New source review changes

By Ken Snell, Paul Farber, and Tim Krause, Sargent & Lundy

Jan. 7, 2003 — In November 2002, the U.S. Environmental Protection Agency (EPA) released both proposed and final changes to New Source Review (NSR), the major air pollution permitting program that applies to most power plant projects. It appears that the changes will not significantly affect new plants, but will make it easier for existing plants to perform maintenance and improvement projects without triggering new pollution control requirements.

The NSR changes fall into two categories:

“- Provisions for baseline actual emissions, projected future emission increases, plantwide applicability limits, clean unit exclusions, and pollution control projects were proposed in 1996 and have now been finalized. These changes will become effective 60 days after the final regulations are published in the Federal Register (published 12/31/02).

“- New procedures for determining whether projects qualify as routine maintenance repair and replacement are being proposed for public comment. Comments will be due 60 days after the proposed regulations are published in the Federal Register. After the comment period closes, EPA will have to resolve all comments and then publish final regulations. Therefore, it probably will be 1 to 2 years before these changes are in effect.

Baseline actual emissions and future emission increases

NSR requirements apply to new facilities with potential pollution emissions above the “major source” thresholds established in federal regulations, and NSR also applies to modifications of existing major sources that result in a significant net increase in annual emissions. To determine whether modification of an existing facility will trigger NSR, it is necessary to define the existing baseline emissions and the potential future emissions.

The final NSR changes define baseline emissions as the actual annual emissions from any consecutive 24-month period within the 5 years immediately preceding the plant modification, and they establish an actual-to-projected-actual test for emission increases. Under this methodology, the baseline emissions before the modification are compared to the projected actual emissions after the modification to determine the net change in emissions.

With respect to electric utility steam generating units (EUSGUs) this change in the regulations is largely a codification of EPA’s current policy for calculating baseline emissions and net changes. In 1992 EPA created a special rule (commonly referred to as the “WEPCO rule”) for physical and operational changes at EUSGUs. In that rule, EPA adopted an actual-to-future-actual test for EUSGUs, similar to the methodology specified in the new NSR regulations.

Under the new regulations, EUSGUs can choose to compare their baseline actual emissions to their post-modification projected actual emissions or their post-modification potential emissions. EUSGUs that use projected actual emissions will be required to send a copy of the projections to their permitting authority before beginning actual construction. In addition, these facilities will be required to report actual post-modification emissions to their permitting authority each year for a period of 5 years. EUSGUs that use potential emissions are not required to track or report their actual post-modification emissions.

Plantwide applicability limitations

Plantwide applicability limitations (PALs) are a new option designed to provide facilities with greater flexibility to make modifications without triggering NSR review. Under this program, facilities that agree to keep their emissions below a plantwide actual emissions cap can modify the facility (or individual emissions units) without triggering NSR review. In return for this flexibility, participating facilities will be required to monitor emissions from all emissions units included under the PAL. This program appears to offer greater flexibility and regulatory certainty to facilities willing to undertake the necessary record keeping, monitoring, and reporting.

Clean unit provisions

The clean unit provisions are a new type of NSR applicability test for facilities designated as clean units. Clean units include facilities that have gone through NSR review and installed emission controls representing best available control technology (BACT) or lowest achievable emission rate (LAER). Facilities that have not gone through NSR review can still qualify for Clean Unit status if they demonstrate to their permitting authority that their emission control levels are comparable to BACT or LAER.

The owner/operator of a clean unit can modify the unit without triggering an additional NSR review if: (1) the project does not cause the need for a change in the emission limits or work practice requirements in the unit’s NSR permit; and (2) the project would not alter any physical or operational characteristics that formed the basis for the unit’s BACT or LAER determination.

Pollution control projects

The existing NSR regulations included an exemption for pollution control projects, as long as they were considered environmentally beneficial. To encourage pollution control and prevention, the new regulations contain a list of environmentally beneficial technologies that qualify as pollution control projects for all types of emission sources. A pollution control project is not subject to the NSR major modification requirements.

Routine maintenance repair and replacement

Under the existing NSR regulations, a plant improvement project is not subject to the NSR major modification requirements if it qualifies as “routine maintenance repair and replacement” (RMRR). However, there is no definition of RMRR, and case-by-case determinations of whether a project is “routine” have become very complicated and very controversial.

The proposed NSR regulations indicate that EPA is considering establishing certain categories of projects that would automatically be considered RMRR. The proposal asks for comments on whether either or both of the following categories should be established as RMRR:

“- Activities that fit within an annual maintenance, repair and replacement allowance.
“- Equipment replacements that meet defined replacement provision criteria.

In the first category, certain activities at a facility would be excluded from NSR provided that the total costs do not exceed an annual maintenance, repair and replacement allowance. Under this approach, a calendar year maintenance, repair and replacement allowance would be established for each facility (EPA is seeking comments on a longer multi-year allowance).

A facility would sum the costs of the relevant activities performed at the facility during the fiscal or calendar year (from the least expensive to the most expensive) to get a yearly cost. For activities taking more than one year to complete, costs associated with those activities would be included in the cost calculations for the year that the costs were incurred. If the total costs for all activities undertaken for these purposes came within the annual maintenance, repair and replacement allowance, these activities would all be considered RMRR.

If the total cost of all activities exceeded the annual maintenance, repair and replacement allowance, the facility would subtract activities from the total yearly cost, starting with the most expensive activity, until the remainder is less than or equal to the allowance. The facility would then evaluate on a case-by-case basis any activities that did not fit within the allowance and that are not otherwise excluded, in order to determine whether they are RMRR. If the facility concluded that an activity was not RMRR, it would then have to determine whether the activity constitutes a “major modification” requiring NSR review.

The annual maintenance, repair and replacement allowance would be equal to the replacement cost of the facility multiplied by a specified maintenance, repair and replacement percentage, which EPA would determine on an industry-specific basis. EPA is considering using the IRS “Annual Asset Guideline Repair Allowance Percentage”, which for an electric utility is currently 5 percent.

The other RMRR category being considered by EPA is replacement of existing equipment with equipment that serves the same function and does not alter the basic design parameters of the unit (such as, maximum heat input and fuel consumption). Activities of this type would automatically qualify for RMRR treatment provided that the cost of the replacement equipment does not exceed a certain percentage of the cost of the unit to which the equipment belongs. EPA is asking for comments on what this percentage should be.

Activities that do not fall within either of the proposed categories still could qualify as RMRR under a case-by-case test similar to the existing provisions.

Editor’s note: Since this article was written, nine Northeastern U.S. states (Connecticut, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont) filed a lawsuit to block the new rules, claiming that the NSR is “gutting” the Clean Air Act.

About the Authors:

Ken Snell is an environmental engineer and attorney with more than 20 years of experience in the fields of environmental compliance, controls and permitting. He is currently a project associate in Sargent & Lundy’s Environmental Services Division. He can be reached at 312-269-2318 or at

Paul Farber is a chemical/environmental engineer with more than 25 years of experience in emission control systems and regulations. He is currently a project associate in Sargent & Lundy’s Environmental Services Division. He can be reached at 312-269-2261 or at

Tim Krause is an environmental biologist with more than 25 years of experience in the power industry. He currently supervises Sargent & Lundy’s environmental permitting group. He can be reached at 312-269-6616 or at

Editor’s note: This article is from the upcoming January 2003 issue of Electric Light & Power magazine.

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The Clarion Energy Content Team is made up of editors from various publications, including POWERGRID International, Power Engineering, Renewable Energy World, Hydro Review, Smart Energy International, and Power Engineering International. Contact the content lead for this publication at

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