On November 3, 1999, the Justice Department filed seven lawsuits against electric utilities in the Midwest and South charging them with violations of the New Source Review (NSR) requirements of the Clean Air Act (CAA). The seven utilities affected are American Electric Power (AEP), Cinergy, First Energy, Illinois Power, Southern Indiana Gas & Electric Company, Southern Company, Tampa Electric Company, or their subsidiaries. Filed on behalf of EPA, the lawsuits represent one of the largest CAA enforcement actions ever taken by EPA. Additional lawsuits have been filed by the State of New York and Connecticut (jointly), Vermont, and New Jersey against AEP, and by a coalition of environmental groups also against AEP. In addition, the Environmental Protection Agency (EPA) issued an administrative order against the Tennessee Valley Authority (TVA), alleging similar violations. Enacted as part of the 1977 CAA Amendments and modestly modified in the 1990 CAA Amendments, NSR is designed to ensure that newly constructed facilities, or substantially modified existing facilities, do not result in violation of applicable air quality standards. The NSR provisions establish permit requirements for constructing new major pollution sources as well as for making major modifications to existing major pollution sources. The specific requirements dictated by NSR depend on where the facility is sited. In attainment areas – those meeting the National Ambient Air Quality Standard (NAAQS) for a pollutant – the governing requirements are the Prevention of Significant Deterioration (PSD) provisions of the CAA. In non-attainment areas – those not in compliance with a NAAQS for one or more pollutant – the governing requirements are covered by non-attainment provisions. Some facilities can be subject to a combination of both, if the area is in attainment for some criteria pollutants, but not others. Meeting these permitting requirements can be a long and complex process, depending on the specific project, the pollutants involved, and the specific state and federal regulatory authorities involved. In 1996, EPA proposed changes to NSR to streamline it. However, the proposals have been subject to considerable controversy, and a final rule has not yet been issued. These complexities and controversies, particularly with respect to major modifications of existing sources, become manifest in the enforcement suits filed by the Justice Department for EPA, and in the responses to them. The suits represent a continuing effort by EPA to reduce pollution from existing sources, particularly coal-fired electric generating facilities. The primary pollutant of concern has been nitrogen oxides (NOx), a criteria air pollutant that is also a precursor to ozone (itself a criteria pollutant), acid rain, fine particulates, and regional haze; other pollutants of concern include sulfur dioxide (SO 2 ), a criteria air pollutant and precursor to acid rain, fine particulates, and regional haze, and particulate matter (also a criteria air pollutant). Efforts by EPA and other groups to reduce these emissions have intensified recently both as a result of new regulatory proposals – to increase the stringency of the ozone and particulate NAAQS and to reduce haze – and as a result of the restructuring of the utility industry which some fear may result in increased emissions from existing plants. EPA's recent enforcement action raise several questions with respect to the NSR and efforts to further control emissions from existing sources. Three of them are discussed in this report: Why is EPA taking this action? Why use the NSR provisions? How does the NSR interact with other EPA actions currently underway? " The EPA believes that there should be a significantly higher rate of NSR permits authorizing the construction of new or expanded facilities than is currently taking place. " The CAA requires a preconstruction review of, and a permit for, almost any major modification of an air polluting source or any major new source. Assuming that a state has an EPA-approved State Implementation Plan (SIP), which spells out the state's strategy for complying with NAAQS, regulatory approval to construct the new source or modify the existing source must come from the appropriate state agency. To receive this "Permit to Construct," the applicant must show that the proposed source or modification will not result in, or exacerbate, violation of a NAAQS, either locally or downwind. In addition, applicants must show that their proposal will not result in local or downwind exceedences of increments of increased air pollution allowed under Prevention of Significant Deterioration (PSD) regulations in areas complying with NAAQS. It is this preconstruction review process that is called New Source Review (NSR). The NSR process is triggered for any new source that potentially could emit 100 tons annually (or less in some areas ) of any criteria air pollutant, and by any modification that will cause a significant increase in annual emissions (regulatorily defined as 40 tons for SO 2 and NOx ). The specific NSR requirements for affected sources depend on whether the sources involved are subject to the PSD or the non-attainment provisions. If covered by PSD, the source is required to install Best Available Control Technology (BACT), which is determined on a case-by-case basis, and which cannot be less stringent than the federally determined New Source Performance Standard (NSPS) for that pollutant. If covered by non-attainment provisions, the source is required to install Lowest Achievable Emission Rate (LAER) and obtain applicable offsets for that particular area. Like BACT, LAER must not be less stringent than the federal NSPS. Despite the breadth of coverage suggested by NSR, few preconstruction permits have been issued to coal-fired power plants over the program's history. If this situation is examined from the perspective of new construction, the lack of permits is not too surprising. Current U.S. coal-fired electric generating capacity is about 300,000 megawatts (MW), and has remained steady at that level for the last ten years. As indicated in Table 1 , additions to coal-fired capacity, while greater than retirements, have not been significant. Capacity that began operation between 1989-1998 constitutes about 3% of total current coal-fired capacity. At first glance, emissions trends for electric utilities appear to confirm the generally static situation with respect to coal-fired capacity. As shown in Figure 1 , emissions of NOx from coal-fired electric generating facilities have remained constant over the last ten years. In contrast, SO 2 emission trends indicate a significant drop in emissions in 1995, the first year of the acid rain control program under title IV of the 1990 CAA Amendments. Under title IV, 111 powerplants were required to reduce their emissions by about 30% from baseline levels specified in the title. In addition, many units were required to install Low-NOx burners to reduce NOx emissions. According to EPA, the affected phase 1 units emitted about 10 million tons of SO 2 in 1990, a number reduced to 5.3 million tons in 1995. Likewise, the NOx provisions reduced emissions from these plants in 1996 by about 0.4 million tons from their 1990 levels. However, comparing the reductions achieved under title IV with the trends indicated in Figure 1 shows that some of the title IV reductions have been offset by increases in emissions from other plants: specifically, while title IV caused a 4.7 million ton SO 2 reduction by 1995, emissions data indicates that overall emissions only went down about 3.6 million tons, as shown by Figure 1 ; likewise, while title IV led to a 0.4 million ton reduction in NOx by 1996, Figure 1 reveals an overall reduction of only about 0.1 million tons. This slippage is not surprising as phase 1 does not cover all coal-fired facilities, but it does imply that within the relatively flat trends for coal-fired capacity and for air emissions, there are some sources of increasing emissions. The dynamism in coal-fired generation is the continuing operation of existing coal-fired facilities. As indicated by Figure 2 , despite the general lack of new plant construction, coal-fired electricity generation and related coal consumption has continued to climb over the past decade. This increase results from utility efforts to optimize performance of existing coal-fired facilities despite their increasing age. Historically, as plants age they become less reliable and less efficient, leading utilities to derate them and move them from baseload to cycling duties. However, as indicated in Table 2 , contrary to historical expectations, utilization of coal-fired capacity has increased over the past decade, and the efficiency of units has not decreased. This suggests that the economics of plant maintenance has changed fundamentally over the past decade or so, making it economic for utilities to spend more to maintain their coal-fired capacity than was the case previously. The question the EPA lawsuits raise is whether these efforts to maintain or even to expand generation from existing coal-fired facilities – compared to the degradation of capacity that would be expected – represent "routine maintenance" or a "major modification" of those facilities under the CAA. If such maintenance does represent a "major modification," then the CAA would require the installation of pollution control equipment; "routine maintenance," on the other hand, would not trigger the requirement for new controls. With the restructuring of the electric utility industry placing ever-greater focus on plant economics, this issue is likely to intensify in the future. " There are signs that many utilities will not use the term " life extension " to describe their spending on old power plants, even though extended life is one of the major goals of the spending program. " The reason for the aversion to the term lies in the 1970 Clean Air Act. That federal law requires all power plants constructed after August, 1971 to restrict emissions of air pollutants such as sulfur dioxide. Plants built prior to 1971 are exempt, which includes most of the early candidates for life extensions.