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OAR Box 1778 

Prepped by Ollie Stewart 

Document Number: 

176) ll-F-3 

Docket Number: 

A-90-06 

Printed 10/28/2008 9:51:00 AM Sheet 176 of 276 
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This item was moved to II-I-40. 
COUNCIL OF ECONOMIC ADVISERS 

EXECUTIVE OFFICE OF THE PRESIDENT 

WASHINGTON 

July 23, 1990 

MtMbtnur 1ncv.uu111.11 

Dear Chairman Ford: 

Pursuant to my testimony of May 8, 1990, legislative 

language that addresses the WEPCO issue is enclosed. The 

Administration believes that language along these lines would 

both protect environmental quality and remove the uncertainty 

surrounding the application of the modification rule to electric 

utility plants as the electric utility industry makes the 

physical and operational changes necessary to meet new pollution 

reduction reguirements under the Clean Air Act Amendments now 

under conference consideration. 

Answers to the specific questions raised in your letter of 

May 18, 1990 will be forthcoming shortly. Please do not hesitate 

to call on me if I can be of assistance regarding any aspect of 

this issue. 

ard Schmalensee 

Enclosure 

The Honorable Wendell H. Ford 

Chairman, Subcommittee on Energy Research 

and Development 

Committee on Energy and Natural Resources 

Unites State s Senate 

364 Dirksen Building 

Washington D.C. 20510-6150 
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Proposed WEPCO Language 

Sec. XXX APPLICABILITY OF NEW SOURCE REVIEW TO EXISTING ELECTRIC 

UTILITY STEAM GENERATING UNITS. 

(a) Applicability of New Source Performance Standards—No 

physical change, or change in the method of operation, 

at an existing electric utility steam generating unit 

shall be treated as a modification for purposes of 

Section 111, provided such change does not increase the 

maximum hourly emissions of any pollutant regulated 

under the section above the maximum hourly emissions 

achievable at that unit during the 5 years prior to the 

change. 

(b) Applicability of Part C of Title I — 

(1) Pollution Control Projects—For purposes of Part 

C, no physical change, or change in the method of 

operation,, at an existing electric utility steam 

generating unit shall be treated as a modification 

of the source for a specific regulated pollutant, 

provided that the change constitutes a pollution 

control project at that unit and does not increase 

maximum hourly emissions of that pollutant above 

past maximum hourly emissions of that pollutant at 

that unit; or 

(2) Pollution Control Projects with Contemporaneous 

Changes—For purposes of Part C, no physical 

change, or change in the method of operation, at 

an existing electric utility steam generating unit 

shall be treated as a modification of the source 

for a specific regulated pollutant, provided that 

the change is part of a pollution control project 

at that unit and 

(A) is accompanied by contemporaneous physical or 

operational changes to that unit, that do not 

exceed 20 percent of the total cost of the 

proj ect; and 

(B) the change does not increase maximum hourly 

emissions of that pollutant above past 

maximum hourly emissions of that pollutant. 

For a unit subject to section 407, 

immediately following the changes, the unit 

shall be required to meet the nitrogen oxide 

emission limitation specified for that boiler 

type pursuant to section 407. In the event 

that the change precedes the establishment of 

nitrogen oxides emissions limitations for 

that boiler type, pursuant to section 407, 
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the unit shall be required to meet the 

applicable emission limitation upon the date 

required by the regulation; (i) for an 

existing electric utility steam generating 

unit not subject to section 407, immediately 

following the change, the unit shall be 

required to meet the nitrogen oxide limit 

equivalent to the limit achievable using 

"low-NOx burners." 

(3) Except as provided in (b)(2), in the event that 

the maximum hourly emissions of any regulated 

pollutant increase, the source is subject to the 

requirements of subsection (c) for the pollutant. 

(c) Nonpollution Control Projects and Pollution Control 

Projects in Nonattainment Areas—Except for a unit that 

is subject to the provisions of subsection (b), no 

physical change, or change in the method of operation, 

at an existing electric utility steam generating unit 

shall be treated as a modification for purposes of Part 

C or Part D, provided that such change does not result 

in a significant net increase in representative actual 

annual emissions of any regulated pollutant at the 

source in the case of Part C and of any criteria 

pollutant in the case of Part D. 

(d) System-wide Netting— 

(1) The operating company may, for purposes of 

subsection (c) of this section, elect to calculate 

its representative actual annual emissions (A) on 

a statewide basis, where EPA is the permit issuing 

authority in the State and thes tate agrees, or 

(B) on a system basis, where EPA is the permitting 

authority in one or more States in which the 

operating company owns electric generating units, 

provided all affected States agree. 

(2) Any State permitting authority may allow actual 

annual emissions in both representative periods to 

be (A) total operating company emissions within 

the State, (B) with the agreement of the owners of 

all other electric generating units with the 

State, total emissions within the State, or (C) 

with the agreement of any other States in which 

the operating company owns electric generating 

units, total operating company emissions. 

(e) Modeling Requirements—Nothing in this section shall 

authorize an increase in emissions which causes or 

contributes to a violation of a national ambient air 
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quality standard, PSD increment, or visibility 

limitation. Any physical or operational change at a 

source subject to subsection (b) of this section that 

results in an increase in representative actual annual 

emissions of any criteria pollutant over levels used 

for that source in the most recent air quality impact 

analysis in the area conducted for the purposes of 

Title I, if any, which the Administrator determines is 

reliable, may be required to perform an air quality 

impact analysis, whenever the Administrator has reason 

to believe that the increase vill cause or contribute 

to a violation of any ambient standard, PSD increment, 

or visibility limitation. The Administrator shall have 

the authority under this section to gather any 

necessary information, including requiring the source 

to conduct modeling, if necessary. 

(f) Nitrogen Oxide Control Requirements 

(1) Any modification, as defined in section 169(2)C), 

at an existing electric utility steam generating 

unit subject to section 165 shall be deemed to 

satisfy the technology requirements of section 

165(a)4 for nitrogen oxides if it meets the 

following: 

(A) For a unit subject to a requirement 

promulgated pursuant to section 407, 

immediately following the modification, the 

unit shall be required to meet the nitrogen 

oxide emission limitation specified for that 

boiler type pursuant to section 407. In the 

event that the modification precedes the 

establishment of nitrogen oxides emissions 

limitations for that boiler type pursuant to 

section 407, the unit shall be required to 

meet the applicable emission limitation upon 

the date required by the regulation. 

(B) For an existing electric utility steam 

generation unit not subject to section 407, 

immediately following the modification, the 

unit shall be required to meet the nitrogen 

oxide limit equivalent to the limit 

achievable using "low-NOx burners." 

(2) Any State or local permitting authority shall 

retain the right to impose more stringent 

limitations for control of nitrogen oxides. 

(g) Definitions—For purposes of this section, 
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(1) "Pollution Control Project" means any physical 

change, or change in the method of operation, at 

an existing electric utility steam generating unit 

for purposes of reducing emissions from such unit 

in order to comply with Title V. Such changes are 

limited to: 

(A) Installation of conventional or innovative 

pollution control technology, including but 

not limited to conventional and advanced flue 

gas desulfurization, sorbent injection for 

S02 and NOx controls and electrostatic 

precipitators; and 

(B) Physical changes, or changes in the method of 

operation, to accommodate switching to fuel 

which is lower in sulfur content than the 

fuel used prior to the change, including 

natural gas or coal re-burning, co-firing of 

natural gas and other fuels for the purpose 

of controlling S02 or NOx emissions; and 

(C) Clean coal technology demonstration projects 

conducted under Title II, section 101(d) of 

the Further Continuing Appropriations Act of 

1985 (section 5903(d) of title 42 of the 

United States Code), or subsequent 

appropriations, up to a total amount of 

$2,750,000,000 for commercial demonstration 

of clean coal technology, or similar projects 

funded through appropriations for the 

Environmental Protection Agency. 

(2) "Representative Actual Annual Emissions" means: 

(A) for the period prior to a physical change or 

change in the method of operation of a unit, 

the average rate, in tons per year, at which 

the unit actually emitted the pollutant 

during the two-year period which precedes the 

change, provided that the Administrator shall 

allow use of a different consecutive two-year 

period within the 5 years before the change, 

where the Administrator determines that such 

a period is more representative of normal 

source operations; and 

(B) for the two-year period after a physical 

change or change in the method of operation 

of a unit, (or different consecutive two-year 

period within 10 years after that change, 

where the Administrator determines that such 
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period is more representative of normal 

source operations), the projected average 

rate in tons per year at which the source is 

projected to emit a pollutant, and 

considering the effect any physical or 

operational changes have on increasing or 

decreasing the hourly emissions rate and on 

projected capacity utilization. In 

projecting future capacity utilization, the 

Administrator (i) may consider all relevant 

information, including but not limited to, 

historical operational data, the company's 

own representations, filings with State or 

Federal regulatory authorities, and 

compliance plans under the Title V of this 

Act, and (ii) shall exclude that portion of 

the increased rate of utilization, if any, 

due to factors unrelated to the physical or 

operational change, including an increase in 

projected capacity utilization equal to the 

rate of electricity demand growth for the 

utility system as a whole. 

(h) EPA Guidance—Within 24 months of enactment of this 

section, the Administrator shall, after notice and the 

opportunity for public comment, issue guidance for use 

by permitting authorities in determining criteria under 

which various refurbishment projects would be 

considered routine or nonroutine. 

NOTE: References to "section 407" refer to S.1630. Other 

section numbers refer to the current Clean Air Act.