Under the CAA, EPA establishes health-based air quality standards that the states must meet and regulates air pollutant emissions from various sources, including industrial facilities and mobile sources such as automobiles. EPA has issued standards for six primary pollutants—carbon monoxide, lead, nitrogen oxides, ozone, particulate matter, and sulfur dioxide—that have been linked to a variety of health problems. For example, ozone can inflame lung tissue and increase susceptibility to bronchitis and pneumonia. In addition, nitrogen oxides and sulfur dioxide contribute to the formation of fine particles that have been linked to aggravated asthma, chronic bronchitis, and premature death. About 133 million Americans already live in areas with air pollution levels above health-based air quality standards, according to EPA. The NSR program, established in 1977, is intended to ensure as new industrial facilities are built and existing ones expand that public health is protected, that the air quality in national parks and wilderness areas is maintained, and that economic growth will occur in a manner consistent with the preservation of existing clean air resources. The NSR program comprises (1) the Prevention of Significant Deterioration (PSD) program, which generally applies to pollutants in areas that meet federal air quality standards for those pollutants or for which the attainment status is unclassified, and (2) the Nonattainment NSR program, which generally applies to pollutants in areas that are not meeting the standards for those pollutants, although the term NSR usually refers to both. The federal NSR program is primarily administered by state and local air quality agencies, with oversight by EPA. If a company plans a change to its facility and determines that it will trigger federal NSR regulations, the company must then prepare and file a permit application with the relevant state or local agency. Figure 1 illustrates this permitting process. The state or local permitting agency determines if the application is complete; develops a draft permit, if justified; notifies EPA and the public of the application; and solicits comments on the draft permit. The permitting agency then responds to comments and issues a final permit, if merited, which can be administratively or judicially appealed. The permitting agency must provide EPA with a copy of every permit application and draft permit; address EPA’s comments, if any; and notify EPA of the final action taken. In addition, the records and reports the state or local agency collects as it monitors compliance with the permit and NSR program generally must be available for public review. Even when federal NSR requirements do not apply to a facility change, the project may still be subject to other federal, state, and local air pollution control requirements. For example, under Title V of the CAA, a company must obtain a facility operating permit that consolidates all of the company’s federal obligations for controlling air pollution and complying with the act. These obligations can include meeting the requirements and standards of states’ and localities’ federally approved plans for improving air quality; other federal requirements to control pollution, such as those controlling hazardous air pollutants not also covered under NSR; and requirements included in any federal, state, or local NSR permits issued to the facility. EPA has now given most state and local agencies approval to implement the Title V operating permit programs that, among other things, provide for public participation in the Title V permitting process. These operating permits are issued and then renewed every 5 years and can be updated at any time. During the mid-1990s, EPA began evaluating NSR compliance for entire industry sectors that produced significant amounts of air pollution. The agency focused its inspections on industry sectors it suspected of potential NSR violations. In particular, EPA looked at industries with a decreasing number of facilities but static or increased production, industries with many years of operation and high emissions but with no record of NSR permits, and industries with new plants being constructed with no NSR permits. EPA’s data suggested that facilities in some sectors might have been making major modifications to increase production or extend the life of the facilities’ equipment—and therefore increasing emissions—without obtaining NSR permits or installing pollution controls. As a result, EPA targeted its NSR investigations on coal-fired power plants, petroleum refineries, steel minimills, chemical manufacturers, wood products companies, and the pulp and paper industry. In 1996, EPA began its investigation of the coal-fired utility industry. Subsequently, EPA referred to DOJ a number of alleged violations of the NSR provisions. Generally, the referrals indicated EPA’s conclusion that the owners and operators of some of the largest coal-fired power plants in the country had violated the NSR provisions by making physical changes to their facilities, without obtaining a permit, that increased emissions and that the agency did not consider to be routine in nature. The companies, however, believed the changes did not violate the NSR program for a number of reasons, including that the projects were exempt under the routine maintenance exclusion. After reviewing these referrals, DOJ in November 1999 filed seven enforcement actions in U.S. district courts. That same month, EPA issued an administrative compliance order to the Tennessee Valley Authority alleging multiple NSR violations at its coal-fired power plants. Since these actions were taken, DOJ has filed an additional six enforcement actions against coal-fired utilities. As of October 2003, 7 of the 14 cases have been settled or decided. Table 1 provides a summary of the seven ongoing enforcement cases and the status of each. Over the years since its inception, various aspects of the NSR program have been subject to litigation that resulted in court decisions affecting the program. For example, in 1990, the Seventh U.S. Circuit Court of Appeals issued a decision in Wisconsin Electric Power Co. v. Reilly. EPA argued in the case that when Wisconsin Electric Power Company (WEPCO) was estimating whether a physical change would increase emissions enough to trigger NSR, the company should have assumed it would operate the modified equipment at the maximum level possible, even though WEPCO had never operated at that level. The court ruled that this requirement was inappropriate. EPA then issued a rule for electric steam-generating utilities only that allowed them to estimate their projected annual emissions after the change based on their actual emissions history for purposes of preconstruction permitting, but they would have to report their actual emissions for 5 years after making the change. More recently, in January 2001, the President established a task force—the National Energy Policy Development Group (NEPDG)—chaired by the Vice President to develop a national energy policy. In its May 2001 National Energy Policy Report, the group recommended to the President that EPA and the Department of Energy investigate the impact of the NSR program on investments in new utility and refinery generation capacity, on energy efficiency, and on environmental protection. The group also recommended that the Attorney General review the existing NSR enforcement actions to ensure they were consistent with the CAA and its implementing regulations. In response to the group’s recommendations, DOJ issued a report in January 2002 that concluded EPA had a reasonable basis for bringing those actions against coal-fired utilities. In June 2002, also in response to the group’s recommendations, EPA issued a report to the President and concurrently issued a set of recommendations for revising the NSR program. EPA issued a final rule in December 2002 that contained five provisions based on its June 2002 recommendations, outlined in table 2 below. Subsequently, in response to a number of requests, EPA agreed to reconsider certain aspects of the final rule, took public comment on those features during July and August 2003, and is assessing the comments to determine if the agency needs to make any changes. Also in December 2002, EPA issued for public comment a proposed rule that would change the method for determining whether a facility change can be exempt from federal NSR requirements because it is routine maintenance, repair, or replacement. EPA intended for the final version of the proposed rule to supplement its case-by-case determination of what facility changes qualify for the routine maintenance exclusion, using factors such as the nature, extent, cost, frequency, and purpose of the change. EPA proposed to determine a facility’s total replacement costs and calculate a certain percentage of those costs that the agency would allow the company to spend on routine maintenance and repair without triggering NSR. EPA proposed several alternative cost thresholds for routine maintenance and repair below which modifications could be considered exempt and solicited comments on the thresholds. EPA also included for comment a provision that would generally allow a facility to consider the replacement of existing equipment with identical or functionally equivalent new equipment as routine replacement, depending on the amount of costs involved. The agency announced a final rule in August 2003, specifying the cost threshold industry could use to replace equipment and exempt it from NSR. This rule will finalize one aspect of the December 2002 proposed rule and, at this time, the agency is not taking action to finalize any other aspects of this proposed rule. The NSR revisions have recently been the subject of recent congressional debates. In 2002, Congress held hearings during which members of Congress, EPA and DOJ officials, and a number of stakeholders— including representatives of industry, states, and environmental groups— presented their positions on the NSR program revisions. For example, during a July 16, 2002, hearing before the Senate Committee on Environment and Public Works, some state attorneys general and environmental group officials testified that the revisions could seriously undercut the ongoing enforcement cases, jeopardizing the millions of tons in pollution reductions that those cases could yield. At the same hearing, EPA and industry officials generally testified that the revisions would allow companies to modify their facilities so that they are more energy efficient and, as a result, would emit less pollution.