The US Environmental Protection Agency has clarified the Clean Air Act's New Source Review (NSR) regulations concerning what constitutes a material change to refineries and other industrial plants.
"The changes we are making in this rule will provide industrial facilities and power plants with the regulatory certainty they need," said EPA Acting Administrator Marianne Horinko. "This rule will result in safer, more efficient operation of these facilities and, in the case of power plants, more reliable operations that are environmentally sound and provide more affordable energy."
Existing regulations under the 1977 Clean Air Act, including the acid rain amendments of 1990, already control emissions and will continue to do so, she added.
US Sen. Jim Jeffords (I-Vt.), ranking member of the Senate Environment and Public Works Committee, said he will join a lawsuit seeking to overturn the rule. The lawsuit is being filed by attorney generals from New York, Connecticut, and other northeastern states.
"This rule won't stand up in court for 1 minute. It's illegal, and its timing is suspect," Jeffords said. "This rule is a victory for polluting power plants and a devastating defeat for public health and the environment."
The National Petrochemical & Refiners Association said the new NSR provision will help increase energy supplies and keep US refineries and petrochemical plants operating.
"This means more US-produced gasoline, diesel, home heating oil, jet fuel, and petrochemical products for consumers than would be the case if the NSR deadlock persists," said Bob Slaughter, NPRA president.
"The NSR reforms and the routine maintenance rule also will better protect the environment because they will facilitate installation of new, energy-efficient technologies that also reduce emissions. And, the rules also will significantly help the refining industry as it implements EPA regulations to bring cleaner gasoline and diesel to US consumers," Slaughter said.
Equipment replacement provision
EPA finalized changes to the definition of equipment replacement under NSR. These changes were proposed in December 2002. EPA conducted a 120-day comment period and five public hearings nationwide. The agency received more than 150,000 written comments and heard testimony from more than 450 individuals (OGJ Online, July 30, 2003).
The final rule applies only to the equipment replacement part of the proposal. Congress established the NSR program as part of the Clean Air Act to help control emissions from major new stationary sources of pollution.
Under the provision released Aug. 27, any equipment replacement activity will be excluded from NSR if:
It involves replacement of any existing components of a process unit with identical or functionally equivalent components.
The fixed capital cost of the replaced component, plus the costs of any repair and maintenance activities that are part of the replacement activity (such as labor, contract services, major equipment rental, etc.), does not exceed 20% of the replacement value of the entire process unit.
The replacements do not change the basic design parameters of the process unit and the replacements do not cause the unit to exceed any emissions limits.
Analyst's reaction
The ruling will increase the life of older US coal plants, said Ronald Barone, managing director of the natural gas and electric utilities group for UBS Warburg LLC, New York.
Under an interpretation that began in 1999, uncertainty existed as to what constituted a modification. Dozens of power utilities were sued for violating the rules by performing modifications without performing upgrades to emissions controls, he said. Meanwhile, many other utilities delayed process improvements to avoid such conflicts.
"Though we see this NSR ruling as 'noise' in the sea of other issues continuing to affect the utilities sector (particularly with the likelihood for a legal battle and long timeframe for impact on the bottom line), we do view it as a net incremental positive for actual coal producers as well as power companies," Barone said.
"On the other hand, we believe any ruling that effectively frees up low-cost incremental coal-fired generation capacity could prove to be a modest incremental negative to the sea of gas-fired merchant power plants, and thus ultimately long-term natural gas prices," he added.
