiency o f

th e facility
. Thus , accordin g t o th e utilit y commenters , becaus e electricit y generatio n unit s are inherentl y large , complex , an dexpensiv e (i n absolute terms) , mos t powe r plan t repai r an dreplacemen t

activit y woul dno t b e covere db y th e exclusion
. Becaus e o f th e cost s an dpotential delay s associate dwit h NS Rthe y believ e tha

t thi s ha s discourage dactivitie s intende dt o maintai n th e reliability, availability , and safet y o f existin g powe r

plants ; and/o r

ha s require dgenerator s t o limi t th e outpu t

o f thei r powe r plant s t o avoi dtriggerin g NS Rregardless o f thei r capacity , i n order

t o maintai n th e unit s durin g their norma l useful lives
. NS Rcost s an ddelay s are o f particula r concer n t o commenter s fo

r suc h change s a

t existin g unit s becaus e (1 ) whil e certai n project s might b e relativel y inexpensiv e absen t NS Rthe y believ e th e cos t o f control s resultin g fromNS Rcan mak e the mcost-prohibitiv e t o undertake , which , in turn , ca n adversel y affect

th e availabilit

y an dreliabilit

y o f plant operation s an ddiscourag e suc h projects , an d(2 ) the y believ e tha

t unit s may nee dt o b e offlin e unti l permittin g ca

n occur , s o delay s i n permittin g ca n hav e significan t impact s o n energ y supply throug h los t generatio n durin g thi s time
. Althoug h utilitie s state dtha t NSR-require dcontrol s ar

e expensiv e relativ e to th e gain s associate dwith project s tha t migh t trigger NS Rothe r

commenter s note dtha

t thes e cost s are smal l compare dt o th e company' s revenue . Th e Clean Ai r Tas k Forc e submitte dastud y b y MS B Energ y Associate s performe do n asampl e o f 5 1 existin g coal-fire d utilit y units
. Th e stud

y conclude s tha

t if thes e unit s triggere dNS Ran dha dt o instal l BACT-leve l controls , th e cos t woul db e modes t

relativ e to th e siz e an drevenu e leve l o f th e companies. 1 9 I n th e commenters ' view , thi s impac t i s exchange dfo

r significan t environmenta

l benefits , estimate da

t 2. 8 millio n ton s pe r

yea r o f sulfu r dioxide (S0 2 ) (22 % o f

1 9 Se e Clea n Ai r

Tas k Forc e Comment s [H-D-236] , Appendi x D
.P.1 3

al l powe r plan t S0 2 emission s i n th e U.S. ) an d1.0 millio n ton s pe r yea r o f NO x (19 % o f

al l powe r plan t NO x emission s i n th e U.S.)
. Accordin g t o industry , thousand s o f repai r an dreplacemen t

project s ar e undertake n b y facilitie s eac h yea r an dthat , a s aresult , NS Rpermittin g i s potentiall y triggere dearly i n th e lif e o f virtually ever

y electri c utilit

y plant , an dthe n repeatedly thereafter. 20 Th e industr y commenter s submitte dinformatio n abou t th e type s o f

project s the y state dthat

the y typicall y undertake , whic h the y maintai n ar e requiredt o ensure reliability , availability , o r safet y o f their facilities , bu t

whic h the y believ e EPA woul dclassif y a s non-routin e an dtherefor

e woul dpotentiall y b e subjec t t o NS Ri f

the y resultedi n asignifican t ne t emission s increase. 2 1 Fo r example , asurve y undertake n b y th e Tennesse e Valle y Authorit y (TVA ) reporte dth e frequency wit

h whic h particula

r repair an dreplacement

project s ar e undertake n withi n th e electri c utilit y industry. 2 Th e TV A surve y covere dapproximatel y 20 % o f th e electri c utilit

y industr y - 21 9 unit s totalin g abou t

80,00 0 M W - an dinclude darevie w o f cas e studie s an dstatistic s regardin g cyclon e replacement , balanced-draf t conversion , reheate r

replacement , an deconomize r replacement
. Fo r example , thei r

surve y state s that , at

th e 19 0 unit s i n th e surve y tha t hadreheaters , ther e wer e 21 3 reheate r replacemen t

project s (som e reheater s wer e replace dmor e than once)
. A t th e 20 2 unit s i n th e surve y tha t ha deconomizers , ther e wer e 9 8 economize r replacemen t

projects
. Fo r

both components , replacement s occurre da s earl y a s 5 year s afte r initiatio n o f

aunit' s commercial operation , o r a s late a s 4 0 t o 5 0 years . Similarly , a t 15 1 boiler s originall y constructe da s force ddraf t systems , utiUtie s replaced 7 9 system s wit

h balance ddraf

t systems , primaril y t o addres s "equipmen t degradation , maintenanc e problems , healt

h an dsafet

y concerns , an dpollutio n contro l requirements.' 2 3 Finally , th e TV A survey reporte dthat , sinc e 1979 , 30 0 cyclone s ou t o f 70 1 ha dbee n replace dat

th e 9 6 electricity-generatin g station s i n th e Unite dState s powere db y cyclon e boilers
. UAR G similarl y reporte damor e complete , recen t censu s o f th e entire coal-fire dstea

melectri c generatin g industry. 24 Thi s censu s sough t industry

wid e informatio n regardin g th e frequency o f maintenance , repair

an dreplacement

activitie s tha

t they believ e EP A consider s non-routine
. Th e censu s result s ar e reporte dt o show :

• Th e industr

y ha s undertake n ten s o f

thousand s o f

suc h maintenance , repai r

or replacement activities ; Ever y uni t i n th e industr

y ha s undertake n suc h activities ;

• Approximately 50 % o f th e unit s i n th e industr

y wil l hav e undertaken suc h activit y withi n five year s o f th e unit' s in-servic e date ;

• Eac h uni t

i n th e industr

y undertake s o n averag e annually a t leas t on e suc h activity
.

2 0 UAR G Comment s [II-D-303 ] a t 29-32
. 2 1 UAR G Comment s [H-D-303 ] Attachmen t C
. 2 2 See Jerr

y Golden , TVA , Routine Maintenance of Electric Generating Stations (February 2000 ) ("TV A 200 0 Report") , described in UAR G Comment s [II-D-303 ] at 29-31
. 2 3 TV A 200 0 Report

at 25
. 2 4 UAR G Comment s [H-D-303 ] a t 3 1 -32
.



### 1 0P. M

I n short , i n th e vie w o f

man y industr

y commenters , a

n inappropriately narco w routin e maintenanc e exclusio n woul dno t exclud e man y commo n maintenanc e projects
. Accordin g t o thes e commenters , thi s woul dleav e nearl y ever y coal-fire d generatin g uni t i n aconstant

state o f obligatio n to evaluat e whethe r

eac h o f thes e numerou s project s woul dtrigge r NSR , an di f

so , whethe r

th e cost s associate dwith NS R(including , i f applicable , th e cost s o f

add-o n control s an dpotential downtime ) woul drende r

suc h project s cost-prohibitive
. A s discusse dbelow , i f suc h project s ar e foun dt o b e cos t prohibitive , commenter s predic t steady deterioratio n o f

existin g capacity , an dlimite dinvestment in th e recovery o f

suc h capacit

y at existin g sources . Man y industr y commenter s echoe dthi s conclusio n an d asserte dtha

t th e situatio n i s unacceptabl e an dmus t b e correcte dt o reflec t

th e real environmen t surroundin g routin e maintenanc e withi n th e electrica l utilit y industry. 2 5 O n th e other

hand , environmenta

l group commenter s an dsome permittin g authoritie s fel t tha t th e routin e maintenanc e exclusio n i s appropriate
. The y believe dtha t ales s narro w exclusio n woul d allo w th e exceptio n t o swallo w th e mie
. I n thi s vein , commenter s expresse dconcern s tha t large-scal e capita l projects , suc h a s majo r

lif e extensio n projects , shoul dno t qualif y a s routine. 2 6 On e o f

thes e commenter s expresse dconcer n tha t afacilit y coul db e virtuall y rebuilt withou t triggerin g NS Runde r industry' s preferre dinterpretation s o f th e routin e maintenanc e exemption 27

. Afte r reviewin g th e comments , th e EP A note s tha t there ar e differing opinion s amongs t th e commenter s abou t

th e appropriate scop e o f

th e routin e maintenanc e exemptio n an dth e resultin g NS R impacts
. I n determinin g whether a n activit y i s "routine " fo

r purpose s o f

bein g exclude dfromNS R EP A consistentl y ha s take n acase-by-cas e approach , weighin g th e nature , extent , purpose , frequency an dcos t o f th e work , a s wel l a s othe r relevan t factors
. Nevertheless , th e Agenc y recognize s tha t man y industr y commenter s expresse duncertaint y abou t th e scop e o f

th e routin e exclusio n an dargue dtha t thi s uncertaint y wil l caus e the mt o dela

y or foreg o project s critica

l t o maintainin g th e availability , reliability an dsafet y o f thei r faculties
. I n ligh

t o f th e volum e o f

anecdota l evidenc e presented , th e EP A conclude s tha t concer n abou t th e scop e o f

th e routin e maintenanc e exclusio n i s havin g an advers e impac t o n project s tha

t affect availability , reliability , efficiency , an dsafety
. Change s t o th e NS Rprogramtha t add t o th e clarit

y an dcertaint

y o f th e scop e o f

th e routin e maintenanc e exclusio n wil l improv e th e proces s b y reducin g th e unintende dconsequence s o f discouragin g worthwhil e project s tha t ar e in fact outsid e th e scop e o f

NSR
. (ii) Energy Impacts Accordin g t o utilit

y commenters , th e energ y impac t o f a n inappropriatel y narro w NS Rroutin e maintenanc e exclusio n woul db e advers e an dpotentiall y quite significant
. I n addition , th e industr y commenter s state dtha

t an inappropriatel y narro w exclusio n woul dleav e man y activitie s potentiall y

2 5 NREC A Comment s [II-D-322 ] at 14-15 ; see also Clas s o f

'8 5 Grou p Comment s [II-D

268 ] a t 9 ("Electri c generatin g plan t personne l hav e bee n place di n th e untenabl e positio n o f no t bein g abl e t o correc t

an dimprov e th e reliabilit

y an defficiency o f

thei r plants , resultin g i n compromise dsafet y t o plan t employee s an dth e genera l public , withou t

riskin g a n enforcemen

t action.") ; Dairylan d Comment s (H-D-324 ) a t

4 (EPA' s current

"interpretatio n may compromis e th e reliabilit y an defficiency o f existin g plant s an dcoul dundermin e th e preservatio n o f adivers e energ y supply.")
. 2<r See , e.g. , RAPC A [II-D-302] , Adirondac k Counci l [II-D-136] , Publi c Citize n [II-D-327]
. 2 7 Publi c Citize n [II-D-327]
.



### 1 1P.1 5

subjec t t o NS RThi s circumstance , the y believe , woul dresult i n limite d alternative s fo

r utilit y managers . The y describ e thre e alternatives
. First , utilitie s coul dg o throug h th e NS Rpre-constructio n permittin g process . Th e principal complaint s agains t

thi s alternativ e wer e protracte dprocessin g delay s an dth e attendant costs , includin g th e cost s o f

pollutio n contro l retrofits. 28 I n addition , commenter s feare dthat , i f th e interpretatio n o f routin e wer e t o b e narrowed , thousand s o f project s woul dtrigge r

NS Rpe r year , an dwoul dresul t

in eve n more substantia

l delay s b y flooding th e permi t proces s wit

h more permi t

application s tha

n i t ha s th e capacit

y t o proces s quickly
. Second , acompan y coul daccep t enforceabl e emission s limit s (throug h a"minor " NS Rpermit ) i n th e for mo f aca p o n emission s fromth e affectedunits. 2 9 Commenter s stated , however , tha t acceptanc e o f

suc h aca p woul drequire autilit

y t o limi t th e affectedunit' s hour s o f operatio n an d productio n rate s t o representativ e emissio n level s jus t prio r to th e change , whic h coul drestric t th e electricit y suppl y i n aparticula

r area. 3 0 Commenter s als o coul dlimit emission s b y addin g pollutio n contro l technology , bu t

commenter s fel

t thi s wa s als o no t

aworkabl e NS Ravoidanc e strateg y becaus e i t als o coul db e infeasible , cost-prohibitive , an dwoul donl y b e atemporar y solution. 3 1 Moreover , commenter s state dtha

t th e delay s associate dwit

h th e mino r

NS Rproces s require dt o creat e th e limi t stil l severel y impac t

aunit' s abilit

y t o replac e component s necessar y t o ge t bac k onlin e quickl y afte

r a force doutage. 3 Fo r

example , whe n aturbin e roto r shaf t crack s o r slag fall s an ddestroy s aboile r floor, th e utilit

y mus t repair th e component

a s quickl y a s possibl e an drestore th e uni t t o service
. Commenter s clai mthat , i f th e necessar

y repairs were no t

considere droutin e maintenance , repai r an d replacement , th e repai r

coul dno t b e mad e unti l th e sourc e obtaine dan NS Rpermit
. I n th e meantime , th e commenter s believ e tha t th e utilit y coul dlos e th e entire capacit y o f th e unit , whic h coul dendanger th e stabilit y o f th e electrica

l gri dan dcreat e arisk

o f regional blackouts. 3 3 Commenter s als o argue dtha t avoidin g NS Rb y acceptin g cap s o n emission s throug h operationa l limit s woul dconstrai n electrica l syste moperators ' flexibility t o deliver necessar y electricit y a t th e leas t cost . I n thi s regard , severa l utilitie s analyze dthei r

system s t o estimate th e restrictions o n thei r abilit y t o produc e electricity , ha dwha t they consider

t o b e anarro w interpretatio n o f th e routin e exclusio n bee n applie dove r th e las t twent y year s an dha dth e utilitie s electe dt o obtai n mino r NS R permit s limitin g generatio n to recent level s i n ever

y instanc e the y undertoo k

certai n replacement projects
.

2 8 See, e.g., Clas s o f

'8 5 Grou p Comment s [II-D-268 ] at 9-10
. 2 9 Commenter s als o complaine do f delay s i n th e mino r

NS Rpermittin g proces s (an averag e o f 3- 8 month s i n on e utility' s servic e area. ) See Jerry L
. Golde n & Donal dP
. Houston , TVA , Impacts of EPA's Reinterpretation of New Source Review Requirements — Potential Loss of Generating Capability on the TVA System, at 8 (Jul y 19,2001 ) ("TV A 200 1 Report" ) (Attachmen t E t o UAR G Comment s [II-D-303])
.

3 0 See UAR G Comment s a t 39-42 ; see also EP A Backgroun dPape r at 7
. 3 1 See UAR G comment s a t 39-42
. 3 2 See , e.g. , Clas s o f

'8 5 Grou p Comment s [II-D-268 ] at 7 , TV A 200 1 report

at 7 (Attachmen t

E t o UAR G Comment s [II-D-303])
. 3 3 See, e.g., id.

1 2P.1 6

Fo r example , TV A (servin g approximatel y 2. 3 millio n home s i n th e Tennesse e River Valley), 3 4 reporte dthat , ove r

th e las t twenty years , i t

woul dhav e los t

32 % o f it s coa l system' s energ y capability , o r 3 4 millio n megawatt-hour s (MW-hr) annually
. I n asimila r analysis , th e Souther

n Company foun

d that , b y th e yea

r 2000 , i t woul dhav e ha da

n energ y shortfall o f

57. 5 millio n MW-hr , an dtha t i t woul d no t hav e bee n abl e t o mee t

38 % o f it s custome r

demand. 3 5 Similarly , Firs t Energ y estimate dtha

t i t woul dhav e los t

39 % o f it s coal-fire dgeneratin g capacit y betwee n 198 1 an d2000. 3 6 Wes t Associate s ( awester n utilit y wit h ayounger

fleet o f generatin g units ) estimate dalos s o f 27 % o f generatin g capacit

y o f on e o f it s plant s jus t

i n th e nex t

si x years . Wes t

Associate s als o estimate dthat , afte r 1 0 year s o f operatio n unde r

thi s "cap system, " th e Western Syste mCoordinatin g Counci l (WSCC ) woul dhav e los t 6 5 millio n MW-hr

o f generatin g capacity , o r

th e equivalent

o f 3 2 powe r plant s wit

h ane t capacit y o f 25 0 M W each. 3 7 Th e National Rural Electri c Cooperativ e Associatio n (NRECA ) estimate dthat , in on e maintenanc e cycle , th e los s o f capabilit y for th e approximatel y 21,00 0 M W o f cooperative-owne d plant s woul db e 12 % t o 24%. 3 8 Nationally , usin g thi s analysi s method , on e commenter state dtha t i t woul dtak e 20 0 ne w 50 0 megawatt powe r plant s jus t

t o mak e u p th e los t

capacity , tha

t is , t o sta y a t th e current level s o f availabl e supply. 3 9 Maximizin g th e utilizatio n o f existin g generatio n capacit y ca n b e critica l t o ensurin g th e abilit

y o f utilitie s t o mee t

consumer deman di n pea

k periods
. Third , accordin g to industr y commenters , acompan y coul dsimpl y choos e no t t o undertake th e neede dmaintenance , repai r an dreplacemen t

project s i n question , s o a s t o avoi dtriggerin g NSR
. The y believ e thi s woul dresul t

i n alos s o f

electricit y generatin g capacity , becaus e delaye dan dforegone maintenanc e lead s t o adecreas e i n availabilit y an dreliability. I n addition , commenter s sugges t tha t suc h adecreas e als o coul dhav e anegativ e impac t o n th e energ y efficiency o f

th e uni t an dth e overal l efficiency o f autilit y system . Thi s i s because , i f alarge r utilit y uni t become s unavailabl e durin g aperio dwhe n i t woul dhav e bee n utilize dt o mee t consume r demand , the n multipl e smaller , les s efficien t unit s ofte n mus t b e utilize di n it s place. 4 0 On e utilit y commente dtha

t onl y throug h maintenanc e o f highl y efficien

t low-cos t baselin e generatio n i s th e retirement o f more inefficien

t unit s possible. 4 1 Th e commenter asserte dtha

t les s efficien

t unit s are more costl y t o operate an dgenerall y produc e more pollutio n pe r uni t o f electri c output .

3 4 TV A 200 1 repor t

at 12-14
. 3 5 Souther n Company , The Dismantling of Energy Supply Capacity Through New Source Review (Attachmen t

D t o UAR G Comment s [JJ-D-303])
. 3 5 Firs t Energ y Comment s [II-D-261 ] at 1
. 3 7 Wes t Associate s Comment s [H-D-216 ] at 7
. 3 8 NREC A Comment s [U-D-322 ] a t 7
. Othe r commenter s tha

t submitte dsimila

r analyse s include : Minnesot aPowe r Comment s [II-D-165 ] (25 % los t production) ; Dairylan dComment s [II-D

324 ] at 7 (41 % los t

generatin g capacity) ; SR P Comment s [II-D-320 ] at 6 (18.5 % loss)
. 3 9 See UAR G Comment s [II-D-303 ] at 39
. 4 0 See Ralp h L
. Roberso n & RichardD
. McRanie , Thought s on Power Plant Efficiency, at

7 (Attachmen t

F t o UAR G Comment s [II-D-303] ) (RM B Report) ; see also Clas s o f '8 5 Grou p Comment s [II-D-268 ] a

t 5- 6 (notin g tha

t utilizatio n o f

base-loade dunit s displace s les s efficient , mor e pollutin g plants)
.

4 1 Firs t Energ y Comment s [II-D-261 ] at 1
.



### 1 3P.1 7

EP A note s tha

t th e possibl e energ y impact s predicte db y industr y commenter s appea

r t o flow fromth e industry' s reporte duncertaint y regarding th e scop e o f

th e routin e maintenanc e exclusion
. Consistent wit h our conclusio n in th e previou s sectio n o f thi s report, w e conclud e tha t concer n abou t th e scop e o f

th e routin e maintenanc e exclusio n i s havin g a n advers e impac t

o n project s tha

t woul d improv e th e reliabilit

y an davailabilit

y o f existin g electri c generatin g facilities
. W e als o note that , when catastrophi c force doutage s hav e occurre di n th e past , th e Agenc y ha s consistentl y worke dwit h industr y an dStat e an dloca l permittin g authoritie s t o allo w th e facilit y t o ge t th e uni t bac k an drunnin g quickly
. B
. impac t o n Efficienc y Improvement Project s (i) NSR Applicability Wit h respec t to th e issu e o f

energ y efficiency , asignifican t number o f industr y commenter s state dtha t an inappropriatel y narro w routin e maintenance , repair an dreplacement

exclusio n woul d prevent electricit y generator s fromtakin g advantag e o f opportunitie s to improv e thei r generatin g efficiency
. On e measur e o f suc h efficiency i s "heat

rate, " o r th e amoun t

of " fuel-boun denerg y require d t o produc e auni t

o f electrica l powe r (typically expresse di n millio n BTU pe r kW-hr)
. Improvin g a

n electri c unit' s efficiency - e.g., it s hea t rat e - mean s tha

t les s fue l i s require dt o produc e th e sam e amount o f electrica l power , reducin g pollutio n pe r uni t o f productio n output . Alternatively , improve d efficiency may allo w auni t to produc e more electricit

y fo r th e same amount

o f fue l burne d(i.e., wit

h n o greater amoun t o f emissions)
. Ne w electri c generatio n technologie s ofte n leadt o energ y efficienc y improvements , bu t

industr y raise dconcern s tha t applyin g thes e ne w technologie s (i.e., replacin g boile r or turbin e component s wit

h component s o f

better desig n an dmaterials ) often coul dtrigger NS R- in som e case s eve n i f

th e unit' s emission s rat e doe s no t increas e - becaus e th e sourc e use s th e mor e efficien t uni t more tha n i t use dth e ol done . Thes e commenter s state dtha t th e turbin e blad e projec t

tha t wa s th e subjec t

o f th e Detroi t Ediso n applicabilit

y determinatio n i s agoo dexampl e o f suc h aproject. 4 2 Industry report s that , unde r a voluntar y self-reportin g progra

minitiate db y th e Energ y Informatio n Administratio n (EIA) , utilitie s hav e reporte dnumerou s project s tha t are expecte dt o increas e efficiency. 4 3 Commenter s cite da s example s project s rangin g fromloadoptimizatio n program s an dimprove dboiler control s t o replacin g turbin e blade s an drotors , t o upgrade s o r replacement s o f

component s like superheater s an dcondensers. 4 4 industr y commenter s note dtha

t EP A view s suc h energ y efficiency project s a s th e Detroi t Ediso n turbin e blad e upgrad e a s "markedl y differen t fromth e frequent , inexpensive , necessary , an d

4 2 EP A Backgroun dPape r at 28
. 4 3 RM B Report

at 6 (Attachmen t

F t o UAR G Comment s [II-D-303])
. 4 4 Industr y commenter s stat

e tha t mos t energ y efficiency improvement s can b e linke dwit h tangibl e benefit s to th e environment an dtha t unles s th e powe r

sourc e i s i n clos e proximit y t o th e proces s i n whic h energ y efficiency i s improved , th e emission s benefit s ar e no t necessaril y local
. I f

th e powe r sourc e i s agrid , i t

may no t b e possibl e t o predic t

where al l th e benefit s wil l occur , no r wha t their magnitud e woul dbe
. Nevertheless , commenter s believ e tha t energ y efficiency shoul db e a n important aspec t o f meetin g nationa

l air pollutio n goal s becaus e th e energ y save di s energ y tha t woul dhav e otherwis e bee n generated
. .



### 1 4P.1 8

incrementa

l maintenanc e an dreplacement " o f deteriorate dcomponent s and , therefore , no t withi n th e scop e o f th e routin e maintenanc e exclusion 4 5 Industr y commenter s expresse dconcer n tha t thi s coul d resul t i n th e discouragement

o f energ y efficienc y improvement s becaus e the y coul db e subjec t t o NSR
. Fo r utilities , thi s i s aparticula

r concer n i n an y jurisdictio n that

ha s no t incorporate dth e WEPC O rale emissio n increas e methodolog y becaus e th e "actual-to-potential " test applie s i n thes e jurisdictions. 4 6 I n non-WEPC O jurisdictions , an di n al l jurisdiction s fo r non-utilit y activities , industr

y commenter s sai dtha

t NS Rcoul dappl y t o any projec t tha t bot h correct s avauabiuty/reiiabilit y problem s an dimprove s efficiency (becaus e o f

di e belie f tha t any projec t

tha t correct s avauabihty/reliabilit y problem s coul dresult in an emission s increas e unde r th e actual-to-potentia

l test), an dt o any efficienc y improvemen t projec t a t auni t tha t i s no t a t th e ver y to p o f asystem' s loadin g order
. Eve n fo r unit s tha t are a t th e to p o f th e loadin g order

o f aparticula

r system , lik

e Detroi t Edison' s Monro e units , industr y commenter s expresse dconcern abou t

whethe r an y efficienc y improvemen t coul db e show n no t

t o increas e emissions , becaus e an efficiency improvement almos t alway s make s th e improve duni t more attractiv e to run . Utilit

y commenter s state dtha

t th e Detroi t

Ediso n applicabilit

y determinatio n discourage s utilitie s fromundertakin g efficiency improvement projects. 4 7 The y suggeste dtha t utilitie s ar e likel y t o foreg o efficienc y improvement s i n order t o avoi dth e uncertainty , delay s an dpotential cost s associate dwit h NS Rapplicability
. On e commenter sought t o illustrat

e thi s poin t

i n responding t o th e EP A Backgroun d Paper' s inquir

y regarding whether

NS Rapplicabilit

y alter s th e economic s o f

efficienc y improvement project s b y evaluatin g atypica l turbin e efficiency improvemen t project
. Thi s evaluatio n showe dtha t suc h aprojec t

woul dcos t

approximatel y $937,00 0 for a25 0 M W unit , an dwoul db e expecte dt o yiel dadditiona

l revenue s o f

$21. 5 millio n (present

value)
. Fo r

suc h aunit , however , th e commenter determine dtha

t NS Rapplicabilit

y woul dresult

i n expensiv e retrofits , wit

h acapita l cos t (i.e., excludin g operatio n an dmaintenanc e o f th e retrofits ) approximatin g $68. 4 million. 4 8 Industr y commenter s sai dtha

t discouragin g efficiency improvement project s als o result s in mor e emission s than i f

th e project s coul dg o forwar dwithou t NSR
. The y argu e that , o n amegawat t basis , efficiency improvement s reduc e pollution, 4 9 an dthat , eve n i f utilizatio n increase s a

t th e uni t wit h improve defficiency , th e dynamic s o f economi c dispatc h o f

electri c generatin g unit s mean tha t th e increase dutilizatio n a

t tha t uni t necessaril y displace s les s efficient , an dtherefor e more-polluting , plants. 5 0 Thus , th e industr y conclude s tha

t discouragin g efficiency improvement s almos t alway s results i n higher emission s than i f

thes e improvement s ha dbee n made
. A s a n example , th e Detroi t

Ediso n cas e wa s agai n cited , wher e th e us e o f th e mor e efficien

t blade s woul dhav e permitte deac h generatin g uni t to produc e th e sam e amoun t

o f electricit y a s i t ha di n 199 4 whil e burnin g 112,63 5 fewe r ton s o f coal
. Th e

4 5 EP A Backgroun dPaper a t 2 8 (citin g Detroi t

Ediso n Applicabilit

y Determination , May 23 , 2000)
. 4 6 Under

EPA' s "WEPC O rule, " NS Ri s no t triggere dfo

r existin g utilit

y source s unles s ther

e i s asignifican

t ne t increas e i n actua

l emission s usin g a

n actua l t o predicte dfutur

e actua l methodology
. 4 7 See, e.g., Clas s o f

'8 5 Grou p Comment s [II-D-268 ] a t 5 ; UAR G Comment s [II-D-303 ] a t 45
. 4 8 See Comment s o f Xce l Energ y [II-D-213 ] at 6-7
. 4 9 EP A Backgroun dPape r a t 28
. 5 0 See Clas s o f

'8 5 Grou p Comment s [II-D-268 ] a t 5-6 ; see also FirstEnerg y Comment s [II

D-261 ] a t 1-2
.



### 1 5P.1 9

result , accordin g t o commenters , woul dhav e bee n areductio n o f 1,826 ton s pe r

yea r (toy ) in S0 2 emissions , 1,40

2 tp y i n NO x emissions , an d259,11 1 tp y i n carbo n dioxid e (C0 2 ) emissions , assumin g tha t input desig n parameter s (maximu mhea t input an dfue l consumptio n specifications ) remaine dth e same . Detroi t

Ediso n estimate dtha

t more than 1,00

0 othe r electri c utilit

y unit s i n th e Unite dState s hav e th e capabilit

y t o achiev e simila

r reduction s throug h simila

r turbin e blad e replacement s an dother projects ; thus , extrapolatin g base dupo n thes e estimates , the y predic t tha t b y encouragin g th e adoptio n o f bladin g efficiency improvements , C0 2 emission s woul db e reduce db y 8 1 millio n ton s pe r yea r or more , provide dinpu t

desig n parameter s (maximu mhea t inpu t an dfue l consumptio n specifications ) remaine dth e same . The y predic t tha t S0 2 an dNO x emission s woul dals o b e reduce dsignificantly
. I n contrast , commenter s fromenvironmenta l group s believ e tha

t NS Rtreat s energ y efficiency improvemen t

project s appropriately
. The y state dtha t NS Ronl y applie s whe n aprojec t result s i n a

n emission s increas e an dtha t th e type s o f

project s discusse dabov e wher e significant reduction s ar e achieve dwoul dno t

trigger NS RHowever , i f

a n energ y efficiency projec t als o result s i n asignifican t emission s increase , thes e commenter s fel t tha t i t woul db e inappropriate t o exemp t th e increas e from revie w unde r

NSR 5 1 On e commenter

als o questione dwhethe r

NS Ri s th e predominan t

factor in influencin g adecisio n abou t whether to procee dwit

h a n efficiency project , notin g tha t som e analyst s believ e tha

t th e regulation o f

utilit y rate s - an dspecifically thei r treatment o f cos t recover y - ha s lessene dth e incentiv e for

heat rat e improvements. 5 2 I n reviewin g th e informatio n regarding energ y efficiency projects , th e EP A conclude s tha t NS R may discourag e som e energ y efficiency improvements
. EP A note s tha t a s lon g a s utilizatio n remains constant , energ y efficienc y improvement s can result i n significan

t emission s reductions
. Suc h project s woul dno t trigger NS Ri f there were no t

asignifican

t emission s increase. 5 3 Becaus e suc h project s are no t subjec t t o th e NS Rregulations, NS Rgenerall y ha s anegligibl e impac t i n suc h cases . However , a s note dabove , energ y efficienc y improvement s ar e often associate dwit h increase s i n utilization , becaus e th e more efficien

t generatin g unit s ar

e dispatche dmore often
. Efficiency improvement s can als o result i n an increas e i n capacit

y o r availability
. I n suc h cases , there can b e loca l emission s increase s tha

t trigger NS Ri f th e project s are no t

routin e maintenance
. Fo r example , i n Detroi t

Edison , i f afive percen t increas e i n operatio n wer e t o result , actual increase s o n th e order o f 80 0 ton s o f

NO x an d200 0 ton s o f S0 2 woul doccur . Eve n i f thes e emission s increase s occur a t th e same time a s emission s decreas e somewhere else , som e commenter s expresse dconcern s abou t th e localize dimpact s o f

potentiall y larg e emission s increases , an dfelt tha t revie w unde r

NS Rwa s neede dt o addres s them
. Congres s provide dtha

t where physica

l change s a

t aplant resul t i n significan

t increase s i n air pollution , thes e plant s shoul dg o throug h NS Ran dtake step s t o contro l emissions
. Eve n i f aphysica l chang e i s relativel y inexpensiv e whe n compare dt o th e cos t o f th e control s tha

t are projecte dt o resul t fromNS Rth e chang e coul dstil l result i n emission s increase s tha

t Congres s believe dshoul dunderg o review
. However , a s note di n th e exampl e turbin e efficienc y improvement projec t above , an dechoe d throughou t

man y comments , th e cost s associate dwith NS Rparticularl y th e cost s t o retrofit pollutio n controls , can rende r

thes e project s uneconomical
. Thus , th e EP A finds tha t NS Rdiscourage s som e

5 1 See , e.g. , Jul y 2 0 testimon y o f Joh n Walke , NRDC
. 5 2 NRD C Comment s [H-D-267]
. 5 3 Thi s wa s th e cas e i n Detroi t Edison , wher e there wa s n o expecte dincreas e an dtherefor e th e propose dprojec t

di dno t trigge r NSR
. [Se e Detroi t

Ediso n Applicabilit

y Determination ]



### 1 6P.2 0

types o f energ y efficiency improvement s whe n th e benefit t o th e company o f

performin g suc h improvement s i s outweighe db y th e cost s to retrofi t pollutio n control s o r

t o take measure s necessar y to avoi dasignifican

t ne t emission s increase
. Th e EP A recognizes th e nee dt o promot e th e development o f efficien t an dmore environmentally friendl y designs
. O n th e other

hand , i t i s als o clea

r tha t awid e rang e o f

activitie s at

an electri c utilit

y ca n hav e energ y efficienc y benefits , fromeveryday maintenanc e t o major capita l projects
. I n general , th e EPA encourage s efficienc y improvement s whereve r feasible
. However , th e scop e an dmagnitud e o f some o f th e kind s o f

changes , thei r

impac t o n recovering capacit

y that ha dbee n los t

t o deterioratio n o f equipment , their

impac t o n significantly extendin g th e lif e o f th e boiler , turbine , etc. , an dth e resultin g significan t emission s increase , necessitate s tha t certai n project s whic h ma y result in efficiency improvements , mus t

b e reviewedunde r

NS RThoug h project s o f thi s magnitud e stil l ma y g o forwar d onc e thei r ai r qualit y impact s are addressed , th e EP A finds tha t NS Rcan discourag e companie s from undertakin g them
. (ii) Energy Impacts Th e IC F repor

t i n suppor t o f th e EP A Backgroun dPape r referre dt o variou s data , suc h a s thos e o f th e Nationa l Coa l Counci l (NCC ) Ma y 200 1 report, whic h estimat e that repair s an d replacement s tha

t improv e efficiency a

t existin g coal-fire dfacilitie s coul dresult i n an increas e in capacit

y o f 5 % to 10%)
. Applie dacros s th e entire coal-fire delectri c generatio n capacity o f th e Unite dState s (over 30 0 GW ) thi s woul dresult i n a n additional capacit

y o f 15,000-30,00 0 MW
. Thi s i s th e equivalent t o 30-6 0 ne w 50 0 M W plant s o r enoug h powe r

for 10-2 0 millio n homes
. Similarly , a s note di n th e EP A Backgroun dPaper , th e NC C repor t foun dtha t coal-fire dunit s ove r 2 0 year s o f

ag e ha dbee n substantiall y derated , an dconclude dthat : "I f al l existin g condition s resultin g i n aderatin g coul db e addressed , approximatel y 20,00 0 MW s o f increase dcapacit

y coul db e obtaine dfromregainin g los t capacit y du e to uni t

deratings. " Likewise , th e NC C reporte dtha t 20,00 0 M W o f additional capacit

y coul db e gaine db y "increasin g hea t inpu t and/o r electrical outpu t

from [existing ] generatin g equipment. " Moreover , th e NC C foundtha t thi s restoratio n an dincreas e o f capacit y fromexistin g unit s coul donl y b e economically viabl y pursue db y th e facilit y owner s if

, amon g other factors , th e increase davailabilit y and/o r electrica l outpu t woul dclearl y no t

trigger NSR
. Other industr y representative s supporte dthi s estimate
. Conversely , environmental grou p commenter s expresse dth e vie w tha t suc h investment s ar

e no t a s profitabl e a s investment s i n completel y ne w electri c generatio n capacit y an dtha t thi s i s wh y th e industr y i s no t pursuin g them , a s oppose dt o NS Rbein g th e major impediment. 5 4 The y als o estimate tha t th e emission s reductions fromefficiency improvement project s woul db e smal l compare dto th e reduction s that

woul db e achieve di f

NS Rapplied
. I n conclusion , fo

r th e utilit y industry , wit

h respec t t o existin g sources , an di n contras t t o ne w sources , th e EP A find s tha t th e availabl e informatio n indicate s tha t th e NS Rprogrami s havin g a n advers e impac t

o n investment

i n bot h electri c generatio n capacit y an denerg y efficiency
. Whil e ther e ar e onl y limite ddat atha

t prov e tha t NS Rha s resulte di n th e cancellatio n o f otherwis e economica

l

5 4 Clea n Ai r

Tas k Forc e comment s [II-D-236 ] a t 4 9 an dApp
. C
.



### 1 7P.2 1

project s o f

either type , asignificant

number o f industr y commenter s presente davariet y o f project s a t existin g source s tha

t coul dhav e increase dcapacity , improve dreliability , o r enhance defficiency , bu t wer e mad e uneconomical du e t o delay s an dcost s associate dwit h NSR
. Th e EP A finds man y o f thes e case s t o b e credibl e an dbase do n real-worl dexamples , an dbelieve s tha t the y demonstrat e that

NS R ha s a n advers e impac t

o n suc h investment

a t existin g sources . It

i s reasonable t o conclud e tha t th e foregone investmen t

ha s resultedi n foregon e capacit y increase s throug h decrease dreliabilit y an d availabilit y tha t are no t recovered, an dthroug h foregone efficienc y improvements
. 2
. Refineries Turnin g to th e questio n o f

NS Rimpact s o n investment i n capacit y at existin g refineries , th e EP

A find s tha t th e comment s agai n highlight area s where NS Rma

y adversel y impac t

investment

in capacit y an denerg y efficienc y projects
. Thes e area s are examine dfurthe r i n thi s sectio n i n order

t o asses s thei r natur e an dextent . Refiner y commenter s observ e tha t th e refining industr

y differs considerabl y fromth e electri c utilit y industr y i n severa

l respects. Fo r

example , i t

i s operatin g muc h closer

to ful l capacit y tha n th e utilit y industry , an di t

i s no t transitionin g fro

man economically regulated basi s to amarke t basis
. Even whil e operatin g a

t ver y hig h utilizatio n rates , commenter s note dtha t th e industr

y mus t b e abl e to respon drapidly to change s i n ra w materia l availability , marke t

demands , an denvironmental requirements
. AP I explaine dthat , "[r]efiner s are require db y law t o mak e adjustment s t o fue l specification s fromon e seaso n to another , produc e fuel s meetin g multipl e specification s i n variou s region s o f th e country , an dreconfigur e to refine cleane

r burnin g lo w sulfu

r diese l an dgasoline , al l whil e bein g abl e t o suppl y fuel s t o mee t constandy changin g customer demand." 5 5 AP I suggeste dtha t thes e requirement s necessitate frequen t an drapid responses tha

t may involv e change s t o arefinery's facilitie s an dprocesses . Moreover , the y not e that , t o mee t deman dfor

petroleu mproduct s an davoi dmarke t disruption s tha

t can leadto shortage s an dpric e volatility , th e refinin g industr y mus t b e abl e t o maintai n th e availability , reliability, an dsafet y o f it s facilities
. NPRA' s comment s noted , "Refinin g operation s ar e continuou s an dcomplex
. The y depen do n th e simultaneou s operatio n o f man y individual , bu t

inter

related , piece s o f

equipment

("units")
. A dela

y o r inabilit y t o chang e o r

improv e operation s o f

asingl e uni t ca n hav e asignifican

t cumulativ e impac t

o n th e refinery' s abilit

y to produc e th e fuel s tha

t it s customers , an dth e national economy , rel y upon.' 6 6 T o mee t increasin g deman dwithou t major constructio n o f

ne w refining facilities , commenter s believ e tha t th e industr

y mus t improv e th e efficiency o f it s existin g facilities , an di t mus t engag e i n what

on e industr

y commenter

describe da s a"continuou s incrementa

l improvemen t

i n productio n capacity." 5 7 Finally , a s note di n th e Backgroun dPaper , an d above , wit h n o ne w refinerie s likel y t o b e buil t i n th e nea r future , assessin g th e impac t o f NS Ro n existin g source s i s particularl y critical
. A s wit h utilities , refineries maintai n tha t th e exclusio n fo

r "routin e maintenanc e repair an d replacement " ha s bee n narrowe db y EP A in recen t year s an dundercut s thei r

abilit y t o respondquickl y to marke t change s an draw material availability
. I n addition , refiner y industr y commenter s expresse d concer n abou t th e tes t use dt o determin e whether achang e result s i n a

n emission s increas e a

t non-utilit y

5 5 AP I Comment s [II-D-134 ] at 1-2
. 5 6 See NPR A Comment s [II-E-27]a t 2
. 5 7 See B P Americ acomment s [H-D-307 ] a t 2
.

1 8P.2 2

sourc e categorie s (i.e. , th e "actual t o potential " test)
. I n th e vie w o f man y refiner

y commenters , th e NS Rprogra

mha s th e effect

o f constrainin g th e industry' s abilit y t o (1 ) expan ddomesti c refining capacity , (2 ) increas e th e suppl y o f cleaner burnin g fuels , an d(3 ) enhanc e energ y efficiency. 5 8 The commenter s sai dtha

t unde r th e NS Rprogram , numerou s commo n activitie s a t arefiner y - whether require dt o respon dt o deman dchanges , t o repai r o r replac e abroke n piec e o f equipment , t o improv e efficiency , to expan drefining capacity , o r eve n to respond to environmental requirement s - are potentiall y subjec t

to NS Rperrnitting. 5 9 On e industr y commenter

state s tha t hundred s o f

suc h activitie s are undertake n eac h year

a t existin g U.S
. refineries
. Accordin g t o commenters , th e lengthy , costly , an duncertai n nature o f

th e current

NS Rpermittin g proces s discourage s thos e activitie s t o whic h i t potentiall y applies , o r

a t leas t introduce s significan

t delay s i n an dconstraint s o n th e abilit y o f th e operato r to mak e th e require dchange s i n a n efficien t an dtimel y manner . Refinin g industr

y commenter s als o note dthat , i n thei r opinion , th e NS Remission s increas e tes t fo r non-utilitie s (th e "actual-to-potential " comparison ) presume s tha t virtuall y any activit

y a t arefinery increase s emission s withi n th e meanin g o f NS Reve n i f

th e activit y were , in fact , t o resul t

i n decrease d actua l emissions. 6 1 Thus , thes e commenter s state dthat , o f th e activitie s undertake n a t agive n refinery , onl y thos e activitie s ultimatel y deeme dt o constitut e "routin e maintenance , repair o r replacemenf

migh t avoi dNSR
. However , accordin g t o industr y commenters , fe

w activitie s beyon dth e mos t mundan e maintenanc e activitie s tha

t ma y b e undertake n eac h yea r at agive n facult

y woul db e deeme d"routine " unde r th e NS Rregulations. 6 2 On e commente r maintaine dthat

th e NS Rprogramwoul dappl y NS Rt o an y chang e that : (a ) result s i n an increas e i n capacit y o r capacit y utilizatio n o f

an existin g proces s unit ; o r (b ) increase s th e efficienc y o r lower s th e uni t

operatin g costs ; o r

(c ) extend s th e useful lif

e o f tha t uni t ..."[o r (d) ] increasefs ] uni t

reliability.'* 3 Accordin g t o industry , thes e ar e precisel y th e type s o f activitie s tha t U.S
. refineries mus t

constantl y undertak

e to mee t deman dan dminimiz e fue l suppl y disruption s and pric e volatility
. Moreover , commenter s sugges t tha t th e us e o f

a n actual-to-potential tes t

encourage s industr y to maximiz e current

actua l emission s withi n permi t

limits , rather

tha n providin g incentive s for emission s reductions. 64 industr y commenter s provide dalis t o f activitie s tha

t the y reportedly undertake t o maintai n reliability , improv e efficiency , an dexpan dcapacit y that , i n thei r

view , are typicall y undertake n i n th e industr y but , nevertheless , are potentiall y subjec t t o NS Runde r

th e curren t

program. 6 5 Accordin g to industry , th e potential applicabilit y o f NS Rwhic h the y believ e coul dencompas s virtually any given project , tend s t o discourag e operator s fromundertakin g particula r project s becaus e NS Rwoul dad d

5 8 NPR A lette r

t o Stephani e Daigle , EPA , 7/23/2001
. 5 9 See AP I Comment s [II-D-134 ] at 2 ; ExxonMobi l Comment s [U.-D-418 ] at 2 ; NPR A Comment s [U-E-27 ] at

3
. 6 0 See Maratho n Ashlan dPetroleu mLL C (MAP ) Comment s [II-D-253 ] a t 2
. 6 1 See, e.g., ExxonMobi l Comment s [U-D-418 ] a t ll(commentin g tha

t actual-to-potential tes t "fabricate^ ] emissio n increases " wher e n o increase s actuall y occur)
.

6 2 See ExxonMobi l Comment s [II-D-418 ] at 12 ; B P Americ aComment s [II-D-307 ] at 2 ; MA P Comment s [II-D-253 ] at 2
. 6 3 See B P Americ aComment s [II-D-307 ] a t 2
. 6 4 NPR A Comment s [II-E-27 ] at Attachmen t

1 , No
. 1
. 6 5 See , e.g. , NPR A comment s [H-D-400 ] an dAP I comment s [II-D-134]
.



### 1 9P.2 3

significan t delay s an dcosts. 6 6 Industr y commenter s observe dtha t th e EP A Backgroun dPaper' s estimate fo

r th e lengt h o f time typically necessar

y t o obtai n a

n NS Rpermi t

di dno t include th e time spent prio r to submitta

l o f acomplete application
. I f suc h time i s included , th e lengt h o f th e NS R permittin g proces s i n th e experienc e o f refinery commenter s i s a

t leas t 7 to 2 2 months , excludin g any post-issuanc e appeal s an dchallenges. 6 7 A n industr y commenter

furthe r predicte dthat , i f

th e liste d activitie s are viewe da s non-routine , th e refining industry , a s wel l a s other U.S
. industries , woul d experienc e muc h longer

leadtimes i n obtainin g NS Rpermit s tha n alread y occur. 6 8 Like utilities , refiner s als o raise dth e concer n tha t there woul db e limite doption s fo r project s tha t are potentiall y subjec t

t o NSR 6 9 The y describe dthre e options
. First , th e operato r coul dsee k

t o obtai n an NS Rpermit , acceptin g th e delays , uncertainties , an dpotentiall y significan t cost s tha t commenter s say are associate dwit h suc h permits. 7 0 Alternatively , an operato r coul dsee k

t o "avoid " NS Rb y limitin g emission s to past , actua l level s throug h amino r

NS Rpermi t

( apermi t which , accordin g t o industry , can take 3-1 2 month s to obtain) , thu s givin g u p refinery capacit y an d"deprive[ing ] th e sourc e o f th e 'headspace ' betwee n actual an dallowabl e emission s tha t i s crucial t o long-ter

moperatin g flexibility an dth e abilit

y to respon dquickl y to change s in demand.'* 7 1 A thirdoptio n woul db e to simpl y cance l th e project , an dforeg o th e projecte dbenefi t that wa s th e reason fo

r th e projec t

i n th e first

place
. Overall , th e comment s submitte db y refiner y an dothe r

commenter s durin g thi s review proces s emphasiz e thei r

belie f tha t b y imposin g significan

t cost s an ddelays , th e NS Rprogramdiscourage s investment

i n project s tha

t are necessar

y to maintai n th e reliability o f existin g refineries , improv e their efficiency , expan dcapacity , an drespon dflexibly t o rapidly changin g consumer deman dfo

r petroleu m products
. Accordin g to on e commenter , wha t th e industr

y mos t need s i s certaint

y an dflexibility i n it s effort s t o mee t

bot h th e energ y need s o f

th e Natio n an denvironmenta l requirements. 7 2 I n contrast , NRDC' s comment s sugges t tha t poo r retur n o n investment

i s more important

tha n environmenta

l consideration s (o f

whic h NS Ri s onl y asmal l part , an di s no t specifically name db y source s examine di n th e EP A Backgroun dPaper) in an y decision s no t t o inves t in ne w capacity
. The y poin t

t o informatio n presente di n th e Backgroun dPaper showin g that , i n recent

years , there ha s bee n significan

t investment

i n refiner y capacit y a t existin g sources . A s discusse dabov e fo

r utilities , th e EP A note s tha t fo r refineries there ar e als o difference s o f opinio n amongs t

th e commenter s about

th e scop e o f

th e routine maintenanc e exclusio n an dth e resultin g impacts
. I n determinin g whethe r a n activit y i s "routine " fo

r purpose s o f

bein g exclude dfromNS REPA consistentl y ha s take n acase-by-cas e approach , weighin g th e nature , extent , purpose , frequency an d cos t o f th e work , a s wel l a s other relevan t factors
. However , EP A acknowledges , a s i t di dfo r utilities ,

6 6 NPR A Comment s [U-E-27]a t 2
. 6 7 See AP I comment s [II-D-134 ] a t 8
. 6 8 See ExxonMobi l Comment s [U-D-418 ] at 16
. 6 9 See B P Americ aComment s [II-D-307 ] a t 2
. 7 0 See id.; see also ExxonMobi l Comment s [U-D-418 ] a t 1 8 (notin g bot

h th e cos t an d schedulin g impact s o f

NS Ro n projec t

economics)
. 7 1 See B P Americ aComment s [II-D-307 ] at 2-3
. 7 2 See AP I Comment s [U-D-134 ] at 2
. 7 3 NRD C comment s [II-D-267]at 5
.

2 0P.2 4

tha t th e comment s report

significan t uncertaint

y abou t th e scop e o f

th e "routine " exemption
. Suc h uncertaint y can resul t

i n th e dela

y o r cancellatio n o f

projects
. Change s t o th e NS Rprogramtha t addto th e clarit y an dcertaint

y o f th e scop e o f

th e routin e maintenanc e exclusio n wil l improv e th e proces s b y reducin g th e unintende dconsequence s o f discouragin g worthwhil e project s tha t are i n fact

outsid e th e scop e o f NSR
. A ke y differenc e betwee n utilitie s an drefineries i s th e fact tha t refinerie s us e th e "actual-to

potentia l tesf fo r determinin g NS Rapplicability , whil e utilitie s generally d o not . Th e EP A ha s reviewed anumbe r o f example s wher e project s coul dhav e provide dcapacit y increase s o r

energ y efficienc y improvements , an dlikel y coul dhav e don e s o withou t increasin g actua

l emissions , an di n som e case s th e project s appea

r likel y t o decreas e actual emissions
. Suc h projects , i f the y occu r

a t unit s operatin g belo w capacity , coul dtrigge r NS Ror , a

t least , trigger

anee dt o ca

p th e unit s belo w capacity o r instal l pollutio n control s t o avoi dNS RAgain , th e determinatio n o f whether achang e result s i n an emission s increas e i s acase-by-cas e determination , bu t th e EP A believe s tha

t th e commenters ' example s mak e a credibl e cas e tha

t som e capacity o r

efficienc y project s tha

t d o no t increas e actual

emission s are no t undertake n becaus e the y trigger NS Runde r

th e actual-to-potentia

l test . Althoug h th e informatio n i s mostl y anecdotal i n nature , th e EP A believe s tha t th e informatio n presente di s base do n real worl d experience , an dmake s acredibl e cas e tha t som e project s ar e no t

goin g forwardi n part

becaus e o f NS RTh e EP A believe s tha t thi s results i n los t

refining capacity , o r

foregon e opportunitie s t o increas e capacit y withou t increasin g emissions
. IV . Impac to n Industrie s Othe r tha n Electri c Utilitie s an d Petroleu m Refinerie s I n additio n t o th e informatio n supplie dt o EPA b y utilit y an drefiner

y commenters , th e Agenc y receivednumerou s comment s fromother industrie s regarding th e NS Rprogram' s impac t o n energ y use , efficiency , an dcapacity
. Thes e comment s cam e principall y from avariet y o f industr y association s an d coalition s o f

manufacturer s representin g th e automobile , aerospace , chemical , electronics , food , aluminu man dsteel , packaging , paper , printing , pharmaceutical , an dothe r manufacturin g sectors . Lik e th e utilit y an drefining industries , thes e commenter s were primaril y concerne dwit h th e current applicatio n o f

th e NS Rprogramt o existin g sources . The y note dman y anecdotal instance s wher e project s woul dhav e reduce denerg y deman dand/o r increase denerg y efficiency , bu t wer e abandone d becaus e o f

NS Rpermittin g delay s and/o r cost s associate dwit

h th e retrofi t

o f existin g equipmen t

wit h th e BAC T o r

LAE Remission s control s mandate db y NS Rrules
. Othe r commenter s presente dsimila r example s o f

pollutio n contro l an dpollutio n preventio n project s abandone dbecaus e o f potential NS R applicability
. Accordin g to th e commenters , th e cancellatio n o f project s tha

t woul dhav e improve d energ y efficienc y o r

decrease dpollutio n mean s tha t NS Ri s havin g a

n advers e impac t

o n investment

i n bot h energ y efficiency an denvironmenta l protection
. Amon g th e general concern s voice db y commenter s i n additio n t o pollutio n contro l cost s were claim s tha t (1 ) th e NS Rprogrami s comple x an dgive s rise t o uncertaint y an dassociate ddelays , (2 ) i t hinder s flexibility , fo

r industr y to quickl y make neede dchanges , an d(3 ) tha t i t results i n th e los s o f productio n capacity wher e NS Ri s triggere dbase do n th e applicatio n o f th e actual-to-potential test , eve n i f emission s wil l no t

actuall y increase
. Furthermore , commenter s argue dtha t i f asourc e want s to



### 2 1P.2 5

avoi dNS Ri t

face s th e undesirabl e outcome o f acceptin g ne w emission s limit s i n th e NS Rpermi t that , accordin g t o commenters , effectively reduc e aplant o r unit' s productiv e capacity. 7 4 A
. NS RApplicabilit

y 1
. Routine Maintenance, Repair & Replacement A s wit h utilitie s an drefineries , man y commenter s fromother industr y sector s focuse do n th e NS R"routin e maintenance , repair an dreplacement" exclusion
. Like th e industrie s discusse dabove , the y believ e tha

t EP A ha s nanowe dth e exclusio n i n recent years . Thus , the y state dthi s wa s th e day-to-da y larges t proble mi n maintainin g th e availability , reliability, an dsafet y o f productio n equipment. 7 5 I n particular , commenter s asserte dtha t project s involvin g repair

o r replacemen t component s incorporatin g "state-of-the-art " improvement s i n material s o r desig n may b e subjec t

t o NS Rsinc e the y may no t

qualif y a s routine maintenance , o r may result

i n mor e efficien

t utilizatio n o f

fue l and/o r ra w material s tha

t may potentiall y increas e afacility' s emissions
. Fo r instance , a

t on e plant , a compan y state s that

i t electe dno t

to replac e spra

y nozzle s i n aproces s dryer , eve n thoug h i t determine dtha

t significan t energ y saving s coul dresult , becaus e i t conclude dtha

t th e ne w Teflo n coate d nozzle s woul dno t

b e equivalen t

part s and , therefore , th e projec t woul dno t

b e exemp t

fromNS Ra s routine
. Accordin g t o th e commenter , th e ne w nozzle s woul dhav e resolve dth e repeate dnee dt o replac e th e existin g equipment , an dma y hav e provide dasafe

r an dmor e reliable operatin g environment. 7 6 Similarly , commenter s complaine dtha t NS Rapplicatio n discourage dengineerin g desig n innovation s tha

t provid e bette r

qualit y an dcontro l assurance s durin g sometimes-dangerou s productio n processes . On e example , provide db y th e chemical industry , wa s th e installatio n o f atemperature regulatin g syste mo n athermal jacke t aroun dadryer

tha t i s equippe dwit

h aheate djacke t

tha t use s a temperature contro l syste mi n th e jacket
. Th e temperature contro l syste mwork s b y regulatin g th e flow o f steamo r ho t liquid s simila

r t o radiator fluids i n th e jacke t

tha t surround s th e dryer
. Th e curren t syste muse s an olde r

desig n an di s relatively ineffectiv e becaus e o f th e system' s wid e temperature variation , whic h cause s risks o f explosio n an dlengthen s th e dryin g proces s time. Bot h problem s coul d b e eliminate dwit

h th e installatio n o f

atemperatur

e regulatin g system , whic h woul dals o reduc e energ y demand s o n th e proces s b y 20%
. Althoug h wor k i s often performe do n th e jacke t regulatin g system , th e compan y suggeste dtha t i t di dno t g o forwar dwit h th e chang e becaus e wor

k o n th e temperature regulatin g system , utilizin g auniqu e ne w system , woul dno t b e considere d"routine.'' 7 7 I t wa s als o suggeste dtha

t applicatio n o f

th e NS Rprogramimpede dth e abilit y o f companie s t o undertak e project s to ensure th e reliabilit y o f their equipmen t tha t might als o result

i n significan

t energ y efficiency gains
. Commenter s presente danumber o f example s o f

suc h projects , includin g example s

7 4 See, e.g., Comment s o f NEDA/CAR P [U-D-272 ] at 9-10
. 7 5 See, e.g., FP A Comment s [U-D-271 ] at 2-3
. 7 6 NEDA/CAR P Comment s [U-D-272 ] Attachmen t A , Exampl e #1
. 7 7 NEDA/CAR P Comment s [U-D-272 ] Attachmen t A , Exampl e #4
. Accordin g t o thi s example , onl y 2 ton s pe r

yea r o f regulate demission s woul dhav e resulte dfromth e change , bu t potentia l emission s coul dhav e increase dove r 100 TP Y o f

VO C becaus e operatio n o f a n incinerato r

wit h a98 % contro l efficienc y voluntaril y installe db y th e company i s no t considere dt o b e "federally enforceable. "

2 2P.2 6

fromth e chemical , packaging , aluminuman dgenera l manufacturin g sectors . On e illustratio n fromth e American Fores t

an dPape r

Associatio n describe dreplacemen t o f outdate danalo g controller s a t a serie s o f si x batc h digesters
. Th e origina l controller s wer e n o longer manufactured , althoug h ne w digita l controllers , costin g approximatel y $50,000 , ar e capabl e o f receivin g input s fromth e digester vesse l temperature, pressure an dchemical/stea mflow
. Th e ne w controller s woul dhav e mor e precisel y filled an dpressurize ddigester s wit h chips , chemical s an dstea m(wherea s th e ol dcontroller s adde dmaterial s in timedsequence) , thu s bringin g abatc h digester o n lin e faster
. However , th e sourc e determine dtha t unde r th e NS Rprogra mthi s projec t woul dno t

b e considere dt o b e routin e because , althoug h repair s to th e analo g syste mmight

hav e bee n frequen

t a t th e company involved , replacement o f th e syste mwit

h a digitalized , computerize dsyste mwoul dno t qualif y a s "routine.' 17 8 A s wit h utilitie s an drefineries , EPA note s tha t there are widel y differing view s o n th e scop e o f th e routin e maintenanc e exclusio n o n other industries
. A s before , w e therefore conclud e tha t concer n about th e scop e o f

th e routin e maintenanc e exclusio n i s havin g an advers e impac t fo r industrie s outside th e energ y sector . I t

als o i s credibl e t o conclud e tha t project s hav e bee n discourage dtha t migh t hav e bee n economically and/o r

environmentall y beneficia

l without increasin g actua

l emissions
. Change s to th e NS Rprogramtha

t ad dto th e clarit

y an dcertaint

y o f th e scop e o f

th e routin e maintenanc e exclusio n wil l improv e th e proces s b y reducin g th e unintende dconsequence s o f discouragin g worthwhil e project s tha t ar e i n fact outsid e th e scop e o f

NS R 2
. Pollution Prevention Projects Anothe r serie s o f example s provide db y commenter s fromth e manufacturin g secto r involve d pollutio n preventio n projects , man y wit h significan

t energ y saving s potential
. Pollutio n preventio n project s a t manufacturin g facilitie s may qualif y fo r exemptio n under

th e NS Rprogram . Thi s determinatio n i s mad e o n acase-by-cas e basi s unde r EPA' s 199 4 guidanc e whic h addresse s pollutio n contro l project s an dNS Rapplicability
. Althoug h thi s guidanc e wa s intende dt o create incentive s fo r industr y t o undertake suc h projects , som e comment s suggeste dtha t i t migh t actuall y discourag e suc h projects
. On e exampl e come s fromth e chemica l industry
. I n tha

t case , achemical facilit

y considere d installatio n o f

anew , mor e efficien

t CF C refrigeratio n system . Completio n o f thi s project , accordin g t

o th e commenter , woul dhav e resultedi n decrease dCF C emission s an dles s electricit y demand , reducin g overal l emission s fromth e facility' s power generatin g plant
. However , thi s projec t woul dno t

hav e qualifie dfor

th e pollutio n contro l projec t exclusio n becaus e th e primar y purpos e o f

th e projec t

wa s no t t o reduc e emissions
. Therefore , becaus e th e projec t otherwis e woul dhav e triggere dNSR , th e compan y electe dno t

t o undertak e it. 7 9 I n asecon dexample , an aerospac e compan y suggeste dtha t i t wa s unabl e t o avoi dNS Rusin g EPA' s 199 4 pollutio n contro l projec t policy , becaus e th e purpos e o f aparticula

r projec t wa s t o improv e energ y efficiency , althoug h significan t pollutio n contro l benefit s woul dals o hav e resulted
. Th e compan y ha dpropose dt o spee du p it s manufacturin g proces s (for part s an dsubassemblies ) b y usin g a ne w adhesiv e tha

t woul d dry (o r

cure ) faster
. Th e compan y state dtha t th e projec t

woul dhav e resulte d i n pollutio n preventio n both becaus e th e ne w adhesiv e ha dalowe r volatil e organi c compoun d(VOC ) content than th e on e i n us e an dbecaus e mor e part s coul db e processe di n les s time, consumin g les s

7 8 AFP A Comment s [II-E-15] , Ta b 3 , Cas e i n Poin t

#4
. 7 9 Comment s o f

American Chemistr

y Counci l [U-D-416 ] exampl e 1
.

2 3P.2 7

energ y overall
. However , thi s projec t coul dno t qualif y fo r th e pollutio n contro l projec t exclusio n becaus e it s purpos e wa s t o improv e efficiency , rather than t o abate pollutio n an dbecaus e th e ne w adhesiv e syste mwoul dhav e increase dth e utilizatio n o f productio n equipment

a t th e plant
. Becaus e th e projec t otherwis e woul dhav e triggere dNS Rapplicability , th e compan y decline dto mak e th e change. 8 0 EP A believe s tha

t thes e example s indicate tha t NS Ri s havin g a

n advers e impac t

o n som e pollutio n contro l an dpreventio n projects
. B
. Energ y Efficiency Th e Agenc y als o receive danumbe r o f industr y comment s explainin g th e NS Rprogram' s effect o n energ y efficienc y an ddemand
. Thes e comment s sugges t tha t th e delay s an dcost s associate dwit h NS Rhav e discourage dth e adoptio n o r implementatio n o f

variou s energ y conservatio n an defficienc y measures . Example s provide db y commenter s include deffort s t o conserv e fue l an dprogram s tha

t wil l result in energ y deman dreduction s a t major industria l plants
. Th e commenter s alleg e that , i n many cases , th e project s woul dultimatel y reduc e actua l emissions , bu t

nonetheles s trigger

NS Runde r

th e actual-to-potentia l test . Fo r instance , NS Rwa s cite da s aprincipal reaso n for no t undertakin g energ y efficienc y project s fo

r th e installatio n o f

heat exchanger s an doverfir

e ai r b y variou s manufacturin g sector s includin g th e electronic s an dapplianc e industries , plastics , an dpape r industries
. Heat

exchanger s recove r heat fromboile r

flue ga s stream s t o heat

wate r use di n th e system' s deaerato r units
. B y preheatin g th e wate r

use di n th e deaerato r

units , th e heat

exchanger

reduce s th e stea

mneede dt o ru

n th e deaerators
. Thi s increase s th e overal l efficiency o f th e boiler hous e an dreduce s fue

l usage . I t als o reduce s annua

l boile r emissions
. A t

aplastic s plant , acommenter pointe dou t

tha t installatio n o f

ahea t exchange r woul db e expecte dt o reduc e natural ga s consumptio n b y 7. 5 percent , NO x emission s b y 7. 5 percent , S0 2 emission s b y 5. 8 percen t an dcarbo n monoxid e (CO ) emission s b y 7. 6 percent , particulat e matte r

(PM ) emission s b y 9 percent , an dVO C emission s b y 9. 3 percent . Th e projec t achieve s thes e benefit s throug h pollutio n preventio n rather tha n add-o n controls. 8 1 I n thi s case , th e industr y applicant

sought exclusio n fromNS Rapplicabilit y under th e pollutio n contro l projec t exclusion
. However , thi s projec t

di dno t qualif y a s apollutio n contro l projec t becaus e it s primar

y purpos e wa s no t pollutio n contro l o r

prevention
. Moreover , becaus e th e boiler s requiredback-u p firing wit h oi l durin g th e winte r t o ensur e operation , th e "actual t o potential " emissio n test woul dhav e cause dth e projec t t o trigger NS RT o avoi dth e installatio n o f ne w control s tha

t woul db e mandate da s th e resul t o f NS R apphcabiHty , th e sourc e state s tha t i t i s considerin g burnin g more fue l oi l over th e nex t tw o year s t o increas e bas e leve l o f

emission s (actua

l emissions)
. Another exampl e from aboiler

a t apul p an dpape r

mil l illustrate s asimila

r problem
. Accordin g t o th e comment , th e mill' s industrial boiler currentl y experience s extensive , interna l erosio n a s aresul t

o f th e carryover

o f solid s suc h a s san dan dwir e fromth e burnin g o f tire-derived fuel , an dburne dbar k particles , whic h hav e le dt o decrease dboiler efficiency
. A s aresult, th e mil l propose dto instal l ane w overfir e ai r syste mto allo w fo

r more complete combustio n o f th e bar k fuel
. B y gettin g more heatin g valu e fromth e sam e amoun t o f bar k burned , les s natural ga s woul db e require dto provid e

8 0 NEDA/CAR P Comment s [U-D-272 ] Attachmen t A , Exampl e #14
. 8 1 NEDA/CAR P Comment s [U-D-272 ] Attachmen t A , Exampl e #15
.

2 4P.2 8

supplementa

l hea t a t an annua l natura l ga s saving s o f

about $ 1 millio n (i n July , 200 1 dollars)
. Accordin g to th e comment , futur e actual emission s o f

NOx , C O an dVOC s woul ddecreas e after completio n o f

thi s project
. However , becaus e th e boile r i s currentl y operatin g belo w it s rate dcapacity , th e potential emission s afte r completio n o f

th e projec t

woul dincreas e ove r

pas t actual emissions , triggerin g NSR
. Th e commenter estimate s tha

t th e cos t o f NS Rcontrol s woul db e $1 7 million. 8 2 A t the tim e thi s projec t

wa s unde r

consideration , th e relevant compan y estimate dtha

t th e annual saving s i

n natura l ga s usag e equate dto roughl y 20 0 millio n cubi c fee t o f natura l gas . Thi s amount

o f ga s ha s a heatin g valu e o f

approximately 0. 2 trillio n Btu
. Th e Departmen t

o f Energ y ha s estimate dtha

t overfir e system s coul db e installe do n 2 0 percent o f th e 20 0 coal firedboiler s i n th e industry , resulting i n 680,00 0 MW-hr i n energ y saving s annually
. Additiona l energ y saving s reportedl y are possibl e i f overfir e ai r provide s simila

r benefit s in wood-fire d systems . Potential reduction s i n NO x , S0 2 , CO , PM , VOC s an dothe r pollutant s suc h a s mercury woul daccompany suc h energ y savings
. Commenter s als o expresse danee dfo r operational flexibility , an dasserte dtha t NS Rdelay s ca

n limi t suc h flexibility, wit

h th e result

tha t i f change s are projecte dto trigger NS Reve n change s tha

t improv e energ y efficiency , the y are n o longe r economicall y viable
. Becaus e som e industrie s mus t mak e rapidchange s i n thei r

produc t line s i t i s ver y difficul t fo r the mt o manag e NS Rcompliance
. On e suc h exampl e wa s provide db y th e flexible packagin g industry
. I n tha t case , th e industr

y ha s bee n movin g steadil y towar dth e replacemen t o f solvent-base dink s an dcoating s with water-base dink s an dcoating s i n th e productio n o f

packagin g fo

r foods , drugs , cosmetics , an dothe r househol dgoods
. However , certai n produc t

order s reportedl y require , from time-to-time, solvent-base dink s o r coatings , an dthes e operation s ar e require dt o operate larg e therma l oxidizer s b y thei r

permits
. I n additio n man y o f th e lo w VO C coating s contai n material s tha t can poiso n athermal oxidizer' s catalyst
. Therefore , th e plan t aske ditsperrmttin g agenc y t o chang e it s permi t t o ru n th e oxidizer

onl y whe n i t

run s VOC-base d coatings
. I n thi s instance , th e operato r calculate dtha

t th e chang e coul dsav e approximatel y 15,00 0 cubi c fee t o f ga s an d65 0 kW h o f

electricit y eac h day
. However , th e commente r fel t tha t th e chang e woul d probabl y b e achang e i n th e plant' s metho do f operation , triggerin g NS Reve n thoug h actua l emission s wer e expecte dt o b e reduce db y th e change
. Becaus e o f th e nature o f

it s operations , involvin g produc t batche s sometime s constitutin g onl y hour s o f aday' s run , th e company di dno t feel i t coul daccep t

limit s o n it s hour s o f

operation
. Therefore , th e project , whic h accordin g t o th e commente r wa s conceive da s away t o creat e larg e energ y savings , di dno t g o forward. 8 4 A numbe r o f commenter s claime dt o hav e abandone denerg y conservatio n project s becaus e the y determine dtha

t NS Rwoul dappl y an dmak e th e projec t cost-prohibitive
. Fo r

instance , at

on e commenter' s automobil e assembl y plant , th e company wante dt o eliminat e on e shif t o f atwo-shif

t operatio n du e t o downwar dmarke t fluctuations. Thi s woul dhav e resultedi n areductio n o f roughl y 30 % (0. 4 billio n cubi c feet ) o f annua l natura l ga s usag e i n th e plant' s boilers , ovens , therma l oxidizer s an dother fue l combustio n equipmen t

a t acos t saving s o f

greater than $ 2 millio n dollar s annually
. I n

8 2 AFP A Comment s [U-E-15] , Ta b 3 , Cas e i n Poin t

#1
. 8 3 FP A Comment s [II-D-271 ] a t 6-7
. 8 4 Id.



### 2 5P.2 9

addition , electrical powe r

consumptio n woul dhav e bee n reduce db y roughl y 10% , a t acos t saving s o f greater than $700,00 0 annually
. I n orde r t o accommodate thi s change , however , th e facilit y neede dto instal l certai n piece s o f

equipment , consistin g mostl y o f assembl y motor s t o increas e th e productio n capabilit y o f asingl e shif

t b y tw o automobile s pe r

hour
. Accordin g t o th e comment , becaus e o f th e actual-to-potential test, an dth e source' s reluctanc e t o take aca p limitin g i t

t o one-shif

t operation , th e projec t woul dhav e triggere dNS Ran dth e projec t woul dn o longer

hav e bee n economicall y viable. 8 5 Overall , th e comment s received fromindustrie s other tha n utilitie s an drefineries als o provid e additiona l evidenc e suggestin g tha

t th e current

NS Rprogra

mi s havin g a

n advers e impac t

o n energ y efficiency b y discouragin g project s tha t ma y improv e energ y efficiency , or may increas e capacit

y an d reliabilit y withou t actuall y increasin g pollutant emissions
. I n som

e case s i t may eve n b e discouragin g project s tha

t decreas e emissions , becaus e o f th e "actual-to-potential " tes t use dfor thes e industries
. V . Impac to n Environmenta l Protectio n Overall , EP A believe s tha

t preventin g emission s o f

pollutant s covere db y NS Rdoe s result i n significan t environmenta

l an dpubli c healt

h benefits
. Attemptin g to specificall y quantif y th e NS R program' s contributio n t o thes e benefit s i s ver y difficul t becaus e o f

th e variet y o f Clea n Ai r Ac t program s that

addres s thes e pollutant s an dbecaus e there i s n o trackin g b y an y governmen t agenc y o f th e reductions i n emission s tha t source s make du e t o th e NS Rprogram . Moreover , EP A recognize s tha t measurin g risk

reductio n benefit s associate dwit h an y give n reductio n i n emission s require s comple x risk assessment s tha

t would , i n turn , requir

e mor e specifi c informatio n tha n ha s bee n gathere din th e context o f thi s review. W e not e tha

t NS Ri s implemente di n th e context o f severa l other significan t Clea n Ai r Ac t programs . Availabl e informatio n indicate s tha t thes e other

program s result

in substantia

l emission s reductions
. Fo r

example , th e Titl e I V Aci dRai n Progra mha s reduce dS0 2 emission s fromth e electri c utilit y industr y b y mor e tha

n 7 millio n ton s per

year . Th e Tie

r 2 moto r vehicl e emission s standard s an d gasolin e sulfu

r contro l requirement s wil l ultimately achiev e NO x reduction s o f 2. 8 millio n ton s pe r

year . Standard s fo

r highway heavy-dut

y vehicle s an dengine s wil l reduce NO x emission s b y 2. 6 millio n ton s pe r year . Standard s for

non-roa ddiese l engine s are anticipate dt o reduc e NO x emission s b y abou t 1. 5 millio n tons pe r

year . Th e NO x "SI P Call " wil l reduc e NO x emission s b y over 1 millio n ton s pe r

year . Altogether , thes e an dothe r simila r program s achiev e emission s reductions tha t fa r excee dthos e attributabl e t o th e NS Rprogram . Moreover , mos t o f thes e other

program s ar e muc h mor e efficient , streamlined , an dsimpl e than NS Rbecaus e the y d o no t entai l th e sam e resource-intensive , case-by

cas e revie w tha

t i s require dunde r

NSR
. It woul db e ver

y difficul t t o estimat

e o r quantif y th e benefit s o f

th e NS Rprogram . However , EP A believe s tha

t th e inabilit

y t o mak e exac t

estimate s doe s no t

mean tha t thes e benefit s are insignifican

t o r nonexistent
. Notably , industr y concern s abou t

NS Rfocuse dalmos t

exclusivel y o n problem s associate dwit

h applyin g th e progra

mto existin g sources . Thes e comment s illustrate da potential dichotomy i n tha t th e benefit s o f

th e NS Rprogramar e largel y attributabl e t o ne w source s whil e th e existin g source s reportedly are more burdene db y th e program .

8 5 NEDA/CAR P Comment s [U-D-272 ] Attachmen t A , Exampl e #12
.



### 2 6P.3 0

Electri c utilitie s an dpetroleu mrefinerie s are significan t source s o f

air emissions
. Th e majo

r regulatedai r

pollutant s emitte dfrompowe r plant s ar e S0 2 , NO x , PM , an dmercury . Refinerie s primarily emi t

S0 2 an dNO x , a s wel l a s VOCs
. Base do n 200 0 emissions , th e electri c utilit y industr y i s th e singl e larges t

sourc e o f S0 2 emission s an dth e secon dlarges t sourc e o f NO x emission s (o n roa

d mobil e source s are th e largest)
. I n 2000 , th e electri c utilit y industr y emitte d11. 2 millio n ton s o f S0 2 , 5. 1 millio n ton s o f

NOx , an d 302,00 0 ton s o f PM
. I n 1999 , refinerie s emitte d479,00 0 ton s o f S0 2 , 299,00 0 ton s o f

NO x an d161,20 0 o f

volatil e organi c compounds
. Emission s o f thes e pollutant s from al l sector s i n 199 9 totaled18. 9 millio n tons S0 2 ,25. 4 millio n ton s NO x , 18. 1 millio n ton s VOC , an d 23. 7 millio n ton s PM
. Ther e i s asignifican

t bod y o f scientifi c literatur

e linkin g air

pollutio n t o severa

l healt h effects
. Thes e include : prematur e mortality , chroni c asthm aan dincrease dasthm aattacks , chroni c an dacute bronchitis , othe r

chroni c respirator

y disease s an ddamage , increase dairwa y responsivenes s t o stimuli , inflammatio n i n th e lung , respiratory cel l damage , premature agin g o f th e lungs , increase dsusceptibilit y t o respirator

y infection , decrease dlun g function , developmenta l effects , infan

t mortality , lo w birt

h weight , cancer , decrease dtime to onse t o f angina , othe r

cardiovascula

r effects
. Additional effect s includ e decrease dworke r

productivity ; increase demergenc y roo mvisit s fo r respiratory an d cardiovascula

r effects , an dmor e hospital admission s fo r respirator y an dcardia c diseases. 8 6 Potential effect s beyon dhuman healt h effect s includ e direc t

damag e t o plant s an dforests , decrease dyield s fo

r crop s an dfores t

products , damag e to ecosyste mfunctions , decrease dvisibility , conosio n an dsoilin g o f

building s an dmonuments , eutrophicatio n (i.e. , explosiv e algae growt h leadin g t o adepletio n o f

oxyge n i n th e water) , acidi c depositio n an dacidificatio n o f wate r bodies , an dimpact s o n recreational deman dfromdamage daesthetic s an ddecrease dvisibility
. Th e EP A Backgroun dPaper provide dsome preliminar y estimate s o f

th e amoun t

o f emission s prevente db y th e NS Rprogramfo r al l industrie s in "clean " area s (e.g. , emission s tha t woul dhav e otherwis e occurre dfromconstruction/modification)
. Th e NS Rprogrami n suc h clea n area s i s know n a s th e PS D program . Th e Pape r state dtha t fo r th e perio d199 7 throug h 1999 , ne w o r modifie dsourc e complianc e wit

h PS D fo r al l industrie s prevente dapproximately 1. 4 millio n tons o f

air pollutio n from bein g emitte dpe r

year . Th e vas t

majorit y o f thes e reduction s are attributabl e t o th e appUcatio n o f NS R

86I n response to publi c request s fo r mor e suc h information , th e Agenc y ha s adde dt o th e docke t som e genera

l benefit s informatio n about reductions i n emission s o f pollutant s likel y t o b e impacte db y th e NS Rregulations
. (A ) U.S
. Environmenta l Protectio n Agency , Offic e o f Ai r Qualit y Plannin g an d Standards
. Regulator

y Impac t Analysi s fo

r th e NO x SIP call , FIP , an dSectio n 12 6 Petitions : Volum e 1 , Cos t an dEconomi c Impacts
. September , 1998
. Locate do n th e Interne t at www.epa.gov/ttn/oarog/otag/sipriav 1 .zip : (B ) U.S
. Environmenta l Protectio n Agency , Offic e o f Air Qualit y Plannin g an dStandards
. Regulator y Impac t Analysi s fo

r th e NO x SI P call , FIP , an dSectio n 12 6 Petitions : Volum e 2 , Healt h an dWelfare Benefits
. December , 1998
. Locate do n th e Interne t a t www.epa.gov/ttn/oarpg/otag/sipriav2.zip : (C ) U.S
. Environmenta l Protectio n Agency , Offic e o f Air Qualit y Plannin g an dStandards
. Regulator y Impac t Analysi s fo

r th e Fina l Regiona l Haz e Rule
. April , 1999
. Locate do n th e Interne t at www.epa.gov/ttn/oarpg/tl/reports/riaes.pdf : an d(D ) U.S
. Environmenta

l Protectio n Agency , Offic e o f Ai r Qualit y Plannin g an dStandards
. Regulator y Impac t Analysi s fo

r th e Final Sectio n 12 6 Petitio n Rule
. December , 1999
. Locate do n th e Interne t a t www.epa.gov/ttn/oarpg/tl/reports/126fri0.pdf
.

2 7P.3 1

t o ne w ga s firedelectri c generatin g units
. Th e Backgroun dPaper als o reporte dtha

t thi s numbe r underestimate s total emissio n reductions becaus e i t doe s no t includ e estimate s o f

emission s prevente di

n nonattainment

area s throug h nonattainment NS Rpermittin g requirement s durin g tha t sam e time period
. Several commenter s reiterate dthi s positio n an dnote dtha t a s ageneral rul e thes e reduction s woul db e greate r

becaus e th e contro l requirement s are more stringent an dth e offse

t requirement s essentiall y result

i n ane t emission s decrease
. Althoug h EPA agree s tha t there are additional emissio n reduction s tha

t resul t fromcomplianc e wit

h th e offset s requirements o f nonattainment

NS Rprogram , a

t thi s tim e th e Agenc y doe s no t

hav e informatio n quantifying thos e emission s reductions. Finally , other commenter s note dthat

th e EP A Backgroun dPaper faile dt o addres s th e emissio n reduction s o f S0 2 an dNO x tha

t occu r a s aresult

o f source s reducin g thei r

emission s s o a s t o avoi dth e applicabilit y o f NS Raltogether
. O n th e othe r hand , sinc e S0 2 emission s fromth e utilit y industr y ar e cappe db y th e Titl e I V aci drai n program , NS Rdoe s no t produc e overal l ne t

reductio n i n S0 2 emission s fro mth e industry
. Similarly , i n nonattainment areas , Titl e I effectivel

y cap s emission s o f

th e nonattainment pollutant
. T o adegree , th e sam e i s tru e fo r seasonall y or

geographicall y limite dca

p an dtrad e programs , suc h a s th e "NO x SI P call. " Furthermore , a s note dbelow , industr y commenter s not e tha

t thes e estimate s o f

emissio n reduction s attribute dt o NS Rd o no t accoun t fo r foregon e emission s reduction s that

the y alleg e woul dhav e occune di n th e absenc e o f NSR' s disincentive s t o procee dwit h project s tha

t increas e efficiency. 8 7 A larg e numbe r

o f commenters , primaril y citizen s an denvironmenta l groups , expresse dstron g suppor t for th e benefit s tha

t deriv e fromreducin g emission s fromthes e industrial sectors , either b y installin g pollutio n reductio n control s o n ne w source s a s the y ar e built , o r o n existin g source s a s they ar e modified
. Man y group s argue dtha t th e publi c healt

h threa t fromth e air

emission s o f

powe r plant s an d refineries i s urgen t

an dfurthe

r reductions ar

e needed
. Notin g environmenta l justic e concerns , on e commenter

state dtha t 8 0 percen t

o f th e refinerie s i n th e Texa s oi l refinery communitie s ar e either populate db y minorit

y citizen s o r

contai n significan

t minorit y representation an dreporte dtha t approximately thre e millio n minorit y citizen s liv e i n thes e Texa s communities
. Th e EP A Backgroun dPape r als o presente dpreviou s estimate s o f th e healt h benefit s pe r

to n o f pollutan t reduce dfor

S0 2 an dNO x emission s base do n astudy o f emission s a

t utilities
. Th e wor

k cite d i n th e EP A Backgroun dPaper i s base do n th e benefit s o f reducin g premature mortalit y associate dwit

h long-ter mexposur e t o PM
. However , man y citize n an denvironmental grou p commenter s requeste da more detaile ddiscussio n o f additiona l healt h benefit s lik

e th e avoidanc e o f

reduce dlun g function , asthm aattacks , los t

wor k day s an dprematur e death , whic h hav e bee n linke dto thes e ai r pollutants
. Fo r example , on e commente r representin g 4 3 environmenta l group s cite dastudy b y Ab t Associate s presentin g thei r

estimat e tha

t national powe r

plan t emission s accounte dfor

mor e than 6,00 0 asthm a attacks , 30,00 0 prematur e deaths , an d5 millio n los t wor k day s pe r year , notin g tha

t elderl y peopl e wit

h respirator y diseas e an dchildre n ar e a t th e greates t

risk. Commenter s requeste dthat EP A presen t

informatio n o n th e benefit s du e t o avoide demission s o f other pollutants , includin g pollutant s tha t ar e reduced collaterally whe n criteri apollutant s are

8 7 Firs t Energ y Corporatio n testimon y o n NS R7/10/2001 , state dtha t curren t interpretation s o f NS Rwoul dhav e prevente dproject s no w resultin g i n areductio n o f 40,00 0 TP Y o f

S0 2 an dNO x emissions
.

2 8P.3 2

controlle d(e.g. , mercury)
. On e commente r note s tha t EP A document s identif

y coal-fire dpowe r

plant s a s th e larges t

industria l emitter s o f

mercury , another

pollutant wit h well-documente dhealt

h an d environmenta

l effects
. Thus , withou t

addressin g th e benefit s tha t deriv e from reductions o f thes e pollutant s a s well , severa

l commenter s argu e tha

t th e EP A Backgroun dPape r significantly underestimate s publi c healt h an denvironmenta

l benefit s o f

NSR
. Man y commenter s als o mentione dnumerou s other benefit s tha

t resul t fromlowe r

emission s frompowe r

plant s an drefineries. The y presente dinformatio n abou t impact s primaril y o f

powe r plant emission s o n th e environment , particularl y i n National Parks
. Fo r example , severa

l group s provide d informatio n regarding th e advers e impac t o f power plant emission s i n particula

r o n visibilit

y i n Nationa l Parks
. Som e commenter s als o not e tha t groun dleve l ozon e (smog ) no t onl y impact s vegetatio n (more than 5 0 specie s o f

plant s an dtree s allegedl y harme db y ozone) , bu t als o th e healt

h o f visitor s t o National Parks
. Additionally , commenter s not e th e impac t o f S0 2 an dNO x emission s o n th e formation o f aci drai n an dit s impac t

o n ecosystem s (e.g. , redspruc e decline , fish killed)
. Finally , man y commenter s wer e als o concerne dabou t C0 2 emission s an dtheir

potentia l t o affect climate , an d believe dtha

t NS Rplay s arol e i n preventin g thes e emission s a s well
. Commenter s urge dEP A to discus s th e benefit s generall y o f reduce demission s i n al l thes e area s more explicitly , an dquantif y them a s the y relat e t o th e NS Rprogram . I n addition , severa

l commenter s note dtha

t i n nonattainment

areas , asource' s failur

e to reduc e emission s throug h NS Rplace s th e burde n o n othe r source s t o reduc e emissions
. I n othe r words , becaus e th e State ha s t o reduc e emission s somewhere i n order t o attai n ai r

quality standards , i t

wil l targe t othe r source s (e.g. , constructio n activities) , o r eve n consumer s i n orde r

to creat e thos e reductions. Eve n i n attainment areas , complianc e wit

h PS D requirement s ca

n hel p maintai n th e area' s abilit y to continu e to grow . Some state an dlocal government s supporte dth e rol e NS Rplay s i n preventin g emission s from ne w an dmodifie dsources. 8 8 The y believe , base do n thei r experience , tha

t withou t NS Remission s fromne w an dmodifie dsource s woul dseverely interfer e wit h their efforts to attai n an dmaintai n air qualit y standards
. Whil e there are severa l important

program s tha

t reduc e emission s fromexistin g sources , the y fel

t NS Rwa s acritica

l complementar

y progra mbecaus e i t

rninimize d emission s fromne w sources . Som e commenter s als o expresse dsuppor t fo r th e technology-forcin g aspec t o f th e NS R program , arguin g tha

t i t i s th e onl y CA A progra

mtha t automatically mirror s improvement s i n contro l technolog y ove r

time, an dtherefor

e encourage s continue ddevelopment o f cleaner technology.' Commenter s urge dEP A t o estimate th e benefit s o f thi s effect a s well
. industry commenter s fel

t tha t th e curren t

NS Rprogramactuall y act s a s abarrier t o improve d environmenta

l protectio n i n certai n instances
. Althoug h NS Ri s onl y triggere dwhe n emission s increase , thes e commenter s argue dtha t th e way EP A calculate s a

n increas e i n emission s can actuall y hav e th e effect o f subjectin g aprojec t

t o NS Rtha

t woul ddecreas e actual emissions
. Becaus e o f th e delay an d cost s associate dwith applyin g NS Rt o aproject , NS Rrender s thes e environmentall y beneficia l project s uneconomical , an dthe y may b e rejected
. Similarly , agai n becaus e o f th e way that

NS R

1 See, e.g. STAPPA/ALAPC O comments .



### 2 9P.3 3

calculate s emission s increases , severa l industr y commenter s note da

n incentiv e t o kee p actual emission s hig h becaus e th e closer

actua l emission s are t o asource' s maximu mcapacit y t o emit , th e les s likel y i

t i s t o trigge r NSR
. VI . Conclusio n Base dupo n th e informatio n examine ddurin g thi s revie w o f th e NS Rprogram , there appear s to b e littl e incrementa

l impac t o f th e progra

mo n th e constructio n o f

ne w electricit

y generatio n an drefiner

y facilitie s bu t

amore dramati c impac t

o n investmen

t i n utilit y an drefinery generatin g capacit y andenerg y efficiency at

existin g utilit

y an drefiner

y plants
. Lookin g a

t industr y a s awhole , there als o i s clea r evidenc e o f

NSR' s benefit s fo

r environmenta

l protection
. Wit h respect t o environmental protection , th e EPA find s tha t NS Ri s no t

designe dt o pla

y th e primar y rol e i n reducin g emission s fromexistin g sources . I n fact , fo r pollutant s covere db y anationa l ca p an dtrad e program(suc h a s th e Titl e I V aci drai n program) , th e NS Rprogramdoe s no t necessaril y produc e an y overal l emission s reductions
. Furthermore , EP A believe s tha t i n particula

r industr y sector s

- especiall y th e utilit

y secto r - th e benefit s currentl y attribute dt o NS Rcoul db e achieve dmuc h more efficientl y an dat muc h lowe r

cos t throug h th e implementatio n o f amulti-pollutant

nationa l ca p an dtrad e program . Nevertheless , th e NS Rprogramplay s arol e i n attainment an dmaintenanc e o f

th e NAAQS , particularl y wit

h regardt o ne w sources . I t help s ensure tha

t a s industr y continue s t o gro w an dexpand , ai r qualit y i s manage dappropriatel y (i.e. , b y helpin g assure tha t clea n area s d o no t

worse n an dtha

t dirt y area s ge t

cleaner)
. I t

als o help s t o protec t

sensitiv e area s like national park s an dwildernes s areas , an dpromote s ne w an dmor e effectiv e pollutio n controls
. A s describe di n thi s report, an dthoroughl y detaile di n th e comment s an dothe r references provided , NS Rals o provide s healt h an decological benefits
. Wit h respec t t o ne w facilities , th e NS Rprogram' s principa l impact s are i n th e for

mo f delay s an dadditional costs , bu t

ther e i s tittle evidenc e tha t thes e delay s an dcost s are preventin g ne w sourc e constructio n i n th e utilit

y industry
. Indee dther

e i s substantia

l evidenc e tha

t significan t ne w generatin g capacit y i s bein g brought

onlin e withi n norma

l time frame s fo

r plannin g suc h projects
. Wit h respec t t o th e maintenanc e an doperatio n o f existin g utilit

y generatio n capacity , ther e i s mor e evidenc e o f

advers e impact s fromNSR
. Credibl e example s wer e presente do f case s i n whic h uncertaint y abou t th e exemptio n fo

r routin e activitie s ha s resulted i n dela y or cancellatio n o f

project s whic h source s sa

y ar e don e for

th e purpose s o f

maintainin g an dimprovin g th e reliability, efficiency an d

3 0P.3 4

safet y o f existin g energ y capacity. 8 9 Suc h discouragement result s i n los t

capacity , a s wel l a s los t opportunitie s t o improv e energ y efficienc y an dreduc e air pollution
. There appeare dto b e Util

e impac t o f NS Ro n plannin g fo

r ne w greenfiel drefineries, becaus e ne w refinerie s ar e no t

bein g buil t

fo r economi c an denvironmental reason s unrelate dt o NSR
. Fo r existin g refineries , th e point s raise dabov e abou t th e routin e maintenanc e exclusio n appl y equall y wel l to refinerie s a s the y d o fo

r utiUtie s - th e EPA observe dtha t commenter s expresse duncertaint y abou t th e appUcation o f

th e exclusio n to any particula r project
. Existin g refineries , however , fac e a n additiona

l issue : th e actual-to-potential emission s test. Th e EP A foundcredibl e example s o f project s a t existin g unit s tha t woul dhav e provide dneede dcapacit y or efficiency improvement s an dwoul dlikel y no t hav e increase d- an di n som e case s ma y hav e decrease d- actual emissions
. Du e t o th e actual-to-potential test, suc h projects , i f

the y occu r

at unit s operatin g belo w capacity , coul dtrigger NS Runles s th e compan y committe dt o continu e operatin g th e unit s belo w capacit y o r instaUe dpoftutio n controls
. Th e EP A believe s tha

t thi s potentiall y results i n los t refining capacity , o r

foregon e opportunitie s to increas e capacit y withou t increasin g emissions , whic h coul dcontribut e t o pric e volatilit

y an dshortage s i

n fue l supply
. Wit

h respec t t o energ y efficiency , th e EP A recognize s tha t th e NS RprogramappUe s t o certai n project s tha

t hav e th e effect

o f increasin g efficienc y (e.g. , project s tha t increas e electricit

y outpu t fo r a give n fue l input)
. Th e ordinar

y cost s an dpenrrittin g times associate dwit h NS Rmay , i n th e EPA' s judgment , resul t

i n th e dela

y o r cancellatio n o f

certai n project s tha

t coul dimprov e energ y efficiency
. EP A encourage s energ y efficienc y improvement s whereve r feasible
. However , th e EP A note s tha t some change s tha

t improv e energ y efficiency als o can result i n significan

t emission s increase s tha

t hav e advers e ai r

quaUt y impact s tha

t mus t b e reviewed , eve n thoug h th e propose dprojec t coul dreduc e regiona l o r nationa l emissions
. Thus , o f

th e univers e o f

possibl e efficiency improvements , th e appropriate focu s o f

th e NS Rprogrami s o n thos e tha t are non-routin e an dthat

significantl y increas e emissions
. A t

non-utilit y sourc e categories , th e "actual t o potential " emission s tes t can discourag e efficiency improvemen t

project s eve n where there woul dno t b e a n increas e i n actua

l emissions
. It

i s clea r tha t som e o f thes e efficienc y improvement s can stil l g o forwar d(b y goin g throug h NS Ror takin g step s t o avoi dNSR) ; however , i t als o i s clea

r tha t other s ar e i n fact

cancele ddu e t o th e cost s an d delay s associate dwith NSR
. A s note dat

th e beginnin g o f

thi s report , representative s o f industry , state an dlocal agencies , an denvironmental group s hav e worke dwit h EP A fo r over adecad e o n developin g improvement s to

8 9 Ver y fe w commenter s provide dsufficientl y detaile dexample s fo

r EP A t o mak e definitiv e judgement s a s t o whethe r

th e give n project s woul dhav e bee n considere dnonroutin e o r ultimatel y triggere dNSR
. A s aresult , EP A canno t quantif y th e numbe r

o f project s affecte do r

th e correspondin g impact s o n capacity , reUability , efficiency , safety , o r other relevan t factors
. Base do n th e informatio n presented , i t

appear s unlikel y tha

t man y o f th e example s discusse dwoul dtrigge r NS Reither

becaus e the y woul dqualif

y fo r th e routin e exclusio n o r

the y woul dno t

increas e emission s significantly
. Nevertheless , th e anecdotal informatio n wa s sufficien t t o suppor t our conclusion s with regar dt o th e overa U impac t o f th e NS Rprogram . 9 0 Th e EP A note s tha

t it s conclusion s fo

r refiner s ar

e equaU y vaU dfo r th e numerou s non-utility/non

refiner y source s tha

t commente ddurin g th e review
.



### 3 1P.3 5

th e NS Rprogram . Ou r

findings i n thi s report

ratif y alongstandin g an dbroadly-hel dbeUe f tha t part s o f th e NS Rprogra mcan an dshoul db e improved
. Fo r example , w e conclud e abov e tha t change s t o NS Rtha t ad dto th e clarit

y an dcertaint

y o f th e scop e o f

th e routin e maintenanc e exclusio n wil l improv e th e programb y reducin g th e unintende dconsequence s o f discouragin g worthwhil e project s tha t ar e i n fact outsid e th e scop e o f

NS RFo r

thes e reasons, EP A i s recommendin g anumbe r o f change s t o th e NS Rprogramthat

wil l addres s th e concern s raise ddurin g thi s NS Rreview a s we U a s man y other concern s presente dt o EP A abou t NS Rove r

th e pas t decade
.

32