Testimony to the U.S. Environmental Protection Agency (EPA)

Testimony to the U.S. Environmental Protection Agency (EPA)

Written Comments on the Environmental Protection Agency’s Proposed Rule on Routine Maintenance, Repair, and Replacement.
67 Fed. Reg. 80290 (Dec. 31, 2002)
(Docket No. A-2002-4)

April 30, 2003
Albany, New York

I am Neil Woodworth, Counsel to the Adirondack Mountain Club, and the New York – New Jersey Trail Conference, representing over 100,000 hikers in New York State.

We have a critical stake in the continued vitality of the federal Clean Air Act’s New Source Review (NSR) requirements applicable to fossil fueled electric power generating plant. Federal enforcement of the NSR program is the catalyst for important reductions in air pollution emissions that are harmful to human communities, aquatic life and forest ecosystems in the Appalachians, Hudson Highlands, Catskills, Adirondacks and White Mountains.

However, the proposed rule changes greatly weaken the NSR program, in practical effect, these changes functionally repeal this critical enforcement provision of the federal Clean Air Act (CAA). We urge you to reject the proposed rule changes and stay on course of your agency’s highly successful legal efforts to enforce our nation’s air quality laws.

The NSR provisions simply require power plant owners to upgrade their air pollution control measures whenever they undertake a major overhaul of a generating unit. The proposed rules essentially repeal NSR, allowing a utility owner to rebuild a power plant and actually increase air pollution levels without adding any pollution controls by qualifying for one of two proposed exemptions to the routine maintenance provision of the Clean Air Act.

The proposed rule changes alter the very narrow routine maintenance activity exemption by creating two new loopholes that essentially swallow the original NSR rule.

The first loophole, the annual cost allowance exclusion, substitutes creative accounting for sound scientific and engineering scrutiny. The proposed regulations would replace careful pre-construction evaluation of the nature and extent of proposed generating plant modifications with a cost threshold below which modifications would escape any EPA scrutiny, even if air pollution levels were materially increased!

According to the proposed regulations, the percentage of the cost of the plant permitted for this annual allowance could be as much as 20%. ADK is deeply troubled that EPA is considering allowing the annual allowances to be aggregated over a multi-year period, thereby openly inviting the utility industry to stage major reconstruction projects in increments over multiple years to evade new source review scrutiny and avoid installing modern air pollution controls.

The second new loophole allowing “like kind” replacements is of enormous concern to ADK and the Trail Conference. Those plants whose reconstruction projects exceed the annual cost allowance would be able to avoid installing air pollution controls if the reconstruction is characterized as a “like kind” replacement.

This loophole greatly expands the meaning of “routine maintenance” by permitting the replacement of major plant components like superheaters, reheaters, boilers, furnaces, coal pulverizers and turbo-generating units as long as they are characterized as “like kind” replacements of original equipment. This loophole has the practical effect of conferring a permanent immunity from NSR pollution control requirements, allowing a polluting utility to rebuild an entire facility in increments without triggering new source review.

While EPA suggests that cost thresholds or magnitude of replacement standards might be employed to limit the degree of replacement, the proposed rule change contains no cost or other yardsticks to limit the magnitude of the like kind replacement activity. There is no assurance that these thresholds will not be set at levels that will allow a utility to take advantage of the system to rebuild a power plant for another 40 years of service without installing pollution controls.

The courts have ruled that very similar interpretations of “routine maintenance” by the utility industry violate the express intent of Congress in enacting the CAA. The purpose and rationale for NSR is quite clear. Older generating plants, mostly coal-fired, were grandfathered, exempt from requirements to install modern pollution control technology. These plants produce approximately 84% of the nitrogen oxides and almost 90% of the sulfur dioxide produced in generating electric power.

Congress assumed these “dirty” plants would eventually be retired and be replaced by clean technology plants. Accordingly, the Clean Air Act mandates that no substantial repair or replacement of these plants may occur without the installation of remediation technology. The pertinent statute, 42 U.S.C. 7411 is quite clear:

“Any new or modified plant would have to incorporate the best available in emission control technology, the modifications provisions of the Clean Air Act come into play when any physical change to a power plant is coupled with an increase in air pollution emissions.”

The landmark case, WEPCO v. EPA, 893 F.2d at 909, is the most important legal decision interpreting the NSR provisions of the Clean Air Act. In WEPCO, the utility contended that a program to replace key generating plant elements qualified as “routine maintenance.” The 7th Circuit Court of Appeals disagreed, stating that the purpose of section 7411 was to “speed up, expand, and intensify the war against air pollution with a view to assuring that the air we breathe throughout the nation is wholesome once again.”

The plain import of section 7411 and the NSR regulations is to require emission control technology to be installed when any change occurs to a power plant that results in any extension of its service life and/or any increase in emissions. In the WEPCO decision, the court opined that “routine maintenance” can not be defined as permitting the replacement and rehabilitation of key elements of a generating plant so as to extend the life expectancy of the facility (893 F2d 911). The court concluded that the replacement of components like superheaters, reheaters, boilers, furnaces, coal pulverizers were non-routine because these units would normally be replaced only once or twice during a plant’s life cycle. WEPCO, 892 F.2d at 912.

The EPA cannot legally change the NSR definition to frustrate the intent of Congress in enacting 42 U.S.C. 7411 or overturn the WEPCO decision. Routine maintenance cannot be defined as permitting the replacement and rehabilitation of key elements of a generating plant so as to extend the life expectancy of the facility or increase the level of proscribed emissions.

The EPA has conceded that since the routine maintenance exclusion was not explicitly created by statute, the exclusion must be narrowly construed. See, In re Tennessee Valley Authority, CAA docket No. 00-6 at page 392. See O’Neal v. Barrow County Bd. Of Commissioners, 980 F.2d 674 (11th Circuit. 1993); North Haven Bd. of Educ. v. Bell, 456 U.S. 512 (1982).

In Alabama Power Co. v. Costle, 636 F.2d 323 at 400, the court noted that the EPA’s legal authority to exempt modification activities from permitting requirements is limited to “de minimis” maintenance activity. This means day-to-day simple repairs like fixing leaky pipes, not major capital programs like replacing boilers, furnaces, coal pulverizers or reheaters.

The EPA itself opined in its September, 2000 Tennessee Valley Authority decision:

“The structure of the Clean Air Act (CAA) reflects that this [plant] grandfathering was envisioned as a temporary rather than permanent status, in that existing plants were required to modernize air pollution controls whenever they were modified in a way that increased emissions. Given that existing sources necessarily deteriorate in performance over time, they ultimately must either shut-down or undergo major overhauls to extend their productive life. Since, in the latter case, such major overhauls would often be subject to the [NSR] requirement to modernize pollution controls, ultimately the environmental protection goals of the CAA would be realized at the vast majority of major sources of air pollution.”

EPA would cripple a key enforcement tool of the CAA if the agency proceeds to adopt these draft regulatory changes to the routine maintenance rule. According to a December 2000 study by the Energy Information Administration (EIA), which analyzed the emission reductions and price implications of NSR enforcement, the NSR enforcement effort, particularly if broadened to address all non-compliant plants would decrease NOx and SO2 emission by 60 to 80%. The EIA analysis also concluded that such pollution reductions would have little to no impact on consumer electricity prices.

In fact, the EPA should consider strengthening enforcement of the NSR program. According to an April 2003 report prepared by a panel of the National Academy of Public Administration (NAPA) at the request of Congress, the EPA does not require prior notice or reporting by power plants planning modifications that may be subject to the current routine maintenance exclusion. Therefore, plants are granted enormous discretion in deciding if said modifications are to be exempt from NSR.

The Panel further states: “although facilities can ask EPA or a state and local air agency for applicability determinations, they have done so quite rarely. As a result, industry has used a ‘don’t ask, don’t tell’ approach to avoid triggering NSR.”(NAPA Panel Report, page 119) Therefore, NSR enforcement cases are in most cases only pursued when the public or state and local government officials report said modifications to the EPA.

Accordingly, the EPA should require mandatory advance determinations of NSR applicability for routine maintenance exclusions and should end the practice of self-reporting of proposed modifications.

The NSR enforcement cases, by forcing the retirement and remediation of dirty coal burning plants with new or reconstructed plants with scrubbers and SCR technology, levels the playing field in the utility industry. If the EPA now permits service life extensions of grandfathered, unremediated plants from their intended life expectancy of 35 to 40 years to double that, it puts those utilities that have complied with the NSR law at a competitive disadvantage. The proposed rule changes would reward utilities that have evaded the plain import and meaning of NSR and in doing so, seriously damaged the environmental and public health values of downwind states.

The NAPA Panel Report concluded the following:

“The issue for utilities is the effect of NSR on the economic life of power generation equipment, particularly older coal-fired units. These mostly grandfathered units have operated much longer than Congress expected, and their longevity seems in part attributable to the economic advantage conferred by their high volumes of grandfathered emissions under NSR. In other words, the older plants can remain economically competitive in part because they do not bear the capital or operating costs of controlling emissions or upgrading their equipment.” (emphasis added, page 99)

The NAPA Panel Report concluded with respect to this agency’s proposed NSR rule changes:

“The Panel believes that simply allowing more modifications to be excluded from NSR will not solve the problems with NSR, nor will it promote environmental protection. Instead, creating wider loopholes will further thwart the intent of Congress for NSR to promote replacing or upgrading old, more polluting equipment.” (NAPA Report, page 141)

The Panel further opined: “The Panel is persuaded that facility owners have extended the economic life of older, dirtier plants and equipment, particularly at coal-fired power plants, to avoid the costs of preventing or controlling pollution through the NSR process.” (NAPA Report, page 114)

The proposed changes would significantly broaden the exclusions from NSR, reduce the number of plant modifications subject to NSR and allow emissions to increase without requiring pollution technology upgrades. The proposed NSR regulatory changes will perpetuate these grandfathered facilities, frustrating the intent of Congress and retarding the construction of new power plants and the implementation of the latest pollution control technologies.

Adoption of these rule changes would severely weaken the Clean Air Act making it increasingly difficult, if not impossible, to make the necessary progress towards eliminating the devastating environmental impacts of air pollution. Strict enforcement of the current NSR program is vitally necessary to improving public health, air and water quality.

The NAPA panel concluded that it was vital to maintain a strong NSR regulatory program, stating:

“NSR provides a mechanism for continuous improvement in emission controls and facility performance for most significant sources of air pollution. Consequently, the Panel -- and Congress -- view NSR as a core regulatory program for attaining and maintaining the health-based ambient air quality standards under the Clean Air Act. Furthermore, the relative environmental benefit of the Clear Skies proposal is a matter of great debate. EPA’s enforcement actions against the utility and refining sectors are starting to impose current BACT on significant portions of those sectors, and the emission reductions achieved by NSR compliance may very well exceed those claimed for Clear Skies.” (NAPA Report, page 85)

For these reasons, we ask you to reject the proposed rule changes and stay the course of your agency’s successful efforts to improve the quality of our nation’s air and atmosphere.

Thank you for this opportunity to testify on the significance of the NSR rule and its importance to the Congressional mandate to reduce the harmful effects of acid deposition and improve the quality of our nation’s air.