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OAR Box 1778 

Prepped by Ollie Stewart 

Document Number: 

240) ll-F-16 

Docket Number: 

A-90-06 

Printed 10/28/2008 9:51:03 AM Sheet 240 of 276 
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Department of Energ 

Washington, DC 20585 

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U2 i ';-:-S 

LEEII-F-16 

May 21, 1991 

MEMORANDUM; ••*" 

TO: Don Elliott 

PROM: ^Dayid B. Rivkin, Jr. 

SUBJECT: EPA's Latest WEPCo Draft 

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0-^ii=» '^.^j- . 

The purpose of this memorandum is to share some legal 

concerns we have with EPA'S latest WEPCO draft. These are as 

follows: 

1. PjSll.it_.ipr. eontro l rvrrHftote. 

X believe that everyone agrees that the only legally 

defensible justification for excluding pollution control projects 

ie reading the NSPS exclusion as being implicit ln the NSR rules. 

Indeed, EPA'S latest legislative rule recognizes this fact. 

Regrettably, it also takes the position that pollution control 

projects are not "environmentally beneficial," if annual emissions, 

generated by the utilities involved, increase. To be sure, the 

preamble goes on to propose a "potential to potential" rule, that 

would treat projects that increase "annual emissions" as being 

environmentally beneficial. tn my view, these contradictory 

statements mean either that EPA is construing current law in a more 

restrictive fashion than is required, or that it is proposing a 

rule that allows utilities to install controls that are not really 

"environmentally beneficial." 

A bright line "annual" increase test (or even * "potential" 

increase test) for determining the applicability of the pollution 

control exclusion has no basis in pre-WEPCo determinations. 

Arguably, the whole point of recognizing any modification exclusion 

la to authorize emission increases caused by the excluded activity. 

Xn the case of pollution controls, the exclusion applies whenever 

the control is not "Iflaa" environmentally beneficial than the 

control it replaces. This exclusion can, and should be, read to 

exclude projects that might increase hourly or annual emissions of 

a regulated pollutant — but not the emissions rats of that 

pollutant, defined as pounds per million BTUs -- where the overall 

reductions are clearly environmentally beneficial. 

In addition to these legal deficiencies of EPA's position on 

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pollution control projects, it also oreates some very real policy 

problems. For example, over the past 20 years, numerous utilities 

have converted low NOx burners, and many mere are required to 

convert to that technology under Title IV of the 1990 CAA 

Amendments. Signifioantly, as the latest draft preamble discloses, 

these conversions may-result in increases in carbon monoxide (CO) 

and particulate emissions. I believe that EPA has never suggested 

ln the past that such increases rendered the substantial reductions 

in NOx "less" environmentally beneficial than higher NOx emissions 

in existence before installation of controls. Nor am I aware that 

the Administration raised any euoh oonoerns with Congress, when 

these controls were mandated under the Administration's legislative 

proposal. 

However, in view of EPA's statement ln the proposed 

legislative rule regarding CO and particulate matter Increases, it 

is clear that the promulgation of even "potential-to-potential" 

proposal for pollution control projects would provide no meaningful 

relief, and would preclude many, if not most, sources from meeting 

their Title IV Phase I (January 1, 1995) deadline, in other words, 

rather then providing relief, the EPA's legislative proposal would 

establish a more stringent standard than is available under current 

law. This can be hardly construed as the faithful implementation 

of the Administration's WEPCO proposal. And, as described above, 

applying any emission tests to pollution control projects is 

legally problematic. 

In summary, the spirit and the purpose of the Administration's 

pollution control proposal can be effected through a reasonable 

interpretation of current rules. In view of the facte recited in 

the preamble regarding NOx reduction technology, any attempt to 

follow such a interpretation with "potential to potential" 

restriction would be contrary to the policies motivating the 

Administration's wfiPCo proposal. And, as described above, applying 

any emission tests to pollution control projects is legally 

problematic. 

2 . Applyin g -h.hw pollutJn n «V>r.+.ynl fiKnlualan onl y ••* Pfift 

I am also highly troubled by the fact that the proposed 

legislative rule would have one pollution control rule apply in PSD 

areas and another one in non-attainment areas. As EPA recognizes, 

current law does not require such a distinction.1 The proposition 

that the same pollution control project is "environmentally 

* The mere fact that tne Administration's Inglalfttivfpropoaals would have made such a distinction, does not 

mean that EPA can ftflfftnifttrfttiveiy establish different 

exclusions for attainment and nonattainment areas. 

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beneficial" under tha PSD program, but not under the non-attainment 

program, may strike one depending on his policy predilections, as 

either a reasonable approach or an absurd one. X would leave to 

the policy people to argue the merits of their respective position. 

My primary concern is EPA is acting as if this distinction was 

already ln place under the current law. This, of course, la not 

the case* if EPA wishes to distinguish between attainment and PSD 

areas, it must do so through legislative rulemaking. 

3. Restriction of Inruml *o Actual Mftthnflolocrv t o T.lkA 

Kind" ReplacemnntB. 

The proposed legislative rule interprets current law as only 

allowing BRA to use the actual to actual methodology for "like 

kind" replacements. This restriction is based on EPA's 

interpretation of the _£E_a and Puerto Rittftn can-ant, decisions aa 

compelling this restriction. X believe that you are well familiar 

with our position on this issue. Simply put, we believe that, 

while EPA may construe WEPCQ and Puerto Rinftp earner^: ar standing 

for the proposition that "like kind" and "non-like replacements" 

should be treated different, the better, and certainly less 

strained, interpretation of these cases is that they recognize no 

such distinction, in any case, we all can, hopefully, agree that 

EPA is not compelled by these cases to establish the like kind/nonlike kind regulatory matrix. X believe that this view is fully 

shared by other concerned agencies. 

Specifically, the Department of Justice (DOJ), in its March 

26, 1991 memorandum, made clear that neither HEECQ nor Puerto Rioan 

Cemspt provides a basis for distinguishing between "like-kind 

replacements" and all other projects.' Instead, the memorandum 

indicated that EPA must focus on whether the unit has "not begun 

normal operations."' The DOJ memorandum went on to rejeot, what it 

understood to be the DOE's more extreme position, namely that all 

projects undertaken by existing utility units should be subject to 

an "actual to actual" test,4 

To clarify, DOE does not now argue, nor has it ever argued, 

DOJ Memo, at 3. According to the memorandum: 

[The court ln KEECaJ simply rejected EPA'a approach for 

like-kind replacements ln that case. Although the court 

in Puerto Rlnan Ce-mmn* . . . upheld BPA'8 approach in a 

case not involving like-kind replacements, neither 

decision state s that this distinction was the basis for 

each court's conclusion. 

Id. 

Id. at 4. 

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Xvthat the "actual to actual" teat applies to all projects undertaken 

at an exiatlng source-, instead, the "actual to actual" test only 

applies to projects, like those before the court ln WEPCo, that do 

not increase the design capacity of the unit." in other words, 

Since the design capacity is the same before and after the project, 

EPA must recognize that the unit has begun normal operations. On 

the other hand, the'"actual to potential" test would continue to 

epply to projects of the kind before the court in Puerto Rlcao 

Cement — i^., projects that convert a unit to a different process 

with a much greater design output capacity.0 Stated differently, 

a unit that Increases its design capacity would have never operated 

at that hew capacity, and thus would become a unit that had not 

begun normal operations. 

As EPA well knows, repairs Involving the Installation of new 

components are undertaken at existing units to address operating 

problems, such as reduced availability or deteriorated capacity. 

Like-kind replacements are undertaken for precisely the same 

reasons. in other words, repairs are indistinguishable?* from 

replacements in terms of their effect on unit operations. And, so 

long as these changes do not Increase design capacity, the "actual 

to actual" test should apply to both repairs and replacements. 

Therefore, EPA should not interpret the "actual to actual" test ln 

its current rule as only applying to like-kind replacements. 

Finally, in subsequent discussions with DOJ, DOE, and EPA, lt 

was agreed that EPA, as a policy matter, ought to interpret the 

"actual to actual" test as applying to projects that are not likekind replacements. Consistent with the Administration's proposal 

to extend "actual to actual" to all non-pollution control projects, 

EPA should exercise its discretion to provide the broadest possible 

interpretive relief that is legally justified. 

cc: 

Steve Wakefield 

Linda Stunts 

S&ft WlBBnnftin Elftgf.arlg Pr»war Co. v . HA-tlly. 893 F.2d 901 , 

908 (7th Cir. 1990) (the replacements before the court 

did "not 'change or alter* the design . . . of the 

facility"). 

Sfi& Ptiftr ^ ploa n camon* v . EPA. 889 F.2d 292 , 293 (1s t 

Cir. 1989) (the unit involved increased design capacity 

by "about 35 percent"). 

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