New Source Review

The New Source Review, (NSR) is a permitting process created by the U.S. Congress in 1977 as part of a series of amendments to the Clean Air Act. The NSR process requires industry to undergo an United States Environmental Protection Agency (EPA) pre-construction review for environmental controls if a they proposed either building new facilities or any modifications to existing facilities that would create a “significant increase” of a regulated pollutant. The legislation allowed “routine scheduled maintenance” to not be covered in the NSR process. Since the terms “significant increase” and “routine scheduled maintenance” were never precisely defined in legislation, they have been differently interpreted by various Administrations, and have become a source of contention in many lawsuits filed by the EPA, public interest groups, and utilities.

Wisconsin Energy Corporation Lawsuit
In 1988 the Wisconsin Energy Corporation (WEPCo) submitted an NSR inquiry to the EPA for improvements at its Port Washington, Wisconsin. The improvements included the replacement and repair of aging equipment including steam turbine, major boiler components and significant amounts asbestos remediation. WEPCo initially believed that the plant, built in 1932, would not be subject to the NSR requirements and would instead fall under the “routine maintenance, repair, and replacement”. The EPA, however, ruled that the improvements would extend the life of the plant, and constitute a long term and significant increase in the facilities emissions, prompting WEPCo to sue the EPA in federal court.

In 1991 the Seventh Circuit Court of Appeals found that the EPA had improperly interpreted the NSR and ruled that work that "does not 'change or alter' the design or nature of the facility”, would render the facility exempt from the NSR rules. Rather, it merely allows the facility to operate again as it had before the specific equipment deteriorated." The appeals court also ruled that WEPCo would not emit any more pollutants after the improvements, and agreed with WEPCo that its emissions would actually decrease and that the EPA had miscalculated it estimation of the plants emissions. However the court did agree with the EPA that the repairs and modifications to the plant did not constitute “routine maintenance” After the WEPCo ruling, the EPA continued to take a case by case approach to NSR’s at facilities built before 1977, viewing the courts ruling as applying only to the power sector specifically and not to all similar NSR applications in general.

Clinton Administration
After an EPA investigation found that many old coal-fired power plants were modifying or upgrading equipment on aging plants without seeking permits that might trigger a NSR, EPA initiated a broad enforcement action in 1999, suing numerous power companies for not installing modern pollution controls and instigating lawsuits. Under the NSR program, plants that are new or modified must obtain prevention of significant deterioration (PSD) permits, which require the installation of the best available pollution controls.

Duke Energy
Between 1998 and 2000, Charlotte, North Carolina based Duke Energy made twenty nine modifications and upgrades to several of its coal-generated units. The modifications were designed to replace or upgrade older equipment. Duke did not apply for or obtain permits from the EPA for this work, and were sued. The EPA argued that the modifications and upgrades could significantly increase the dispatch capacity of the units, and allow them to operate at higher outputs for longer periods of time, placing Duke in excess of the EPA’s Prevention of Significant Deterioration (PSD), requiring an automatic NSR.

Duke Energy initially prevailed in both the trial as well as the appeal in front of the Fourth Circuit Court of Appeals, when they ruled that the EPA’s rulings were inconsistent with prior decisions and that the EPA’s previous interpretation of the NSR would also have to be applied to its application of its PSD rule. . The EPA, along with the North Carolina Sierra Club appealed the decision to the Supreme Court, which in a unanimous decision, overturned the Fourth Circuit’s decision. The Court ruled the term “modification” did not have the same meaning in the PSD and NSPS provisions.

December 2002 NSR Rule
Beginning in 2002, EPA under George W. Bush broadened equipment replacement rules to allow for the replacement of process unit equipment without triggering NSR review. It also carved specific exemptions for "pollution control projects" and "clean units," and proposed allowing a facility to avoid the NSR permitting process when making alterations if actual emissions remain below a cap, creating new methods for calculating baseline emissions and post-change emissions.

On June 24, 2005, the U.S. Court of Appeals for the D.C. Circuit struck down several aspects of the rule and reaffirmed the program's focus on actual emissions (rather than potential emissions).

2003 rule
EPA's October 2003 Rule changed NSR to allow power plants and other major emitters not to have to upgrade their pollution controls as long as the changes in question cost less than 20% of the replacement value of the facility. A report by the General Accounting Office, the investigative arm of Congress, found that the EPA had relied not on scientific evidence to build the case for the new law.

Twelve states (New York, Connecticut, Maine, Maryland, Massachusetts, New Hampshire, New Mexico, New Jersey, Pennsylvania, Rhode Island, Vermont, and Wisconsin) and the District of Columbia sued the Bush Administration in October 2003 to block the changes. On December 24, 2003, a federal court ruled that the new NSR rules could not go into effect until the lawsuit had been fully adjudicated. When the new rules were being proposed, the EPA administrator claimed that the new rules would not stop any enforcement actions against utilities that had been started under the previous administration and were still ongoing, but shortly after the rules were adopted, the EPA decided to drop most of those lawsuits.

On March 17, 2006, the Clean Air Task Force, other citizen groups, and numerous state and local governments, won an unanimous decision from the DC Circuit that permanently invalidated the exemption.

United States Files Clean Air Act Complaint Against Homer City Power Plant
On January 11, 2011, the U.S. Department of Justice filed a Clean Air Act complaint on behalf of the U.S. Environmental Protection Agency against the owners and operators of the Homer City Generating Station, a coal-fired power plant in Homer City, Indiana County, Pa.

According to the complaint filed by the EPA, beginning in 1990 operators of the Homer City Power Plant violated the Clean Air Act New Source Review requirements by making major modifications to the boiler units at the power plant and continuing to operate without first obtaining appropriate permits and installing and operating the best available pollution control technologies to reduce sulfur dioxide and particulate matter.

In addition, the complaint alleged that the plant operators had not disclosed the plant’s major modifications, the need for best available control technologies, nor the appropriate emissions limits in their request for a Title V operating permit from Pennsylvania’s Department of Environmental Protection. Also, the defendants’ Title V permit did not include the required limits on emissions that would be achieved using the best available pollution control technologies.