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EPA Announces Next Step to Improve the New Source Review Program

Release Date: 08/27/2003
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(08/27/03) EPA is establishing an equipment replacement provision as part of the routine maintenance, repair and replacement exclusion of the New Source Review (NSR) permitting program. Today’s rule makes the program more effective and responsive to today’s environmental, economic and energy challenges.

“The changes we are making in this rule will provide industrial facilities and power plants with the regulatory certainty they need,” said 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.”

“While today’s rule is an important step in improving the New Source Review program, I also remind everyone that existing authorities under the Clean Air Act, including the Acid Rain Amendments of 1990, already control emissions from these facilities and will do so in the future,” added Horinko.

Under the Clean Air Act Amendments of 1990, an Acid Rain control program was established that capped emissions of SO2 from power plants. The program went into effect in 1995, and SO2 emissions from these sources have already been reduced more than 40 percent from 1980 levels in a program widely acknowledged as both efficient and effective.

“Enforcement plays an important role in any pollution abatement effort,” Horinko said, “but the most effective and efficient way to control emissions is through comprehensive approaches like those successful in controlling acid rain pollutants. These same approaches are embodied in the President’s Clear Skies legislation now before Congress.”

In today’s action EPA is finalizing changes to the definition of “equipment replacement” under NSR. These changes were proposed in December 2002. EPA opened a 120 day comment period and held five public hearings across the country to ensure ample opportunity for public comment on the proposed changes. EPA received over 150,000 written comments and heard from over 450 individuals who participated in the public hearings. After reviewing the comments, EPA decided to move forward to finalize part of the proposed rule. Today’s final rule applies only to the equipment replacement part of the proposal.

Congress established the New Source Review program as part of the 1977 Clean Air Act to help control emissions from major new stationary sources of pollution. The NSR program does not generally apply to existing sources, but it does apply if they make a modification that results in a significant emissions increase.

The action taken today promotes the central purposes of the Clean Air Act, “to protect and enhance the quality of the Nation’s air resources so as to promote the public health and welfare and the productive capacity of its populations” (Clean Air Act section 101). Under this rule, an equipment replacement activity will be excluded from NSR if:

• it involves replacement of any existing component(s) of a process unit with an identical or functionally equivalent component(s);

• 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 percent of the replacement value of the entire process unit;
• the replacement(s) does not change the basic design parameters of the process unit; and
• the replacement(s) does not cause the unit to exceed any emissions limits.

The rule allows sources to use the following approaches to determine the replacement value of a new process unit:

• replacement cost;
• invested cost, adjusted for inflation;
• the insurance value of the equipment, where the insurance value covers complete replacement of the process unit; or
• another accounting procedure, based on Generally Accepted Accounting Principles.

In addition, the final rule also:

• defines a “process unit;”
• specifically delineates the boundary of a process unit for certain specified industries;
• defines a “functionally equivalent” replacement; and
• defines how an owner or operator establishes basic design parameters for electric utility steam generating units and for other types of process units.

Additional information and copies of the final rule are available on the Web at: www.epa.gov/nsr.