NSR Fact Sheet

NEW SOURCE REVIEW:
THE BUSH ADMINISTRATION'S DECISION
AND ITS EFFECT ON CLEAN AIR

NSR: a Linchpin of the Nation's Clean Air Laws

The so-called "new source" review (NSR) provisions are a central part of the nation's clean air laws. In simple terms, these provisions set a limit on how long more than 17,000 older industrial facilities such as power plants, refineries and industrial factories can operate without adopting modern air pollution control technology. The law requires that when these plants make "major modifications" that would result in an increase in total emissions, they must install state of the art pollution control technology. Without such a provision, the nation's industrial base would be forever "grandfathered", or excused, from having to meet modern clean air requirements. The Bush Administration has announced final and proposed rule changes that would basically "grandfather" or excuse the industrial base from having to meet modern clean air requirements.

During the 1980's and 1990's, a substantial number of these large industrial facilities began to make major investments in existing plants to extend their lives and expand capacity. In many cases, however, these industrial emitters did not make upgrades to their air pollution controls as required by law.

In the late 1980’s , the federal EPA and Department of Justice began to file lawsuits challenging this behavior and seeking to get state of the art controls installed. EPA’s first successes in enforcing NSR violations addressed violations by the wood products manufacturing industry. The first suit to force power plants to comply with NSR in the late 1980s followed this. Suspecting widespread violations of NSR, EPA began investigations of several industrial sectors, with a focus on coal-fired power plants, refineries, steel mini-mills, wood products manufacturers and pulp and paper manufacturers.

As of this date, lawsuits have been filed against 43 power plants in 13 states. Two companies -- Tampa Electric and PSE&G – have entered into settlements with the Department of Justice, and two other settlements -- by Cinergy (Indiana) and Virginia Power -- were announced in principle nearly two years ago but have stalled.

These 51 power plants, while representing only 11% of the nation's fossil fuel electricity, represent about 25% of the nation's harmful power plant emissions. Their emissions cause up to 9,000 premature deaths annually and nearly 200,000 asthma attacks. Making these plants meet modern emission standards would avoid most of these health effects. See www.clnatf.org/publications/reports/power_to_kill.

In addition, emissions from facilities subject to NSR help contribute to pervasive regional haze that reduces summer visibility in parks by 80% or more, as well as acid rain and nitrogen overloads. Applying "new source" standards, as the law requires, would reduce these emissions and effects measurably.

What is EPA changing about New Source Review?

On October 24, 2002 EPA announced changes to NSR that reflect more than ten years of concerted lobbying by the energy industry for relief from its requirements, and especially from lawsuits that have been filed. Following a year of intense pressure and lobbying by industry, the EPA is now relaxing NSR as described below.

EPA has made misleading statements that it simply is finalizing changes proposed by the previous administration in 1996. Not only is EPA choosing to finalize the most polluter-friendly aspects of the 1996 proposals, it has dropped key measures intended to help protect and restore air quality in America's national parks and other treasured areas. Recognizing the value of clean air in national parks including Yellowstone and Great Smoky Mountains, Congress required in the 1977 Clean Air Act Amendments that these areas have the nation's cleanest air, and set a national goal of natural air quality for them. Industry has been lobbying to gut these provisions ever since.

The EPA has stated that the environment benefits of NSR could be "achieved much more efficiently and at much lower costs through the implementation of a multi-emission national cap and trade program, such as" the Bush Administration's Clear Skies Initiative which the administration claims will provide a "unique opportunity to provide a much more effective and lasting solution for the power-generation sector." In short, EPA is presenting its new rules as a companion to proposed power plant legislation that would cover only 1,110 of the more than 17,000 industrial facilities subject to NSR.

What the Rules Would Do

EPA’s new NSR rules, some of which are final, and some of which are proposals, would eliminate the teeth in the new source review program in a number of ways.

Final changes to NSR and their effect on air quality:

1. Plantwide Applicability Limit (PAL): Allows factories such as power plants, refineries and chemical facilities to avoid modern emission control requirements by placing a cap on overall facility emissions based on their most polluting 24-month period in the last decade.

Problem: Establishes perpetual grandfathering of excessive emissions at old dirty units, and would allow increases in pollutants from some units above current levels.

2. Clean Unit Loophole: Allows sources that install something comparable to Best Available Control Technology to escape NSR for 10-15 years, even if the source makes major changes that significantly increase pollution emissions.

Problem: Clean up technology is improving rapidly and standards for "best available control" continually tighten as a result. But this provision would essentially freeze progress for more than a decade and create, in effect, a new "grandfathering" status.

3. Changes in How to Determine Whether an Emission Increase has Occurred: Non-utility sources of pollution may now use a more lenient method of calculating whether an emission increase has occurred as a result of a major modification. The new test is the same as that used for utilities.

Problem: For years, utilities have been allowed to escape NSR review based on a "projection" that they will not crank up their facilities to full capacity in the future. By extending this loophole to industrial facilities, emissions will be even harder to control under this new definition of emission increase.

Problem: The new rule will also allow sources to pick and choose the "baseline" that increases are measured from -- from as long ago as ten years. Thus, neighbors of a facility which has long had lower emissions for a decade could suddenly be faced with large emissions increases, with no legal recourse.

4. Pollution Control Exemption: EPA will allow a source to avoid cleaning up to modern standards for all pollutants if the source has installed pollution controls for only one pollutant.

Problem: This means that a source that puts on controls to clean up N0x emissions can make changes that increase S02, particulate matter, or benzene without modernizing controls for those pollutants.

Proposed Changes to NSR and their effect on air quality

EPA has also proposed additional changes to the NSR program. These changes are potentially even more damaging to public health and the environment than those described above.

Everything is "Routine Maintenance": EPA rules are clear that major overhauls of large industrial facilities (including power plants) do not fall within the "routine maintenance" exemption from NSR. Now, however, EPA proposes to exempt a long list of modifications specifically and generally will allow unit "replacements" to qualify for the exemption. In addition they will establish a cost threshold below which modifications escape NSR review. Under the proposed rules, EPA will consider modifications to a facility to be "routine" and therefore not subject to NSR if those modifications cost less than $XX million per year over five years. This threshold is so high that no modification will ever trigger NSR.

Problem: The "replacement" and cost thresholds effectively end the relevance of NSR for large industrial facilities. These rules would create regulatory immortality for old dirty facilities.

 

Problem: The Administration is expected to issue [OR has issued] "guidance documents" that may seek to apply this new interpretation on a retroactive basis. If this occurs, the government’s enforcement cases, now pending against owners of many old power plants, would be significantly weakened. The guidance documents would ruin the opportunity to get large reductions from over 50 power plants now being sued for violations of NSR rules.

Key Flaws in the White House's Reasoning and Approach

The central claim that the Administration makes in support of its rule changes is that the current NSR program "has impeded or resulted in the cancellation of projects that would maintain or improve reliability, efficiency or safety" or that would "benefit the environment." However, the record before EPA proves otherwise. For example, a Clean Air Task Force analysis, cited by the EPA in its report accompanying the rule changes, (www.clnatf.org/publications/reports/bottom_of_the_barrel.html ), demonstrates that the amount of deferred or reduced generating capacity available, even if all of it were recoverable through relaxed NSR rules, is less than 1% of total US generating capacity. And that capacity is highly uneconomic to recover because it is spread in small chunks throughout the system.

In addition, "heat rate" or efficiency improvements available in the nation's power plant fleet are limited to 4% or less. www.clnatf.org/publications/reports/bottom_of_the_barrel.html. Moreoever, any pollution reductions flowing from efficiency improvements at existing units targeted by current NSR actions are a tenth or less of the pollution reductions that would be achieved by requiring those units to meet modern emission standards, as the current NSR rules require. See report above.

The administration's handling of this issue blocks honest debate on pollution from large industrial facilities. Not only is the Administration misrepresenting the reach of these rollbacks – they apply to more than 17,000 large industrial sources of pollution, but it also obstructs frank and honest discussion about the pressing need to clean up our nation’s oldest and dirties power plants.

On the one hand, the Administration claims that the rollbacks offered here must be read in the context of the "more efficient" power plant emission reductions and caps proposed in the President "Clear Skies Initiative." (CSI) That initiative is deeply flawed, however, resulting in some cases in emissions caps 50% higher than EPA and OMB initially proposed, to be phased in nearly a decade later than EPA initially proposed. See cta.policy.net/proactive/newsroom/release.

But, just as important, CSI is merely proposed legislation. By contrast, much of EPA’s rule will be final when published. It's impossible to consider and debate this rule as one half of a "reform" package, the other half of which is theoretical. They're asking us to trade real health protections now for hypothetical gains later.

As a practical matter, the Administration's piecemeal reform proposal, if successful, reduces incentives for utility companies to agree to tougher pollution caps in legislation.

But, ironically, the new rules are unlikely to deliver much relief in the next several years if ever. The companies targeted by NSR actions -- including Cinergy, AEP, Virginia Power and TVA -- should take no comfort from EPA’s rule changes. The rules are patently illegal and environmental groups and many states will challenge them in court. Those companies in settlement discussions would be wise to settle and not rely on this illegal gambit by the Administration for relief.