EPA
Docket Center (Air Docket)
U.S.
Environmental Protection Agency, 1301 Constitution Ave., N.W., Room: B108,
Mail
code: 6102T
Washington,
DC, 20004
Attention
Docket ID No. A-2002-04
Prevention
of Significant Deterioration (PSD) and Non-attainment New Source review (NSR):
Routine Maintenance, Repair and Replacement: Proposed Rule
Environment
Canada
May
1, 2003
Filed
by
Environment
Canada
on
May
1, 2003
Introduction
Environment Canada is pleased to submit
comments in response to the U.S. Environmental Protection Agency (EPA) proposal
in the Federal Register notice of December 31, 2002 Docket No A-2002-04
entitled "Prevention of Significant Deterioration (PSD) and Non-attainment New
Source Review (NSR): Routine Maintenance, Repair and Replacement".
Context
In 1991, Canada and the U.S. signed the Air
Quality Agreement (AQA), which codified the principle that countries are
responsible for the effects of their air pollution on one another, and
confirmed the commitment of Canada and the U.S. to consult and develop the
means to deal with any existing transboundary air pollution problems. Since
1991, through the bilateral mechanism of the Canada-U.S. Air Quality Committee,
cooperation and collaboration on matters of interest and concern to both Canada
and the U.S. has been extensive and effective.
Environment Canada has reviewed the NSR
reforms and this proposal with interest for two reasons. First, there are
lessons to learn from the U.S. experience. In Canada, principles of pollution
prevention, continuous improvement and keeping clean areas clean are part of
the Canada-Wide Standards agreed to by Canadian governments in 2000. "Keeping
clean areas clean" recognizes that polluting "up to a limit" is not acceptable
and that the best strategy to avoid future problems is to keep clean areas
clean. Continuous improvement applies in areas with ambient air quality levels
below the levels of the standards but still above the levels associated with
observable health effects. Canadian jurisdictions are encouraged to take
remedial and preventative actions to reduce emissions from anthropogenic
sources to the extent practicable. A multi-stakeholder working group has been
established to develop a national Guidance Document on Continuous Improvement
and Keeping Clean Areas Clean for PM and Ozone.
The second reason for Environment Canada's
interest in the NSR program stems from a concern about "grandfathered"
industrial plants and power plants and the impact of changes to the NSR program
on the reduction of their emissions.
Grandfathered Coal-fired Power Plants
It is our
understanding that there are large disparities in pollution levels among U.S.
power plants operating today stemming largely from a provision in the Clean Air
Act that exempts, or "grandfathers," older plants from meeting the same
emission standards that must be met by modern plants. We know that in 1970,
Congress exempted already existing power plants from the new, more stringent
emissions standards when it passed the Clean Air Act. It did so with the
expectation that the useful life of the typical power plant was 30 years and
that these "grandfathered" plants would be retired and replaced with cleaner
burning plants.
Our
understanding is that shifts in technology and economics have resulted in many
of the grandfathered power plants continuing to operate well beyond their
30-year projected lives, free of emission standards imposed on modern plants.
In fact, we are of the impression that a rough estimate of fossil capacity in
the U.S. that is "grandfathered" or exempt from NSR and New Source Performance
Standards (NSPS) is approximately 85 per cent.
The NSR program is a powerful tool. The fact that
EPA, in recent years, has filed NSR "enforcement" lawsuits against a substantial
number of "grandfathered" industrial plants, including power plants, is of
interest to Environment Canada. In particular, we noted the announcement by
the U.S. Attorney General, on January 15, 2002 that the EPA's NSR enforcement
actions against certain facilities, such as power plants and oil refineries,
were consistent with the Clean Air Act and that ongoing prosecutions would
proceed. Clearly, while the EPA may have had concerns about the enforcement of
the provisions of the NSR program, when it is enforced, it can be a significant
instrument through which to affect emissions from existing facilities.
The locations of the plants that were
"targeted" by EPA through the NSR "enforcement" lawsuits and other actions have
also been of considerable interest to Environment Canada. Many, if not most of
the plants appear to be located in the Midwestern states which comprises an
area of the United States from which transboundary smog and acid rain pollution
affecting Canadians living in eastern Canada originates.
US EPA PROPOSED RULING
Generally speaking, as Environment Canada
understands the NSR program, the Clean Air Act requires that if a large
facility is modified such that its emissions increase significantly, it must
obtain a preconstruction permit specifying the state-of-the-art pollution
control equipment it must use. But not every modification of an
existing facility that impacts emissions requires preconstruction review.
Instead, an exception exists for "routine maintenance, repair and replacement."
We understand that the implementation and definition of this exception has, in
fact, been an important issue in EPA's NSR "enforcement" actions.
The December 31, 2002 NSR proposal
addresses the routine maintenance, repair and replacement issue. The proposal
is for two categories of activities that will be considered routine
maintenance, repair and replacement (RMRR) activities: 1) activities within an
annual maintenance, repair and replacement allowance, and 2) replacements that
meet a set of EPA criteria for the replacement of existing equipment.
Under the proposal, when an activity falls
within either of these categories, it would be considered RMRR and would be
excluded from NSR. When an activity did not fall within one of these
categories, then it still could qualify as routine maintenance, repair and
replacement under a case-by-case test.
PROPOSED PROVISIONS
Routine Maintenance, Repair and
Replacement (RMRR) Allowance
The proposed rulemaking would "allow
certain activities engaged in to promote the safe, reliable and efficient
operation of a facility - that is, those that involve relatively small capital
expenditures compared with the replacement cost of the facility - to be
excluded from NSR provided that total costs did not exceed the annual
maintenance, repair and replacement allowance." The proposed approach would
establish for each stationary source an allowance for maintenance, repair and
replacement - whether annually or in a multi-year format will depend on the
results of the comments received by EPA.
Essentially, if total costs for relevant
activities are less than the RMRR allowance, then the activities would be
exempt from NSR. If total costs, however, exceed the allowance, then the owner
or operator would have to deduct the costs of the projects, in decreasing order
of expense, until total relevant expenditures fell within the allowance. The
large projects that were not covered by the annual allowance might still
qualify as RMRR under the traditional case-by-case approach. But any of the
most expensive changes that failed the case-by-case test would be considered
"major modifications" subject to NSR only if they were to result in significant
net emissions increases.
EPA has suggested that the allowance would
be an industry specific cost-threshold calculation, the basis for which, EPA is
requesting comment.
The EPA is proposing to exclude the
following from the use of the annual allowance:
-
Construction of new "process units or the
replacement of an entire process unit;
-
Any change that would result in an increase in
the source's maximum achievable hourly emissions rate of any regulated NSR
pollutant or in the emission of any regulated NSR pollutant not previously
emitted by the stationary source.
Questions and comments:
The starting premise underlying the
following questions and comments is that EPA's revisions to NSR and the RMRR
rule revisions are intended to fulfill the basic goals of improving air quality
and minimizing emissions that Congress wrote into the Clean Air Act. The first
question, therefore, relates to the RMRR proposal preambular statement that
"none of the proposed provisions related to the RMRR exclusion will have a
significant impact on emissions from the power sector." If the modifications
to the RMRR rule will result in holding the line on emissions from the power
sector, will this result be sufficient or would emission reductions be a more
effective response in terms of the overall goals for the NSR program? Where
Canada is concerned, emission reductions from the power sector in the United
States will be essential as we move forward to meet the Canada Wide Standards
in regions of the country where there is significant transboundary flow. One
way to achieve these needed reductions might be to tighten up the RMRR rule
revisions.
The second
comment relates to the RMRR proposal to remove the "routine" from the RMRR
exemption. While the existing RMRR rule allows an exemption from the
"modification" provision of the CAA for routine repair, maintenance and
replacement activities, the proposal drops the "routineness" requirement from
its annual cost allowance and equipment replacement safeguards. Activities
that are unusual and non-routine would qualify for exemption from NSR as long
as the other criteria of the exemptions are satisfied. Is there a specific
rationale for dropping the "routineness" concept when, as it is understood in
Canada, this concept has been a central element of the RMRR exemption since EPA
originally adopted it in 1980?
Finally, we have
several further questions for consideration.
Using a
cost-threshold approach, are there some low-cost projects that could in fact
increase emissions significantly? Particularly with respect to the higher end
of the threshold range, would a cost-threshold approach provide an allowance
that is so high that facilities could proceed with modifications to parts of
process units without triggering New Source Review or a case-by-case review?
Is it possible that some projects that fall within an annual maintenance,
repair, and replacement allowance, and that comply with the proposed hourly
emissions safeguard, could nevertheless result in significant net emissions
increases (in tpy) in any NSR-regulated pollutants? Even with the submission
of annual reports to the appropriate reviewing authority after the end of the
year over which activity costs have been summed, could there be disagreements
regarding the way in which the RMRR allowance has been used and, if there are,
is there a straightforward avenue for resolution?
Equipment Replacement Provision
In addition to or instead of the proposed
RMRR allowance, the proposed ruling also outlines an equipment replacement
provision. Under this provision, existing equipment may be replaced with
equipment that serves the same function and that does not alter the basic
design parameters of a unit. This approach would also qualify for RMRR
treatment provided the cost of the replacement equipment does not exceed a
certain threshold percentage of the cost of the process unit to which the
equipment belongs.
The cost threshold proposal is that the
threshold be specified using, for example, the approach taken in the New Source
Performance Standard (NSPS) program. In the NSPS program, a project at an
existing affected source triggers the NSPS requirement to meet the current
performance standard when the cost of the project exceeds 50 percent of the
fixed capital cost that would be required to construct a comparable entirely
new unit. Other lower percent reconstruction thresholds are also being
proposed as suitable lines of demarcation.
Questions:
If this provision is adopted or adopted
with the annual maintenance, repair and replacement allowance proposal, will
there be the risk of major work proceeding without NSR or a case-by-case review
if no one piece of equipment exceeds a specified cost threshold that
would be set? Further, if this proposed RMRR rule is adopted, will the
equipment replacement provision of the proposed rule be subject to the same
three safeguards that apply to the annual maintenance, repair, and replacement
allowance? More specifically, will projects be able to qualify for the
equipment replacement exclusion only if they will not lead to an increase in a
source's maximum achievable hourly emissions rate of regulated pollutants or in
the emission of new regulated pollutants?
Other Options Considered
In the proposed ruling two other options
were discussed as alternatives to the cost-based approaches:
1. Capacity-Based Option - an owner/operator could
undertake any activity that did not increase the capacity of the process unit;
and
2. Age-Based Option - process units under a
specific age could undergo any activity that would not increase the capacity of
a process unit on a maximum hourly basis without triggering the requirements of
NSR program. However, the activities could not constitute reconstruction of the
process unit and their cost could not exceed 50 percent of the cost of a
replacement process unit. The age of the process unit would likely be in the
range of 25-50 years after which the owner or operator would have to become a
"Clean Unit" once the age of a process unit exceeded the age threshold.
Questions:
Would a combination of a cost threshold and
a capacity-based approach hold any value as the basis for defining the RMRR
allowance? With an aged-based approach, at what point in the age of the
facility would the owner or operator no longer consider expenditures worthwhile
for important maintenance and efficiency activities? With respect to the
capacity-based option, are there activities that would be excluded that would
increase emissions? Is it possible that some projects that fall within a
capacity-based exclusion and that comply with the proposed hourly emissions
safeguard could nevertheless result in significant net emissions increases (in
tons per year) in any NSR-regulated pollutants?
Cost-based Approach in
general
It would appear that the use of the
cost-based approach used in both the Routine Maintenance, Repair and
Replacement (RMRR) Allowance and Equipment Replacement Provision proposed
"safe harbours" may result in an uneven application of the RMRR exemption.
Because exempt activities under both safe harbours would be limited to a cost
determined in part by the replacement value of the relevant facility or
production unit, the scale of exempt activities will be proportionally greater
at larger and more valuable plants. Thus, a certain project may be deemed an
exempt maintenance, repair, or replacement activity if undertaken at a plant
worth hundreds of millions of dollars, but a project of the same scope and
nature might not be exempt if undertaken by a smaller facility.
Additional Exemptions
In the proposal,
comments are also requested with respect to establishing additional
exemptions. Specifically, the proposal indicates that there may be rare
instances where activities do not involve replacing existing equipment, are not
otherwise excluded from NSR, and nevertheless promote efficiency. The question
is asked whether there is a need for a separate "stand-alone" exclusion for
such activities and, if so, whether there should be other limitations on the
scope of such activities. Further, EPA is asking for comment on how to treat
activities that result in a minor improvement in efficiency but a very large
increase in annual emissions?
Is it possible
that the adoption of "stand alone" exclusions from the coverage of the NSR
program could create uncertainty and opportunity for interpretation by
regulators and industry users of the NSR program?
Transboundary air pollution resulting
from the proposals
EPA describes the analyses undertaken to
assess the emission impact resulting from a number of RMRR exclusion
scenarios. The conclusion of the description of the results of the analyses
done with the Integrated Program Model (IPM) is that "regardless of which
scenario is closest to what comes to pass, none of the proposed provisions
related to the RMRR exclusion will have a significant impact on emissions from
the power sector." Further analyses are described using the National Energy
Modeling System (NEMS). The results of all of the analyses indicate that the
emissions changes attributable to future promulgation of a rule based on the
proposals made for RMRR are insignificant in comparison with the impact of the
Clean Air Act programs such as the Title IV Acid Rain program, the Tier 2 motor
vehicle program and the NOx "SIP Call" ozone transport program.
There was no explicit analysis or
consideration, however, of the impact that the proposals would have on
"grandfathered" coal-fired power plants in particular or on the emissions from
geographic regions such as the Midwest where many of the old power plants and
industrial facilities are located. Such analyses would be important not only
for assessing possible U.S.-Canada transboundary air pollution consequences but
also the possible air pollution transport impact that could exist within the
United States between the Midwestern states where many of the "grandfathered"
plants are located and the northeastern states.
Conclusions
Clearly, the intent of the EPA proposals
with respect to routine maintenance, repair and replacement is to provide
greater certainty to owners and operators of existing facilities when they
consider how to work within the NSR program. The questions being posed in this
comment are intended to offer constructive support in the discussion.
In addition, Environment Canada is
interested in seeing analyses undertaken of the predicted results of the NSR proposals
as they relate to the "grandfathered" power plants and other facilities built
before 1971. Such analyses should attempt to assess both the U.S.-Canada air
pollution consequences as well as the interstate transport results of the
proposals.
All information requests should be directed
to:
Mr. Barry Stemshorn
Assistant Deputy Minister
Environmental Protection Service
Environment Canada
351 St. Joseph Blvd.
Gatineau, Quebec
K1A 0H3
Canada
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