TESTIMONY OF
JEFFREY HOLMSTEAD
ASSISTANT ADMINISTRATOR
OFFICE OF AIR AND RADIATION
U.S. ENVIRONMENTAL
PROTECTION AGENCY
BEFORE THE
COMMITTEE ON ENVIRONMENT
AND PUBLIC WORKS
AND THE COMMITTEE ON
JUDICIARY
U.S. SENATE
JULY 16, 2002
Good morning Chairmen and members of the committees. Thank you for the opportunity to talk with you about the New Source Review (NSR) program under the Clean Air Act and the proposed improvements we have announced.
There has been longstanding agreement among
virtually all interested parties that the NSR program can and should be
improved. For well over ten years,
representatives of industry, state and local agencies, and environmental groups
have worked closely with EPA to find ways to make the program work better. In 1996, EPA proposed rules to amend several
key elements of the program. In 1998,
EPA sought additional public input on related issues. Since 1996, EPA has had countless discussions with stakeholders
and has invested substantial resources in an effort to develop final revisions
to the program. Between the 1996
proposal and January 2001, EPA held two public hearings and more than 50
stakeholder meetings. Environmental
groups, industry, and state, local and federal agency representatives
participated in these many discussions.
Over 600 detailed comments were submitted to EPA between 1992 and 2001.
In 2001, the National Energy Policy
Development Group asked EPA to investigate the impact of NSR on investment in
new utility and refinery generation capacity, energy efficiency and
environmental protection. During this
review, the Agency met with more than 100 groups, held four public meetings
around the country, and received more than 130,000 written comments. EPA issued a report to President Bush on
June 13 in which we concluded that the NSR program does, in fact, adversely
affect or discourage some projects at existing facilities that would maintain
or improve reliability, efficiency, and safety of existing energy capacity. This report lends strong support to the
decade-long effort to improve the NSR program.
We now believe that it is time to finish the
task of improving and reforming the NSR program. At the same time that we submitted our report to the President,
we published a set of recommended reforms that we intend to make to the NSR
program. These reforms are designed to
remove barriers to environmentally beneficial projects, provide incentives for
companies to install good controls and reduce actual emissions, specify when
NSR applies, and streamline and simplify several key NSR provisions. We plan to move ahead with this rulemaking
effort in the very near future. We look
forward to working with you during this important effort.
Background
The NSR program is by no means the primary
regulatory tool to address air pollution from existing sources. The Clean Air Act provides authority for
several other public health-driven and visibility-related control efforts: for
example, the National Ambient Air Quality Standards (NAAQS) Program implemented
through enforceable State Implementation Plans, the NOx SIP Call, the Acid Rain
Program, the Regional Haze Program, the National Emissions Standards for
Hazardous Air Pollutants (NESHAP) program, etc. Thus, while NSR was designed by Congress to focus particularly on
sources that are newly constructed or that make major modifications, Congress
provided numerous other tools for assuring that emissions from existing sources
are adequately controlled.
The NSR provisions of the Clean Air Act
combine air quality planning, air pollution technology requirements, and
stakeholder participation. NSR is a
preconstruction permitting program. If
new construction or making a modification will increase emissions by an amount
large enough to trigger NSR requirements, then the source must obtain a permit
before it can begin construction. To
obtain the permit, the owners must meet several requirements, including
applying state-of-the-art control technology.
States are key partners in the program.
Under the Act, States have the primary responsibility for issuing
permits, and they can customize their NSR programs within the limits of EPA
regulations. EPA’s role has been
approving State programs and assuring consistency with EPA rules, the State’s
implementation plan, and the Clean Air Act.
EPA also issues permits where there is no approved NSR program, such as
on some Tribal lands.
The NSR permit program for major sources has
two different components -- one for areas with air quality problems, and the
other for areas where the air is cleaner.
Under the Clean Air Act, geographic areas, such as counties or
metropolitan statistical areas, are designated as “attainment” or “nonattainment”
for the NAAQS, which are the air quality standards used to protect human health
and the environment. Preconstruction
permits for sources located in attainment or unclassifiable areas are called
Prevention of Significant Deterioration (PSD) permits and those for sources located
in nonattainment areas are called nonattainment NSR permits.
A major difference in the two programs is
that the control technology requirement is more stringent in nonattainment
areas and is called the Lowest Achievable Emission Rate (LAER). In attainment areas, a source must apply
Best Available Control Technology (BACT).
The statute allows consideration of cost in determining BACT.
Also, in keeping with the goal of progress
toward attaining the NAAQS, sources in nonattainment areas must always provide
or purchase “offsets” -- decreases in emissions which compensate for the
increases from the new source or modification.
In attainment areas, PSD sources typically do not need to obtain
offsets. However, under the PSD provisions,
facilities are required to undertake an air quality modeling analysis of the
impact of the construction project. If
the analysis finds that the project contributes to ambient air pollution that
exceeds allowable levels, the facility must take steps to reduce emissions and
mitigate this impact. In addition to
ensuring compliance with the NAAQS, States track and control emissions of air
pollution by calculating the maximum increase in concentration allowed to occur
above an established background level -- that change in concentration is known
as a PSD increment.
Another key requirement is the provision in
the PSD program to protect pristine areas like national parks or wilderness
areas, also referred to as Class I areas.
If a source constructs or modifies in a way that could affect a Class I
area, the law allows a federal land manager, for example, a National Park
Service superintendent, an opportunity to review the permit and the air quality
analysis to assure that relevant factors associated with the protection of
national parks and wilderness areas are taken into consideration, and, if
necessary, that harmful effects are mitigated.
Current Status of the NSR Program
Let me give you a few statistics about the
NSR program to put things in perspective.
Estimates based on our most recent data indicate that typically more
than 250 facilities apply for a PSD or nonattainment NSR permit annually. The nonattainment NSR and PSD programs are
designed to focus on changes to facilities that have a major impact on air
quality.
EPA has worked for over 10 years to make
changes to the NSR program to provide more flexibility and certainty for
industry while ensuring environmental protection. In 1992, EPA issued a regulation addressing issues regarding NSR
at electric utility steam generating units making major modifications. This is referred to as the “WEPCO”
rule. And in 1996, EPA proposed to make
changes to the existing NSR program that would significantly streamline and
simplify the program. In 1998, EPA
issued a notice of availability where we asked for additional public comment on
several issues.
EPA held public hearings and more than 50
stakeholder meetings on the 1996 proposed rules and related issues. Environmental groups, industry, and State,
local and Federal agency representatives variously participated in these
discussions. Despite widespread
acknowledgment of the need for reforms, EPA has not yet finalized these
proposed regulations.
In May 2001, the President issued the
National Energy Policy. The Policy
included numerous recommendations for action, including a recommendation that
the EPA Administrator, in consultation with the Secretary of Energy and other
relevant agencies, review New Source Review regulations, including
administrative interpretation and implementation. The recommendation requested
EPA to issue a report to the President on the impact of the regulations on
investment in new utility and refinery generation capacity, energy efficiency,
and environmental protection.
In June 2001, EPA issued a background paper
giving an overview of the NSR program.
EPA solicited public comments on the background paper and other
information relevant to New Source Review.
In developing the final report responding to the National Energy Policy
recommendation, EPA met with more than 100 industry, environmental, and
consumer groups, and public officials, held public meetings around the country,
and evaluated more than 130,000 written comments.
On June 13, 2002, EPA submitted the final report
on NSR to President Bush. At that time,
EPA also released a set of recommended reforms to the program. With regard to the energy sector, EPA found
that the NSR program has not significantly impeded investment in new power
plants or refineries. For the utility
industry, this is evidenced by significant recent and future planned investment
in new power plants. Lack of
construction of new greenfield refineries is generally attributed to economic
reasons and environmental or other permitting restrictions unrelated to NSR.
With respect to the maintenance and operation
of existing utility generation capacity, there is more evidence of adverse
impacts from NSR. EPA’s review found
that uncertainty about the exemption for routine activities has resulted in the
delay or cancellation of some projects
that would maintain or improve reliability, efficiency and safety of existing
energy capacity. Reforms to NSR will
remove barriers to pollution prevention projects, energy efficiency
improvements, and investments in new technologies and modernization of
facilities.
EPA announced that it intends to take a
series of actions to improve the NSR program, promote energy efficiency and pollution
prevention, and enhance energy security while encouraging emissions reductions.
These improvements include finalizing NSR
rule changes that were proposed in 1996 and recommending some new changes to
the rules. The 1996 recommendations and
subsequent notice of availability were subject to extensive technical review
and public comment over the past six years.
EPA will conduct notice-and-comment rulemaking for changes not proposed
in 1996.
Our actions are completely consistent with
the strong public health protection provided by the Clean Air Act. The key provisions of the Clean Air Act
include several programs designed to protect human health and the environment
from the harmful effects of air pollution and all of them remain in place. Moreover, the changes that we make to the
NSR program will be prospective in nature, and EPA will continue to vigorously
pursue its current enforcement actions.
Accordingly, EPA does not intend for its future rulemaking or proposed
changes to be used in, or have any impact on, current litigation.
Congress established the New Source Review
Program in order to maintain or improve air quality while still providing for
economic growth. The reforms announced last month will improve the program to
ensure that it is meeting these goals.
These reforms will:
·
Provide greater
assurance about which activities are covered by the NSR program;
·
Remove barriers
to environmentally beneficial projects;
·
Provide
incentives for industries to improve environmental performance when they make
changes to their facilities; and
·
Maintain
provisions of NSR and other Clean Air Act programs that protect air quality.
The following NSR reforms, all of which were
originally proposed in 1996, have been subject to extensive technical review
and public comment:
$
Pollution
Control and Prevention Projects: To encourage pollution control and prevention, EPA will create a
simplified process for companies that undertake environmentally beneficial
projects. NSR can discourage investments in certain pollution control and
prevention projects, even if they are environmentally beneficial.
$
Plantwide
Applicability Limits (PALs):
To provide facilities with greater flexibility to modernize their operations
without increasing air pollution, a facility would agree to operate within
strict sitenwide emissions caps called PALs.
PALs provide clarity, certainty and superior environmental protection.
$
Clean Unit
Provision: To encourage the installation of statenofnthenart
air pollution controls, EPA will give plants that install “clean units”
operational flexibility if they continue to operate within permitted limits.
Clean units must have an NSR permit or other regulatory limit that requires the
use of the best air pollution control technologies.
$
Calculating
Emissions Increases and Establishing Actual Emissions Baseline: Currently, the NSR program estimates
emissions increases based upon what a plant would emit if operated 24 hours a
day, year‑round. This can make it difficult to make certain modest
changes in a facility without triggering NSR, even if those changes will not
actually increase emissions. This
common‑sense reform will require an evaluation of how much a facility
will actually emit after the proposed change.
Also, to more accurately measure actual emissions, account for
variations in business cycles, and clarify what may be a “more representative”
period, facilities will be allowed to use any consecutive 24‑month period
in the previous decade as a baseline, as long as all current control
requirements are taken into account.
EPA also intends to propose three new reforms
that will go through the full rulemaking process, including public comment,
before they are finalized. These include:
C
Routine
Maintenance, Repair and Replacement: To increase environmental protection and promote the implementation of
routine repair and replacement projects, EPA will propose a new definition of “routine”
repairs. NSR excludes repairs and
maintenance activities that are “routine”, but a multi-factored case-by-case
determination must currently be made regarding what repairs meet that standard.
This has deterred some companies from conducting certain repairs because they
are not sure whether they would need to go through NSR. EPA is proposing guidelines for particular
industries to more clearly establish what activities meet this standard.
C
Debottlenecking: EPA
is proposing a rule to specify how NSR will apply when a company modifies one
part of a facility in such a way that throughput in other parts of the facility
increases (i.e., implements a “debottlenecking” project). Under the current rules, determining whether
NSR applies to such complex projects is difficult and can be time consuming.
C
Aggregation: Currently, when multiple projects are implemented in a short period of
time, a detailed analysis must be performed to determine whether the projects
should be treated separately or together (i.e., “aggregated”) under NSR. EPA’s proposal will establish two criteria
that will guide this determination.
It is important to note that we are
undertaking changes in the NSR program at the same time as we are moving
forward on the President’s historic Clear Skies Initiative. The Clear Skies Initiative is the most
important new clean air initiative in a generation, and will cut power plant
emissions of three of the worst air pollutants - nitrogen oxides, sulfur
dioxide, and mercury - by 70 percent.
The initiative will improve air quality and public health, protect
wildlife, habitats and ecosystems. By
using a proven, market-based approach, Clear Skies will make these reductions
further, faster, cheaper, and with more certainty than the current Clear Air
Act. In the next decade alone, Clear
Skies will remove 35 million more tons of air pollution than the current Clean
Air Act.
In summary, the NSR reforms will remove the
obstacles to environmentally beneficial projects, simplify NSR requirements,
encourage emissions reductions, promote pollution prevention, provide
incentives for energy efficient improvements, and help assure worker and plant
safety. Overall, our reforms will improve the program so that industry will be
able to make improvements to their plants that will result in greater
environmental protection without needing to go through a lengthy permitting
process. Our actions are completely
consistent with key provisions of the Clean Air Act designed to protect human
health and the environment from the harmful effects of air pollution.