EPA
United
States
Environmental
Protection
Agency
Office
of
Air
and
Radiation
Office
of
Air
Quality
Planning
and
Standards
Innovative
Strategies
and
Economics
Group
August,
2003
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
prepared
by
Innovative
Strategies
and
Economics
Group
Air
Quality
Strategies
and
Standards
Division
1
"
We
broadly
use
the
term
"
activities"
to
mean
all
maintenance
and
non­
maintenance
projects
conducted
at
a
stationary
source,
some
of
which
may
trigger
major
NSR.
Executive
Summary
Under
the
New
Source
Review
regulations
at
40
CFR
parts
51
and
52,
"
major
modification"
is
defined
as
any
physical
change
in
or
change
in
the
method
of
operation
of
a
major
stationary
source
that
would
result
in:
(
1)
a
significant
emissions
increase
of
a
regulated
new
source
review
(
NSR)
pollutant;
and
(
2)
a
significant
net
emissions
increase
of
that
pollutant
from
the
major
stationary
source.
Owners
or
operators
of
major
stationary
sources
(
sources)
are
required
to
obtain
a
major
NSR
permit
prior
to
beginning
actual
construction
of
a
modification
that
meets
this
definition.
The
regulations
exclude
certain
activities
from
the
definition
of
"
major
modification."
One
such
exclusion
is
for
routine
maintenance,
repair
and
replacement
(
RMRR)
activities.
The
regulations
do
not
define
this
term.

Prior
to
the
final
RMRR
rule,
the
RMRR
exclusion
was
applied
on
a
case­
by­
case
basis
using
a
multi­
factor
test.
In
interpreting
this
exclusion,
we
followed
certain
criteria.
The
preamble
to
the
1992
"
WEPCO
Rule"
(
57
FR
32314)
and
applicability
determinations
made
to
date
described
the
case­
by­
case
approach
to
assessing
what
activities
constitute
RMRR.
This
approach
is
known
as
the
multi­
factor
test.
The
EPA
is
now
finalizing
a
rule
that
changes
the
major
NSR
program
by
providing
specific
categories
of
activities
1
that
 
provided
certain
conditions
in
the
rule
are
met
 
EPA
will
automatically
consider
RMRR
in
the
future
and
reviewing
authorities
will
consider
for
identifying
RMRR
activities.
When
an
activity
falls
within
one
of
the
defined
categories,
then
EPA
would
consider
it
to
be
RMRR
and
a
source
would
know
that
it
was
excluded
from
major
NSR
without
regard
to
other
considerations.
When
an
activity
does
not
fall
withinautomatically
qualify
under
the
categoriesERP,
then
it
becomes
subject
to
consideration
as
RMRR
under
the
multi­
factor
case­
by­
case
test.

The
categories
of
activities
being
defined
as
RMRR
are
those
activites
that
involve
the
replacement
of
existing
equipment
with
equipment
(
1)
that
is
identical,
or
(
2)
that
serves
the
same
function
without
altering
the
basic
design
parameters
of
a
unit,
provided
the
cost
of
the
replacement
equipment
does
not
exceed
20
percent
of
the
replacement
value
of
the
process
unit
to
which
the
equipment
belongs
and
provided
the
replacementat
it
does
not
alter
the
basic
design
parameters
of
the
process
unit
or
cause
the
process
unit
to
exceed
any
emission
limitation
or
operational
limitation
(
that
has
the
effect
of
constraining
emissions)
that
applies
to
any
part
of
the
process
unit
and
that
is
legally
enforceable.
Such
a
definition
would
preserve
environmental
protection
while
removing
disincentives
to
undertaking
RMRR
activities
and
providing
more
certainty
both
to
the
industry,
who
could
better
plan
activities
at
their
facilities,
and
to
reviewing
authorities,
who
could
better
focus
resources
on
activities
outside
the
RMRR
category.

There
are
fundamental
limitations
on
the
ability
to
do
a
full
quantitative
analysis
of
the
effects
of
the
final
rule.
The
equipment
replacement
approach
is
being
made
available
as
an
option
that
sources
may
exercise
at
their
discretion.
Because
a
source's
decision
whether
and
when
to
exercise
a
voluntary
option
is
a
highly
case­
specific
decision,
dependent
on
a
number
of
factors
including
other
regulatory
programs,
EPA
is
unable
to
model
overall
industry
behavior
in
responding
to
the
final
rule.
2
The
exception
is
the
fact
that
SO
2
emissions
are
covered
by
a
cap
and
trade
program
for
the
utility
sector
that
generally
does
not
cover
other
sectors.
For
this
reason,
we
did
not
generalize
SO
2
results
for
the
utility
sector
to
non­
utilities.
We
have
attempted
to
quantitatively
analyze
the
possible
emissions
consequences
of
the
equipment
replacement
approach
to
the
RMRR
exclusion
described
above.
The
analysis
was
conducted
using
the
Integrated
Planning
Model
(
IPM)
which
is
a
powerful
model
that
covers
the
entire
power
industry.
We
do
not
have
such
a
model
for
other
industries
but,
for
reasons
discussed
below,
we
believe
that
the
results
for
the
electric
utilities
are
representative
of
the
results
we
would
see
in
other
industries.
This
is
because,
despite
necessary
considerations
arising
from
differences
between
the
utility
and
non­
utility
sectors,
none
of
these
differences
invalidate
the
application
of
the
qualitative
utility
sector
conclusions
to
other
industrial
sectors.
2
Furthermore,
the
quantitative
results
for
the
utility
sector
tend
to
dominate
effects
for
other
sectors,
particularly
when
analyzing
the
effects
on
emissions.

The
analysis
looks
at
the
potential
impacts
of
several
scenarios
which
represent
a
range
of
possible
outcomes
in
the
electric
utility
industry
in
response
to
the
final
RMRR
rule,
together
with
a
scenario
which
represents
the
outcome
if
the
NSR
rules
had
been
left
unchanged.
The
analysis
is
meant
to
bound
the
potential
effects
of
the
final
rule.
It
is
difficult
to
be
certain
that
such
an
analysis
can
truly
bound
the
potential
improvements
in
energy
efficiency
and
emissions
reductions
which
may
be
realized
by
a
the
final
rule,
but
we
proceeded,
based
on
our
engineering
judgment,
to
develop
scenarios
that
we
believe
represent
the
range
of
possible
outcomes
in
response
to
changes
in
the
RMRR
exclusion.

We
also
considered
similar
analyses
for
the
power
sector
conducted
by
the
Department
of
Energy
(
DOE).
The
DOE
used
a
complex
model
called
the
National
Energy
Modeling
System
(
NEMS).
Although
NEMS
and
IPM
do
not
employ
exactly
the
same
analytical
methods,
we
consider
the
results
from
both
models
to
be
comparable
and
useful
in
examining
our
final
rule.

The
analyses
generally
concluded
that
the
breadth
of
the
RMRR
exclusion
would
have
little
impact
on
the
emissions
reductions
that
will
be
achieved
in
the
future
under
the
major
NSR
program.
The
analyses
showed
that
utility
emissions
of
sulfur
dioxide
(
SO2)
are
essentially
the
same
under
all
scenarios.
This
stands
to
reason
because
nationwide
emissions
of
SO2
from
the
power
sector
are
capped
by
the
title
IV
Acid
Rain
Program.
For
nitrogen
oxide
(
NOx),
the
analyses
showed
small
relative
decreases
in
some
cases
and
small
relative
increases
in
other
cases.
These
predicted
changes
represent
only
a
relatively
small
fraction
of
nationwide
NOx
emissions
from
the
power
sector,
which
hover
around
4.3
million
tons
per
year.

Regarding
non­
utilities,
the
analysis
generally
concludes
that
there
would
likewise
be
little
impact
on
the
emissions
reductions
that
will
be
achieved
in
the
future
under
the
major
NSR
program.
While
we
expect
that
there
would
be
small
relative
increases
and
decreases
for
industrial
boilers
as
was
modeled
for
utilities,
we
have
determined
that
these
changes
would
be
small
compared
to
electric
generators,
not
only
because
of
the
fact
that
the
size
and
emissions
of
boilers
tend
to
be
smaller,
but
also
because,
compared
to
an
electric
utility,
any
changes
in
the
operational
profile
(
i.
e.,
increase
in
utilization)
of
a
non­
utility
facility's
industrial
boiler(
s)
in
response
to
equipment
replacement
projects
would
likely
be
proportionally
much
smaller.
For
the
same
reasons,
other
units
at
industrial
facilities
would
have
an
even
smaller
effect
when
compared
to
the
results
for
electric
utilities.
Thus,
the
conclusions
of
the
bounding
analysis
for
utilities
(
except
capped
SO
2)
hold
for
other
industrial
sectors
as
well.

This
is
also
further
supported
by
a
series
of
case
studies
analyzed
by
an
EPA
contractor
to
estimate
the
overall
impact
of
the
final
rule
on
6
different
industrial
sectors
(
automobile
manufacturing,
carbon
black
manufacturing,
natural
gas
transmission,
paper
and
pulp
mills,
petroleum
refining
and
pharmaceutical
manufacturing).
The
case
studies
also
indicate
that
replacement
activities
in
these
industries
should
not
lead
to
increased
emissions
at
the
sources.

The
IPM
and
DOE
analyses
do
not
consider
changes
in
the
actual
cost
of
performing
maintenance,
they
only
assume
changes
in
fuel
and
material
costs
and
changes
in
capital
costs
associated
with
new
generating
units
and
new
emission
control
equipment.
Therefore,
the
analyses
probably
understate
the
cost
of
the
increased
maintenance
scenarios
and
understate
the
cost
of
the
major
NSR
base
case.
The
model
runs
also
do
not
include
the
administrative
savings
to
industry
and
reviewing
agencies,
due
to
decreases
in
making
applicability
determinations,
associated
with
identifying
categories
of
activities
that
are
RMRR.
Although
we
do
not
have
the
ability
to
model
these
administrative
savings,
we
are
certain
that
the
final
rule
will
lead
to
significant
administrative
cost
reductions,
and
will
allow
industry
and
reviewing
agencies
to
shift
these
savings
to
more
economically
and
environmentally
beneficial
activities.
In
addition,
the
final
rule
will
preserve
powerful
incentives
within
the
Clean
Air
Act
to
adopt
"
leap­
frog"
technologies
and
production
processes
that
further
reduce
costs,
increase
efficiencies
and
reduce
pollution.

Finally,
the
IPM
analysis
showed
that
an
improved
approach
to
RMRR
can
lead
to
increased
availability
of
units
which
will
decrease
the
need
for
new
generating
units,
saving
tenshundreds
of
millions
of
dollars.
That,
combined
with
the
potential
for
improved
national
and
international
competitiveness
due
to
RMRR
flexibility
improvements
could
potentially
result
in
job
savings
and
job
creation,
avoid
reliability
problems,
and
give
rise
to
other
macro­
economic
improvements.
Unfortunately,
there
is
no
way
to
develop
an
estimate
for
these
improvements..
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
1
The
purpose
of
this
document
is
to
provide
information
on
the
potential
costs
and
benefits
of
the
final
rule
establishing
an
equipment
replacement
provision
to
define
categories
of
activities
that
would
qualify
as
routine
maintenance,
repair
and
replacement
(
RMRR)
under
the
major
NSR
program.
This
rule
was
proposed
in
December
2002,
and
a
draft
of
this
document
was
made
available
for
comment
at
that
time.
The
EPA
received
several
comments
on
this
document,
and
has
revised
the
document
as
appropriate
to
respond
to
them.
A
more
specific
description
of
the
comments
received
and
the
EPA
responses
to
them
can
be
found
in
the
technical
support
document
for
the
final
rule.

New
Source
Review
is
one
of
many
programs
created
by
the
Clean
Air
Act
to
limit
emissions
of
air
pollutants
emitted
from
a
wide
variety
of
sources
which
have
an
adverse
impact
on
human
health
and
the
environment.
Other
key
programs
include:
the
title
IV
Acid
Rain
Program,
Maximum
Achievable
Control
Technology
(
MACT)
and
other
air
toxics
standards
for
control
of
Hazardous
Air
Pollutants
(
HAPs),
New
Source
Performance
Standards,
the
22­
state
NOx
"
SIP
call",
the
Regional
Haze
program,
numerous
mobile
source
programs,
and
the
basic
state
and
local
air
control
programs
to
attain
and
maintain
the
National
Ambient
Air
Quality
Standards
(
NAAQS).
Together,
these
other
(
i.
e.,
non­
NSR)
programs
have
achieved,
and
will
continue
to
achieve,
tens
of
millions
of
tons
per
year
of
which
has
reduced
SO
2
emissions
from
the
electric
utility
industry
by
more
than
7
million
tpy
and
will
ultimately
result
in
reductions
of
approximately
10
million
tpy;
the
Tier
2
motor
vehicle
emissions
standards
and
gasoline
sulfur
control
requirements
which
will
ultimately
achieve
NO
x
reductions
of
2.8
million
tpy;
standards
for
highway
heavy­
duty
vehicles
and
engines
which
will
reduce
NO
x
emissions
by
2.6
million
tpy;
standards
for
non­
road
diesel
engines
which
are
anticipated
to
reduce
NO
x
emissions
by
about
1.5
million
tpy;
and
the
NO
x
"
SIP
call"
which
will
reduce
NO
x
emissions
by
over
1
million
tpy.
Altogether,
these
and
other
similar
programs
achieve
emissions
reductions
that
are
independent
of
any
effects
offar
exceed
those
attributable
to
the
major
NSR
program
and
dwarf
any
possible
emissions
consequences
attributable
to
the
final
rule.

While
the
non­
NSR
programs
mentioned
above
play
the
dominant
role
in
reducing
emissions
of
air
pollution,
the
major
NSR
program
assures
that
when
the
construction
of
new
major
sources
of
pollution
or
major
modifications
at
existing
sources
occur
that
increase
emissions,
the
emissions
that
result
from
that
construction
or
modification
are
well­
controlled
and
are
permitted
consistent
with
these
programs.

This
document
supports
the
Agency's
requirements
under
the
various
Acts
and
Executive
Orders
governing
the
analysis
of
regulations,
including
(
but
not
limited
to)
the
requirements
discussed
below
in
section
2
of
this
analysis
with
regard
to
determining
the
regulatory
burden
associated
with
the
change
to
the
major
NSR
program
to
provide
clear
categories
of
activities
that
will
be
considered
routine
maintenance,
repair,
and
replacement
under
the
major
NSR
program.

Currently,
the
Agency
interprets
and
applies
its
major
New
Source
Review
(
major
NSR)
exclusion
for
sources
performing
routine
1
Introduction
1.1
Purpose
1.2
Introduction
3
U.
S.
EPA,
2002,
"
New
Source
Review:
Report
To
the
President,"
http://
www.
epa.
gov/
air/
nsr­
review/
background.
html
4
U.
S.
EPA,
2001,
"
NSR
90­
Day
Review
Background
Paper,"
Docket
A­
2001­
19,
Document
Number
II­
A­
01,
http://
www.
epa.
gov/
air/
nsr­
review/
background.
html
5
U.
S.
EPA,
2001,
"
Information
Collection
Request
for
40
CFR
Part
51
and
52
Prevention
of
Significant
Deterioration
and
Nonattainment
New
Source
Review,"
OMB
Control
Number
2060­
0003;
EPA
Form
Number
1230.09.

6
U.
S.
EPA,
2002,
"
Information
Collection
Request
for
Changes
to
the
40
CFR
Parts
51
and
52
PSD
and
NSR
Applicability
Requirements
for
Modifications
to
Existing
Sources,"
EPA
Form
Number
2074.01.

7
U.
S.
EPA,
2002,
"
Information
Collection
Request
for
the
Establishment
of
a
Definition
of
Routine
Maintenance,
Repair
and
Replacement
for
the
New
Source
Review
Program,"
EPA
Form
Number
1713.04.

REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
2
maintenance,
repair
and
replacement
(
RMRR)
on
a
case­
by­
case
basis.
The
final
rulemaking
provides
an
exclusion
for
certain
equipment
replacement
of
identical
or
functionally
equivalent
equipment.
When
an
activity
falls
within
either
of
these
categories,
then
EPA
would
automatically
consider
it
to
be
RMRR
provided
certain
safeguards
are
met,
and
a
source
would
know
that
it
was
excluded
from
major
NSR
without
regard
to
other
considerations.
When
an
activity
did
not
fall
within
these
categories,
then
it
would
become
subject
to
consideration
as
RMRR
under
the
multi­
factor
test.

The
categories
of
activities
being
defined
as
RMRR
are
those
activites
that
involve
the
replacement
of
existing
equipment
with
equipment
(
1)
that
is
identical,
or
(
2)
that
serves
the
same
function
without
altering
the
basic
design
parameters
of
a
unit,
provided
the
cost
of
the
replacement
equipment
does
not
exceed
20
percent
of
the
replacement
value
of
the
process
unit
to
which
the
equipment
belongs
and
provided
the
replacementat
it
does
not
alter
the
basic
design
parameters
of
the
process
unit
or
cause
the
process
unit
to
exceed
any
emission
limitation
or
operational
limitation
(
that
has
the
effect
of
constraining
emissions)
that
applies
to
any
part
of
the
process
unit
and
that
is
legally
enforceable.
Such
a
definition
would
preserve
environmental
protection
while
removing
disincentives
to
undertaking
RMRR
activities
and
providing
more
certainty
both
to
the
industry,
who
could
better
plan
activities
at
their
facilities,
and
to
reviewing
authorities,
who
could
better
focus
resources
on
activities
outside
the
RMRR
category.

This
paper
presents
an
overview
of
the
impacts
of
the
final
(
RMRR)
rule
within
the
framework
of
the
major
NSR
preconstruction
permit
program.
To
perform
this
analysis,
the
Agency
relied
heavily
upon
existing
reports
on
file
for
various
aspects
of
the
major
NSR
program,
including
the
June
2002
Report
to
the
President,
3
the
major
NSR
Review
Background
Paper,
4
the
current
major
NSR
Information
Collection
Request
(
ICR),
5
the
ICRs
submitted
in
May
and
June
for
revisions
to
the
major
NSR
applicability
requirements
and
the
proposed
RMRR
program,
6,
7
and
their
associated
Federal
Register
notices
and
other
public
announcements.

The
major
NSR
program
is
a
combination
of
air
quality
planning
and
1.3
The
Current
NSR
Program
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
3
air
pollution
control
technology
program
requirements
for
new
and
modified
major
stationary
sources
of
air
pollution.
Section
109
of
the
Clean
Air
Act
Amendments
of
1990
(
CAAA)
requires
EPA
to
promulgate
primary
National
Ambient
Air
Quality
Standards
(
NAAQS)
to
protect
public
health
and
secondary
NAAQS
to
protect
public
welfare.
Once
EPA
has
set
these
standards,
states
must
develop
State
Implementation
Plans
(
SIPs)
that
contain
emission
limitations
and
other
control
measures
to
attain
and
maintain
the
NAAQS
and
to
meet
the
other
requirements
of
section
110(
a)
of
the
Act.
The
major
NSR
program
is
a
part
of
that
SIP
requirement.

The
program
commonly
called
"
major
NSR"
derives
its
authority
from
parts
C
and
D
of
Title
I
of
the
Act
and
is
a
preconstruction
review
and
permitting
program
applicable
to
new
or
modified
major
stationary
sources
of
air
pollutants.
In
areas
not
meeting
the
NAAQS
and
in
the
ozone
transport
regions
(
OTR),
the
program
is
the
"
nonattainment"
major
NSR
program,
implemented
under
the
requirements
of
part
D
of
title
I
of
the
Act.
In
attainment
areas
(
areas
meeting
NAAQS)
or
in
areas
where
there
is
insufficient
information
to
determine
whether
they
meet
the
NAAQS
("
unclassifiable"
areas),
the
Agency
implements
major
NSR
as
the
Prevention
of
Significant
Deterioration
(
PSD)
program
under
the
requirements
of
part
C
of
Title
I
of
the
Act.
Applicability
of
the
major
NSR
program
must
be
determined
in
advance
of
construction
and
is
pollutantspecific
When
a
source
triggers
major
NSR
in
attainment
areas,
it
must
install
best
available
control
technology
(
BACT)
and
conduct
modeling
and
monitoring
as
necessary.
If
the
source
is
located
in
a
nonattainment
area,
it
must
install
technology
that
meets
the
lowest
achievable
emission
rate
(
LAER),
secure
emission
reductions
to
offset
any
increases
above
baseline
emission
levels,
and
perform
other
analysis.

The
modification
provisions
of
the
major
NSR
program
in
parts
C
and
D
are
based
on
the
definition
in
section
111(
a)(
4)
of
the
Act:

".
.
.
[`
modification'
means]
.
.
.
any
physical
change
in,
or
change
in
the
method
of
operation
of,
a
stationary
source
which
increases
the
amount
of
any
air
pollutant
emitted
by
such
source
or
which
results
in
the
emission
of
any
air
pollutant
not
previously
emitted."

That
definition
involves
a
two­
step
test
for
determining
whether
source
activities
constitute
a
modification
subject
to
major
NSR
requirements:
the
source
determines
whether
a
physical
or
operational
change
will
occur
and
then
determines
whether
the
change
will
result
in
(
1)
a
significant
emissions
increase
of
a
regulated
pollutant
from
a
combination
of
one
or
more
emissions
units
following
the
physical
or
operational
change;
and
(
2)
a
significant
net
emissions
increase
of
that
pollutant
from
the
major
stationary
source
over
the
contemporaneous
period.

Under
the
NSR
rules
codified
in
40
CFR
parts
51
and
52,
"
major
modification"
is
defined
as
any
physical
change
in
or
change
in
the
method
of
operation
of
a
major
stationary
source
that
would
result
in:
(
1)
a
significant
emissions
increase
of
a
regulated
new
source
review
(
NSR)
pollutant;
and
(
2)
a
significant
net
emissions
increase
of
that
pollutant
from
the
major
stationary
source.
Owners
or
operators
of
major
stationary
sources
are
required
to
obtain
a
major
NSR
permit
prior
to
beginning
actual
construction
of
a
modification
that
meets
this
definition.
The
regulations
1.4
RMRR
­
Background
8
See
EPA's
June
13,
2002
document,
"
New
Source
Review:
Report
to
the
President,
page
11".

9
Ibid,
p.
26
10
Ibid,
p.
31
11
Ibid.
p
7.

REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
4
exclude
certain
activities
from
the
definition
of
"
major
modification,"
including
activities
that
constitute
RMRR.

Currently,
the
RMRR
exclusion
is
interpreted
and
applied
on
a
case­
by­
case
basis.
During
2001
the
EPA
examined
the
impact
of
the
NSR
rules
on
utility
and
refinery
industries
and
concluded,
among
other
things,
that
"
concern
about
the
scope
of
the
routine
maintenance
exclusion
is
having
an
adverse
impact
on
projects
that
affect
availability,
reliability,
efficiency,
and
safety"
at
electric
utilities
and
refiners.
8
Moreover,
the
EPA
concluded
that
the
problems
with
the
RMRR
exclusion
are
not
limited
to
the
utility
and
refinery
sectors,
observing
that,

"
industries
other
than
utilities
and
refineries
also
provide
additional
evidence
suggesting
that
the
current
NSR
program
is
having
an
adverse
impact
on
energy
efficiency
by
discouraging
projects
that
may
improve
energy
efficiency,
or
may
increase
capacity
and
reliability
without
actually
increasing
pollutant
emissions.
In
some
cases
it
may
even
be
discouraging
projects
that
decrease
emissions..."
9
Following
its
review,
EPA
recommended
that
changes
to
the
NSR
program
that
add
to
the
clarity
and
certainty
of
the
scope
of
the
routine
maintenance
exclusion
will
improve
the
process
by
reducing
the
unintended
consequences
of
discouraging
worthwhile
projects
that
are
in
fact
outside
the
scope
of
NSR.
10
Such
discouragement
results
in
lost
capacity,
as
well
as
lost
opportunities
to
improve
energy
efficiency
and
reduce
air
pollution.

Another
major
problem
inherent
in
the
current
major
NSR
system
is
regulatory
delay.
Since
1997,
the
average
time
needed
to
obtain
a
major
NSR
or
PSD
permit,
across
all
industries,
is
about
seven
months.
11
The
National
Petroleum
Council
(
NPC)
reported
in
June
2000
that
the
lengthy
process
for
obtaining
permits
can
limit
a
refinery's
ability
to
respond
quickly
to
changing
market
conditions.
They
offered
the
following
list
of
average
regulatory
delays,
based
upon
surveys
of
its
members:

°
3­
6
months
to
prepare
a
permit
application
°
1­
3
months
for
the
reviewing
authority
to
deem
the
application
complete
°
3­
6
months
for
the
development
and
negotiation
of
a
draft
permit
°
An
unstated
period
for
public
notice
and
the
opportunity
to
receive
public
comments
on
the
draft
permit
°
An
unstated
period
of
time
for
the
reviewing
authority
to
respond
to
public
comments
and
12
Ibid.
p
44.

REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
5
take
final
action
on
the
permit
12
These
figures
do
not
even
include
the
time
needed
to
seek
a
determination
of
routineness,
which
is
the
primary
focus
of
this
rulemaking.
We
estimate
that
the
average
time
needed
to
make
a
maintenance­
related
NSR
determination
is
between
thirty
and
sixty
days,
and
it
can
potentially
takeis
generally
longer
in
complicated
cases.
Thus,
relying
on
the
results
of
the
NPC
survey,
the
entire
process
of
merely
getting
approval
to
make
a
routine
modification
would
require
a
minimum
of
a
year.
Then,
if
the
determination
indicated
the
activity
required
major
NSR
permitting,
the
source
would
have
to
wait
once
more
for
its
permit
to
be
approved
before
beginning
the
repair.
In
other
words,
a
source
may
have
to
wait
for
up
to
eighteen
months
to
be
able
to
make
a
repair
because
it
triggers
major
NSR
permitting.
For
comparison,
a
refinery
typically
performs
its
repairs
all
at
once
during
a
period
referred
to
as
"
turnaround"
so
as
to
minimize
the
time
that
the
refinery
is
offline,
and
most
of
these
turnarounds
lastup
to
40
days
or
fewerto
complete.
Obviously,
if
routine
equipment
replacements
are
warranted
in
response
to
changing
market
conditions,
then
RMRR­
related
and
other
NSR
delays
would
threaten
a
company's
ability
to
operate
effectively
in
the
market.
Further,
many
problems
are
discussed
during
the
shutdown
period
and
it
is
necessary
to
make
decisions
base
don
engineering
judgement
while
the
unit
is
down.
A
time
consuming
process
to
determine
whether
the
activity
is
RMRR
prevents
this
necessary
real­
time
decision
making.
One
of
the
goals
of
the
equipment
replacement
provision
is
to
allow
for
the
RMRR
exclusion
to
be
implemented
without
such
procedural
delays
to
the
extent
practicable.

The
equipment
replacement
approach
would
apply
to
the
replacement
of
existing
equipment
with
either
identical
new
equipment
or
with
functionally
equivalent
equipment.
The
final
rule
defines
procedures
for
determining
whether
a
project
is
RMRR
when
the
project
involves
the
replacement
of
existing
equipment
with
equipment
that
serves
the
same
function.
So
long
as
(
1)
the
replacement
does
not
alter
the
basic
design
parameters
of
a
unit,
(
2)
the
cost
of
the
replacement
equipment
does
not
exceed
20
percent
of
the
replacement
value
of
the
process
unit
to
which
the
equipment
belongs,
and
(
3)
the
replacement
does
not
cause
the
process
unit
to
exceed
any
emission
limitation
or
operational
limitation
(
that
has
the
effect
of
constraining
emissions)
that
applies
to
any
part
of
the
process
unit
and
that
is
legally
enforceable,
it
would
automatically
be
considered
RMRR.
This
approach
would
let
sources
determine
with
greater
confidence
what
large­
scale
replacement
activities
would
or
would
not
trigger
major
NSR
permitting.

While
the
equipment
replacement
provision
will
improve
implementation
of
the
RMRR
exclusion,
it
may
not
cover
all
activities
that
are
RMRR.
The
current
approach
requires
complex
analysis
to
decide
whether
or
not
proposed
projects
constitute
RMRR.
Sources
must
choose
between
proceeding
without
a
permit
(
with
all
of
the
potential
liabilities
of
noncompliance)
or
seeking
an
applicability
determination,
which
delays
major
source
NSR
project
implementation
by
a
minimum
of
six
months.
Given
such
a
choice,
it
is
not
surprising
that
the
Agency
has
amassed
anecdotal
evidence
showing
that
the
uncertainty
about
the
exemption
for
routine
activities
has
resulted
in
expensive
delays
or
even
the
cancellation
of
beneficial
projects.
Such
regulatory
discouragement
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
6
results
in
lost
productive
capacity,
as
well
as
lost
opportunities
to
improve
energy
efficiency
and
reduce
air
pollution.
The
final
rule
seeks
to
promote
the
safe,
efficient,
and
reliable
operation
of
affected
facilities,
without
compromising
the
current
level
of
environmental
protection.

Sources
are
not
the
only
entities
that
incur
costs
from
such
determinations.
State
and
local
reviewing
authorities
must
devote
scarce
resources
to
make
complex
determinations,
consult
with
other
agencies
to
ensure
their
determinations
are
consistent
with
decisions
made
for
similar
circumstances
in
other
jurisdictions
(
and
the
EPA),
and
confer
with
other
regulators
to
ensure
consistency
among
the
RA's
conclusions.
Thus,
streamlining
procedures
for
determining
whether
activities
constitute
RMRR
would
free
up
agency
resources
to
pursue
more
environmentally
beneficial
activities
and
programs.

The
results
of
the
EPA's
analysis
are
found
in
Section
5
below.
1.6
Analytical
Considerations
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
7
This
part
of
the
qualitative
analysis
summarizes
the
statutory
requirements
affecting
the
development
of
a
Federal
major
NSR
program
and
describes
the
nature
of
the
problem.
The
need
for
regulatory
action
and
the
consequences
of
the
regulation
in
terms
of
improving
the
functioning
of
the
market
are
also
discussed.

In
the
absence
of
government
regulation,
market­
oriented
economic
systems
typically
fail
to
prevent
elevated
levels
of
pollution
in
the
environment
because
the
environment
is
a
public
good.
More
specifically,
individual
sources
treat
the
assimilative
capacity
of
the
environment
as
a
"
free
good"
resource
to
dispose
of
unused
byproduct
emissions.
Under
these
conditions,
eEmitters
of
pollutants
and
pollutant
precursors
do
not
internalize
the
cost
of
damages
created
by
their
own
emissions.
These
damages
occur
to
society
as
a
whole,
rather
than
to
specific
members
of
society.
This
is
because
pollution
emissions
are
non­
market
goods
­­
goods
not
bought
or
sold
in
the
marketplace
­­
and
the
atmosphere
carries
with
it
no
property
rights.
The
damages
of
pollution
include
increased
morbidity
and
mortality;
property
damage
from
soiling,
staining,
and
corrosion;
and
productive
loss
due
to
decreased
worker
efficiency,
crop
and
livestock
damage,
and
increased
wear
and
tear
on
capital
stocks.
All
of
these
damages
are
measurable.
In
addition,
there
are
damages
caused
by
pollution
that
are
much
harder,
if
not
impossible,
to
quantify.
These
damages
include
habitat
loss,
diminished
biodiversity,
reductions
in
aesthetic
quality,
option
values,
and
existence
values.

The
divergence
between
the
private
cost
of
production
and
the
social
cost
of
production
occur
because
the
source
does
not
bear
the
full
cost
of
its
activities
(
market
costs
plus
damages).
The
outcome
of
the
cost
divergence
is
market
failure,
where
as
described
in
this
case,
the
level
of
output
is
such
that
marginal
social
benefits
are
not
equal
to
marginal
social
cost.
The
result
is
economic
inefficiency,
or
a
mis­
allocation
of
society's
resources;
the
polluting
activity
(
e.
g.,
the
release
of
ozone
precursors)
occurs
at
too
high
a
level
in
comparison
to
the
optimally
efficient
situation,
thus
reducing
the
potential
total
benefits
to
society.
Regulatory
strategies
attempt
to
correct
for
the
divergence
between
social
and
private
costs.
Using
regulatory
strategies
to
internalize
the
negative
externality
may
not,
however,
result
in
zero
air
pollution.
Economic
efficiency
calls
for
abatement
up
to
the
point
where
additional
abatement
would
cost
more
than
the
additional
benefits
would
be
worth
to
society.

In
addition
to
government
regulation,
other
potential
mechanisms
may
be
used
to
correct
for
the
negative
externality
brought
about
by
air
pollution.
Negotiations
or
litigation
under
tort
and
common
law,
in
theory,
could
result
in
compensation
to
persons
for
the
damages
that
they
incur.
However,
two
major
obstacles
block
the
correction
by
the
private
market
for
pollution­
based
inefficiencies
and
inequities.
The
first
obstacle
is
high
transaction
costs
when
millions
of
persons
are
affected
by
millions
of
pollution
sources.
Transaction
costs
of
compensating
those
adversely
affected
arise
and
accumulate
because
the
current
and
future
injury
to
each
individual
must
be
2
Needs
and
Consequences
2.1
Nature
of
the
Problem
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
8
appraised,
the
injury
must
be
apportioned
to
each
precursor
source,
and
damage
suits
or
negotiations
must
be
conducted.
In
an
unregulated
market,
each
source
of
precursor
emissions
and
each
affected
person
would
have
to
litigate
or
negotiate.
The
transaction
costs
would
be
so
high
as
to
probably
exceed
the
benefits
of
reduced
air
emissions.
These
obstacles
strongly
suggest
that
another
mechanism
is
desirable
for
solving
air
pollution
problems.

The
second
obstacle
discouraging
resolution
by
the
private
sector
is
due
to
the
public­
good
nature
of
the
air
resource.
That
is,
after
emission
reductions
have
been
achieved,
the
benefits
of
cleaner
air
can
be
enjoyed
by
additional
persons
at
no
additional
cost.
This
results
in
the
classic
"
free
rider"
problem.
Everyone
would
have
an
incentive
to
be
the
last
to
contribute
resources
for
litigation
or
negotiation,
thinking
that
he
or
she
would
freely
benefit
from
the
efforts
of
others.

While
rRegulatory
intervention
cangenerally
serves
to
mitigate
the
impacts
of
the
types
of
market
failures
discussed
above,
but
they
generally
do
not
occur
without
imposing
their
own
costs.
Typically,
these
costs
include
administration,
enforcement,
and
the
redistribution
of
resources
at
all
levels.
However,
secondary
impacts
on
social
and
economic
sub­
groups
of
the
economy
can
also
be
affected
in
a
disproportionate
manner.
This
is
of
particular
relevance
to
the
RMRR
final
rule
because
the
EPA
has
previously
determined
that
costs
associated
with
the
RMRR
exclusion
are
impeding
projects
that
would
promote
the
safe,
reliable,
and
efficient
operation
of
industrial
facilities.
The
purpose
of
this
report
is
to
analyze,
identify,
and
mitigate
these
regulatory
costs.

This
section
describes
various
legislative
and
executive
requirements
that
govern
the
analytical
requirements
for
Federal
rulemakings,
and
describes
how
each
analytical
requirement
is
addressed
in
this
RIA.

Executive
Order
12866,
"
Regulatory
Planning
and
Review"
(
FR,
1993),
supercedes
Executive
Order
12291
"
Federal
Regulation"
of
1981.
It
requires
EPA
to
provide
the
Office
of
Information
and
Regulatory
Affairs
of
the
Office
of
Management
and
Budget
(
OIRA,
OMB)
with
an
assessment
of
the
costs
and
benefits
of
significant
regulatory
actions.
A
"
significant
regulatory
action"
is
defined
as
"
any
regulatory
action
that
is
likely
to
result
in
a
rule
that
may:


Have
an
annual
effect
on
the
economy
of
$
100
million
or
more
or
adversely
affect
in
a
material
way
the
economy,
a
sector
of
the
economy,
productivity,
competition,
jobs,
the
environment,
public
health
or
safety,
or
State,
local,
or
tribal
governments
or
communities;


Create
a
serious
inconsistency
or
otherwise
interfere
with
an
action
taken
or
planned
by
another
agency;


Materially
alter
the
budgetary
impact
of
entitlements,
grants,
user
fees,
or
loan
programs
or
the
rights
and
obligations
of
recipients
thereof;
or

Raise
novel
legal
or
policy
issues
arising
out
of
legal
mandates,
the
President's
priorities,
or
the
principles
set
forth
in
the
Executive
Order"
(
FR,
1993).

For
any
such
regulatory
action,
the
Agency
must
provide
a
statement
of
the
need
for
the
proposed
2.2
Legislative
Requirements
2.2.1
Executive
Order
12866
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
9
action,
must
examine
alternative
approaches,
and
estimate
social
benefits
and
costs.

It
has
been
determined
that
the
change
to
the
RMRR
exclusion
constitutes
an
economically
significant
regulatory
action.
The
Agency
recognizes
the
importance
of
the
major
NSR
program
and
its
effort
to
streamline
and
simplify
its
processes.
Consequently,
this
RIA
has
been
prepared
to
provide
updated
economic
cost
and
benefits
information
required
by
E.
O.
12866
for
a
significant
regulatory
action.

Executive
Order
12898,
"
Federal
Actions
to
Address
Environmental
Justice
in
Minority
Populations
and
Low­
Income
Populations,"
requires
federal
agencies
to
consider
the
impact
of
programs,
policies,
and
activities
on
minority
populations
and
low­
income
populations.
Disproportionate
adverse
impacts
on
these
populations
should
be
avoided.
According
to
EPA
guidance,
agencies
are
to
assess
whether
minority
or
low­
income
populations
face
risk
or
a
rate
of
exposure
to
hazards
that
is
significant
(
as
defined
by
the
National
Environmental
Policy
Act)
and
that
"
appreciably
exceeds
or
is
likely
to
appreciably
exceed
the
risk
or
rate
to
the
general
population
or
other
appropriate
comparison
group."
(
EPA,
1996b)
This
guidance
outlines
EPA's
Environmental
Justice
Strategy
and
discusses
environmental
justice
issues,
concerns,
and
goals
identified
by
EPA
and
environmental
justice
advocates
in
relation
to
regulatory
actions.

In
general,
the
potential
for
disproportionate
effects
on
minority
and
low­
income
populations
in
the
major
NSR
program
come
from
siting
issues.
However,
by
definition,
the
RMRR
component
of
the
major
NSR
program
deals
exclusively
with
existing
facilities.

Executive
Order
13045,
"
Protection
of
Children
from
Environmental
Health
Risks
and
Safety
Risks,"
directs
Federal
agencies
developing
health
and
safety
standards
to
include
an
evaluation
of
the
health
and
safety
effects
of
the
regulations
on
children.
Regulatory
actions
covered
under
the
Executive
Order
include
rulemakings
that
are
economically
significant
under
Executive
Order
12866,
and
that
concern
an
environmental
health
risk
or
safety
risk
that
the
Agency
has
reason
to
believe
may
disproportionately
affect
children.
EPA
has
developed
internal
guidelines
for
implementing
the
E.
O.
13045.
(
EPA,
1998b)
The
Agency
does
not
have
reason
to
believe
the
environmental
health
risks
or
safety
risks
addressed
by
this
action
present
a
disproportionate
risk
to
children.

Executive
Order
13132,
entitled
Federalism
(
64
FR
43255,
August
10,
1999),
requires
EPA
to
develop
an
accountable
process
to
ensure
meaningful
and
timely
input
by
State
and
local
officials
in
the
development
of
regulatory
policies
that
have
federalism
implications.
"
Policies
that
have
federalism
implications"
is
defined
in
the
Executive
Order
to
include
regulations
that
have
"
substantial
direct
effects
on
the
States,
on
the
relationship
between
the
national
government
and
the
States,
or
on
the
distribution
of
power
and
responsibilities
among
the
various
levels
of
government."
Under
Executive
Order
13132,
EPA
may
not
issue
a
regulation
that
has
federalism
2.2.2
Executive
Order
12898
2.2.3
Executive
Order
13045
2.2.4
Executive
Order
13132
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
10
implications,
imposes
substantial
direct
compliance
costs,
or
that
is
not
required
by
statute,
unless
the
Federal
government
provides
the
funds
necessary
to
pay
the
direct
compliance
costs
incurred
by
State
and
local
governments,
or
EPA
consults
with
State
and
local
officials
early
in
the
process
of
developing
the
proposed
regulation.
EPA
also
may
not
issue
a
regulation
preempts
State
law
unless
the
Agency
consults
with
State
and
local
officials
early
in
the
process
of
developing
the
proposed
regulation.

If
EPA
complies
by
consulting
States
and
local
governments,
Executive
Order
13132
requires
EPA
to
provide
to
OMB,
in
a
separately
identified
section
of
the
preamble
to
the
rule,
a
federalism
summary
impact
statement
(
FSIS).
The
FSIS
must
include
a
description
of
the
extent
of
EPA's
prior
consultation
with
State
and
local
officials,
a
summary
of
the
nature
of
their
concerns
and
the
agency's
position
supporting
the
need
to
issue
the
regulation,
and
a
statement
of
the
extent
to
which
the
concerns
of
State
and
local
officials
have
been
met.
Also,
when
EPA
transmits
a
draft
final
rule
with
federalism
implications
to
OMB
for
review
pursuant
to
Executive
Order
12866,
EPA
must
include
a
certification
from
the
Agency's
Federalism
Official
stating
that
EPA
has
met
the
requirements
of
Executive
Order
13132
in
a
meaningful
and
timely
manner.

The
change
to
the
RMRR
exclusion
under
the
major
NSR
program
will
not
have
substantial
direct
effects
on
the
States,
on
the
relationship
between
the
national
government
and
the
States,
or
on
the
distribution
of
power
and
responsibilities
among
the
various
levels
of
government,
as
specified
in
Executive
Order
13132.
As
discussed
above,
this
rule
imposes
only
minimal
compliance
burdens
beyond
those
already
included
in
the
major
NSR
program.
Thus,
the
requirements
of
section
6
of
the
Executive
Order
do
not
apply
to
this
rule.

Under
Executive
Order
13084,
"
Consultation
with
Tribal
Governments,"
EPA
may
not
issue
a
regulation
not
required
by
statute
that
significantly
or
uniquely
affects
the
communities
of
Indian
tribal
governments,
or
that
imposes
substantial
direct
compliance
costs
on
those
communities,
unless
the
Federal
government
provides
the
funds
necessary
to
pay
the
direct
compliance
costs
incurred
by
the
tribal
governments,
or
EPA
consults
with
those
governments.
If
EPA
complies
by
consulting
these
governments,
Executive
Order
13084
requires
EPA
to
provide
to
OMB
in
a
separately
identified
section
of
the
preamble
to
the
rule,
a
description
of
the
extent
of
EPA's
prior
consultation
with
representatives
of
affected
tribal
governments,
a
summary
of
the
nature
of
their
concerns,
and
a
statement
supporting
the
need
to
issue
the
regulation.
In
addition,
Executive
Order
13084
requires
EPA
to
develop
an
effective
process
permitting
elected
and
other
representatives
of
Indian
tribal
governments
"
to
provide
meaningful
and
timely
input
in
the
development
of
regulatory
policies
on
matters
that
significantly
or
uniquely
affect
their
communities."

This
change
in
the
major
NSR
program
does
not
significantly
or
uniquely
affect
the
communities
of
Indian
tribal
governments.
As
discussed
above,
this
rule
imposes
only
minimal
new
compliance
burdens
beyond
those
already
required
by
the
major
NSR
program.
Moreover,
the
final
Section
126
rule
will
not
impose
substantial
direct
compliance
costs
on
such
communities.
Consequently,
the
requirements
of
section
3(
b)
of
Executive
Order
13084
do
not
apply.
2.2.5
Executive
Order
13084
13
Where
appropriate,
agencies
can
propose
and
justify
alternative
definitions
of
"
small
entity."
This
RIA
relies
on
the
SBA
definitions.

REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
11
The
Regulatory
Flexibility
Act
(
RFA)
of
1980
(
PL
96­
354)
requires
agencies
to
conduct
a
screening
analysis
to
determine
whether
a
regulation
will
have
a
significant
impact
on
a
substantial
number
of
small
entities,
including
small
businesses,
governments
and
organizations.
If
a
regulation
will
have
such
an
impact,
agencies
must
prepare
a
Regulatory
Flexibility
Analysis,
and
comply
with
a
number
of
procedural
requirements
to
solicit
and
consider
flexible
regulatory
options
that
minimize
adverse
economic
impacts
on
small
entities.
The
RFA's
analytical
and
procedural
requirements
were
strengthened
by
the
Small
Business
Regulatory
Enforcement
Fairness
Act
(
SBREFA)
of
1996.
The
RFA
and
SBREFA
require
use
of
definitions
of
"
small
entities",
including
small
businesses,
governments
and
non­
profits,
published
by
the
Small
Business
Administration
(
SBA).
13
The
final
RMRR
rule
will
not
have
a
significant
economic
impact
on
a
substantial
number
of
small
entities
because
it
will
decrease
the
regulatory
burden
of
the
existing
regulations
and
have
a
positive
effect
on
all
small
entities
subject
to
the
rule.
This
rule
improves
operational
flexibility
for
owners
and
operators
of
major
stationary
sources
and
clarifies
applicable
requirements
for
determining
if
a
change
qualifies
as
a
major
modification.
We
have
therefore
concluded
that
today's
final
rule
will
relieve
regulatory
burden
for
all
small
entities.
We
continue
to
be
interested
in
the
potential
impacts
of
the
rule
on
small
entities
and
welcome
comments
on
issues
related
to
such
impacts.

The
Unfunded
Mandates
Reform
Act
(
UMRA)
of
1995
(
PL
104­
4)
was
enacted
to
focus
attention
on
federal
mandates
that
require
other
governments
and
private
parties
to
expend
resources
without
federal
funding,
to
ensure
that
Congress
considers
those
costs
before
imposing
mandates,
and
to
encourage
federal
financial
assistance
for
intergovernmental
mandates.
The
Act
establishes
a
number
of
procedural
requirements.
The
Congressional
Budget
Office
is
required
to
inform
Congressional
committees
about
the
presence
of
federal
mandates
in
legislation,
and
must
estimate
the
total
direct
costs
of
mandates
in
a
bill
in
any
of
the
first
five
years
of
a
mandate,
if
the
total
exceeds
$
50
million
for
intergovernmental
mandates
and
$
100
million
for
private­
sector
mandates.

Section
202
of
UMRA
directs
agencies
to
provide
a
qualitative
and
quantitative
assessment
of
the
anticipated
costs
and
benefits
of
a
Federal
mandate
that
results
in
annual
expenditures
of
$
100
million
or
more.
The
assessment
should
include
costs
and
benefits
to
State,
local,
and
tribal
governments
and
the
private
sector,
and
identify
any
disproportionate
budgetary
impacts.
Section
205
of
the
Act
requires
agencies
to
identify
and
consider
alternatives,
including
the
least
costly,
most
cost­
effective,
or
least
burdensome
alternative
that
achieves
the
objectives
of
the
rule.
2.2.6
Regulatory
Flexibility
Act
and
the
Small
Business
Regulatory
Fairness
Act
of
1996
2.2.7
Unfunded
Mandates
Reform
Act
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
12
We
believe
the
RMRR
rule
changes
will
actually
reduce
the
regulatory
burden
associated
with
the
major
NSR
program
by
improving
the
operational
flexibility
of
owners
and
operators
and
clarifying
the
requirements.
Because
the
program
changes
provided
in
the
final
rule
are
not
expected
to
result
in
any
increases
in
the
expenditure
by
State,
local,
and
tribal
governments,
or
the
private
sector,
we
have
not
prepared
a
budgetary
impact
statement
or
specifically
addressed
the
selection
of
the
least
costly,
most
cost­
effective,
or
least
burdensome
alternative.
Because
small
governments
will
not
be
significantly
or
uniquely
affected
by
this
rule,
we
are
not
required
to
develop
a
plan
with
regard
to
small
governments.
Therefore,
this
rule
is
not
subject
to
the
requirements
of
section
203
of
the
UMRA.

The
Paperwork
Reduction
Act
of
1995
(
PRA)
requires
Federal
agencies
to
be
responsible
and
publicly
accountable
for
reducing
the
burden
of
Federal
paperwork
on
the
public.
EPA
has
submitted
an
Information
Collection
Request
(
ICR)
to
the
Office
of
Management
and
Budget
(
OMB)
for
the
change
to
the
RMRR
exclusion
in
compliance
with
the
PRA.
The
ICR
explains
the
need
for
additional
information
collection
requirements
and
provides
respondent
burden
estimates
for
additional
paperwork
requirements
to
State
and
local
governments.

The
EPA
estimated
the
burden
and
cost
of
the
final
rulemaking.
These
estimates
of
administrative
burden
costs
are
contained
in
the
docket
for
this
action.
Burden
means
the
total
time,
effort,
and
financial
resources
expended
by
persons
to
generate,
maintain,
retain,
and
disclose
or
provide
information
to
or
for
a
federal
agency.

An
agency
may
not
conduct
or
sponsor,
and
nor
is
a
person
required,
to
respond
to
a
collection
of
information
unless
it
displays
a
currently
valid
OMB
control
number.
The
OMB
control
numbers
for
EPA's
regulations
are
listed
in
40
CFR
part
9
and
48
CFR
Chapter
15.
2.2.8
Paperwork
Reduction
Act
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
13
Because
the
final
change
to
the
RMRR
exclusion
under
the
major
NSR
program
has
been
subject
to
an
extensive
stakeholder
outreach
program,
it
has
been
subjected
to
discussions
of
numerous
alternative
approaches.
These
discussions
included
participants
from
the
regulated
community,
State
and
local
air
pollution
control
agencies,
environmental
organizations,
and
other
Federal
agencies.
Consequently,
the
change
to
the
RMRR
exclusion
constitutes
a
well
reasoned
compromise
to
the
specific
interests
of
each
of
those
groups.

The
consideration
of
alternative
approaches
must
include
a
determination
of
the
feasibility
of
the
Federal
government
taking
no
action.
Title
I
of
the
Act
mandates
the
NSR
process.
Consequently,
"
No
Regulation"
is
not
a
viable
option
for
this
analysis.

The
purpose
of
the
rulemaking
is
to
increase
the
clarity
regarding
the
RMRR
exclusion.
Consequently,
the
Agency
plans
to
give
this
package
the
earliest
possible
effective
date.
Consideration
of
alternative
effective
dates
would,
in
effect,
result
in
additional
costs
and
burden
to
sources.
3
Consideration
of
Alternative
Approaches
3.1
No
Regulation
3.2
Alternative
Effective
Dates
14
Information
Collection
Request
for
40
CFR
Part
51
and
52
Prevention
of
Significant
Deterioration
and
Nonattainment
New
Source
Review,
Office
of
Management
and
Budget
(
OMB)
Control
Number
2060­
0003;
EPA
Form
Number
1230.09.

REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
14
There
are
two
types
of
sources
potentially
affected
by
the
final
RMRR
rule
within
the
framework
of
the
Agency's
major
NSR
preconstruction
permit
program:
electricity
utility
steam
generating
units
and
non­
utility
sources.
The
following
discussion
includes
brief
descriptions
of
each
type
of
affected
entity.
The
Agency
made
this
differentiation
based
upon
existing
air
quality
reports
and
regulatory
analyses:
the
Ozone
Transport
Assessment
Group's
(
OTAG's)
1990
data
base;
the
Operating
Permits
data
base
of
respondents;
and
the
data
base
developed
by
the
RACT/
BACT/
LAER
Clearinghouse
(
RBLC).

In
1990,
approximately
2.8
trillion
kilowatt
hours
(
kWh)
of
electricity
were
generated
in
the
United
States.
In
2001,
approximately
3.7
trillion
kWh
were
generated.
About
70%
of
this
power
was
generated
by
traditional
utilities.
The
remaining
30%
was
generated
by
independent
power
producers
and
combined
heat
and
power
plants.
The
IPM
runs
in
this
document
model
the
behavior
of
over
12,000
electrical
generating
units,
but
the
number
of
units
affected
by
the
final
NSR
rule
would
be
much
smaller
than
this
is
because
EPA's
analysis
also
considers
electricity
generated
by
hydro
facilties,
wind
turbines,
and
nuclear
units
that
do
not
emit
primary
air
pollutants
and
are
thus
not
affected
by
NSR.
In
addition,
EPA's
analysis
includes
a
number
of
smaller
EGUs
that
may
not
be
affected
by
NSR
due
to
their
size.
EPA's
analysis
looked
at
slightly
over
1300
coal­
fired
units
and
approximately
2000
more
units
that
were
greater
than
25
MW
in
size
that
produced
emissions
of
primary
air
pollutants
because
they
combusted
a
fuel
such
as
natural
gas
or
oil.
Many
of
these
units
are
located
at
power
plants
that
contain
more
than
one
unit,
so
the
number
of
affected
NSR
major
sources
is
probably
fewer
than
1200
different
plants.
This
is
in
contrast
to
the
overall
universe
of
more
than
14,000
affected
sources
identified
in
the
next
section.

There
are
about
14,500
sources
subject
to
Title
I
operating
permits
requirements
in
the
EPA's
Operating
Permits
Database,
encompassing
all
industry
classifications
in
34
states
and
the
District
of
Columbia.
EPA
believes
this
database
represents
the
majority
of
the
universe
of
potentially
affected
sources
for
the
major
NSR
program.
Table
1
below
is
in
the
current
NSR
ICR.
Table
1
displays
the
industry
classifications
most
commonly
affected
by
major
NSR
permitting
requirements.
14
Table
1
Most
Commonly
Affected
Entities
Industry
Group
SIC
NAICS
Pulp
and
Paper
Mills
261
32211,
322121,
322122,
32213
4
Description
of
Affected
Entities
4.1
Electricity
Generating
Units
4.2
Non­
Utility
Potentially
Affected
Sources
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
15
Paper
Mills
262
322121,
322122
Chemical
Processes
281
325181,
32512,
325131,
325182,
211112,
325998,
331311,
325188
Pharmaceuticals
283
325411,
325412,
325413,
325414
Petroleum
Refining
291
32411
Automobile
Manufacturing
371
336111,
336112,
336712,
336211,
336992,
336322,
336312,
33633,
33634,
33635,
336399,
336212,
336213
Electric
Services
491
221111,
221112,
221113,
221119,
221121,
221122
Natural
Gas
Transport
492
48621,
22121
15
The
exception
is
the
fact
that
SO
2
emissions
are
covered
by
a
cap
and
trade
program
for
the
utility
sector
that
generally
does
not
cover
other
sectors.
For
this
reason,
we
did
not
generalize
SO
2
results
for
the
utility
sector
to
non­
utilities.

REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
16
The
Agency
believes
that
any
source
facing
the
need
to
determine
if
a
planned
equipment
replacement
project
qualifies
as
RMRR
would
make
use
of
the
equipment
replacement
provisions
of
the
final
rule.
Although
not
every
source
will
be
faced
with
such
a
determination
every
year,
we
expect
that
any
such
determination
would
make
use
of
the
equipment
replacement
provision
due
to
its
greater
certainty
administrative
simplicity
when
compared
to
the
multi­
factor
test.
To
analyze
the
benefits
and
costs
associated
with
the
rule
change,
EPA
looked
at
both
the
beneficial
effects
on
industry
maintenance
practices
by
having
identified
categories
of
activities
as
RMRR
and
on
the
potential
reduction
in
work
for
industry
and
reviewing
authorities
through
having
to
perform
fewer
applicability
determinations.
As
noted
above,
there
is
difficulty
in
developing
quantitative
estimates
of
the
effect
of
changes
to
the
RMRR
exclusion
on
emissions
and
costs.
However,
EPA
has
powerful
modeling
tools,
like
the
Integrated
Planning
Model
(
IPM),
that
enable
us
to
make
educated
assessments
of
the
resulting
impact
of
such
regulatory
revisions.

We
have
attempted
to
quantitatively
analyze
the
possible
emissions
consequences
of
the
equipment
replacement
approach
to
the
RMRR
exclusion
in
the
final
rule.
The
analysis
was
conducted
using
IPM.
We
do
not
have
such
a
model
for
other
industries
but,
for
reasons
discussed
below,
we
believe
that
the
results
for
the
electric
utilities
are
representative
of
the
results
we
would
see
in
other
industries.
This
is
because,
despite
necessary
considerations
arising
from
differences
between
the
utility
and
non­
utility
sectors,
none
of
these
differences
invalidate
the
application
of
the
qualitative
utility
sector
conclusions
to
other
industrial
sectors.
15
Furthermore,
the
quantitative
results
for
the
utility
sector
tend
to
dominate
effects
for
other
sectors,
particularly
when
analyzing
the
effects
on
emissions.

The
DOE
also
attempted
to
analyze
quantitatively,
for
the
electric
utility
sector,
the
possible
emissions
consequences
of
the
RMRR
exclusion
described
above.
The
NEMS
model
is
similar
to
the
IPM
and
has
been
widely
used.
DOE
provided
its
analysis
to
EPA
and
a
copy
of
the
analysis
is
included
in
Appendix
A.
Using
the
NEMS,
DOE
evaluated
a
variety
of
changes
in
energy
efficiency
and
availability,
as
well
as
the
effect
on
emissions
resulting
from
these
changes.

This
is
also
further
supported
by
a
series
of
case
studies
analyzed
by
an
EPA
contractor
to
estimate
the
overall
impact
of
the
final
rule
on
6
different
industrial
sectors
(
automobile
manufacturing,
carbon
black
manufacturing,
natural
gas
transmission,
paper
and
pulp
mills,
petroleum
refining
and
pharmaceutical
manufacturing).
The
case
studies
also
indicate
that
replacement
activities
in
these
industries
should
not
lead
to
increased
emissions
at
the
sources.

We
have
also
attempted
to
characterize
the
significant
reduction
in
the
costs
to
industry
and
reviewing
agencies,
due
to
decreases
in
making
applicability
determinations
associated
with
5
Assessing
Benefits
and
Costs
16
This
finding
is
described
in
detail
in
EPA's
June
13,
2002
New
Source
Review
Report
to
the
President.

REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
17
identifying
categories
of
activities
that
are
RMRR,
as
well
as
any
other
changes
in
burden
that
would
result
from
the
final
rule.

In
order
to
evaluate
the
impact
of
the
routine
maintenance
provisions,
EPA
considered
a
scenario
under
which
major
NSR
regulations
remained
in
place
and
a
range
of
scenarios
that
could
occur
if
existing
plants
were
able
to
undertake
routine
maintenance
activities
without
being
subject
to
major
NSR.
The
first
scenario
is
intended
to
represent
the
existing
program,
which
the
EPA
has
found
impedes
or
results
in
cancellation
of
projects
that
maintain
and
improve
reliability,
availability,
and
efficiency
at
existing
power
plants.
16
The
second
range
of
scenarios
is
based
on
companies
receiving
flexibility
under
the
major
NSR
program
that
removes
many
of
these
impediments
.
As
part
of
this
analysis,
EPA
reviewed
three
key
variables:
change
in
SO2
emissions,
change
in
NOx
emissions
and
change
in
cost.

As
we
issue
a
final
rule
to
establish
categories
of
activities
that
qualify
as
RMRR
under
major
NSR,
we
note
that
final
rules
governing
the
use
of
plantwide
applicability
limits
(
PALs),
and
Clean
Units
will
already
be
in
place.
Some
sources
within
the
electric
utility
generation
industry
may
take
advantage
of
these
changes.
However,
any
such
decision
will
be
based
on
case
specific
information
related
to
their
past
operating
levels,
current
levels
of
control
and
the
company's
specific
strategies
for
complying
with
major
NSR.
Therefore,
we
can
not
make
estimates
on
how
many
sources
may
take
advantage
of
PALs
and
Clean
Units.
To
the
extent
they
are
used
within
the
industry,
they
will
dampen
the
effects
shown
in
this
analysis
(
i.
e.,
estimated
decreases
and
increases
will
not
be
as
large).

One
part
of
our
analysis
was
performed
using
IPM.
A
copy
of
this
analysis
is
included
in
Appendix
B.
IPM
is
a
linear
programming
model
that
EPA
uses
to
analyze
the
effect
of
various
environmental
policies
on
the
power
sector.
It
provides
forecasts
of
least­
cost
capacity
expansion,
electricity
dispatch
and
emission
control
strategies
for
meeting
energy
demand
and
environmental,
transmission,
dispatch
and
reliability
constraints.
EPA
has
used
it
to
analyze
many
environmental
policies
including
the
Phase
II
Acid
Rain
Nitrogen
Oxide
regulations
and
the
Nitrogen
Oxide
SIP
Call.
Analysis
can
be
performed
varying
multiple
constraints
such
as
availability
of
various
types
of
power
plants
(
e.
g.
coal­
fired,
nuclear,
gas­
fired
combined
cycle
units),
heat
rates
of
various
types
of
power
plants,
environmental
constraints
(
e.
g.
caps
on
emissions,
emission
rate
limitations).
More
detail
regarding
IPM
can
be
found
in
the
document
titled
"
Documentation
of
EPA
Modeling
Application
(
V.
2.1)
Using
the
Integrated
Planning
Model,
which
can
be
found
at:
http://
www.
epa.
gov/
airmarkets/
epa­
ipm/
index.
html.

The
EPA
used
the
IPM
model
to
develop
a
bounding
analysis
of
the
effects
of
the
final
rule.
We
analyzed
several
scenarios
which
represent
a
set
of
possible
outcomes
within
the
electric
utility
sector
based
on
our
assessment
of
how
companies
manage
their
plants
given
the
regulatory
consequences
of
the
NSR
program.
Our
goal
was
to
provide
a
bounding
analysis;
it
was
not
possible
using
IPM
to
generate
a
list
of
specific
projects
at
specific
facilities
that
would
result
5.1
Analysis
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
18
from
our
final
rule,
and
to
then
compute
the
emissions
and
other
consequences
of
such
projects.
Rather,
we
made
an
overall
assessment
of
the
range
of
effects
that
such
projects
could
have
if
carried
out
across
the
utility
sector
according
to
reasonable
expectations
(
example
projects
are
discussed
in
Appendix
A).
We
then
made
estimates
of
what
range
of
effects
could
be
expected
on
parameters
such
as
heat
rate,
availability,
and
emissions
of
various
pollutants.
These
effects
were
estimated
using
the
engineering
judgment
of
EPA
experts
familiar
with
the
electric
utility
industry.
Because
we
modeled
a
range
of
different
parameters,
we
expect
that
the
actual
effect
of
the
rule
on
the
electric
generating
sector
will
be
somewhere
within
the
range
we
analyzed.

To
develop
the
base
case
against
which
to
compare
our
final
rule
(
referred
to
as
the
major
NSR
base
case),
EPA
had
to
assess
what
would
happen
under
the
current
program
(
i.
e.,
if
the
equipment
replacement
approach
were
not
finalized.)
Our
experience
suggests
that
under
the
current
NSR
program,
managers
of
coal­
fired
electric
generating
facilities
take
whatever
actions
are
necessary
to
avoid
triggering
NSR,
primarily
because
of
its
very
high
retrofit
control
costs
and
the
substantial
opportunity
costs
associated
with
regulatory
delays.
When
considering
projects
to
facilitate
safe,
reliable,
and
efficient
operation
of
their
facilities,
managers
will
typically
only
undertake
those
projects
where
NSR
is
clearly
not
triggered.
As
confirmed
by
our
recent
NSR
Report
to
the
President,
where
there
is
uncertainty,
or
where
NSR
would
be
triggered,
the
project
will
generally
not
go
forward.
Thus,
to
analyze
the
current
rule,
EPA
assumed
that
facilities
undertake
only
limited
maintenance,
and,
when
NSR
might
be
triggered,
facilities
take
enforceable
restrictions
on
fuel
use
or
other
actions
to
stay
out
of
the
program.
This
results
in
gradual
deterioration
in
performances,
resulting
in
higher
heat
rates
and
lower
capacities.

We
did
not
assume
that
reduced
maintenance
resulted
in
a
change
in
maximum
potential
unit
availability.
This
is
because
over
the
last
20
years,
availability
of
coal­
fired
plants
has
increased
even
as
the
plants
have
aged.
This
is
due
in
large
part
to
improved
maintenance
practices.
For
instance,
tests
to
inspect
boiler
tubes
have
been
continually
improving
(
see
"
Preventing
Boiler
Tube
Failures
with
EMAT's",
S.
P.
Clark
et
al,
"
EPRI
International
Conference
on
Boiler
Tube
Failures
and
HRSG
Tube
Failures
and
Inspects",
November
6­
8,
2001).
These
improved
preventive
maintenance
practices
have
increased
availability
by
reducing
the
incidence
of
forced
outages.
Based
on
this
observation,
we
did
not
assume
availability
decreases
due
to
reduced
maintenance,
but
we
did
assume
that
continued
future
availability
increases
would
diminish,
and
any
remaining
increases
would
essentially
be
negated
by
deterioration
caused
by
limited
maintenance.

The
second
range
of
scenarios,
referred
to
as
increased
maintenance
cases
#
1
­
#
5
,
looks
at
a
range
of
scenarios
for
what
might
happen
in
the
utility
sector
if
companies
were
provided
with
increased
flexibility
under
major
NSR
to
perform
maintenance.
Because
of
improvements
in
efficiency
that
would
be
allowed
to
go
forward
under
the
final
rule,
this
would
result
in
lower
heat
rates,
but
would
also
result
in
higher
capacities
and/
or
higher
unit
availabilities
for
these
units.
IPM
models
the
changes
in
emissions
at
such
units,
as
well
as
the
corresponding
changes
in
units
elsewhere
(
e.
g.,
an
increase
in
generation
at
the
more
efficient
unit
will
result
in
decreased
utilization
at
other
units).
We
examined
a
range
of
possible
effects,
as
described
in
Appendix
B.
Finally,
EPA
also
looked
at
one
case
(
standard
base
case)
in
which
heat
rate,
capacity
and
unit
availability
did
not
change.
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
19
It
is
important
to
note
that
there
are
several
limitations
to
this
analysis.
The
limitations
are
discussed
in
detail
in
Appendix
B.

Results:

Changes
in
SO2
Emissions,
NOx
emissions
and
cost
are
summarized
in
Tables
2,
3
and
4
of
Appendix
B.
EPA's
analysis
suggests
there
is
very
little
change
in
SO2
emissions
over
the
entire
time
period
studied
under
the
two
scenarios.
DOE's
NEMS
analysis
(
Appendix
A)
showed
a
similar
pattern
 
i.
e.,
very
little
change
in
SO2
emissions
relative
to
estimates
for
the
Base
Case.
This
is
because
SO2
emissions
are
already
capped
nationally
under
the
Title
IV
Acid
Rain
Provisions.

However,
because
emissions
can
also
be
shifted
temporally
by
banking
emission
allowances
to
be
used
in
a
future
year
there
can
be
significant
changes
in
emissions
for
a
specific
year.
While
temporal
distribution
of
emissions
did
not
change
much
over
time
in
the
major
NSR
cases
considered,
there
was
more
temporal
distribution
of
emissions
in
the
increased
maintenance
scenarios
considered.

For
NOx,
which
is
not
capped,
there
can
be
changes
in
emissions.
The
modeling
scenarios
evaluated
by
EPA
and
DOE
suggest
a
range
in
the
potential
effect
on
NOx
emissions.
It
appears
that
the
assumptions
regarding
the
effect
that
increased
NSR
flexibility
to
perform
replacement
projects
would
have
on
plant
availability
is
a
key
factor
affecting
changes
in
NOx
emissions
relative
to
the
base
case.
This
analysis
suggests
that
the
effect
of
the
final
rule
is
dependent
upon
the
effect
that
it
will
have
on
maximum
unit
availabilities,
as
well
as
upon
the
extent
to
which
efficiency
improvements
offset
this
effect,
and
capacity
increases
add
to
it.
If
the
RMRR
changes
increase
efficiency
and
plant
capacity
without
increasing
maximum
unit
availability
(
as
was
modeled
in
cases
2
and
5)
this
analysis
suggests
that
the
changes
could
decrease
emissions.
The
amount
of
that
emission
decrease
would
depend
both
on
how
much
heat
rate
decreased
and
capacity
increased
and
how
quickly
these
changes
occurred.
The
greater
the
heat
rate
decrease
and
capacity
increase
and
the
more
quickly
the
changes
occurred,
the
greater
the
emission
reductions.
The
DOE
analysis
suggests
similar
results.
Efficiency
improvements
resulting
from
RMRR
decrease
NOx
emissions,
whereas
availability
improvements
increase
emissions.
In
the
cases
represented
in
this
analysis,
the
impacts
of
the
assumed
reductions
in
heat
rates
tend
to
dominate
the
corresponding
effects
of
the
assumed
availability
increases.
If
on
the
other
hand,
increased
maximum
unit
availabilities
dominate
heat
rate
improvements
(
as
was
modeled
in
cases
3
and
4)
this
analysis
suggests
that
the
changes
could
increase
NO
x
emissions,
but
only
slightly.
A
more
complete
description
of
the
analysis
and
its
results
can
be
found
in
EPA
Air
docket
A­
2002­
04.
.

From
these
results,
we
have
determined
that,
for
the
electric
generating
sector,
the
overall
scope
of
the
routine
maintenance
exclusion
has
relatively
little
practical
impact
on
the
benefits
that
would
be
achieved
in
the
future
under
the
NSR
program.
Capped
SO
2
emissions
remain
unchanged,
and
NO
x
emissions
change
slightly
depending
upon
which
modeled
scenario
is
closest
to
what
actually
occurs.
This
change
is
particularly
insignificant
when
compared
to
the
power
sector's
national
NO
x
emissions
of
over
4
million
tons
per
year,
or
the
more
than
7
million
tons
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
20
per
year
of
NO
x
reductions
expected
from
recently
promulgated
rules.
For
example,
the
NO
x
"
SIP
call"
will
reduce
NO
x
emissions
by
over
one
million
tons
per
year,
most
of
which
comes
from
the
same
utility
sources
covered
in
this
analysis.
The
title
V
Acid
Rain
program
alone
has
reduced
SO
2
emissions
from
the
electric
utility
industry
by
more
than
7
million
tons
per
year,
and
will
ultimately
result
in
reductions
of
approximately
10
million
tons
per
year.
In
addition,
a
handful
of
recently
promulgated
mobile
source
rules
will
reduce
NO
x
emissions
by
a
combined
7
million
tons
per
year.

As
stated
above,
the
EPA
believes
that
the
conclusions
of
this
analysis
are
generally
applicable
to
all
industrial
sectors.
We
do
not
have
tools
like
IPM
for
modeling
the
response
of
non­
utility
sectors,
so
our
ability
to
present
a
quantitative
bounding
analysis
specific
to
any
other
sector
is
limited.
We
also
note
that
there
are
some
important
differences
between
the
utility
sector
and
other
sectors.
Unlike
utilities,
other
sectors:
(
1)
are
not
subject
to
a
nationwide
SO
2
cap,
(
2)
are
not
interconnected
and
thus
do
not
experience
such
potentially
large
changes
in
utilization
resulting
from
changes
in
dispatch
order,
(
3)
were,
until
March
2003,
subject
to
the
actual­
topotential
test
for
NSR
applicability,
and
(
4)
generally
have
lower
emissions,
such
that
emissions
are
not
nearly
as
sensitive
to
small
changes
in
utilization.
Despite
these
differences,
the
EPA
believes
that
the
overall
conclusions
of
the
IPM
analysis
are
valid
for
other
sectors.
This
is
because
none
of
the
differences
identified
above
invalidate
the
application
of
the
qualitative
utility
sector
conclusions
for
NO
x
to
other
industrial
sectors.
Furthermore,
the
quantitative
results
for
the
utility
sector
tend
to
dominate
effects
for
other
sectors,
particularly
when
analyzing
the
effects
on
emissions.

The
largest
stationary
sources
of
SO2
and
NOx
emissions
other
than
electric
utilities
are
industrial
boilers.
These
units
are
very
similar
to
boilers
in
the
electric
utility
industry.
They
usually
only
provide
steam
or
energy
for
the
industrial
facility
where
they
are
located
though
in
some
cases
they
may
serve
multiple
facilities.
We
believe
the
IPM
runs
showing
the
impacts
on
NOx
emissions,
which
were
not
subjected
to
a
cap
in
our
analysis,
resulting
from
different
scenarios
with
a
range
of
effects
on
capacity
or
efficiency
are
equally
valid
related
to
SO2
and
NOx
emissions
from
industrial
boilers.
In
some
cases
there
may
be
small
increases
and
in
other
cases
there
would
be
an
overall
reduction
in
emissions.

For
all
other
industrial
sources,
we
believe
that,
in
general,
facilities
in
these
sectors
have
regular
A
number
of
commenters
raised
concerns
that
EPA
had
not
analyzed
the
impact
of
the
final
rule
on
industries
other
than
for
electric
utilities.
To
further
examine
the
potential
effects
of
the
ERP
for
non­
utilities,
the
EPA
funded
a
contractor
study
to
estimate
the
overall
impact
of
the
final
rule
on
six
different
industrial
sectors(
automobile
manufacturing,
carbon
black
manufacturing,
natural
gas
transmission,
paper
and
pulp
mills,
petroleum
refining
and
pharmaceutical
manufacturing).
This
study
is
included
as
Appendix
C
to
this
report.
Even
the
experts
involved
in
this
analysis
emphasize
that
empirical
assessments
of
the
costs,
emissions,
and
other
economic
and
environmental
effects
of
this
rule
are
extremely
difficult
to
perform,
particularly
when
generalizing
beyond
the
sector
facility
involved.
The
analysis
would
have
to
simulate
a
great
many
decisions
made
by
each
plant
involving
routine
maintenance
under
a
variety
of
policy
scenarios.
There
is
simply
no
credible
way
to
make
these
assessments
for
the
entire
economy
or
for
an
entire
sector.
Hence,
with
the
exception
of
the
electric
utility
industry
model,
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
21
we
relied
on
a
case
study
approach
to
gain
insights
as
to
how
this
rule
affects
particular
industrial
sectors.
The
analysis
was
designed
to
examine
effects
of
the
final
rule,
but
it
is
important
to
note
that
the
case
studies
were
performed
prior
to
decisions
on
the
exact
form
and
content
of
the
final
rule.
For
example,
the
selection
of
process
units
for
each
of
the
industries
may
not
be
an
accurate
depiction
concerning
how
a
particular
industry's
operations
should
be
separated
into
process
units
under
the
final
rule.
As
such,
none
of
these
characterizations
should
be
taken
as
EPA's
position
on
appropriate
process
units
for
a
given
industry.
(
Information
on
that
subject
can
be
found
in
Section
III.
F
of
the
preamble
and
in
the
final
rule
for
selected
industries.)
In
addition,
in
costing
out
replacement
activities
in
the
different
industries,
the
contractor
made
assumptions
regarding
which
costs
needed
to
be
included
and
how
multiple
replacement
activities
should
be
grouped
that
may
not
be
consistent
with
the
final
rule.
Again,
these
assumptions
on
the
part
of
the
contractor
should
not
be
interpreted
as
EPA's
conclusions
of
how
their
rules
should
be
applied
to
such
replacement
activities
in
these
industries.
Even
with
these
caveats,
the
case
studies
provide
useful
insight
into
the
potential
effects
of
the
final
ERP.
The
six
industries
are
significant
sources
of
air
pollution
emissions
and
are
very
diverse
in
terms
of
their
types
of
operations,
their
existing
maintenance,
repair
and
replacement
strategies,
and
the
range
of
potential
replacement
costs
at
some
of
their
process
units.
This
diversity
is
important
because
the
final
rule
will
impact
a
great
many
industrial
sectors
and
individual
process
units
which
are
extremely
varied
in
terms
of
their
maintenance,
repair
and
equipment
replacement
cycles
that
ensure
that
a
facility
maintains
its
productive
capacity
and
facilitates
its
safe
and
reliable
operation.
Equipmentreplacement
strategies.
For
example,
issues
related
to
safety,
reliability
and
availability
will
vary
greatly
across
these
industries.
The
need
to
assure
that
the
electricity
and
natural
gas
supply
is
reliable
and
available
is
critical
to
ensuring
the
safety
of
the
public
in
the
hottest
and
coldest
times
of
the
year,
and
it
is
critical
to
the
operation
of
the
nation's
infrastructure,
to
the
degree
they
do
not
have
backup
power
generation,
devoted
to
public
health
(
e.
g.,
drinking
water,
sewage
treatment,
food
refrigeration,
hospitals).
Thus,
strategies
related
to
maintenance,
repair
and
replacement
at
existing
facilities
are
critical
to
ensure
that
vital
electric
utilities
and
natural
gas
transmission
continue
uninterrupted.
As
we
are
clarifying
what
activities
fall
within
the
ERP,
owners
or
operators
at
these
facilities
will
be
able
to
make
decisions
on
when
and
how
to
conduct
RMRR
activities
based
on
engineering
judgement.
The
case
studies
conclude
that
equipment
replacement
activities
generally
just
maintain
the
operational
capability
of
the
facility,
rather
than
increasing
demand
or
availability.
Thus
we
do
not
expect
RMRR
to
result
in
increases
in
hours
of
operation
or
emissions
at
such
facilities.
To
the
contrary,
in
some
cases,
RMRR
may
increase
the
production
efficiency
of
the
facility,
which
will
usually
reduce
the
amount
of
emissions
per
product.
These
changes
generally
do
not
affect
the
overall
emissions
of
the
facility
because
the
emissions
are
driven
by
total
production
at
the
facility
which
in
turn
is
driven
by
the
demand
for
the
product
 
not
by
the
fact
that
there
has
been
anvary
widely
within
these
industries
for
the
process
units
selected.
Across
the
industries,
the
studies
estimated
that
equipment
replacement.
activities
could
range
in
percentage
by
over
an
order
of
magnitude.
By
establishing
a
threshold
at
20
percent
of
the
replacement
cost
of
the
process
unit,
we
believe
we
have
set
a
reasonable
standard
that
allows
most
replacements
to
proceed
unimpeded
as
long
as
the
other
safeguards
are
met.
At
the
same
time,
under
the
20
percent
threshold,
the
most
capital­
intensive
replacements
would
be
subject
to
case­
by­
case
review.
The
data
from
these
case
studies
clearly
indicate
that
20
percent
would
function
well
as
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
22
the
dividing
line
between
those
replacement
activities
that
automatically
qualify
under
the
ERP
and
those
activities
which
should
be
subject
to
case­
by­
case
review.
The
case
studies
also
indicate
that
replacement
activities
in
these
industries
should
not
lead
to
increased
emissions
at
the
sources.
Based
on
the
case
studies,
we
believe
that
replacement
with
identical
or
functionally
equivalent
equipment
as
the
rule
requires,
will
result
in
equivalent
or
reduced
emissions.
The
decrease
in
emissions
would
result
from
efficiency
improvements
that
reduce
the
amount
of
air
pollution
emitted
per
product
produced
in
the
process
unit.
Therefore,
if
operating
levels
do
not
change,
then
total
emissions
will
decrease
with
such
identical
or
functionally
equivalent
equipment
replacements.
The
case
studies
looked
at
a
wide
range
of
projects.
We
have
concluded
based
on
this
analysis
that
replacement
activities
do
not
generally
cause
changes
in
operating
levels
at
the
process
unit.
Instead,
other
factors,
like
economic
downturns
or
increased
demand
for
the
product
of
the
process
unit,
will
cause
operating
levels
to
fluctuate.
Efficiency
changes,
even
when
they
lead
to
increases
in
product
output
from
the
same
raw
material
input
will
not
lead
to
increases
in
emissions
unless
an
independent
factor
like
increased
demand
for
the
product
also
occurs.
We
strongly
support
efficiency
improvements
where
they
can
occur
with
an
appropriate
safeguard
like
the
basic
design
parameters.
Our
inability
to
model
economy­
wide
impacts
does
not
mean
we
cannot
characterize
the
effects
of
this
rule.
In
qualitative
terms,
the
case
studies
further
support
our
conclusion
that
the
old
case­
by­
case
approach
to
RMRR
is
having
perverse
effects
by
discouraging
projects
that
would
improve
efficiency.
As
noted
elsewhere,
efficiency
improvements
necessarily
imply
less
pollution
holding
everything
else
constant.
For
example,
the
case
study
on
the
pulp
and
paper
industry
finds
that:

"[
A]
s
[
safety,
reliability
and
efficiency]
activities
begin
to
be
reviewed,
those
that
raise...
questions
under
the
ambiguity
of
the
current
rules
may
be
postponed,
altered,
or
simply
cancelled.
Under
the
proposed
ERP
approach,
these
activities
can
be
tested
against
a
clearer
set
of
criteria,
that
will
allow
more
activities
to
be
executed.

...
The
new
approach
provides
the
regulatory
clarity
and
certainty
in
making
applicability
decisions
that
is
completely
absent
from
the
current
case­
by­
case
approach.
Thus,
the
manner
in
which
mills
will
handle
the
processing
of
equipment
replacement
activities,
with
regard
to
assessing
their
air
permit
applicability
assessments,
will
be
able
to
be
streamlined.
By
definition,
a
`
case­
by­
case'
approach
is
simply
unworkable
for
a
typical
pulp
and
paper
mill,
which
may
have
thousands
of
maintenance
and
repair
related
work
orders
involving
equipment
replacements
executed
each
year,
affecting
all
areas
of
mill
operations.
Clearly,
only
a
small
subset
of
these
equipment
replacement
activities
can
be
evaluated
using
the
complicated
and
vaguely
interpreted
multi­
factor
test
inherent
with
the
current
case­
by­
case
approach.
...
The
proposed
ERP
approach
helps
by
setting
criteria
for
the
routineness
determinations.
Under
the
proposed
approach,
a
mill
could
set
up
more
straight­
forward
guidelines
to
be
followed
throughout
an
organization
that
would
allow
quick
and
defensible
determinations
to
be
made
regarding
individual
maintenance
activities."

Based
on
the
analytical
work
performed
by
the
contractor
for
pulp
and
paper,
we
expect
that,
at
17
By
efficiency,
we
mean
unit
of
input
per
unit
of
output,
for
example,
amount
of
energy
needed
to
produce
a
specific
amount
of
output.
Another
example
would
be
the
amount
of
raw
material
to
produce
a
specific
amount
of
output.
18
A
common
example
illustrates
the
point
well.
When
one
"
tunes­
up"
a
car,
the
automobile
gets
more
miles
per
gallon,
is
cleaner
burning,
and
is
cheaper
to
operate.
19
For
example,
energy
efficiency
is
not
a
design
parameter
to
determine
functional
equivalency
for
defining
routine
maintenance.
Accordingly,
a
firm
could
adopt
a
more
efficient
"
functionally
equivalent"
technology
without
fear
of
triggering
NSR
provisions.

REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
23
such
facilities,
the
power
boiler
would
be
the
most
affected
by
the
ERP,
as
well
as
an
important
or
even
dominant
emissions
source.
We
would
anticipate
that
this
would
be
true
for
many
of
the
inorganic
and
organic
chemical
subsectors.
In
fact,
we
did
not
pursue
an
analysis
of
the
chloralkali
sector,
in
large
part
because
the
power
boiler
was
the
most
obvious
process
unit
to
analyze,
and
the
issues
raised
overlapped
with
the
pulp
and
paper
analysis.
Thus,
it
is
logical
that
the
conclusions
from
the
case
studies
would
generalize
to
many
other
sectors.

Beyond
the
case
studies,
there
is
also
a
great
deal
of
research
and
experience
that
allows
for
some
robust
findings.
Previous
research,
such
as
the
articles
cited
below,
supports
the
following
findings:

Enhanced
efficiency
and
less
pollution
in
the
short
run.
Holding
everything
else
constant,
when
a
plant's
efficiency
increases,
pollution
must
go
down.
This
nation's
growing
experience
with
pollution
prevention,
efficiency
enhancements,
voluntary
environmental
programs,
and
Environmental
Management
Systems
adoption
all
reinforce
the
notion
that
enhanced
plant
efficiency
translates
into
less
environmental
pollution
17.
Further,
there
is
an
economic
incentive
to
keep
plant
efficiency
high.
Proper
maintenance
and
the
resulting
efficiency
enhancements
and
pollution
prevention
reduce
resource
needs
and
therefore
reduce
costs.
18
By
providing
the
certainty
needed
to
plan
and
undertake
efficiency
investments
(
economically
efficient
maintenance)
this
rule
will
achieve
lower
pollution.

The
rule
will
allow
firms
to
take
advantage
of
pollution
prevention
opportunities
and
new
pollution­
reducing
technologies.
As
technology
advances,
plants
will
be
able
to
adopt
innovative
solutions
that
enhance
energy
efficiency
(
and
reduce
pollution).
19
One
example
of
such
an
opportunity
identified
by
the
EPA
contractor
in
one
of
the
case
studies
is
the
replacement
of
spray
guns
on
a
topcoat
operation
in
order
to
improve
the
quality
of
the
paint
job,
while
also
increasing
the
transfer
efficiency,
and
decreasing
coating
and
associated
solvent
usage.
This
project
could
be
deemed
a
physical
change
and
have
major
NSR
applicability
ramifications
if
not
for
the
ERP
of
the
RMRR
exclusion.
Under
the
current
case­
by­
case
approach
to
RMRR,
the
facility
may
forego
the
change
to
the
newer
spray
gun
design
if
there
is
a
perceived
risk
that
the
determination
could
be
questioned.
Under
the
new
ERP
approach,
the
change
would
proceed
more
definitively
as
RMRR,
and
thus
the
emission
reductions
could
be
realized.

While
firms
can
operate
existing
plants
efficiently,
the
rule
preserves
powerful
incentives
within
the
Clean
Air
Act
to
adopt
"
leap­
frog"
technologies
and
production
processes
that
further
reduce
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
24
costs,
increase
efficiencies
and
reduce
pollution.
Because
of
the
Clean
Air
Act
requirements
and
economic
gains
associated
with
improved
efficiency,
producers
still
have
an
incentive
to
invest
in
these
clean
technologies
to
replace
older
facilities.

In
addition,
a
substantial
body
of
research
has
explored
the
consequences
of
environmental
regulation
that
sets
more
stringent
control
requirements
for
new
sources.
This
research
explores
how
differentiated
regulation
can
affect
firm
behavior
both
on
theoretical
and
empirical
grounds.
The
literature
includes
the
following
citations:

Buchanan,
James
and
Gordon
Tullock.
"
Polluters'
Profits
and
Political
Response:
Direct
Controls
Versus
Taxes,"
American
Economic
Review
Vol.
65,
No.
1,
March
1975,
pp.
139­
47.

Gollop
and
Roberts
"
Environmental
Regulations
and
Productivity
Growth:
The
Case
of
Fossil­
Fueled
Electric
Power
Generation,
Journal
of
Political
Economy,
91:
654­
74.
1983.

Grey,
Wayne
B.
and
Ronald
J.
Shadbegian.
"
Environmental
Regulation
and
Manufacturing
Productivity
and
the
Plant
Level,"
NBER
Working
Paper
No.
4321,
April
1993.

Gruenspecht,
Howard
K.
"
Differentiated
Regulations:
The
Case
of
Auto
Emissions
Standards,"
American
Economic
Review
Vol.
72,
No.
2,
May
1982,
pp.
328­
331.

Jaffe,
Adam,
Richard
Newell
and
Robert
Stavins.
Chapter
11,
"
Technological
Change
and
the
Environment.
Forthcoming
in
Maler,
and
Vincent
eds.,
The
Handbook
of
Environmental
Economics
(
Amsterdam:
North­
Holland/
Elsevier
Science
2003.

Kleit,
Andrew
N.
"
The
Effect
of
Annual
Changes
in
Automobile
Fuel
Economy
Standards,"
Journal
of
Regulatory
Economics
Vol.
2,
1990,
pp.
151­
172.

Maloney,
Michael
T.
and
Robert
E.
and
McCormick
.
"
A
positive
theory
of
environmental
quality
regulation,"
Journal
of
Law
and
Economics
Vol.
25,
April
1982,
pp.
99­
123.

Maloney
and
Brady
"
Capital
Turnover
and
Marketable
Pollution
Rights",
Journal
of
Law
and
Economics,
31:
203­
226
1988.

McCubbins
et
al.
"
Structure
and
Process,
Politics
and
Policy:
Administrative
Arrangements
and
the
Political
Control
of
Agencies,
Virginia
Law
Review
75:
431­
482
1989.

Nelson
et
al.
"
Differental
Environmental
Regulation:
Effects
on
Electric
Utility
Capital
Turnover
and
Emissions,
Review
of
Economics
and
Statistics
75:
368­
373.
1993.

Portney,
Paul
R.,
ed.
Public
Policies
for
Environmental
Protection.
Washington,
DC:
Resources
for
the
Future,
1990.

Stanton,
Timothy
J.
"
Capacity
Utilization
and
New
Source
Bias:
Evidence
From
the
US
Electric
Power
Industry,"
Energy
Economics,
Vol.
15,
No.
1,
January
1993,
pp.
57­
60,
20
U.
S.
EPA,
1994,
"
Economic
Analysis,
Regulatory
Flexibility
Act
Screening
Analysis,
and
Paperwork
Reduction
Act
Information
Collection
Request
Analysis
for
Proposed
Revisions
to
Part
70
Operating
Permits
Regulations,"
by
Daniel
Charles
Mussatti,
pp
33­
48.
21
http://
ildpower.
com/
fossil02.
html
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
25
Zodrow,
George
R.
"
Grandfather
Rules
and
the
Theory
of
Optimal
Tax
Reform,"
Journal
of
Public
Economics
Vol.
49,
1992,
pp
This
literature
provides
further
evidence
that
the
NSR
can
easily
distort
investment
and
production
decisions
against
more
efficient
maintenance
and
replacement.

We
do
not
believe
the
final
rule
will
lead
to
any
increases
in
emissions
for
these
sectors
nationally.
The
EPA
believes
that
the
modeled
effects
of
utilities
dominate
the
effects
for
nonutilities
and
the
overall
conclusion
of
the
utility
analysis
 
that
the
structure
of
the
RMRR
replacement
has
no
practical
impact
on
emissions
reductions
under
the
NSR
program
 
is
valid,
despite
our
inability
to
model
these
other
sectors
individually.
Modeled
costs
are
discussed
in
section
5.3.

"
Benefits"
refers
to
any
and
all
outcomes
of
a
regulation
that
contribute
to
an
enhanced
level
of
social
welfare.
The
two
primary
types
of
benefits
that
can
be
attributed
to
the
change
to
the
RMRR
exclusion
are
temporal
healthrelated
benefits
and
benefits
from
avoided
costs.

The
Agency
believes
most
of
the
benefits
from
the
change
to
the
RMRR
exclusion
will
be
derived
from
cost
savings,
of
which
this
report
identifies
four
types:
1)
increased
efficiency
for
industrial
production,
2)
improved
flexibility
and
reaction
time,
3)
reductions
in
the
number
of
applicability
determinations
performed
by
industry
and
reviewing
authorities
and
their
associated
delays
and
4)
reductions
in
the
need
for
the
construction
of
new
sources.
The
delays
associated
with
applicability
determinations
can
limit
industry's
ability
to
react
quickly
in
a
changing
economic
environment
For
many
source
categories,
this
is
not
a
big
problem
because
they
undertake
major
NSR­
related
activities
on
an
infrequent
basis.
However,
for
a
number
of
industries,
the
Agency
has
identified
as
many
as
three
or
four
changes
take
place
each
year
that
could
prompt
an
Operating
Permit
revision
and,
potentially,
a
major
NSR
permit,
as
well.
20
When
such
changes
occur,
permitting
lags
can
significantly
impact
the
profitability
of
the
source
by
preventing
timely
changes
in
processes
that
improve
competitiveness
and
protect
market
share.
For
EGUs
and
other
boiler
applications,
the
failure
to
perform
timely
repairs
and
maintenance
can
reduce
boiler
efficiency
and
thereby
reduce
electricity
generating
capacity.
Even
a
one
percent
change
in
the
heat
rate
of
a
boiler
(
ceteris
paribus)
can
impose
a
half
a
million
dollar
change
in
net
revenues
for
a
500
MWe
coal­
fired
boiler.
21
Allowing
sources
to
respond
to
maintenance­
related
problems
in
a
revenue
maximizing
fashion
will
unambiguously
increase
revenues
(
and
profits)
and
reduce
operating
costs
for
industry.

The
net
effect
of
these
cost
savings
could
be
substantial.
In
tangible
cost
savings,
the
ability
to
address
larger
routine
maintenance
and
repair
problems
quickly
can
conceivably
result
in
5.2
Benefits
REGULATORY
IMPACT
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REPAIR,
AND
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Page
26
tens
of
millions
of
dollars
in
savings
through
more
efficient
electricity
generation
alone.
The
IPM
analysis
in
Appendix
B
showed
that
RMRR
can
lead
to
increased
availability
of
units
and
increased
efficiency,
which
will
decrease
fuel
costs
and
the
need
for
new
generating
units.
Just
these
two
avoided
costs
will
save
tens
of
millions
of
dollars
from
fuel
costs
and
capital
costs
associated
with
new
generating
units
and
emissions
control
equipment.
That,
combined
with
the
potential
for
improved
national
and
international
competitiveness
due
to
RMRR
flexibility
improvements,
could
potentially
result
in
job
savings
and
job
creation,
avoid
reliability
problems,
and
give
rise
to
other
macro­
economic
improvements.
Unfortunately,
there
is
no
way
to
develop
an
estimate
for
the
value
of
these
improvements.

Regarding
costs,
EPA
estimates
for
changes
in
cost
are
summarized
in
Table
4
of
Appendix
B.
As
discussed
above
in
the
benefits
section,
the
IPM
analysis
showed
significant
avoided
costs
associated
with
the
increased
maintenance
scenarios.
These
decreases
result
from
the
increased
availability
of
existing
units
and,
therefore,
the
decrease
in
construction
of
new
generating
units
in
order
to
meet
electricity
demand.
Note
that
this
analysis
does
not
consider
changes
in
the
actual
cost
of
performing
maintenance;
it
only
assumes
changes
in
fuel
costs
and
changes
in
capital
costs
associated
with
new
generating
units
and
new
emission
control
equipment.
Therefore
it
probably
understates
the
cost
of
the
increased
maintenance
scenarios
and
understates
the
cost
of
the
Major
NSR
Base­
case.

EPA
believes
costs
will
be
insignificant
for
most
of
the
sources
participating
in
the
RMRR
program
under
the
equipment
replacement
approach.

Table
2
Expected
One
Time
Marginal
Burden
and
Cost
to
Industry
for
the
Equipment
Replacement
Approach
Entity
/
Activity
Re
spondentsAffe
cted
Sources
Ho
urs
Per
RespondentAff
ected
Source
per
Year
T
otal
Hours
(
All
RespondentsA
ffected
Sources)
Cost
per
RespondentAffe
cted
Source
1
To
tal
Cost
(
All
RespondentAf
fected
Sources)
1
Sources
Rule
Assimilation,
Development
of
Strategy
14,
500
4
58
,000
$
30
0
$
4,
350,000
Assessment
of
Replacement
Value
14,
500
4
58
,000
$
30
0
$
4,
350,000
Total
Source
Burden
and
Cost
14,
500
8
11
6,000
$
60
0
$
8,
700,000
1
All
costs
are
in
2002
dollars
The
14,500
sources
of
air
pollution
potentially
subject
to
major
NSR
permitting
under
the
equipment
replacement
approach
will
have
to
undertake
the
tasks
listed
in
Table
2,
above.
The
equipment
replacement
approach
does
not
have
an
associated
annual
reporting
requirement..
Each
affected
source
will
expend
about
8
additional
hours
in
regulatory­
related
activities
in
the
first
5.3
Costs
5.3.1
Source
Costs
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
27
year
that
such
rules
are
effective
for
it,
relative
to
the
status
quo,
for
a
total
additional
cost
of
about
$
8.7
million
per
year.
These
costs
will
be
spread
over
the
3­
5
years
immediately
following
the
effective
date
of
the
final
rule.
The
Agency
believes
that
the
reduction
in
uncertainty
and
improved
flexibility
associated
with
the
equipment
replacement
provision
outweighs
the
small
one
time
increase
in
burden
and
costs
imposed
on
the
entire
universe
of
potentially
affected
sources.

Reviewing
authorities
seeking
to
implement
the
new
RMRR
provisions
will
also
incur
costs.
Reviewing
authorities,
however,
do
not
have
to
adopt
any
particular
provision
as
long
as
they
can
show
that
their
version
of
the
program
is
at
least
as
stringent
as
the
EPA
program.
Reviewing
authorities
who
do
not
want
to
implement
the
new
provision
will
incur
costs
associated
with
demonstrating
the
adequacy
of
their
existing
programs.
Each
participating
reviewing
authority
will
have
to
learn
the
rule
and
incorporate
it
into
its
SIP.
The
Agency
identified
five
tasks
that
each
reviewing
authority
must
perform
for
the
incorporation
of
the
RMRR
program
into
its
SIP.
Table
3
displays
the
expected
one
time
burden
and
cost
of
this
rulemaking
to
reviewing
authorities
for
the
maximum
scope
of
this
analysis.
We
anticipate,
however,
that
many
reviewing
authorities
will
combine
work
on
this
rule
with
similar
work
on
final
changes
to
the
NSR
program
that
were
published
on
December
31,
2002.
The
overall
incremental
one
time
cost
of
incorporating
this
rule
into
their
SIP
estimated
below
will
be
greatly
reduced
if
they
do.

Table
3
Expected
Marginal
One
Time
Burden
and
Cost
to
Reviewing
Authorities
Entity
/
Activity
Res
pondentsRevie
wing
Authorities
H
ours
Per
Activity
Total
Hours
(
All
RespondentsRevie
wing
Authorities)
Total
Cost
per
RespondentRevie
wing
Authority
1
Total
Cost
(
All
RespondentRevie
wing
Authorities)
1
Rule
Familiarization
112
6
0
6,720
$
2,22
0
$
248,
640
Applicability
Determinations
112
3
0
3,360
$
1,11
0
$
124,
320
SIP
Revision
112
1
20
13,44
0
$
4,44
0
$
497,
280
Public
Hearing
and
SIP
Modification
112
9
0
10,08
0
$
3,33
0
$
372,
960
Legislative
Coordination
112
1
20
13,44
0
$
4,44
0
$
497,
280
Total
One­
Time
RA
Burden
and
Cost1
112
47,04
0
$
15,5
40
$
1,74
0,480
1
All
costs
are
in
2002
dollars
The
Federal
government
incurs
a
moderate
one
time
burden
from
the
promulgation
of
this
rule,
but
the
Agency
believes
the
burden
and
cost
of
the
RMRR
program
to
be
justified..
For
the
RMRR
program,
EPA
will
be
responsible
for
two
one­
time
activities,
SIP
revision
support
(
at
least
30
hours
of
guidance
per
reviewing
authority,
or
3,360
hours),
and
SIP
review
and
approval
(
at
least
24
hours
per
SIP,
or
a
total
of
5.3.2
Reviewing
Authority
Costs
5.3.3
Federal
Costs
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
28
2,688
hours).
Table
4,
below,
displays
the
expected
one
time
burden
and
cost
to
the
Federal
government
for
the
RMRR
program.

At
most,
the
equipment
replacement
approach
will
cost
sources
$
8.7
million,
or
about
$
600
per
source.

Table
4
Expected
Marginal
One
Time
Burden
and
Cost
to
The
Federal
Government
Entity
/
Activity
Nu
mber
of
Respondents
Served
Ho
urs
per
Year
Per
Respondent
Tot
al
Hours
Av
erage
Cost
per
Respondent
1
Tot
al
Cost
(
All
Respondent)
1
Coordination
with
RAs
2
112
30
3,3
60
$
1,
110
$
12
4,320
Review
of
SIPS
2
112
24
2,6
88
$
88
8
$
99
,456
TOTAL
One­
Time
Federal
Burden
and
Costs
1
54
6,0
48
$
1,
998
$
22
3,776
1
All
costs
are
in
2002
dollars
Under
the
equipment
replacement
approach,
the
Agency
has
provided
opportunities
for
industry
to
improve
its
responsiveness
to
changing
economic
conditions
while
performing
critical
routine
repair,
replacement
and
maintenance
activities
to
improve
the
safety,
reliability
and
availability
of
their
facilities.
These
improvements
derive
from
the
RMRR
program's
primary
goals
­
the
reduction
of
uncertainty
and
regulatory
delay
related
to
the
performance
of
such
activities.
While
the
Agency
believes
these
benefits
may
be
significant,
and
the
IPM
model
runs
shed
light
on
the
possible
overall
magnitude
of
the
benefits
included
in
the
model,
the
effect
of
a
decrease
in
uncertainty
and
regulatory
delay
is
not
quantifiable
in
the
traditional
sense.
Instead,
the
Agency's
assertion
that
the
approach
to
RMRR
provides
regulatory
relief
depends
on
a
simple
concept,
the
Le
Chatelier
Principle
in
its
economic
application:
reducing
the
restrictions
on
industry
reduces
costs.
Consequently,
while
the
measurable
portion
of
the
proposed
approaches
indicate
increases
in
burden
and
cost,
the
program
in
toto
should
be
beneficial.
5.3.4
Bottom
Line
Impacts
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
29
Table
5
Bottom
Line
One­
Time
Costs1
Entity
/
Activity
N
umber
of
Respondents
Ho
urs
per
per
Respondent
To
tal
Hours
(
All
Respondents)
Co
st
per
Respondent
1
To
tal
Cost
(
All
Respondent)
1
Affected
Sources
1
4,500
8
11
6,000
$
6
00
$
8
,700,000
Reviewing
Authorities
1
12
42
0
47
,040
$
1
5,540
$
1
,740,480
US
Environmental
Protection
Agency
1
12
54
6,
048
$
1
,998
$
2
23,776
Total
Expected
Cost
$
1
0,664,256
1
All
costs
are
in
2002
dollars
The
analysis
is
based
upon
the
best
data
available
to
the
Agency
at
this
time.
However,
inconsistencies
in
reviewing
authority
reporting
techniques,
incomplete
data
sets,
and
sampling
limitations
necessitated
a
certain
amount
of
extrapolation
and
"
best­
guess"
estimations
by
Reviewing
Authorities
and
Agency
experts.
Consequently,
the
reader
should
not
consider
the
conclusions
to
be
an
exact
representation
of
the
level
of
burden
or
cost
that
will
occur.
Instead,
this
report
should
be
considered
a
directionally
correct
assessment
of
the
impact
from
the
programmatic
changes
included
in
this
rulemaking.

For
most
analyses,
the
Agency
relies
upon
a
Bayesian
approach
to
predicting
the
future
impacts
of
its
regulations:
it
relies
upon
past
information
of
a
similar
nature
as
the
best
predictor
of
the
future.
The
estimates
in
this
analysis
are
based
upon
the
experiences
and
expertise
of
the
Agency's
staff
and
consultants,
as
well
as
industry
representatives.
5.3.5
Caveats
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
30
APPENDIX
A
EMISSIONS
IMPACTS
OF
HIGHER
EFFICIENCIES
AND
AVAILABILITIES
FOR
COAL­
FIRED
GENERATING
UNITS
AND
EMISSION
PROJECTIONS
UNDER
NSR
ALTERNATIVES
(
DEPARTMENT
OF
ENERGY)
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
31
EMISSIONS
IMPACTS
OF
HIGHER
EFFICIENCIES
AND
AVAILABILITIES
FOR
COAL­
FIRED
GENERATING
UNITS
Description:
Utilizing
assumptions
provided
by
the
Office
of
Fossil
Energy
of
the
Department
of
Energy,
this
analysis
considers
the
effects
of
potential
improvements
in
coal
power
plant
heat
rates
and
availabilities.
The
Office
of
Fossil
Energy
believes
that
these
improvements
might
occur
if
they
could
be
accomplished
without
triggering
the
major
New
Source
Review
(
major
NSR)
requirements.
Specifically,
heat
rates
for
coal­
fired
plants
are
assumed
to
decrease
by
5,
10,
and
15
percent
by
2010.
Each
of
these
cases
are
also
combined
with
assumed
increases
in
availability
for
coal
capacity
of
2
and
5
percentage
points
by
2010.
The
resulting
impacts
on
fuel
use
and
emissions
(
sulfur
dioxide,
nitrogen
oxide,
mercury,
and
carbon
dioxide)
are
examined.

Methodology:
Using
the
National
Energy
Modeling
System
(
NEMS),
the
assumed
changes
in
heat
rates
and
availabilities
are
analyzed
by
modifying
the
AEO2002
Reference
Case.
The
improvements
are
phased
in
through
2010.
Although
the
potential
to
improve
heat
rates
and
availabilities
could
vary
among
coal
units,
this
analysis
assumes
that
the
same
rate
of
change
occurs
to
all
of
this
capacity.
Although
these
improvements
could
require
increases
in
maintenance
costs,
no
change
in
these
costs
is
incorporated.
Potential
improvements
to
oil­
and
gas­
fired
capacity
are
also
not
included.

Analysis:
Improvements
in
heat
rates
(
i.
e.,
increased
operating
efficiency)
result
in
lower
coal
consumption
and
emissions,
although
sulfur
dioxide
emissions
nationally
are
unaffected
since
there
is
a
cap
on
total
emissions.
Compared
to
the
AEO2002
Reference
Case,
a
5­
percent
decrease
in
heat
rates
reduces
carbon
and
nitrogen
oxide
emissions
by
about
4
percent
each
and
mercury
emissions
by
2
percent
in
2010
(
Table
1).
In
2020,
the
respective
emissions
reductions
are
3
percent,
4
percent,
and
2
percent.
Not
surprisingly,
higher
assumed
efficiency
improvements
result
in
greater
emissions
reductions.
A
10­
percent
decrease
in
heat
rates
reduces
carbon
and
nitrogen
oxide
emissions
by
about
8
percent
each
and
mercury
emissions
by
5
percent
in
2010
(
Table
2).
In
2020,
the
respective
emissions
reductions
are
7
percent,
8
percent,
and
4
percent.
A
15­
percent
decrease
in
heat
rates
reduces
carbon,
nitrogen
oxide,
and
mercury
emissions
in
2010
by
about
12
percent,
13
percent,
and
9
percent,
respectively
(
Table
3).
In
2020,
the
corresponding
reductions
are
10
percent,
12
percent,
and
8
percent.

Increasing
the
availability
of
coal­
fired
capacity
leads
to
increases
in
coal
generation,
consumption
and
emissions.
However,
these
increases
in
emissions
are
not
enough
to
offset
the
reductions
that
result
from
the
efficiency
improvements,
except
when
the
lowest
assumed
efficiency
improvement
(
5
percent)
is
combined
with
the
highest
assumed
availability
increase
(
5
percentage
points).
Compared
to
the
Reference
Case,
mercury
emissions
in
this
case
are
about
1
percent
higher
in
2010
and
2020
(
Table
1).
Carbon
emissions
are
2
percent
lower
in
2010
and
1
percent
lower
in
2020.
Nitrogen
oxide
emissions
are
slightly
lower
in
2010
but
slightly
higher
in
2020.
If
a
5­
percent
decrease
in
heat
rates
is
combined
with
the
lesser
availability
increase
of
2­
percentage
points,
carbon
and
nitrogen
oxide
emissions
in
2010
are
each
3
percent
lower
than
in
the
Reference
case
and
mercury
emissions
are
1
percent
lower.
In
2020,
the
reductions
are
about
2
percent
each
for
carbon
and
nitrogen
oxide
and
1
percent
for
mercury.
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
32
Compared
to
the
AEO2002
Reference
Case,
both
the
10­
percent
and
15­
percent
efficiency
improvement
cases
are
projected
to
lower
emissions
when
combined
with
both
of
the
assumed
availability
increases.
Assuming
a
10­
percent
decrease
in
heat
rates
and
a
2­
percentage
point
increase
in
availability
lowers
carbon
and
nitrogen
oxide
emissions
in
2010
by
7
percent
each
and
mercury
emissions
by
5
percent
(
Table
2).
A
5­
percentage
point
increase
in
availability
results
in
further
increases
in
coal
use,
so
the
emissions
reductions
resulting
from
the
10­
percent
heat
rate
improvements
are
further
offset
by
the
availability
increases.
In
this
case,
carbon,
nitrogen
oxide,
and
mercury
emissions
in
2010
are
6
percent,
5
percent,
and
2
percent
lower
than
in
the
AEO2002
Reference
Case,
respectively.
A
15­
percent
decrease
in
heat
rates
combined
with
a
2­
percentage
point
increase
in
availability
lowers
carbon
and
nitrogen
oxide
emissions
in
2010
by
11
percent
each
and
mercury
emissions
by
8
percent
(
Table
3).
A
15­
percent
decrease
in
heat
rates
combined
with
a
5­
percentage
point
increase
in
availability
lowers
carbon
emissions
by
10
percent,
nitrogen
oxide
emissions
by
9
percent,
and
mercury
emissions
by
6
percent
in
2010.
In
2020,
the
emissions
reductions
in
the
combined
heat
rate/
availability
improvement
cases
are
typically
about
1
to
2
percentage
points
lower
than
the
corresponding
results
in
2010.

In
conclusion,
efficiency
improvements
resulting
from
increased
maintenance
are
expected
to
decrease
emissions,
whereas
availability
improvements
are
expected
to
increase
emissions.
In
the
cases
represented
in
this
study,
the
impacts
of
the
assumed
reductions
in
heat
rates
tend
to
dominate
the
corresponding
effects
of
the
assumed
availability
increases.
However,
the
some
of
the
assumed
heat
rate
improvements
could
be
difficult
to
achieve.
In
2000,
the
average
heat
rate
for
coal
capacity
was
about
10,250
btu
per
kilowatt­
hour,
so
a
10­
percent
reduction
by
2010
would
lower
the
average
heat
rate
to
about
9,200
btu
per
kilowatt­
hour.
This
heat
rate
would
be
almost
as
good
as
the
heat
rate
assumed
for
new
coal
units.
A
15­
percent
decrease
would
reduce
the
heat
rate
to
a
level
below
the
heat
rate
for
new
units.
Even
if
the
assumed
heat
rate
improvements
are
feasible,
they
may
not
be
economic.
The
required
increase
in
maintenance
costs,
which
is
not
represented
in
these
cases,
may
be
higher
than
the
resulting
savings
in
fuel
costs.

Since
the
assumed
efficiency
improvements
result
in
lower
fuel
consumption,
it
may
also
be
possible
to
increase
output
at
coal­
fired
units
without
resulting
in
a
net
increase
in
coal
consumption
and
triggering
major
NSR.
The
assumed
increases
in
availability
represent
one
option
for
increasing
generation.
Another
way
to
increase
generation
would
be
to
increase
capacity,
but
this
option
is
not
considered
in
this
analysis.

Emission
Projections
Under
NSR
Alternatives
General
Concepts
This
paper
addresses
the
emission
implications
of
New
Source
Review
(
NSR)
policies.
These
policies
will
be
discussed
in
the
context
of
their
impacts
on
fossil
fuel
fired
power
plants,
although
the
regulations
also
apply
to
other
source
categories
as
well.
The
units
of
key
concern
are
existing
coal­
fired
generators
which
replace
a
part
or
component
and
which,
in
doing
so,
could
increase
emissions.
The
issue
is
how
different
policies
on
defining
routine
maintenance,
repair,
and
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
33
replacement
(
RMR&
R)
might
influence
national
emission
rates.
The
policies
in
question
could
create
either
incentives
or
barriers
to
improved
efficiency,
reliability
or
capacity
when
actions
are
taken
during
maintenance,
repair,
or
replacement
of
parts
at
a
facility
subject
to
air
pollution
regulation.

Generally
speaking,
when
parts
at
a
power
plant
are
replaced,
they
are
replaced
with
parts
having
the
equivalent
function.
In
many
cases,
in
the
time
period
between
the
original
operation
of
the
power
plant,
and
the
point
where
a
part
is
replaced,
technology
has
advanced
and
better
performing
parts
are
now
available.
Indeed,
in
some
cases,
exact
replacements
for
the
original
design
are
not
available.
The
main
mechanism
for
emissions
to
be
affected
is
through
improvement
in
unit
efficiency,
capacity,
and
reliability,
as
newer
parts
tend
to
be
more
efficient
and
less
prone
to
malfunction.
On
a
regional
basis,
the
primary
impact
of
higher
efficiency
is
to
lower
emissions,
because
less
fuel
is
needed
to
create
the
same
amount
of
electricity.
Changes
causing
an
increase
in
capacity,
on
the
other
hand,
could
lead
to
greater
emissions,
because
the
alternative
to
increased
output
from
existing
coal
power
plants
would
probably
be
increased
construction
of
new
units,
which
would
have
lower
emissions
per
kilowatt­
hour
generated
(
whether
coal
or
gas­
fired).
Improved
reliability
or
availability
has
an
effect
similar
to
increased
capacity
if
existing
plant
generation
displaces
new
plant
generation,
as
demand
for
power
grows.
However,
if
a
change
in
capacity
or
availability
occurred
more
often,
or
to
a
greater
degree,
at
lower
emitting
coal
units
than
at
higher
emitting
coal
units,
then
economic
dispatching
of
the
inventory
of
plants
could
lead
to
lower
emissions
overall.
Given
the
complexity
of
the
problem,
it
is
difficult
to
predict
the
outcome
of
changes
in
efficiency,
capacity
and
reliability
without
the
assistance
of
complex
computer
models.

These
general
trends
in
emissions
are
not
universal.
Pollutants
which
are
"
capped",
like
sulfur
dioxide
(
SO2)
under
the
acid
rain
program,
are
not
influenced
by
these
factors.
Any
reduction
or
increase
in
emissions
at
a
particular
unit
would
be
adjusted
for
within
the
emission
cap,
and
regional
emissions
would
remain
constant.
Nitrogen
oxides
(
NOx)
present
a
complex
situation,
because
emissions
in
most
Eastern
states
are
capped
under
the
ozone/
NOx
SIP
Call,
whereas
emissions
in
other
states
are
not
capped.
Mercury
emissions
from
existing
power
plants
are
currently
not
regulated,
but
in
the
future
may
be
subject
to
a
capped
limit
under
a
regulatory
scheme
like
the
Clear
Skies
Initiative,
or
they
may
be
uncapped
under
a
Section
112
regulatory
scheme.

Emission
Projections
The
DOE/
EIA
NEMS
model
was
used
to
evaluate
the
emissions
implications
of
current
and
alternative
NSR
approaches.
Tables
1
through
3,
below,
present
modeling
results
for
a
range
of
assumptions
for
efficiency
and
availability
changes
which
might
result
for
an
NSR
approach
which
facilitated
improvements,
versus
one
which
posed
barriers
to
such
improvements.
In
each
table,
the
current
rules
are
represented
by
the
"
Base
Case"
and
possible
outcomes
for
modified
NSR
rules
are
included
as
alternative
scenarios.
In
this
analysis,
"
capacity"
changes
are
defined
as
changes
which
increase
the
amount
of
fuel
which
could
be
utilized
above
initial
design
rates
for
the
power
plant.
No
increase
in
hourly
fuel
use
was
assumed,
due
to
expectations
that
physical
changes
at
a
unit
which
caused
increases
in
such
capacity
would
be
precluded
by
environmental
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
34
regulation.
Results
are
included
for
carbon
dioxide
emissions
(
expressed
as
carbon),
SO2,
NOx,
and
mercury.

Figures
1
through
3
show
NOx
emission
changes
over
time
for
the
same
hypothetical
changes
in
unit
availability
and
heat
rate
(
efficiency).
These
results
reflect
extreme
scenarios,
and
actual
outcomes
are
likely
to
fall
short
of
the
potential
emission
reductions
and
increases
presented
(
perhaps
by
about
one­
half).
Mitigating
factors
include
the
ability
of
source
owner/
operators
to
avoid
new
source
review
by
"
netting
out",
the
likelihood
that
modest
improvements
in
these
parameters
could
be
made
at
existing
units
without
triggering
NSR,
and
the
possibility
that
potential
improvement
rates
would
not
be
achieved
in
practice.
Attachments
1
and
2
present
greater
detail
on
the
technologies
assumed
and
the
mechanisms
by
which
changes
in
efficiency
and
availability
would
manifest
in
annual
emissions.

Table
1.
Parameter
Scenario
Base
Case
10/
0
*
10/
2
**
10/
5
***
2010
Coal
Generation
(
billion
kilowatthours)
2215.2
223
1.7
227
1.9
233
6.6
Coal
Consumption
(
quadrillion
Btu)
22.8
20.7
21.0
21.6
Avg.
Efficiency
­
Coal
(
percent)
33.2%
36.9
%
36.8
%
36.9
%
Carbon
Emissions
(
million
metric
tons)
688.8
634.
4
639.
5
647.
6
Sulfur
Dioxide
Emissions
(
million
tons)
9.7
9.7
9.7
9.7
Nitrogen
Oxide
Emissions
(
million
tons)
4.0
3.7
3.8
3.8
Mercury
Emissions
(
tons)
43.7
41.5
41.7
42.8
2020
Coal
Generation
(
billion
kilowatthours)
2423.2
246
4.3
251
2.1
260
0.5
Coal
Consumption
(
quadrillion
Btu)
24.7
22.7
23.2
24.0
Avg.
Efficiency
­
Coal
(
percent)
33.5%
37.0
%
37.0
%
36.9
%
Carbon
Emissions
(
million
metric
tons)
790.2
737.
8
745.
7
759.
4
Sulfur
Dioxide
Emissions
(
million
tons)
8.9
8.9
8.9
8.9
Nitrogen
Oxide
Emissions
(
million
tons)
4.2
3.9
3.9
4.0
Mercury
Emissions
(
tons)
44.0
42.2
42.7
43.2
*
Scenario
10/
0
assumes
10%
improvement
in
heat
rate
and
no
change
in
availability.
**
Scenario
10/
2
assumes
10%
improvement
in
heat
rate
and
2%
in
availability.
***
Scenario
10/
5
assumes
10%
improvement
in
heat
rate
and
5%
in
availability.

Table
2.
Parameter
Scenario
Base
Case
15/
0
*
15/
2
**
15/
5
***
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
35
2010
Coal
Generation
(
billion
kilowatthours)
2215.2
2235.
0
228
0.3
234
3.8
Coal
Consumption
(
quadrillion
Btu)
22.8
19.6
20.0
20.5
Avg.
Efficiency
­
Coal
(
percent)
33.2%
39.0
%
39.0
%
39.0
%
Carbon
Emissions
(
million
metric
tons)
688.8
606.9
612.
3
619.
6
Sulfur
Dioxide
Emissions
(
million
tons)
9.7
9.7
9.7
9.7
Nitrogen
Oxide
Emissions
(
million
tons)
4.0
3.5
3.6
3.7
Mercury
Emissions
(
tons)
43.7
39.8
40.3
41.0
2020
Coal
Generation
(
billion
kilowatthours)
2423.2
2489.
0
252
5.8
261
6.1
Coal
Consumption
(
quadrillion
Btu)
24.7
21.8
22.1
22.9
Avg.
Efficiency
­
Coal
(
percent)
33.5%
39.0
%
38.9
%
38.9
%
Carbon
Emissions
(
million
metric
tons)
790.2
712.6
717.
7
730.
5
Sulfur
Dioxide
Emissions
(
million
tons)
8.9
8.9
8.9
8.9
Nitrogen
Oxide
Emissions
(
million
tons)
4.2
3.7
3.8
3.9
Mercury
Emissions
(
tons)
44.0
40.5
41.0
42.2
*
Scenario
15/
0
assumes
15%
improvement
in
heat
rate
and
no
change
in
availability.
**
Scenario
15/
2
assumes
15%
improvement
in
heat
rate
and
2%
in
availability.
***
Scenario
15/
5
assumes
15%
improvement
in
heat
rate
and
5%
in
availability.

Table
3.
Parameter
Scenario
Base
Case
5/
0
*
5/
2
**
5/
5
***
2010
Coal
Generation
(
billion
kilowatthours)
2215.2
2222.
8
226
4.1
232
8.8
Coal
Consumption
(
quadrillion
Btu)
22.8
21.7
22.1
22.7
Avg.
Efficiency
­
Coal
(
percent)
33.2%
34.9
%
35.0
%
34.9
%
Carbon
Emissions
(
million
metric
tons)
688.8
660.7
666.
5
676.
7
Sulfur
Dioxide
Emissions
(
million
tons)
9.7
9.7
9.7
9.7
Nitrogen
Oxide
Emissions
(
million
tons)
4.0
3.9
3.9
4.0
Mercury
Emissions
(
tons)
43.7
42.9
43.4
44.0
2020
Coal
Generation
(
billion
kilowatthours)
2423.2
2457.
4
248
9.2
257
0.3
Coal
Consumption
(
quadrillion
Btu)
24.7
23.8
24.1
24.9
Avg.
Efficiency
­
Coal
(
percent)
33.5%
35.2
%
35.2
%
35.2
%
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
36
Carbon
Emissions
(
million
metric
tons)
790.2
765.3
771.
0
783.
9
Sulfur
Dioxide
Emissions
(
million
tons)
8.9
9.0
9.0
8.9
Nitrogen
Oxide
Emissions
(
million
tons)
4.2
4.0
4.1
4.2
Mercury
Emissions
(
tons)
44.0
43.3
43.7
44.6
*
Scenario
5/
0
assumes
5%
improvement
in
heat
rate
and
no
change
in
availability.
**
Scenario
5/
2
assumes
5%
improvement
in
heat
rate
and
2%
in
availability.
***
Scenario
5/
5
assumes
5%
improvement
in
heat
rate
and
5%
in
availability.
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
37
Conclusions
For
capped
pollutants,
like
SO2,
NSR
policy
will
have
no
impact
on
future
emissions.
For
uncapped,
or
partially
capped
pollutants,
a
policy
that
facilitates
improvements
in
efficiency
and
reliability
as
parts
are
replaced
will
tend
to
reduce
national
emissions.
For
the
pollutants
and
scenarios
examined
in
this
analysis,
emissions
declined
by
a
moderate
amount
(
typically
3­
7%)
in
all
scenarios
except
one,
compared
to
a
baseline
case
in
which
such
improvements
in
plants
were
prohibited
under
NSR
policy.
The
one
scenario
in
which
some
emissions
increased
(
by
up
to
1%)
combined
a
very
high
increase
in
availability
with
a
low
improvement
in
efficiency.
This
scenario
is
not
considered
a
likely
outcome
from
NSR
regulatory
changes
(
see
discussion
of
likely
availability
changes
in
Attachment
1),
but
is
included
for
completeness.
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
38
NOx
Emissions
with
Proposed
NSR
(
10%
Efficiency
Improvement)

3.50
3.60
3.70
3.80
3.90
4.00
4.10
4.20
4.30
4.40
4.50
1995
2000
2005
2010
2015
2020
2025
Emissions,
million
TPY
AEO­
02
Baseline
NSR:
10%
Eff'y
&
5%
Avail'y
NSR:
10%
Eff'y
&
2%
Avail'y
NSR:
10%
Eff'y
&
0%
Avail'y
Figure
2
NOx
Emissions
with
Proposed
NSR
(
15%
Efficiency
Improvement)

3.50
3.60
3.70
3.80
3.90
4.00
4.10
4.20
4.30
4.40
4.50
1995
2000
2005
2010
2015
2020
2025
Emissions,
million
TPY
AEO­
02
Baseline
NSR:
15%
Eff'y
&
5%
Avail'y
NSR:
15%
Eff'y
&
2%
Avail'y
NSR:
15%
Eff'y
&
0%
Avail'y
Figure
3
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
39
NOx
Emissions
with
Proposed
NSR
(
5%
Efficiency
Improvement)

3.50
3.60
3.70
3.80
3.90
4.00
4.10
4.20
4.30
4.40
4.50
1995
2000
2005
2010
2015
2020
2025
Emissions,
million
TPY
AEO­
02
Baseline
NSR:
5%
Eff'y
&
0%
Avail'y
NSR:
5%
Eff'y
&
2%
Avail'y
NSR:
5%
Eff'y
&
5%
Avail'y
Figure
4
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
40
Attachment
1
Unit
Availability
For
Coal­
fired
Power
Plants
Data
on
the
causes
of
power
plant
outages
is
maintained
by
the
North
American
Electric
Reliability
Council
(
NERC),
and
much
of
this
data
is
accessible
at
their
website
(
www.
nerc.
com/~
gads/).
The
top
25
causes
of
outages
at
coal
units
for
the
period
1996­
2000
are
presented
in
the
table
below.

NERC
GADS
Data
Principal
causes
of
outages
or
derating
at
coal
units,
1996­
2000.

AVG
NO.
OCC
AVERAGE
MWH
AVERAGE
MWH
PER
UNIT­
YR
PER
UNITYR
PER
OUTAGE
SYSTEM/
COMPONENT
CAUSE
­­­­­­­­­­­­­
­­
­­­­­­­­­­­­­­
­­­­­­­­­­­­­­­­­
­
­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­

0.43
83,199
193,623
MAJOR
BOILER
OVERHAUL
0.33
60,765
185,529
SOOT
BLOWERS
­
STEAM
0.21
41,527
196,080
MAJOR
TURBINE
OVERHAUL
0.57
40,013
70,047
PULVERIZER
OVERHAUL
0.32
37,735
116,539
BOILER
INSPECTIONS
4.95
35,785
7,223
PULVERIZER
MILLS
1.83
30,202
16,499
FURNACE
WALL
LEAKS
1.16
22,949
19,738
FEEDWATER
PUMP
0.92
19,642
21,386
PULVERIZER
INSPECTION
1.83
19,509
10,645
ELECTROSTATIC
PRECIPITATOR
PROBLEMS
2.67
17,237
6,455
OTHER
PULVERIZER
PROBLEMS
0.7
15,695
22,336
HIGH
PRESSURE
HEATER
TUBE
LEAKS
0.96
14,959
15,604
BOILER,
MISCELLANEOUS
6.44
13,821
2,146
OPACITY
­
FOSSIL
STEAM
UNITS
0.62
13,549
21,969
FIRST
REHEATER
LEAKS
0.57
13,138
23,097
REDUCED
POWER
TO
AVOID
SLAG/
FOULING
0.29
10,475
36,353
ESP
FIELD
OUT
OF
SERVICE
0.48
10,337
21,454
SECOND
SUPERHEATER
LEAKS
3.89
9,689
2,489
PULVERIZER
FEEDERS
0.39
9,207
23,397
BURNERS
0.53
8,005
15,126
PULVERIZER
MOTORS
AND
DRIVES
0.55
7,930
14,483
FIRST
SUPERHEATER
LEAKS
0.51
7,571
14,713
ELECTROSTATIC
PRECIPITATOR
FOULING
0.02
7,502
324,107
SERVICE
WATER
PUMPS
AND
MOTORS
0.32
7,298
22,465
CIRCULATING
WATER
PUMPS
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
41
Coal
Unit
Availability
(
NERC)

70
75
80
85
90
95
100
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
Availability
Factor
0.5
%/
year
change
0.5
%/
year
change
0.3
%/
year
change
0.1
%/
year
change
Grouping
these
problems
by
power
plant
section,
it
can
be
seen
that
about
75%
are
due
to
failures
in
the
boiler
or
pulverizers,
17%
due
to
turbine
repair,
and
7%
due
to
parasitic
power
units
(
ESP,
pumps,
motors).

The
incidence
of
such
problems
has
decreased
over
the
past
two
decades,
even
though
the
average
age
of
these
power
plants
has
increased,
due
to
improved
maintenance
practices
by
plant
operators.
The
figure
below
shows
the
average
coal
power
plant
availability
(
defined
as
the
hours
the
unit
could
deliver
power
in
a
year,
divided
by
the
hours
in
a
year,
expressed
as
a
percentage)
since
1982.

Note
that
the
rate
of
improvement
in
availability
has
dropped
from
about
0.5%
per
year
in
the
early
1980'
s
to
0.1%
per
year
in
the
late
1990'
s.
This
is
believed
attributable
to
physical
limits
on
average
fleet
availability.
These
trends
would
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
42
suggest
that
even
aggressive
programs
to
improve
availability
cannot
improve
performance
more
than
1%
(
cumulatively)
between
2000
and
2010.
Hence,
average
availability
might
be
expected
to
rise
from
86%
to
87%
by
2010.
In
the
absence
of
a
rigorous
methodology
to
attribute
the
portion
of
this
future
improvement
to
actions
which
would
be
considered
"
routine
maintenance,
repair
and
replacement"
versus
non­
routine
actions
subject
to
permit
restrictions
or
new
source
review
limitations,
one
half
of
the
increase
could
be
assumed
to
be
constrained
by
current
NSR
policy.

Given
the
uncertainty
in
predicting
a
change
in
availability,
a
range
of
changes
was
modeled
using
the
NEMS
modeling
system.
Even
though
less
than
a
1%
increase
in
availability
is
expected,
a
range
of
0
to
5%
increase
was
modeled.
An
overview
of
the
NEMS
system
is
available
at
http://
tonto.
eia.
doe.
gov/
FTPROOT/
forecasting/
05812000.
pdf
.
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
43
Attachment
2
Potential
for
Efficiency
Improvements
At
Existing
Coal­
Fired
Power
Plants
The
average
efficiency
of
the
US
fleet
of
coal­
fired
power
plants
was
33%
in
2000,
which
equates
to
a
heat
rate
(
fuel
energy
needed
to
generate
one
kilowatt­
hour
of
power)
of
10,240
Btu/
kwh.
Possible
measures
to
improve
this
efficiency
have
been
investigated
in
recent
years
due
to
interest
in
fuel
savings,
as
well
as
in
the
greenhouse
gas
emissions
reduction
(
i.
e.,
CO2)
which
would
accompany
such
a
performance
improvement.
For
example,
see
Integrating
Consultancy
­
Efficiency
Standards
for
Power
Generation,
Australian
Greenhouse
Office,
Jan.
2000;
Review
of
Potential
Efficiency
Improvements
at
Coal­
Fired
Power
Plants,
Perrin
Quarles
Associates,
Inc.,
for
Clean
Air
Markets
Division,
USEPA,
April
2001;
Increasing
Electricity
Availability
From
Coal­
Fired
Generation
in
the
Near­
Term,
The
National
Coal
Council,
May
2001.
The
Department
of
Energy
is
currently
studying
such
measures.
Preliminary
results
from
the
DOE
effort
have
highlighted
several
promising
options,
as
indicated
in
the
table
below.

Table
2.1
Technology
%
Efficiency
Improvement
Concept
Turbine
reblading
5­
10%
Replace
existing
turbine
blade
sections
and
seals
with
more
efficient
computer­
based
designs.

Energy
management
1­
5%
Replace
current
power
plant
control
system
with
real­
time
performance
monitoring
and
adjustment
of
chemical
feed
rates,
air
flow,
steam
temperatures,
outage
maintenance
against
a
theoretical
model.

Intelligent
soot
blowing
1­
2%
Replace
current
soot
blowing
system
with
"
smart"
systems,
which
can
reduce
steam
use
for
soot
blowing
by
30%.

Distributed
Control
System
controls
0.5­
2%
Automate
manual
adjustment
of
air
registers,
burner
tilt,
fan
power,
etc.,
using
an
optimal
computer
"
smart"
system.

Generator
exciter
replacement
1­
2%
Replace
current
mechanical
exciter
with
a
more
efficient
solid­
state
system.
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
44
Condenser
enhancement
1%
Replace
condenser
with
a
larger
unit
to
reduce
back
pressure
and
make
steam
turbine
more
efficient.

Overall
improvments
8­
17%
(
Numbers
are
not
additive
due
to
some
overlapping
improvements,
and
possible
doublecounting

In
general,
these
improvements
all
improve
the
efficiency
of
steam
conversion
to
electricity,
or
reduce
parasitic
power
consumption
within
the
power
plant.
Such
improvements
in
efficiency
produce
more
power
for
the
same
amount
of
energy
consumed,
and
therefore
do
not
increase
emissions,
in
and
of
themselves.
However,
two
larger
scale
issues
must
also
be
considered.

First,
if
the
increase
in
efficiency
also
improves
the
unit's
economics,
then
the
unit
might
be
dispatched
(
used)
more,
while
other
units
are
used
less.
It
is
likely
that
voluntary
efficiency
improvements
would
improve
unit
economics.
To
further
evaluate
this
situation,
emission
changes
at
a
midwestern
power
pool
for
were
evaluated
for
a
range
of
hypothetical
efficiency
improvements
in
coal­
fired
units.
Four
hypothetical
NGCC
generating
units
were
"
added"
to
the
system
to
reflect
a
future
scenario
in
which
a
broader
mix
of
coal
and
gas­
fired
units
would
probably
exist.
The
analysis
found
that
only
a
very
large
change
in
efficiency
(
13.5%,
or
greater)
would
be
likely
to
change
the
relative
dispatching
of
coal
units
with
generically
different
units,
such
as
natural
gas­
fired
or
nuclear
units,
and
that
even
at
such
high
levels
of
efficiency
improvement,
the
net
effect
was
a
reduction
in
emissions
of
3­
4%.
(
10/
19/
2001
email
from
V.
Koritarov,
ANL,
to
D.
Carter,
USDOE)
It
would
be
reasonable
to
expect
some
shifting
in
dispatching
between
other
coal
units,
if
all
the
units
were
not
comparably
improved.
Such
a
change
could
result
in
an
increase
in
emissions
if
higher
emitting
units
were
the
subject
of
efficiency
improvements.
However,
given
emission
caps
for
sulfur
dioxide,
caps
in
certain
states
for
nitrogen
oxides,
and
a
tendency
by
power
plant
operators
to
achieve
optimal
performance
(
both
efficiency
and
emissions)
at
their
"
flagship"
units,
it
seems
much
more
likely
that
units
receiving
the
greatest
efficiency
upgrades
would
be
the
cleaner
units.
Under
these
circumstances,
efficiency
improvements
of
the
type
cited
above
would
reduce
emissions.
In
other
words,
if
one
expects
a
10%
overall
improvement
in
efficiency
at
coal
units,
efficiency
improvements
of
12%
might
occur
at
the
lowest
emission
units,
and
improvements
of
8%
at
the
highest
emitting
units.
This
behavior
would
lead
to
significant
emission
reductions
in
periods
of
"
off­
peak"
generation,
which
includes
the
major
portion
of
the
year.
However,
this
type
of
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
45
behavior
is
difficult
to
model
and
was
not
simulated
in
the
model
runs
by
ANL
or
EIA.

The
second
larger
scale
issue
is
that
of
demand
growth.
The
growth
in
electricity
demand
over
the
next
decade
is
projected
to
be
greater
than
expected
growth
in
electricity
production
due
to
efficiency
improvements
at
coal­
fired
power
plants.
Another
way
of
looking
at
this
is
that
almost
all
additional
generation
which
comes
from
efficiency
improvements
would
be
power
not
needed
from
new
generators.
Because
the
efficiency
improvements
are
at
existing
coal
units,
whereas
new
generation
over
the
next
decade
will
be
dominated
by
much
lower
emitting
natural
gas
combined
cycle
units,
one
might
suppose
that
the
efficiency
improvement
would
result
in
increased
emissions
overall.
However,
this
is
not
the
case.
As
long
as
the
increased
power
production
does
not
require
additional
coal
consumption
(
which
is
the
case
for
these
efficiency
improvements),
then
the
resulting
net
emissions
will
be
lower
than
the
total
emissions
for
"
unimproved"
coal
plants
and
"
super­
clean"
natural
gas
plants.

Most,
but
not
all
of
the
efficiency
improving
technologies
cited
in
Table
2.1
reflect
replacement
components.
This
is
important
to
note
because
some
NSR
policies
might
apply
differently
to
replacement
parts
versus
new
components
added
to
a
plant
for
the
sole
purpose
of
improving
efficiency.

Given
the
expanding
suite
of
efficiency
improving
technologies,
and
growing
interest
in
reducing
greenhouse
gas
emissions
through
efficiency
improvements,
it
is
reasonable
to
project
overall
efficiency
improvements,
in
the
absence
of
NSR
constraints,
as
large
as10­
15%.
Such
a
range
is
much
larger
than
conventional
wisdom,
which
is
perhaps
shaped
by
expectations
under
the
current
NSR
policy,
and
the
absence
of
efficiency
incentives
related
to
climate
change
concerns.
To
cover
a
broad
range
of
possible
improvements,
a
range
of
5%
to
15%
was
examined
using
the
NEMS
modeling
system.
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
46
APPENDIX
B
EVALUATION
OF
ROUTINE
MAINTENANCE
MODEL
SCENARIO
FOR
POWER
PLANTS
(
ENVIRONMENTAL
PROTECTION
AGENCY)
22
This
finding
is
described
in
detail
in
EPA's
June
13,
2002
New
Source
Review
Report
to
the
President.

REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
47
EVALUATION
OF
ROUTINE
MAINTENANCE
MODEL
SCENARIO
FOR
POWER
PLANTS
Purpose:
This
analysis
uses
model
scenarios
to
evaluate
the
impact
that
the
changes
to
the
routine
maintenance
provisions
of
NSR
are
likely
have
on
emissions
from
the
power
generation
sector.

Methodology:
In
order
to
evaluate
the
impact
of
the
routine
maintenance
provisions,
EPA
considered
a
scenario
under
which
NSR
regulations
remained
in
place
and
a
range
of
scenarios
that
could
occur
if
NSR
did
not
exist.
The
first
scenario
is
intended
to
represent
the
existing
program,
which
the
EPA
has
found
impedes
or
results
in
cancellation
of
projects
that
maintain
and
improve
reliability,
availability,
and
efficiency
at
existing
power
plants.
22
The
second
range
of
scenarios
represents
companies
receive
flexibility
under
the
NSR
program
that
removes
many
of
these
impediments
.
As
part
of
this
analysis,
EPA
reviewed
three
key
variables:
change
in
SO2
emissions,
change
in
NOx
emissions
and
change
in
cost.

It
is
worth
noting
that
EPA
recently
promulgated
final
rules
governing
the
use
of
plantwide
applicability
limits
(
PALs),
and
Clean
Units.
Some
sources
with
in
the
electric
utility
generation
industry
may
take
advantage
of
these
changes.
However,
any
such
decision
will
be
based
on
case
specific
information
related
to
their
past
operating
levels,
current
levels
of
control
and
company's
specific
strategies
for
complying
with
NSR.
Therefore,
we
can
not
make
estimates
on
how
many
sources
may
take
advantage
of
PALs
and
Clean
Units.
To
the
extent
they
are
used
within
the
industry,
they
will
dampen
the
effects
shown
in
this
analysis
(
i.
e.,
estimated
decreases
and
increases
will
not
be
as
large.

This
analysis
was
performed
using
the
Integrated
Planning
Model
(
IPM).
IPM
is
a
linear
programming
model
that
EPA
uses
to
analyze
the
effect
of
various
environmental
policies
on
the
power
sector.
It
provides
forecasts
of
least­
cost
capacity
expansion,
electricity
dispatch
and
emission
control
strategies
for
meeting
energy
demand
and
environmental,
transmission,
dispatch
and
reliability
constraints.
EPA
has
used
it
to
analyze
many
environmental
policies
including
the
Phase
II
Acid
Rain
Nitrogen
Oxide
regulations
and
the
Nitrogen
Oxide
SIP
Call.
Analysis
can
be
performed
varying
multiple
constraints
such
as
availability
of
various
types
of
power
plants
(
e.
g.
coal­
fired,
nuclear,
gas­
fired
combined
cycle
units),
heat
rates
of
various
types
of
power
plants,
environmental
constraints
(
e.
g.
caps
on
emissions,
emission
rate
limitations).
More
detail
regarding
IPM
can
be
found
in
the
document
titled
"
Documentation
of
EPA
Modeling
Application
(
V.
2.1)
Using
the
Integrated
Planning
Model,
which
can
be
found
at:
http://
www.
epa.
gov/
airmarkets/
epa­
ipm/
index.
html.

Assumptions:
The
first
scenario,
referred
to
as
the
NSR
base
case,
approximates
utility
behavior
under
the
current
program,
where
the
EPA
has
found
that
companies
perform
limited
maintenance
on
coal
plants
because
of
concerns
about
NSR.
In
this
scenario,
it
was
assumed
that
the
performance
of
coal
units
would
deteriorate,
resulting
in
higher
heat
rates
and
lower
capacities.
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
48
EPA
did
not
assume
that
reduced
maintenance
resulted
in
a
change
in
maximum
potential
unit
availability.
This
is
because
over
the
last
20
years,
availability
of
coal­
fired
plants
has
increased
even
as
the
plants
have
aged.
This
is
due
in
large
part
to
improved
maintenance
practices.
For
instance
tests
to
inspect
boiler
tubes
have
been
continually
improving
(
see
"
Preventing
Boiler
Tube
Failures
with
EMAT's",
S.
P.
Clark
et
al,
"
EPRI
International
Conference
on
Boiler
Tube
Failures
and
HRSG
Tube
Failures
and
Inspects",
November
6­
8,
2001).
These
improved
preventive
maintenance
practices
have
improved
availability
by
reducing
the
incidence
of
forced
outages.
Although
we
did
not
assume
availability
decreases,
we
did
assume
that
continued
future
availability
increases
would
diminish,
and
any
remaining
increases
would
essentially
be
negated
by
deterioration
caused
by
limited
maintenance.

The
second
range
of
scenarios,
referred
to
as
increased
maintenance
cases
#
1
­
#
5
,
looks
at
a
range
of
scenario
for
what
might
happen
in
the
utility
sector
if
companies
were
provided
with
increased
flexibility
under
NSR
to
perform
RMRR.
This
would
result
in
lower
heat
rates,
higher
capacities
and/
or
higher
unit
availabilities
for
these
units.
Finally
EPA
looked
at
one
case
(
standard
base
case)
in
which
heat
rate,
capacity
and
unit
availability
did
not
change.
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
49
Table
1:
Key
modeling
assumptions
in
routine
maintenance
analysis
Winter
Availability
Summer
Availability
Heat
Rate
Change
Capacity
Change
NSR
Base­
case
81.6%
89.8%
+
0.1%
per
year
­
0.1%
per
year
Increased
Maintenance
Case
#
1
85.0%
92.0%
­
0.1%
per
year
+
0.1%
per
year
Increased
Maintenance
Case
#
2
81.6%
89.8%
­
0.1%
per
year
+
0.1%
per
year
Increased
Maintenance
Case
#
3
85.0%
92.0%
­
1.6%
in
year
2005
and
beyond
+
1.6%
in
year
2005
and
beyond
Increased
Maintenance
Case
#
4
85.0%
92.0%
­
3.2%
in
year
2005
and
beyond
+
3.2%
in
year
2005
and
beyond
Increased
Maintenance
#
5
81.6%
89.8%
­
1.6%
in
year
2005
and
beyond
+
1.6%
in
year
2005
and
beyond
Standard
Base
Case
81.6%
89.8%
No
change
No
change
It
is
important
to
note
several
limitations
to
this
analysis.
First
this
analysis
only
considered
emission
regulations
that
are
currently
in
effect
(
e.
g.
the
NOx
SIP
Call
and
the
Title
IV
Acid
Rain
Provisions).
Future
environmental
regulations
such
as
emission
reduction
requirements
necessary
to
meet
the
fine
particulate
matter
standards
or
emission
reductions
under
multipollutant
regulations
could
significantly
change
this
analysis.
Second,
the
analysis
assumed
the
operating
and
maintenance
costs
of
coal­
fired
units
was
the
same
for
units
performing
limited
maintenance
and
for
units
performing
increased
maintenance..
Since
the
most
significant
cost
associated
with
running
an
existing
power
plant
is
the
cost
of
fuel,
this
impact
is
probably
fairly
small.

Results:

Changes
in
SO2
Emissions,
NOx
emissions
and
cost
are
summarized
in
Tables
2,
3
and
4
below.
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
50
Table
2:
Changes
in
SO2
emissions
in
scenarios
considered
in
routine
maintenance
analysis.

2005
SO2
Emissions
(
tons)
2010
SO2
Emissions
(
tons)
2015
SO2
Emissions
(
tons)
2020
SO2
Emissions
(
tons)

NSR
Base­
case
10,168,
230
9,713,6
84
9,101,6
22
9,103,2
75
Increased
Maintenance
Case
#
1
10,135,
120
9,739,0
29
9,104,1
21
9,102,6
88
Increased
Maintenance
Case
#
2
10,186,
660
9,701,1
12
9,099,3
63
9,099,2
71
Increased
Maintenance
Case
#
3
10,075,
060
9,773,2
42
9,104,8
36
9,103,7
79
Increased
Maintenance
Case
#
4
10,009,
250
9,813,6
64
9,105,4
29
9,104,3
96
Increased
Maintenance
#
5
10,079,
510
9,764,9
71
9,099,9
23
9,100,3
61
Standard
Base
Case
10,168,
520
9,712,4
99
9,100,2
64
9,100,6
80
As
shown
in
Table
2,
there
is
very
little
change
in
SO2
emissions
over
the
entire
time
period
studied
under
the
two
scenarios.
This
is
because
SO2
emissions
are
already
capped
nationally
under
the
Title
IV
Acid
Rain
Provisions.
Therefore
if
a
unit
decreases
its
emissions
to
make
room
under
its
PAL,
it
could
instead
sell
excess
allowances
to
another
unit.
However
because
emissions
can
also
be
shifted
temporally
by
banking
emission
allowances
to
be
used
in
a
future
year
there
can
be
significant
changes
in
emissions
for
a
specific
year.
While
temporal
distribution
of
emissions
did
not
change
much
over
time
in
the
NSR
cases
considered,
there
was
more
temporal
distribution
of
emissions
in
the
increased
maintenance
scenarios
considered.

Table
3:
Changes
in
NOx
emissions
in
scenarios
considered
under
routine
maintenance
scenarios.

2005
NOx
Emissions
(
tons)
2010
NOx
Emissions
(
tons)
2015
NOx
Emissions
(
tons)
2020
NOx
Emissions
(
tons)
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
51
NSR
Basecase
4,279,3
62
4,285,4
00
4,338,4
61
4,375,48
6
Increased
Maintenance
Case
#
1
4,340,1
66
4,362,9
48
4,442,8
81
4,471,49
9
Increased
Maintenance
Case
#
2
4,276,5
50
4,283,0
81
4,327,9
79
4,362,85
9
Increased
Maintenance
Case
#
3
4,307,7
96
4,350,7
37
4,423,1
41
4,472,70
6
Increased
Maintenance
Case
#
4
4,276,1
72
4,334,6
71
4,412,3
40
4,460,04
1
Increased
Maintenance
#
5
4,259,1
70
4,271,2
94
4,324,9
92
4,363,93
0
Standard
Base
Case
4,277,4
07
4,285,4
23
4,332,2
09
4,360,04
4
Increasing
capacity
(
under
the
increased
maintenance
cases)
leads
to
increases
in
NOx
emissions.
When
comparing
increased
maintenance
cases
#
1
and
#
2
(
which
had
the
same
increases
in
efficiency,
but
different
changes
in
maximum
availability,
NOx
emissions
increase
by
an
average
of
almost
92,000
tons
per
year
over
the
time
period
analyzed.

It
appears
that
changing
heat
rates
and
capacities
has
the
opposite
effect
on
emissions.
NOx
emissions
actually
decrease
when
flexibility
under
NSR
allows
power
generation
companies
to
improve
efficiency
by
performing
increased
maintenance
if
maximum
availability
of
these
units
does
not
change
at
the
same
time.
For
instance
if
one
compares
two
scenarios
with
the
same
maximum
capacities:
NSR
Base­
case
,
increased
maintenance
case
#
2
and
the
standard
base
case,
average
emissions
are
about
7000
tons
per
year
higher
over
the
time
period
analyzed
in
NSR
Base­
case
where
heat
rates
are
higher
and
capacities
are
lower.
Looking
at
increased
maintenance
cases
#
3
and
#
4
shows
the
same
trend.
In
these
two
cases
maximum
availability
remains
constant,
but
heat
rates
are
lower
and
capacities
are
higher
in
increased
maintenance
case
#
4.
These
lower
heat
rates
and
higher
capacities
lead
to
emissions
that
are
on
average
nearly
18,000
tons
per
year
less
in
increased
maintenance
case
#
4
than
in
increased
maintenance
case
#
5.

Another
point
to
note
is
that
EPA
also
looked
at
the
speed
in
which
the
improvements
to
the
units
were
made.
For
example
by
2020,
the
heat
rate
decrease
and
the
capacity
increase
was
the
same
in
both
increased
maintenance
case
#
2
and
increased
maintenance
case
#
5
were
the
same.
However
in
case
#
5,
those
changes
happened
in
one
step
in
2005,
and
in
case
#
2,
the
changes
happened
gradually.
When
the
changes
occurred
all
at
emissions
were
lower
in
the
early
years.
In
the
later
years,
when
the
total
magnitude
of
the
changes
was
more
similar
in
both
cases,
the
NOx
emissions
were
also
more
similar.
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
52
This
analysis
suggests
that
the
effect
that
changing
the
requirements
of
NSR
with
regard
to
RMRR
will
have
on
emissions
is
dependent
upon
the
effect
that
it
will
have
on
maximum
unit
availabilities.
If
the
RMRR
changes
increase
efficiency
and
plant
capacity
without
increasing
maximum
unit
availability,
this
analysis
suggests
that
the
changes
could
decrease
emissions.
The
amount
of
that
emission
decrease
would
depend
both
on
how
much
heat
rate
decreased
and
capacity
increased
and
how
quickly
these
changes
occurred.
The
greater
the
heat
rate
decrease
and
capacity
increase
and
the
more
quickly
the
changes
occurred,
the
greater
the
emission
reductions.
If
on
the
other
hand,
the
new
provisions
increase
maximum
unit
availabilities
this
analysis
suggests
that
the
changes
could
increase
emissions.

Changes
in
cost
are
summarized
in
Table
4
below.
Note
that
this
analysis
does
not
consider
actual
changes
in
the
cost
of
performing
maintenance;
it
only
assumes
changes
in
fuel
costs
and
changes
in
capital
costs
associated
with
new
generating
units
and
new
emission
control
equipment.
Therefore
it
probably
understates
the
cost
of
the
increased
maintenance
scenarios
and
understates
the
cost
of
the
NSR
Base­
case.

Table
4:
Total
cost
of
scenarios
considered
(
in
1999
dollars)

2005
Total
Cost
(
million
1999
dollars)
2010
Total
Cost
(
million
1999
dollars)
2015
Total
Cost
(
million
1999
dollars)
2020
Cost
(
million
1999
dollars)

NSR
Basecase
76,187
80,934
88,921
95,819
Increased
Maintenance
Case
#
1
75,432
79,819
87,306
92,817
Increased
Maintenance
Case
#
2
76,088
80,290
87,861
93,781
Increased
Maintenance
Case
#
3
74,422
79,309
86,715
92,788
Increased
Maintenance
Case
#
4
73,740
78,250
85,898
91,932
Increased
Maintenance
#
5
75,164
79,782
87,600
93,784
Standard
Base
Case
76,149
80,572
88,404
94,588
For
more
detailed
results,
see
the
attached
IPM
run
summaries.
The
runs
are
listed
in
Table
5
below.
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
53
Table
5:
IPM
Runs
used
in
this
analysis
Scenario
IPM
Run
#

NSR
Base­
case
NSR­
13
Increased
Maintenance
Case
#
1
NSR­
8
Increased
Maintenance
Case
#
2
NSR­
11
Increased
Maintenance
Case
#
3
NSR­
14
Increased
Maintenance
Case
#
4
NSR­
15
Increased
Maintenance
#
5
NSR­
16
Standard
Base
Case
IPM2000s100d
REGULATORY
IMPACT
ANALYSIS
FOR
THE
SPECIFICATION
OF
CATEGORIES
OF
ACTIVITIES
AS
ROUTINE
MAINTENANCE,
REPAIR,
AND
REPLACEMENT
FOR
THE
NEW
SOURCE
REVIEW
PROGRAM
Page
54
APPENDIX
C
CASE
STUDIES
OF
SELECTED
INDUSTRIES
