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A description of the existing requirements for new source review

  • Regulated industries complain that the state of the law is in flux, forcing them to make business decisions in an atmosphere of uncertainty;
  • Investigations were started at over 100 plants, and several cases were referred to the Justice Department for prosecution.

The Issue How should air pollution sources that were grandfathered under the Clean Air Act of 1970 be regulated when they are modified? One of the important innovations in the modern Clean Air Act of 1970 CAA or the Act was the decision to regulate air pollution sources directly. However, recognizing that companies had already invested capital in existing sources, and aware of the cost of retrofitting these sources with modern pollution controls, Congress did not require owners of existing stationary sources to install air pollution control technology until these plants were modified or upgraded in a way that would increase air pollution.

A determination of whether a physical change required the installation of the pollution control equipment was made on a case-by-case basis. Despite the expectation that all grandfathered sources would eventually cease operation or be required to upgrade, many older sources continued in use without pollution abatement equipment for a very long time.

The longevity of these old plants may be traced to variability of enforcement at the EPA, including its expansive reading of the RMRR exception.

  1. CPR supports consistency in enforcement but rejects efforts to weaken NSR under the guise of creating consistency or clarity.
  2. Despite the expectation that all grandfathered sources would eventually cease operation or be required to upgrade, many older sources continued in use without pollution abatement equipment for a very long time.
  3. Permitting considerations going forward.
  4. Moreover, the proposed regulations posited that an existing source could avoid control requirements by improving efficiency of operation, which meant that these sources could continue in perpetuity without ever upgrading pollution control equipment.
  5. What People are Fighting About What's at Stake Whether grandfathered plants should be required to install state-off-art pollution control across-the-board, as recommended by the National Academy of Public Administration. In addition, the Clear Skies Initiative also proposed a cap and trade program for Mercury, which had been designated a hazardous air pollutant under the Clinton Administration.

These sources, primarily coal-fired electric power plants and petroleum refineries, continue to cause a disproportionate share of air pollution in most regions of the country, exacerbating health problems and limiting future economic growth.

In the late 1990s, the Clinton administration began a concerted effort to enforce the new source review provisions against any existing sources that were upgrading illegally. Investigations were started at over 100 plants, and several cases were referred to the Justice Department for prosecution. What People are Fighting About What's at Stake Whether grandfathered plants should be required to install state-off-art pollution control across-the-board, as recommended by the National Academy of Public Administration.

Bush stated in 2000 that he would bring relief to those industries most affected by the new source review procedures.

EPA Continues Reforms to NSR and Other Clean Air Act Permitting Programs

This proposal, called the Clear Skies Initiative, would eliminate direct pollution control requirements on any major source of sulfur dioxide and nitrogen oxides, and would replace them with a cap and trade system.

Under such a system, the total amount of these pollutants would be limited and sources could decide themselves how to best meet these limitations, either through installing or using control equipment or buying pollution credits from other sources.

In addition, the Clear Skies Initiative also proposed a cap and trade program for Mercury, which had been designated a hazardous air pollutant under the Clinton Administration. The Clear Skies Initiative has been criticized in many circles as not doing enough to reverse air pollution. Several studies indicate that it would not reduce air pollution as quickly as would full enforcement of the NSR provisions. Additionally, many states opposed the measure because they believed it would make it harder for them to clean up their air locally.

Last, strong Senate opposition was based on concern that its pollution control requirements were too weak and that the legislation omits any provisions to address the control of global warming gases, a proposition refused by the supporters of Clear Skies. The administration proposed rules which would seek to specify when new sources must upgrade.

Though these rules provided brighter lines to govern when a modified source must upgrade pollution control equipment, it appeared that the rule would allow sources to undertake far more extensive modifications without upgrading than had previously been allowed. Specifically, the rules did not mandate that pollution control must occur when a physical modification increases the amount of a pollutant by the sources, in direct contravention to the statutory requirement in the Clean Air Act.

Moreover, the proposed regulations posited that an existing source could avoid control requirements by improving efficiency of operation, which meant that these sources could continue in perpetuity without ever upgrading pollution control equipment. This outcome is exactly the opposite of what Congress envisioned when it passed the CAA. Many in the energy industry support these proposed rules because it would allow them to modernize their existing pollution sources without having to spend money on increasing pollution control.

A description of the existing requirements for new source review

But while it may benefit the bottom line of the energy industry, there is evidence that the rules would allow air quality far worse than would exist if New Source Review were actively enforced. Reviving the New Source Review Program. In addition to criticizing the proposed reforms, the NAPA report calls for a fundamental reform of NSR, including ending grandfathering of older sources, creating a performance-based system to require facilities to reduce air pollution, and adopting NSR reforms which integrate other protections of the Clean Air Act and which anticipate future environmental challenges.

  • A Progressive Perspective The problems that exist with the current approach to New Source Review arise largely because existing sources have pushed to exempt alterations well beyond what the CAA envisioned, Relentless lobbying and negotiation have taken their toll, and EPA has allowed many modifications to occur without requiring an upgrade of pollution control equipment;
  • As recommended by the National Academy of Public Administration, grandfathering of all plants built before 1970 should be repealed altogether;
  • In addition to criticizing the proposed reforms, the NAPA report calls for a fundamental reform of NSR, including ending grandfathering of older sources, creating a performance-based system to require facilities to reduce air pollution, and adopting NSR reforms which integrate other protections of the Clean Air Act and which anticipate future environmental challenges;
  • The longevity of these old plants may be traced to variability of enforcement at the EPA, including its expansive reading of the RMRR exception;;
  • Permitting considerations going forward.

The regulations were challenged in federal court in 2002 and 2003 as a violation of the Clean Air Act. To this day, the Bush administration continues to support these administrative changes and continues to propose new rules that will weaken NSR.

A Progressive Perspective The problems that exist with the current approach to New Source Review arise largely because existing sources have pushed to exempt alterations well beyond what the CAA envisioned, Relentless lobbying and negotiation have taken their toll, and EPA has allowed many modifications to occur without requiring an upgrade of pollution control equipment.

The Center for Progressive Reform

Regulated industries complain that the state of the law is in flux, forcing them to make business decisions in an atmosphere of uncertainty. As recommended by the National Academy of Public Administration, grandfathering of all plants built before 1970 should be repealed altogether. Since all of the existing plants have already operated far beyond the life expectancy originally envisioned by Congress when it granted the exemption, the owners of such plants have no reasonable expectation that they can continue in operation without pollution controls indefinitely.

  • Several studies indicate that it would not reduce air pollution as quickly as would full enforcement of the NSR provisions;
  • Moreover, the proposed regulations posited that an existing source could avoid control requirements by improving efficiency of operation, which meant that these sources could continue in perpetuity without ever upgrading pollution control equipment.

CPR supports consistency in enforcement but rejects efforts to weaken NSR under the guise of creating consistency or clarity. These grandfathered plants continue to contribute to high pollution levels in almost all jurisdictions, making it harder to improve air quality and putting a higher economic burden on new pollution sources and economic growth.

This is both unfair and inefficient. If all plants were on an equal playing field, some suggested pollutant trading systems could be more fairly administered, and far more significant reductions would result than those envisioned in the Clear Skies proposal. If retrofitting is too costly, operators should make the business decision to close them and build new sources to replace them.

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Any sunk costs in the original construction of the grandfathered sources have been accounted for, recovered, and amortized. There is no need to enhance profitability of these plants at the expense of public health.

  1. The application of New Source Review to modifications of existing pollution sources has caused uncertainty, produced inconsistent enforcement, and created an uneven playing field for electric utilities. Permitting considerations going forward.
  2. The regulations were challenged in federal court in 2002 and 2003 as a violation of the Clean Air Act.
  3. As a result, sources undertaking projects having a net emissions decrease can seek to rely on that decrease for purposes of NSR permitting.
  4. If all plants were on an equal playing field, some suggested pollutant trading systems could be more fairly administered, and far more significant reductions would result than those envisioned in the Clear Skies proposal.
  5. Since all of the existing plants have already operated far beyond the life expectancy originally envisioned by Congress when it granted the exemption, the owners of such plants have no reasonable expectation that they can continue in operation without pollution controls indefinitely. In addition, the Clear Skies Initiative also proposed a cap and trade program for Mercury, which had been designated a hazardous air pollutant under the Clinton Administration.

Moreover, any economic shocks could be eliminated by having a suitable phase-in period, such as five years. The application of New Source Review to modifications of existing pollution sources has caused uncertainty, produced inconsistent enforcement, and created an uneven playing field for electric utilities. The continued operation of the old plants has led to much higher levels of pollution than necessary or tolerable from a public health point of view.

The answer to this problem is not to make it easier to avoid New Source Review and let grandfathered pollution sources continue in perpetuity, as the Bush Administration has proposed. Instead, grandfathering should be eliminated and all coal-fired power plants brought up to modern pollution control standards.