Background

Under the Clean Air Act (CAA), “new” sources are subject to more stringent emissions limitation requirements than existing sources.  Under the New Source Review (NSR) permitting program, both new and, in some cases, modified stationary sources of air pollutants, e.g., power plants and factories must obtain NSR permits that limit the source’s air pollutant emissions.  NSR permits also include specifications with respect to the construction and operation of the new or modified facilities.

“Major modifications” to major stationary sources trigger a requirement for New Source Review.  Under Environmental Protection Agency (EPA) regulations, a major modification includes any physical change to or change in the method of operation of a major stationary source that would result in a significant net emissions increase of a regulated pollutant.  While “major modification” excludes routine maintenance, repair and replacement, these terms are not clearly defined and have been interpreted differently by EPA over time.  Substantial litigation has surrounded this program, with companies now deterred from upgrading existing equipment, even when the upgraded plant would be more efficient or reliable.  This is because a plant that operates more reliably and productively may produce both more output and more emissions, which could trigger NSR review, even though the emissions per unit of output go down.

Potential Impact of Regulation

Because “major modifications” to major stationary sources trigger a requirement for NSR, with the potential for new emissions limits and construction and operational requirements, there is a disincentive to modernize or otherwise improve the efficiency and competitiveness of power plants and industrial facilities.  Because modernization could improve the environmental performance of those plants and facilities, the NSR Program can undermine the goals of the Clean Air Act.  Moreover, because power plant, refinery and other facility owners have been subjected to EPA (and state) enforcement actions on account of what these owners thought was routine maintenance, repair or replacement activities, the NSR Program has become a disincentive to some best maintenance practices, with facility operations and reliability suffering as a result.

Action Needed

NSR permit programs must be replaced or reformed by legislation or by regulation to eliminate the disincentive to modernize power plants and industrial facilities and to allow routine maintenance without the threat of NSR enforcement action.

Please note:  This document is current only as of the date listed above.