Court blocks equipment replacement regulation

By Tim Krause, Sargent & Lundy

On Dec. 24, 2003, a federal court blocked implementation of changes to New Source Review (NSR) regulations related to equipment replacement. The regulatory changes would have exempted many refurbishment and upgrade projects from NSR requirements. The regulatory changes were published in the Federal Register on Oct. 27, 2003, and they would have gone into effect on Dec. 26, 2003. The court decision means that the equipment replacement exemption generally will not be available for use until a lawsuit challenging the regulatory changes has been resolved.

NSR is the federal air pollution program that affects most new power plants and “major modifications” to existing plants. Under NSR regulations, a “major modification” is defined as a physical or operational change that results in a significant net increase in the emissions of a regulated pollutant. Such modifications trigger NSR pre-construction permitting and emission control requirements.

However, NSR regulations also provide that “routine maintenance, repair and replacement” (RMRR) activities are exempt from NSR requirements. Historically, the U.S. Environmental Protection Agency has applied the RMRR exemption on a case-by-case basis, and the interpretation of what activities are “routine” has become extremely controversial. The regulatory changes published on Oct. 27, attempted to give plant owners more certainty by adding an equipment replacement provision to the RMRR exemption.

Under the new provision, equipment replacement would qualify as RMRR provided that: (1) the new equipment is identical or functionally equivalent to the equipment being replaced; (2) the cost of the new equipment is less than 20 percent of the replacement value of the generating unit; (3) the replacement does not change the unit’s basic design parameters; and (4) the unit continues to meet all applicable emission limits and operational requirements.

The equipment replacement provision was immediately challenged in court by a group of 12 states, several cities, and several environmental groups. They argued that the provision would weaken the Clean Air Act by allowing older power plants to emit more pollution. The recent court decision found that the challengers had “demonstrated the irreparable harm and likelihood of success on the merits required for the issuance of a stay.” Final resolution of the court case could require several months.

Krause supervises Sargent & Lundy’s environmental permitting group. He can be reached at 312-269-6616 or at timothy.p.krause@

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