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Clean Air Issues: New Source Review (1-25-05)

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On November 22, 2002, the Environmental Protection Agency (EPA) announced changes to the New Source Review (NSR) program. The new NSR regulations increase the ease with which older generating plants can upgrade and expand. Some believe that the current NSR procedures have acted to discourage companies from doing even routine maintenance because of the regulation processes. Environmentalists have voiced disapproval of the changes to the new NSR, pointing out that it will hinder air quality and may undercut enforcement actions currently waiting in the court system that the EPA has taken against power companies. They are also uneasy about increasing industry autonomy, allowing industry to make structural changes without checking the environmental impact.

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The Clean Air Act's (CAA) New Source Review (NSR) requirements have been a major source of contention in recent years, leading to a revision of the rules and numerous lawsuits between industry, the Environmental Protection Agency (EPA), and several states. NSR requires industry to install modern pollution control equipment when a power plant is built or when it makes a major modifications to existing sources.

The controversy stems from the definition of "modification" in the NSR language. Industry generally claims most of its changes are "routine maintenance" rather than a modification, and therefore not applicable to the NSR process. In the 1990's, the EPA began reviewing industry records to determine if their changes were indeed routine. Consequently, the EPA and the Department of Justice have filed suits against 14 electric companies since 1999, claiming major modifications were made in absence of NSR and without installing the best available pollution controls. Of these suits, 13 were filed during the Clinton administration.

The release of President Bush's energy plan in May 2001 prompted a review of NSR rules by the EPA. The review was completed in June 2002 and followed by the EPA enacting four new rules and proposing one new rule on November 22, 2002. The proposed rule has gained the most attention by redefining routine maintenance as any upgrade costing less than 20% of the total cost of the entire unit. The EPA hails the changes, saying they streamline the regulatory process by removing barriers standing in the way of energy efficiency and pollution control projects. Environmentalists, along with key Democrats and a number of states, see the changes as providing a loophole allowing older facilities to make use of this "routine maintenance" for years and years, extending the life of facilities that should be shut down and replaced with newer, safer, technologically superior plants.

In 2003, New York Attorney General Eliot Spitzer led nine Northeastern states - New York, Connecticut, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, Rhode Island, and Vermont in a challenge to the revised NSR rules in the U.S. Court of Appeals for the District of Columbia. On March 6, 2003, the judge denied the petition to delay the NSR rules' immediate implementation in several states and local air districts. Spitzer vowed to appeal.

In an initial victory for environmentalists and Spitzer, the EPA announced on June 30, 2004 that it would reconsider some of the reforms made to NSR. Although the EPA said it was not planning to change the reforms, they opened a 60-day public comment period before issuing a final decision after 180 days.

For additional information see AGI's Update on Clean Air Issues from the 108th Congress and the Congressional Research Service report provided by the National Library for the Environment.

Sources: Environmental Protection Agency, E&E News, Greenwire, Thomas website, The Washington Post, The New York Times, the Los Angeles Times, USA Today and hearing testimony.

Contributed by Emily M. Lehr, AGI Government Affairs Staff, David Millar 2004 AGI/AAPG Fall Intern.

Background section includes material from AGI's Update on the Clean Air Act for the 108th Congress.

Please send any comments or requests for information to AGI Government Affairs Program.

Last updated on January 25, 2005.

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