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MEMORANDUM 

DATE: September 9, 1988

 

SUBJECT: Applicability of Prevention of Significant Deterioration 

 (PSD) and New Source Performance Standards (NSPS) 

 Requirements to the Wisconsin Electric Power Company 

 (WEPCO) Port Washington Life Extension Project 

 

FROM: Don R. Clay, Acting Assistant Administrator 

 for Air and Radiation (ANR-443) 

 

TO: David A. Kee, Director 

 Air and Radiation Division, Region V 

 

 

 This is in further response to your March 25, 1988 memorandum 

requesting guidance on PSD applicability regarding the proposed 

renovation of the Port Washington Power Plant by the WEPCO. I 

have also addressed the question whether the renovations proposed 

for this facility would subject the individual units to Subpart Da 

of the NSPS. 

 

 Based on the information presented in your memorandum, 

subsequent written information received from WEPCO, information 

provided by the State of Wisconsin, and other information 

contained in the Environmental Protection Agency's (EPA's) 

files on this matter, I have concluded that, as proposed, this 

renovation project would not come within the PSD and NSPS 

exclusions for routine maintenance, repair, and replacement, nor 

the exclusions for increases in production rate or hours of 

operation. It also appears that the project would increase 

emissions within the meaning of these two programs. Thus, the 

renovation project likely would be subject to PSD review as a 

major modification of an existing stationary source and that the 

renovations proposed for units 1-5 at this facility probably would 

subject the individual units to Subpart Da of the NSPS as a 

modification. However, WEPCO has not yet requested EPA to make an 

applicability determination. In any case, it would not be 

possible to make final applicability determinations at this point, 

for three basic reasons. 

 

 First, EPA must be supplied sufficient data regarding the 

various pollutants emitted by the Port Washington facilities to 

determine, on a pollutant-specific basis, how the proposed 

renovations would affect emissions levels. Second, WEPCO might 

avoid both PSD and NSPS applicability by adding or enhancing 

pollution control equipment, or in the case of PSD, restricting 

 - 2-

operations below maximum potential such that the emissions 

increases necessary to trigger applicability would not occur. The 

WEPCO should discuss its plans in this regard with EPA. Third, 

regarding NSPS applicability to unit 1, additional information is 

necessary to determine whether a physical or operational change 

would occur. 

 

 Thus, although this memorandum will serve to answer many of 

the questions necessary to reaching final determinations, you 
should advise WEPCO that ultimately applicability depends upon 

changes in emissions after the renovations and whether the company 

decides to take the steps which would enable it to lawfully avoid 

coverage. Also, NSPS coverage of unit 1 can only be determined 

after an evaluation of the additional information regarding the 

work to be performed. In addition, as to NSPS, WEPCO should be 

advised to submit a formal request pursuant to 40 CFR 60.5 if it 

desires a final applicability determination. 

 

 As the need for further factual development here suggests, 

determinations of PSD and NSPS applicability are fact-specific, 

and must be made on a case-by-case basis. This memorandum 

provides a framework for analyzing the proposed changes at Port 

Washington and gives EPA's views on relevant issues of legal 

interpretation. It should also be useful in assessing other 

so-called "life extension" projects in the future. However, any 

such project would need to be reviewed in light of all the facts 

and circumstances particular to it. Thus, a final decision 

regarding PSD and NSPS applicability here would not necessarily be 

determinative of coverage as to other life extension projects. 

 

 If you have any further questions regarding the discussion or 

conclusions in this memorandum, please have your staff contact 

David Solomon of the New Source Review Section at FTS 629-5375. 

 

I. Background 

 

 As mentioned in your March 25 request, the five coal-fired 

units at Port Washington began operation in 1935, 1943, 1948, 

1949, and 1950, respectively. Each unit was initially rated at 80 

megawatts electrical output capacity. In recent years, however, 

the performance of the units began to deteriorate due to agerelated degradation of the physical plant. In particular, 

inspections performed by a WEPCO consultant in 1984 revealed 

extensive cracks originating from the internal surfaces of the 

rear steam drums and boiler bank boreholes in units 2, 3, 4, and 

5, creating significant safety concerns. Because of these safety 

concerns and other age-related problems, in 1985 the operating 

levels of units 2, 3, and 4 were reduced, and unit 5 was removed 

from service. As a result of the plant's deteriorating condition, 

the maximum rated physical capacities of units 1, 2, 3, and 4 at 

this time are 45, 65, 75, and 55 megawatts, respectively. 

 - 3 -

 The life extension project includes extensive capital 

improvements to the common facilities and each of the individual 

units, including replacement of the rear steam drum in units 2, 3, 

4, and 5. The renovation work will restore the physical and 

operational capability of each unit to its original 80 megawatt 

nameplate capacity, and extend the useful life of the units well 

beyond the planned retirement dates that would otherwise apply. 

Upon completion of the project, WEPCO intends to substantially 

increase the actual operations at the Port Washington plant. 

 

II. PSD Applicability 

 

 The life extension project at Port Washington is subject to 

preconstruction review and permitting under the Act's PSD 

provisions if it is a "major modification" within the meaning of 

the Act and EPA's regulations. The PSD regulations at 40 CFR 

52.21 govern this determination because Wisconsin has been 

delegated PSD permitting authority under the provisions of 

52.21(u). The definition of "major modification" in 

52.21(b)(2)(i) requires an analysis of several factors. These 

factors may be grouped under two general questions. Will the work 

entail a "physical change in or change in the method of operation 

of a major stationary source"? If so, will the change "result in 

a significant net emissions increase of any pollutant subject to 

regulation under the Act" [see 52.21(b)(2)(i)]? The Port 

Washington facility is an existing major stationary source 
because it emits well in excess of the PSD threshold amount for 

several pollutants. 

 

 A. Physical Change or Change in the Method of Operation 

 This requirement of a major modification is satisfied if 

either a physical or operational change would occur. 

 1. Physical Change 

 The renovation work called for under the proposed life 

extension project at Port Washington would constitute a "physical 

change" at a major stationary source. The clear intent of the PSD 

regulations is to construe the term "physical change" very 

broadly, to cover virtually any significant alteration to an 

existing plant. This wide reach is demonstrated by the very 

narrow exclusion provided in the regulations: other than certain 

uses of alternate fuels not relevant here, only "routine 

maintenance, repair and replacement" is excluded from the 

definition of physical change [see 52.21(b)(2)(iii)(a)]. 

 

 In determining whether proposed work at an existing 

facilityis "routine," EPA makes a case-by-case determination by 

weighing the nature, extent, purpose, frequency, and cost of the 

work, as well as other relevant factors, to arrive at a 

common-sense finding. In this case, all of these factors suggest 

that the work required under WEPCO's life extension project appears 

not to be "routine." The available information indicates that the work 

proposed at Port Washington is far from being a regular, 

customary, or standard undertaking for the purpose 

 - 4 -

of maintaining the plant in its present condition. Rather, this is a highly 

unusual, if not unprecedented, and costly project. Its purpose is 

to completely rehabilitate aging power generating units whose 

capacity has significantly deteriorated over a period of years, 

thereby restoring their original capacity and substantially 

extending the period of their utilization as an alternative to 

retiring them as they approach the end of their useful physical 

and economic life. The most important factors that would support 

these conclusions are outlined below. 

 a. The project would involve the replacement of numerous 

major components. The information submitted by WEPCO shows that 

the company intends to replace several components that are 

essential to the operation of the Port Washington plant. In 

particular, as noted above, WEPCO would replace the rear steam 

drums on the boilers at units 2, 3, 4, and 5. According to WEPCO, 

these steam drums are a type of "header" for the collection and 

distribution of steam and/or water within the boilers. They 

measure 60 feet long, 50.5 inches in diameter, and 5.25 inches 

thick, and their replacement is necessary to continue operation of 

the units in a safe condition. In addition, at each of the 

emissions units, WEPCO plans to repair or replace several other 

integral components, including replacement of the air heaters at 

units 1, 2, 3, and 4. The WEPCO also plans to renovate major 

mechanical and electrical auxiliary systems and common plant 

support facilities. The WEPCO intends to perform the work over a 

4-year period, utilizing successive 9-month outages at each unit. 

 

 In its July 8, 1987 application for authority to renovate 

tothe Public Service Commission of Wisconsin (PSC), WEPCO 

described the life extension project and explained its purpose and 

necessity. The WEPCO took care to distinguish the proposed 

renovation work from routine maintenance that did not require PSC 

approval, explaining that: 

 

 . . . [work items] falling into the category of repetitive 

 maintenance that are normally performed during scheduled 

 equipment outages do not require specific commission 
 approval and, accordingly, are not included in this 

 application. 

Thus, WEPCO's own earlier characterization of this project 

supports a finding that the planned renovations are not routine. 

 

 b. The purpose of the project is to significantly enhance 

the present efficiency and capacity of the plant and substantially 

extend its useful economic life. In its application to the PSC, 

WEPCO pointed out that due to age-related deterioration, total 

plant capability had declined by 40 percent. The company noted 

that the currently planned retirement dates for the Port 

Washington units, as set forth in its Advance Plan filed with the 

State, ranged from 1992 to 1999. However, WEPCO asserted that 

"extensive renovation of the five units and the plant common 

facilities is needed if operation of the plant is to be 

continued." In any event, WEPCO stated that the renovation work 

would allow the Port Washington plant to generate power at its 

designed capacity until the year 2010, and thus "represents a 

life extension of the units." 

 - 5 -

 In contrast, in its July 29, 1988 letter to EPA headquarters 

(pages 9-13), WEPCO characterized the renovation work as the 

timely, routine correction of equipment problems--principally, the 

steam drum cracks. However, the information presented leads to 

the conclusion that this is not the case. While replacement of 

the steam drums is necessary to restore lost generating capacity, 

that is not the only work proposed to be done. Based upon maximum 

capacity figures for past years, it appears that the units had 

experienced deterioration in physical generating capacity even 

prior to the discovery of the steam drum cracks in 1984. Thus, 

WEPCO proposes a wide-ranging project encompassing a broad array 

of tasks that would not only correct the steam drum problem, but 

correct other age-related deterioration that is essentially 

independent of the steam drums. Such other work (e.g., 

replacement of air handlers) apparently is also necessary as a 

practical matter to restore original nameplate capacity. Thus, it 

appears that even if WEPCO had undertaken this renovation work 

immediately following discovery of the steam drum cracks, it would 

have been proper to characterize the proposed work as a nonroutine 

life extension project. 

 

 c. The work called for under the project is rarely, if ever, 

performed. The WEPCO's application to the PSC asserted that the 

work to be performed under the life extension project was not 

frequently done: 

 

 Generally, the renovation work items included in this 

 application are those that would normally occur only 

 once or twice during a unit's expected life cycle. 

 

 The EPA asked WEPCO to submit information regarding the 

frequency of replacement of steam drums, the largest category of 

____________________ 

 1It is important to note in this regard that not all 

renovation, repair, or "life extension" projects would properly be 

characterized as modifications potentially subject to PSD and 

NSPS. For example, nonroutine repairs to correct unexpected 

equipment outages, even of major components such as steam drums, 

would not be subject to NSPS if they did not increase the maximum 

capacity of the affected facility as it existed prior to the 

outage. Conversely, undertaking a program of repair and 

maintenance properly characterized as routine would not subject a 

facility to the Act's requirements. 

 - 6 -
work item called for under the project. WEPCO reported that to 

date, no steam drums have ever been replaced at any of its 

coal-fired electrical generating facilities. WEPCO did point out 

that it had replaced other "headers" comparable in design pressure 

and function. However, the largest of these was 16 inches in 

diameter, and EPA does not believe that they are comparable in 

diameter, wall thickness, function, or importance to the rear 

steam drums at Port Washington.2 

 

 d. The work called for under the project is costly, both in 

relative and absolute terms. The latest information supplied by 

WEPCO is that the renovation work at Port Washington will cost 

$87.5 million, of which at least $45.6 million is designated as 

capital costs.3 The WEPCO reports that, in terms of annualized 

costs, the renovation project will cost $7.8 million, as compared 

to $51.6 million for a new 400 megawatt plant. Thus, renovation 

costs represent approximately 15 percent of replacements costs. 

 

 2. Change in the Method of Operation 

 

 The renovation work at Port Washington would not constitute a 

"change in the method of operation" within the meaning of the PSD 

regulations. However, it is clear that the "physical change" and 

"operational change" components of the "major modification" 

____________________ 

 2The WEPCO's July 29, l988 letter to EPA stated (on page l3) 

that after further investigation, the company "learned of several 

examples" of steam drum failure and replacement. However, WEPCO 

provides no further details, other than noting that in one 

instance, the drum failed during initial testing and was 

replaced. Replacement of a failed component at a new facility 

presumably would not increase emissions from the facility, and 

probably would be viewed as routine if the alternative was to 

forego operation of that new facility. Under such circumstances, 

it is unlikely that the replacement would trigger the Act's 

requirements. 

 

 3The WEPCO's July 8, 1987 application to the PSC included a 

project cost estimate of $83.9 million, of which $45.6 million was 

designated as capital costs. A more recent cost estimate provided 

to EPA by WEPCO indicates that several work items are now deemed 

unnecessary, such that the cost of the original project is now 

estimated at $70.5 million. However, all but $89,000 of these 

reductions are designated as "maintenance" items. The recent 

submission also relates that the scope of the original project 

has now been expanded to include flue gas conditioning equipment 

and associated air heater work costing approximately $17 million. 

Although WEPCO has not broken down these additional costs into 

capital and maintenance (or "expense") expenditures, it would 

appear that most, if not all, of this additional work would be 

classified as capital costs. Thus, it is highly likely that 

actual capital costs would be significantly higher than $45.6 

million. 

 - 7 -

definition are discrete and independent. Thus, as explained 

below, PSD still applies if there is a physical change that will 

significantly increase net emissions. 

 

 In addition, the regulations exclude from the definition of 

physical or operational change "an increase in the hours of 

operation or in the production rate" [see 40 CFR 

52.21(b)(2)(iii)(f)]. The preamble to the rule [45 FR 52676, 

52704 (August 7, 1980)], makes it clear that this exclusion is 

intended to allow a company to lawfully increase emissions through 

a simple change in hours or rate of operation up to its potential 

to emit (unless already subject to any federally enforceable 

limit) without having to obtain a PSD permit. Thus, emissions 
increases at Port Washington associated with increased operations would not, standing alone, subject WEPCO to PSD 

requirements. However, as discussed in greater detail below, the 

exclusion for increases in hours of operation or production rate 

does not take the project beyond the reach of PSD coverage if 

those increases do not stand alone but rather are associated with 

non-excluded physical or operational changes. 

 

 In its March 17, 1988 letter to Region V and its July 29, 

l988 letter to EPA Headquarters, WEPCO asserted that the exclusion 

for increases in operational hours or production rate also would 

serve to render PSD review not applicable to the renovation work 

proposed at Port Washington because the project's purpose was to 

restore the original design capacity of 80 megawatts per unit, but 

not to exceed that level. However, a plant's original design 

capacity is irrelevant to a determination of PSD applicability. 

 

B. Significant Net Emissions Increase 

 

 Under the PSD regulations, whether the life extension project 

at Port Washington would result in a "significant net emissions 

increase" depends on a comparison between the "actual emissions" 

before and after the physical changes resulting from the 

renovation work. Where, as here, the source has not yet begun 

operations following the renovation, "actual emissions" following 

the renovation are deemed to be the source's "potential to emit" 

[see 40 CFR 52.21(b)(21)(iv)]. Apparently, there would be a 

"significant net emissions increase" within the meaning of the PSD 

regulations as a result of the proposed renovations as currently 

planned, because potential emissions after the project--reflecting 

the restoration of 80 megawatt capacity at each unit--would 

greatly exceed representative actual emissions prior to the 

physical changes. (The fact that the project is intended to 

\restore the plant's original design capacity is irrelevant to that 

calculation)4 If this is so, the project would be a "major 

modification" subject to PSD review. However, PSD applies on a 

pollutant-specific basis, and EPA has not been furnished with 

adequate data regarding the impact of the proposed renovations on 

the various pollutants to determine whether a significant net 

emissions increase would indeed occur for any pollutant. Such 

data must be provided before EPA can make a final determination of 

PSD applicability. 

 - 8 -

 It is important to note in this regard that WEPCO, at its 

option, could "net out" of PSD review by accepting federally 

enforceable restrictions on its potential to emit after the 

renovation. This could occur through enhancement of existing 

pollution control equipment, addition of new equipment, 

acceptance of federally enforceable operational restrictions, or 

some combination of these measures, limiting potential emissions 

to a level not significantly greater than representative actual 

emissions priorto the renovations. Theoretically, WEPCO could 

minimize the needed restrictions on its potential to emit 

following the renovations if it could show that some period other 

than the most recent two years is "more representative of normal 

source operation" [see 52.21(b)(21)(ii)]. (Obviously, such a 

showing would be most important with respect to unit 5, because it 

has been shut down and has had zero emissions since 1985.) Since 

these matters are within WEPCO's control, you should advise the 

company to enter discussions with Region V and Wisconsin, as 

appropriate, if WEPCO desires to "net out" of PSD review. The 

WEPCO also argued in its July 29, 1988 letter, at pages 33-41, 

that even if EPA is correct that the Port Washington life 

extension project would involve physical changes within the 

meaning of the PSD regulations, any emissions increases would be 

due to increased production rates or hours of operation rather 

than higher emissions per unit of production. Therefore, WEPCO 

contends that these increases should be excluded from 

consideration in determining whether a net significant emissions 
_____________________ 

 4The WEPCO also contends (July 29, 1988 letter, page 35) that 

EPA should instead compare representative actual emissions prior 

to the change with "projected" actual emissions after the 

renovations. The PSD regulations provide no support for this 

view. Where, as here, a source is not currently subject to a PSD 

permit containing operational limitations, EPA must presume that 

the source will operate at its maximum capacity and, hence, its 

maximum potential to emit. However, as discussed below, a source 

is entitled to reduce its potential to emit by embodying its 

"projections" of future emissions in federally enforceable 

restrictions on its operations that may serve to lawfully avoid 

PSD review. 

increase and, hence, a major modification, would occur. The WEPCO 

is incorrect in this regard. 

 As noted above, the exclusions cited by WEPCO are intended 

to apply where a source increases emissions by simply combusting a 

larger amount of fuel, or processing a larger amount of raw 

materials during a given time period, or by expanding its hours of 

operation "to take advantage of favorable market conditions" (see 

45 FR 52704). In this instance, however, it is obvious that 

WEPCO's plans to increase production rate or hours of operation 

are inextricably intertwined with the physical changes planned 

under the life extension project. Absent the extensive 

renovations proposed at Port Washington, WEPCO would have little 

market incentive to, and in part would be physically unable to, 

increase operations at these aged and deteriorated facilities 

which, absent the renovations, would likely be retired from 

service in the near future. Thus, WEPCO's plans call for 

precisely the type of "change in hours or rate or operation that 

would disturb a prior assessment of a source's environmental 

impact [and] should have to undergo [PSD review] scrutiny" (see 45 

FR 52704). Conversely, accepting WEPCO's interpretation of the 

major modification regulations would serve to exclude from 

consideration all physical or operational changes except those 

which cause increased emissions per unit of production. Clearly, 

EPA never intended this result. It would allow, through 

substantial capital investment, significant expansion of the 

pollution-emitting capacity and longevity of major industrial 

facilities without PSD review of the impacts on air quality and 

opportunities for future economic growth. 

 - 9 -

 C. Baseline Date 

 

 The November 9, 1987 letter from the Wisconsin Department of 

Natural Resources to Region V asked whether a complete March 28, 

1986 PSD permit application for certain work at Port Washington 

triggered the PSD baseline date, despite the fact that the permit 

was never issued. The answer to this question is yes. Baseline 

dates are triggered by the first complete application and remain 

in effect regardless of whether the application is revised or 

withdrawn, or whether the permit is finally issued and the source 

constructed or modified. 

 

III. NSPS Applicability 

 

 The Port Washington renovations are subject to the Act's NSPS 

if they constitute "modifications" within the meaning of section 

111 and 40 CFR Part 60. Under 60.1, the NSPS applies to 

modifications at an "affected facility." Each unit at Port 

Washington is properly characterized as an "affected facility" 

subject to the NSPS at 40 CFR Part 60, Subpart Da, which applies 

to electric utility steam generating units [see 60.40(a)]. 

Pursuant to 60.14(a), a modifi- cation for NSPS purposes is 

defined as "any physical or operational change to an existing 

facility which results in an increase in the emission rate to the 
atmosphere of any pollutant to which a standard applies." 

Increase in emission rate is in turn defined as an increase in 

kilograms per hour (kg/hr) [see 60.14(b)]. 

 Pursuant to longstanding EPA interpretations, the emission 

rate before and after a physical or operational change is 

evaluated at each unit by comparing the hourly potential emissions 

under current maximum capacity to emissions at maximum capacity 

after the change. In addition, under the Act's NSPS provisions, 

only physical limitations on maximum capacity are considered in 

determining potential emissions at power plants. Thus, any 

prospective changes in fuel or raw materials accompanying the 

physical or operational change are not considered in determining 

maximum capacity. Consequently, 60.l4(b)(2) requires that, in 

conducting emissions tests before and after a change to determine 

whether an increase in emission rate has occurred, "operational 

parameters" which may affect emissions must be held constant. Fuel 

and raw materials are "operational parameters" for this purpose. 

Similarly, 60.14(e)(4) provides that use of an alternative fuel or 

raw material which the existing facility was designed 

toaccommodate before the change would not be considered a 

modification. Thus, for example, a physical change which 

increases the maximum capacity of the facility would have a 

corresponding increase in the sulfur dioxide emissions if the 

facility used fuel with the same sulfur content before and after 

the change. Such a prospective increase cannot be offset by 

instead using fuel with a lower sulfur content after the change, 

because, under the regulations, the facility would always have the 

option of changing back to the higher sulfur-content fuel at a 

later date without triggering a modification for NSPS purposes. 

However, any offsetting reductions in emission rate caused by the 

concurrent addition of pollution control equipment would be 

considered in determining whether a physical or operational change 

results in an increase in emission rate. 

 - 10 -

 The WEPCO contends (July 29, l988 letter, at pages 20-27) 

that baseline capacity for the purpose of determining whether an 

increase in emission rate occurs for purposes of an NSPS 

modification is the original design capacity of the facility. 

This is incorrect. The thrust of the NSPS modification provisions 

is to compare actual maximum capacity before and after the change 

in question. Thus, original design capacity is irrelevant. The 

provision in 40 CFR 60.l4(b)(2) for manual emission tests to 

determine whether an increase has occurred clearly contemplates 

that tests will be done just prior to and after the physical or 

operational change. The original design capacity of a unit, to 

the extent it differs from actual maximum capacity at the time of 

the test due to physical deterioration--and, hence, derating--of 

the facility, is immaterial to this calculation. 

 

 A. Physical or Operational Change 

 

 As with the Act's PSD provisions, a modification occurs for 

NSPS purposes, if there is either a physical or operational change 

[see 40 CFR 60.14(a)]. 

 1. Physical Change 

 

 As is the case under the PSD provisions, the proposed 

renovations at Port Washington would constitute a physical change 

for NSPS purposes, at least at units 2, 3, 4, and 5. The WEPCO 

would need to supply more information, if EPA is to make a 

definitive determination as to unit 1. 

 

 The rear steam drums are part of the steam generating 

unitwhich constitutes the "affected facility" within the meaning 

of 40 CFR 60.41(a), and the drum replacements at units 2, 3, 4, 

and 5 are integral to the planned increase in maximum capacity, 

which is the purpose of the life extension project. With respect 
to unit 1, other physical changes would increase maximum capacity 

from 45 to 80 megawatts. However, there is some question whether 

those changes, in significant part, would occur at the steam 

generating unit or will be limited to the turbine/generator set, 

which is not part of the affected facility. We suggest that you 

pursue this matter with WEPCO to the extent necessary to determine 

NSPS applicability regarding unit 1. 

 

 As with PSD, the NSPS regulations exclude routine 

maintenance, repair, and replacement [see 60.14(e)(2)]. However, 

the renovations at the Port Washington steam generating units are 

not routine for NSPS purposes for the same reasons--detailed 

above--that they are not routine for PSD purposes. 

 

 2. Operational Change 

 

 Operational changes include both increases in hours of 

operation and increases in production rate. Section 60.14(e)(3) 

provides that an increase in hours of operation is not, by itself, 

a modification. However, an increase in production rate at an 

existing facility constitutes a modification, unless it can be 

accomplished without a capital expenditure on that facility [see 

60.14(e)(2)]. 

 - 11 -

 It is highly likely that the life extension project at Port 

Washington constitutes an operational change under this standard, 

for two reasons. First, restoring nameplate capacity at units 1, 

2, 3, and 4 presumably entails, among other things, changes that 

will allow the units tocombust a larger amount of fuel at maximum 

capacity through operation at higher working pressures than the 

units have been able to accommodate in recent years. In the case 

of unit 5, the renovations presumably involve an increase over 

zero fuel and pressure. These changes constitute an increase in 

production rate within the meaning of the regulations. Second, as 

noted above in the discussion of PSD applicability, this increase 

in production rate entails substantial investments to improve the 

capital stock at each affected facility. It appears that these 

investments are large enough to qualify as "capital expenditures" 

under the formula specified in 60.2, although WEPCO should be 

asked to supply actual calculations should this become necessary 

to determine NSPS applicability. 

 B. Increase in Emission Rate 

 

 It seems clear that, absent some creditable offsetting 

changes, the increases in maximum generating capacity proposed for 

each of the Port Washington units would represent an increase in 

the hourly potential emission rate for each pollutant to which a 

standard applies over the emission rate prior to the renovation. 

As noted above, burning cleaner fuels would not be creditable. 

Similarly, voluntarily restricting the production rate following 

the renovations also would not be creditable for NSPS purposes, 

because WEPCO could, at a later date, increase production without 

triggering NSPS [see 40 CFR 60.14(e)(2)]. Accordingly, to avoid 

triggering NSPS, WEPCO would need to install additional air 

pollution control equipment, or upgrade existing equipment, to 

offset the potential emissions increases, such that no increase 

would occur at maximum capacity. The information submitted 

indicates that WEPCO may plan some enhancement of the current 

control equipment, but it is unclear whether this would be 

adequate to prevent an increase in emission rates. As with PSD 

applicability, such steps can lawfully avoid NSPS requirements. 

Accordingly, you should advise the company that it should address 

these contingencies if it desires EPA to rule on whether WEPCO can 

avoid NSPS requirements in this fashion. 

 

 C. Reconstruction 

 

 Based upon data provided by WEPCO, it seems that the Port 
Washington renovations would not qualify as a "reconstruction" for 

NSPS purposes under 40 CFR 60.15, because the capital cost for the 

upgrades to each of the five units, while substantial, apparently 

is less than 50 percent of the fixed capital cost of constructing 

a comparable, entirely new steam generating unit [see 

60.15(b)(1)]. However, the modification and reconstruction 

provisions of NSPS are independent. The former provisions are 

intended to apply in circumstances where physical or operational 

changes which increase emissions make NSPS coverage appropriate at 

levels well below 50 percent of the capital cost of a replacement 

unit. Conversely, the reconstruction provisions are aimed at 

changes to an existing unit irrespective of associated emissions 

 - 12 -

increases, but trigger NSPS requirements only if the higher 50 

percent level is reached. Thus, the suggestion made by WEPCO in 

its July 29, l988 letter (at pages l4-l5) that EPA must undertake 

rulemaking to amend the reconstruction regulations before NSPS 

could be applied to the Port Washington project is not well taken. 

 

IV. Conclusion 

 

 In adopting the PSD and NSPS programs, Congress sought to 

focus air pollution control efforts at an efficient and logical 

point: the making of long-term decisions regarding the creation 

or renewal of major stationary sources. The Port Washington life 

extension project, as it has been presented to EPA, would involve 

a substantial financial investment at pollution-emitting 

facilities that may significantly increase potential emissions of 

air pollutants over a period well beyond the current life 

expectancy of those facilities. If the additional factual 

information called for in this memorandum shows that emissions 

increases would indeed result from this project, the project would 

be subject to PSD and NSPS requirements. Such a result would be 

in harmony with the broad policy objectives that 

Congress intended to achieve through these programs. 

 

cc: Gerald Emison, OAQPS 

 Alan Eckert, OGC 

 

bcc: G. Foote, OGC 

 L. Wegman, OAR 

 J. Seitz, SSCD 

 M. Alushin, AED 

 Air Branch Chief, Regions I-X 

 Regional NSR Contacts, Regions I-X 

 J. Calcagni, OAQPS 

 J. Farmer, OAQPS 

 W. Stevenson, OAQPS 

 E. Lillis, OAQPS 

 G. McCutchen, OAQPS