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OAR Box 1778 

Prepped by Ollie Stewart 

Document Number: 

89) ll-C-31 

Docket Number: 

A-90-06 

Printed 10/28/2008 9:50:55 AM Sheet 89 of 276 
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NOTE: This item is missing attachments. 
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\ ^fify. * UNITED STATES ENVIRONMENTAL PROTECTION AGENCY-^""* £• ~^? / 

\ OQO.tW ASHIN G TO-. 3 C 2046 0 

MAR I 5 1971 

OFFIC E o r 

GENERAICOUNSE L 

Mr. Don Santa ,„^- T "' 

Counsel T '•, s \\ '.•._ 

Subcommittee on Mineral Resources, 

Development and Production 

364 Dirksen 

Senate Office Building 

Washington, D.C. 20510 \ U—-T^Tt^nr.iC^^ 

Dear Mr. Santa: 

This is in reference to our recent telephone conversation 

regarding EPA's upcoming interpretative ruling under the new 

source performance standards (NSPS) and new source review (NSR) 

provisions of the Clean Air Act. I have enclosed the materials 

we discussed, which accurately summarize the anticipated terms of. 

the ruling. 

You indicated that you were particularly interested in 

treatment of projects involving the retrofit of pollution control 

equipment. In short, the ruling will clarify that neither 

Congress nor EPA intended retrofit projects to be treated as 

"modifications" subject to new source requirements unless 

emissions would somehow increase as a result of the retrofit. 

This position is stated in EPA's enclosed January 30, 1990 letter 

to the State of Indiana. Pages 6 and 8 of that letter relate 

that the interpretative ruling will provide that, regardless of 

whether they occur as part of the Department of Energy's Clean 

Coal Technology demonstration program, all temporary and 

permanent retrofit projects will be excluded from NSPS and NSR 

coverage so long aft-they are no* environmentally harmful. As to 

NSR, the March 8, 1990 letter to Indiana further clarifies that 

EPA will pruuse that increases in. capacity utilization following 

a retrofit'"*%..<and associated increases in annual emissions — 

are not attributable to the retrofit. This presumption would be 

overcome only i f the facts show a clear likelihood that 

utilization will increase because of the retrofit. 
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EPA does not at present plan to extend the interpretative 

ruling to fuel switches that do not constitute the addition of 

retrofit pollution control technology. I have enclosed for your 

information a recent letter involving Detroit Edison which 

explains EPA's current position on fuel switches. That case 

involved an economically-driven switch from oil burning to dual 

oil-gas capability at a peaking unit, apparently to take 

advantage of lower fuel prices for gas. Precisely for this 

reason, however, EPA had reason to believe that the company would 

substantially increase its utilization of the facility. If that 

occurred, there would be a corresponding increase in NOx 

emissions over current actual levels of emissions. EPA advised 

the company that the addition of gas-burning capability would 

constitute a "physical change" for the source as a whole, and 

would require an air quality analysis under a PSD permit. 

However, it appeared that there would be only minor changes at 

the emissions unit itself. If this is indeed the case, the 

company would have no obligation to install best available 

control technology (BACT) at the unit. Consequently, there would, 

be no additional control costs at the source. EPA also advised 

the company that if the facts should show a physical change at "? 

the boiler itself, the extra cost of retrofitting pollution 'A--

controls would be considered in determining whether any 

additional controls were necessary to meet the BACT requirement. 

Absent legislative changes, EPA presumably would follow the 

same course with respect to fuel switches at coal-fired boilers 

involving the addition of gas co-firing capability. If the 

source as a whole would undergo a physics31 change to accommodate 

gas, a PSD permit, including an air quaiity impact analysis, may 

be necessary. However, if the emissions unit itself would not 

undergo a "physical change," there would be no BACT requirement. 

If the facts showed a physical change at the boiler and the need 

for BACT, retrofitting costs would be carefully considered. 

While a BACT analysis would be needed, it would appear highly 

unlikely that scrubbers would be required as BACT under such a 

scenario. 

You showllralso be aware that EPA's interpretative ruling 

will not addre** projects such as that involving the Wisconsin 

Electric^ Co^any's Port Washington plant ("WEPCO"). The WEPCO 

case did not" involve the retrofit of pollution controls, boiler 

repowering, or Clean Coal Technology. Rather, that case involved 

a utility "life extension" program, in which the company planned 

to replace steam drums, air heaters, and other major plant 

components, in order to restore generating capacity that had been 

lost due to age-related deterioration, improve plant capacity and 

efficiency, and extend the life of the generating units. The 

company planned to increase utilization substantially following 

the modifications. EPA continues to believe that such life 

extension projects should be subject to new source requirements 
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where they will result in an emissions increase over baseline 

levels. The court decision involving WEPCO, Wisconsin Electric 

Co. v. Reilly, Nos. 88-3264 and 89-1339 (7th Cir., slip op. Jan. 

19, 1990) strongly endorsed this treatment under current law. In 

one respect, regarding the calculation of post-modification 

emissions increases for PSD purposes, the court found that EPA 

should look to past operating history as a predictor of future 

utilization levels. EPA intends to follow such an approach in 

responding to the court's remand on that point. 

Sincerely, 

C4lA 

A Gregory o. 

Attorney 

Air and Radiation Division 

(LE-132A) 

Enclosures 

cc: Joan LaRock 

Rob Brenner 

Stan Meiberg 

Nancy Kete